Basic Guide To Models: Confidential. All Trademarks Appearing Herein Belong To Their Respective Owners

Basic Guide to Models
1
Confidential. All trademarks appearing herein belong to their respective owners.
Basic Guide to Models
Types and Uses of Models

Descriptive
Segmentation Profiling
Predictive
Triggers (or Association Rules) Regression Trees Neural Networks Genetic Algorithms
Implementing Models Why Models Fail
2
Segmentation
3
Segmentation
Segmentation analysis groups variables with like characteristics.
Can be market driven: analyst determines the segments. Can be data driven: data determines the segments (clustering)
Example: Segments Sales by Card type

SALE SEGMENTS HIGH $1,149 MEDIUM $333 LOW $97 12 M INACTIVE $0 0.10% 6.5% $1,021 $0 0.09% 1.2% $1,088 $96 1.63% 24.9% $413 $0 0.69% 0.2% $998 $339 1.05% 6.0% $552 $80 17.20% 42.1% $80 PLATINUM 4.75% 0.2% $1,238 $832 9.83% 7.2% $450 $248 23.18% 39.3% $94 PRIEVILEGE 17.98% 5.6% $596 $561 21.90% 20.5% $178 CLASSIC 1.59% 14.6% $359
Population( %) Attrition Rate (%)

Pre Sales (Oct01Sep02)
Post Sales (Oct02Sep03)
4
Profiling
5
Profiling
1) Credit Happy Spender Highest number of trades, but relatively lower Utilization High Credit Activity (ATV,ATF) in all trades except Retail Trades Credit Activity 5) High Risk Delinquents Risky 4 times more Charge-Offs than average
4
2)High Inc / Established Credit High Income Group ($ 109,000) Lower Number of Trades, but high utilization High Credit Activity in Mortgage & Home Equity 3) Middle Class Average Credit Activity (Number, Balance, Utilization) in all trades Highest Proportion of Credit Union Trades to Total 4) Retail Spenders High Retail Balance(10 times more than average) Highest number / proportion of Balance Active Trades Highest Utilization in Non-Installment Trades
Low Credit Limit 6) Senior Citizens
7 1 6 3 2
* Size of Bubble indicates Relative Proportion of Accounts
60+ Years Age Thick File(112 Months of credit history) Minimum Utilization in All trades 7) Credit Avoiders Least Number of Trades Least Credit Limit/Balance No Recent Credit Inquiries
* Indicative List
6
Profiling (simplified)
Owners (%)
94% 92% 92% 90% 88% 86% 84% Client A Client B Client C Client D Client E 0% Client A Client B Client C Client D Client E 92% 10% 89% 89% 87% 15% 14% 13%
Home Market Value > $250K (%)
90%
5% 5% 3%
7%
7%
6% of the customers in the overall portfolio have a missing value
7% of the customers in the overall portfolio have a missing value Overall
Length of Residence < 2 Years (%)

25%
Multiple Families (%)

25% 23% 23% 22% 21% 20%
20% 20%
18%
15% 15% 14% 15%
21%
18%
20%
16%
18%
10% Client A Client B Client C Client D Client E
15% Client A Client B Client C Client D Client E
7
Triggers
8
Triggers
What are Triggers?
Triggers are indicators based on Credit Activity or Profile of Customers which can generate higher response / sales to marketing offers Triggers present an opportunity for customized marketing at the right time based on customer need & profile.
What Behavior / Characteristics of customers can be Potential Triggers?

High Credit Activity (Acquisition) Low Liability (Acquisition) Movers (Acquisition, Lifecycle) Purchase Behavior (Retention) Thin Files (Acquisition) Wealth Indicators (Acquisition)
What kind of data can be used for identifying Triggers?

Internal Performance Data Demographic Data Credit Bureau Data
Answers the question, When to Target?

