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Data Fusion, Data Mining, and Decision Support System: Bank Marketing in the 21st Century

Prof. Chan Chi Fai, Department of Marketing Prof. Lai Siu King, Department of Decision Science and Economics Prof. Lau Kin Nam, Department of Marketing Prof. Leung Kwong Sak, Department of Computer Science and Engineering Prof. Leung Pui Lam, Department of Statistics Prof. Leung Yee, Department of Geography

The Chinese University of Hong Kong 11 June 2001

The Introduction
by Prof. Chan Chi Fai

The Chinese University of Hong Kong

Introduction:
CUHK research project supported by : 0.7M 3.5M Strategic Research Fund, CUHK Innovation and Technology Fund from Industry Department of SAR

Hong Kongs first prominent academic/business cooperation on design and implementation of Customer Relationship Management system for financial institutions A major Bank in Hong Kong participated as industry partner to provide data for pilot system implementation since Jan 99

The Chinese University of Hong Kong

Page I1

The Study
by Prof. Lau Kin Nam

The Chinese University of Hong Kong

Contents:
Bank Marketing Objectives Marketing Technology in the Information Era CRM fundamentals Major types of Selling CRM Roadmaps
Phase 1 : Data Capturing Phase 2 : Data Cleansing Phase 3 : Data Mining Applications

CRM System Future CRM Directions

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Page S1

Bank Marketing Objectives


New customer acquisition
Cross-selling / up-selling

Increase utilization
Customer retention Win-back

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Page S2

Marketing Technology in Information Era


Technology Data Farming Data Warehouse Data Cleansing and Fusion Data Mining Database Marketing Sales Automation Description Design data capturing sytem Enhance data retrieval Convert data into meaningful information Recover hidden knowledge from the database Apply data mining results to improve sales/efficiency e.g. Siebel

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CRM Fundamentals
Customer Focus
Speed Technology
Selling by Information Selling by Relationship Selling by Automation
Page S4

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Major Types of Selling


Active Selling Event Triggered Selling
Mortgage, Personal Loan

Product Based Selling


Campaign Management

Passive Selling Customer Based Selling


By Branch By Phone By Internet

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Page S5

Phase 1: Internal Data Capturing Process

CRM Roadmap
Autopay

Employers
Salary

Banks Internet Mall

Purchases

Retail Customers

Purchases

Merchants
Card data

Browsing data

Demographics, banking transaction

Banks Raw Database

Phase 2 Phase 2 The Chinese University of Hong Kong Page S6

In-house data
A. Types:
Product Usage Data Demographics Socio-economics Transactional Data
Credit Card EPS PPS Autopay/payroll MPF

BACK

B. Problems:
Outdated Incomplete Isolated

Channel Data

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Page S7

Phase 2: Data Cleansing

Phase 1
Standardization of data and format Identification of household relationship

Various classification schemes to convert data to useful information

update
Customer Survey

Enriched Database

fusion

External databases

Validation

Solving missing value problems

Analytical and statistical models

Phase 3

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Example:
Address standardization:
Unformatted: 4/F., K.K. Leung Bldg., ShaTin, N.T. Formatted: Room no.

Floor
Building Street

District

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Example:
Name standardization:
Unformatted: Andrew C.F. Chan

BACK

Formatted:
Last Name First Name Christian Name

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Example:
Mr. Chan Tai Man
Sex :M Age : 32 Tel. : 26096000 Address : 25, 5/F., CRM building, Sha Tin, NT.

BACK

Miss Lee Mei Lai


Sex :F Age : 28 Tel. : 26096000 Address : 25, 5/F., CRM building, Sha Tin, NT.

Couple
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Example:
Job Classification
Address Classification Life-stage Classification Credit Card Merchant Classification SME Classification

BACK

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Page S12

Example:
Census
Property transaction database

BACK

CRE (Central Registration Establishment) TDC (Trade Development Council)

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Page S13

Survey:
Contact information
Phone, Business address, Email, Website

BACK

Updated demographics
Marital Status, Number of dependants, Spouses information

Socio-economics
Job, Income, Property ownership, Car ownership

Product Interests
UT Insurance Deposit Yes Yes Yes No No No
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BACK

Enrichment Examples:
Signal ATM withdrawal from race-course ISP payment from credit card School payment Change of address Enrichment variables: Gambling Internet user Age and number of kids Buy/sell property

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Example:

Age MS Edu level Industry Address Income

: 30 : Married : College : Banking : 3A, Blk. 5, Island Harborview : $35,000

Age MS Edu level Industry Address

: 29 : Married : College : Banking : 6B, Blk. 2, Island Harborview


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Income(?) : $35,000 2000

BACK

Integrated Database
Category Variables
Contact Information e.g. Address, phone (Business/home), E-mail, website Demographics Socio-economics Household Information Relationship Variables e.g. Age, sex, marital status, Life stage e.g. Income, job, education, property ownership, car ownership, social class e.g. Household Income, Numbers/Age of dependants, Spouse information e.g. Overall tenure, product tenure, past profitability, No. of product

Product Ownership/ e.g. RFM (card), Deposit, Loan, UT, Insurance Usage
Channel e.g. Branch, ATM, Phone, Internet

Behavioral variables e.g. Gambling, Travel, Degree of Luxury, Life-style, Risk attitude
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Phase 3: Data Mining


OLAP (query)

Next part

Phase 2
Customer and product segmentation

Marketing campaigns
Prediction model

Integrated Database ready for mining


Customer based selling 1. Cross selling opportunity 2. Channel 3. CLV and ROI
Extract internal and external signals

New customers analysis

Attrition Analysis

Customer retention

Cross selling by branch, phone, internet

SWOT on each customer segment and product

1.Acquisition criterion 2.Increase utilization

Attrition pattern and signals

Event driven selling

Targeting, positions, pricing, bundling

Cross Selling Plan

Strategic Marketing Plan


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Segmentations:
1. By occupation 2. Prizm scheme =
Lifestage Address class
Single Married Married with kids Retired

Public

Private Luxury housing

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Page S19

Segmentations:
3. by shareholders variables
Profitability
Low Medium High

BACK

New

Tenure

13

3+

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Page S20

Current Basket

Name Age Sex Edu

: Liu Wai Chuen : 24 : Male : College

Future Basket

Credit Card Deposit

Mortgage UT

Current and Past Value

Future Value

Page S21

BACK

Future Value
Low High Let go/stay High Retention / Loyalty Program

Past Value
Low De-marketing Aggressive selling

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Page S22

Campaign Management:
Potential Customers in the Database

BACK

Past Campaign Results Adopters

Selected

Selected

Non-Adopters

Page S23

CRM System:
Data Capturing

Data Retrieval
Data Analysis Data Application Sales Execution and Automation
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A Comparison:
Before CRM:
Selling a good product by Advertising Personal Selling

After CRM:
Selling a good product by Information Relationship Automation Customer Based Selling

Product Based Selling

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Page S25

Future CRM Direction

1. Customer Driven Organization


Customer Segment 1 Customer manager Segment 2 Segment 3

Value Equity Officer (Price, Convenience, Quality)

Retention Officer (Loyalty Program, Building Relationship)

Brand Equity Officer

(Brand Awareness)

Modified from: Driving Customer Equity, (Rust Zeithaml Lemon), 2001

Page S26

Future CRM Direction

2. Product and Service Diversification

Banking Products

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Page S27

End of Presentation

*There would be a Q & A session after the coffee break.

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Page S28

Coffee Break
Venue Time : 1/F Foyer : 10:45 a.m. 11:15 a.m.

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