9
Triggers
In absence of Models, Triggers can be used to Target Better Customer Segments to meet Marketing Objectives Triggers can be Overlaid on Existing Models to Maximize Gains from Marketing Programs Lifestage Strategy
Prescreen
Types of Triggers
Credit Bureau, Demographic, Internal Performance
Acquisition
Cross-Sell
High Performers (High Sale, High Profit)
Lifecycle
Yield Management Customer Retention
Demographic, Internal Performance
Triggers Present Wider Opportunities for Customer Retention, Yield Management, Loyalty & Cross-Sell
10
Internal Performance
Activity Triggers
Build up in Sale over '4 quarters' of a year (Sale Increases quarter over quarter) (High Purchase Likelihood, Personal Loan) Build up in Finance Charge over 4 quarters of a year (High Profit Likelihood, Personal Loan) Months Since Last Sale < 3 months (High Purchase Likelihood, Personal Loan) Sale in at least 10 months of a year (High Purchase Likelihood, Personal Loan) Ratio of Current Balance to highest Balance over Lifetime >= 0.8 (High Purchase / Profit Likelihood, Personal Loan) Sale in At least 3 of the first 9 months of the year and no sale in the last 3 months of the year Attrition Trigger
Credit Need Triggers

Non-Sufficient Funds (Debt Consolidation) Credit Line Denial (HELOC) Accounts with Over limit (HELOC)
* Indicative List
11
Demographic Triggers
Activity Triggers
Household Characteristics
Presence of Children - (Retailers) Presence of Adults (TeleShopping) Owner (Home Improvement) Renter (Low Liability Personal Loan)

Purchase Behavior
Mail Order Buyer Home Improvement Women Apparel (Retailers) Financial Services Bank (Dual Card) Bargain Seekers (PLCC Lifecycle)
Wealth Indicators
Low Income (Personal Loan, Dual Card, PLCC Acquisition) Low Net Worth (Personal Loan, PLCC Acquisition) Low Home Market Value (Personal Loan, PLCC Acquisition)
Hobbies / Interests
Home Furnishing (Home Improvement) Fashion - (Retailers)
Movers
Change of Address in Last 2 years (Home Loan, Personal Loan, Home Improvement)
* Indicative List
12
Credit Bureau Triggers
Activity Triggers
Utilization (Personal Loan, Dual Card)
Utilization >= 40% and at least 1 inquiry on Revolving Trade At least 2 Bank Revolving Trades with Utilization > 75% Utilization > 50% and Balance > $5,000 on Personal Finance Trades At least 3 trades with Utilization > 75%

Trend Variables (Multiple Uses)
Increase in Revolving Trade Inquiries from last 6 to last 3 months (> 0) and Revolving Trade Utilization >= 40% Increase in Open Bank Card Trades from last 6 to last 3 months (> 0) and utilization on Bank Card Trades >= 40% Increase in Bank Card Balance from last 6 to last 3 months > $5000 Increase in Mortgage Inquiries from last 6 to last 3 months (> 0)
Activity (Personal Loan, Dual Card)

At least 5 Active Bank Card Trades At least 4 bank Card Trades with bal > $500 At least 5 Active Bank Revolving Trades Increase in # of trades opened from last 12 to last 6 months > 2
Inquiries (PLCC Acquisition)

# of Inquiries on Revolving Trades>=3 # of Inquiries for Credit in last 6 months >= 2 # of Mortgage Inquiries in last 3 months > 0
* Indicative List
13
Regression
14
Linear Regression
Uses continuous values to predict continuous value. Explains variation in data using ordinary least squares (OLS). Useful in predicting:
charge-off dollars ~ balance, financial risk profile, demographics amount of claim ~ age, health risk profile, geography dollar balance ~ financial risk profile, action to account, market pressure average profitability ~ financial risk profile, price sensitivity, demographics amount of sale ~ advertising, cost, demographics
15
Implementation
16
Implementation Challenge
How do we select based on model results?

K-S Chart/ Table Lift Chart / Gains Table
What is the impact to the bottom line?

Control Group Tracking Model Metrics Maintaining Solicitation History
17
KS Table and Chart

Decile 1 2 3 4 5 6 7 8 9 0 Cum response rate 1.15% 0.96% 0.85% 0.77% 0.71% 0.65% 0.60% 0.56% 0.52% 0.48% Cumulative % of responders 24.1% 40.3% 53.2% 64.6% 74.64% 82.1% 88.4% 93.1% 97.4% 100.0% KS 14.11 20.41 23.34 24.67 24.75 22.24 18.44 13.14 7.40 0.00
Max KS 24.75 at 5th Decile. 50% Leads capture ~75% responders
100% 90% 80% 70%

70% 80% 90%
100%
Cumulative % of responders captured
60% 50% 40% 30% 20% 10% 0% 10% 20% 30% 40% 50%
10% 20% 30% 40%
60%
50%
60%
70%
80%
90%
100%
Cumulative % of Leads
18
Lift Chart
Node ID Leads % (L) Cumul Leads % Resp % (R) Cumul Resp % Cumul Resp % at base node resp rate 18.2% 24.7% 37.5% 41.8% 45.7% 64.8% 67.8% 80.5% 91.4% 100.0% Lift (100*R / L)
x.14/1.2/3 x.14/0 x.14/4 x.14/2.4/0 x.14/3.2/0 x.14/1.2/1 x.14/2.4/1 x.14/1.2/0 x.14/1.2/2 x.14/3.2/1
18.2% 6.5% 12.8% 4.3% 3.9% 19.1% 3.0% 12.7% 10.9% 8.6%
18.2% 24.7% 37.5% 41.8% 45.7% 64.8% 67.8% 80.5% 91.4% 100.0%
38.2% 10.2% 18.7% 3.8% 3.3% 13.1% 1.7% 7.0% 2.8% 1.1%
38.2% 48.4% 67.1% 70.9% 74.2% 87.3% 89.0% 96.1% 98.9% 100.0%
100% 90% 80%
210 155 146 90 84 68 59 55 26 13
Nodes (or Deciles) with Lift greater than 100 are worthwhile marketing Target the top 3 nodes in this example
250 200 150 100 50 0 -50

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Cumm Leads (%)
70% 60% 50% 40%
Cumul Resp at base node resp rate Cumul Resp % Lift
30%
20% 10% 0%
Cumm Apps (%)

19
Lift
All models are wrong, but some are useful. George Box
20

Basic Guide To Models: Confidential. All Trademarks Appearing Herein Belong To Their Respective Owners

Încărcat de

Informații document

Descriere originală:

Titlu original

Drepturi de autor

Formate disponibile

Partajați acest document

Partajați sau inserați document

Opțiuni de partajare

Vi se pare util acest document?

Este necorespunzător acest conținut?

Drepturi de autor:

Formate disponibile

Basic Guide To Models: Confidential. All Trademarks Appearing Herein Belong To Their Respective Owners

Încărcat de

Drepturi de autor:

Formate disponibile

Basic Guide to Models

Basic Guide to Models

Types and Uses of Models

Implementing Models Why Models Fail

Example: Segments Sales by Card type

Population( %) Attrition Rate (%)

Low Credit Limit 6) Senior Citizens

Home Market Value > $250K (%)

6% of the customers in the overall portfolio have a missing value

7% of the customers in the overall portfolio have a missing value Overall

Length of Residence < 2 Years (%)

Multiple Families (%)

10% Client A Client B Client C Client D Client E

15% Client A Client B Client C Client D Client E

6% of the customers in the overall portfolio have a missing value

3% of the customers in the overall portfolio have a missing value

What Behavior / Characteristics of customers can be Potential Triggers?

What kind of data can be used for identifying Triggers?

Answers the question, When to Target?

High Performers (High Sale, High Profit)

Yield Management Customer Retention

Demographic, Internal Performance

Credit Need Triggers

Credit Need Triggers

Credit Bureau Triggers

Credit Need Triggers

Activity (Personal Loan, Dual Card)

Inquiries (PLCC Acquisition)

Confidential. All trademarks appearing herein belong to their respective owners.

How do we select based on model results?

What is the impact to the bottom line?

KS Table and Chart

Max KS 24.75 at 5th Decile. 50% Leads capture ~75% responders

100% 90% 80% 70%

Cumulative % of responders captured

210 155 146 90 84 68 59 55 26 13

250 200 150 100 50 0 -50

Cumm Leads (%)

70% 60% 50% 40%

Cumul Resp at base node resp rate Cumul Resp % Lift

Cumm Apps (%)

S-ar putea să vă placă și