James Mendelsohn of Capital One, with over 50 million customers and $180 billion in managed loans, gave a presentation entitled “Measure, Manage and Maximize Your Return on Customer Investment.” Capital One invented the credit card balance transfer; commonplace now, but an innovation when they first did it.
With 50 million customers, they are looking for ways to extend relationship with them into other financial services, where they are the 11th largest player in the nation. They see themselves as big enough to compete and change the game, but not so big and vested in the status quo that they won’t. For example, Bank of America has 10 times as many retail branches, so they have to make retail branches part of their strategy. Capital One doesn’t.
First innovation: smashing the cost of credit from an almost universal 19.8% to an average of below 10 percent. Another: the blank check for auto financing, taking the hassle out of buying a car so people don’t have to do dealer financing.
Financial services is attractive for innovation because it is huge and profitable, has an attractive industry structure, and ripe for reinvention because of negative customer feelings and the ability to create electronic/virtual products.
Consumer lending businesses are consolidating nationally, with for example 90 percent of credit card share in the top 10 players. It’s less consolidated in other segments, but the trend is toward consolidation.
One key point was that by de-averaging results from a marketing test, you can actually see places where a test that appeared to have “failed” vs. the control was in fact successful. This suggests that targeted media/social media and retailers groups would enable marketers to focus on groups that would be profitable.
For example, one retailer’s customers may be more loyal, bigger monthly spenders and more inclined to cash rewards points. Understanding this can help marketers tailor product offerings.
For call center customer satisfaction, in the final example, the location of the call center (U.S. or outsourced) made no difference in satisfaction scores. What mattered was the type of call. They use a robust data model to see what things matter for resolving problems (e.g. late payment fee waivers) to create more long-term, satisfied customers who will stay with the company.
I guess that’s why the phone system always says, “Your call may be monitored for quality control purposes.” They probably really are using them for marketing analysis.
Good presentation; James obviously needed to keep some of the data confidential because of competitive concerns, but he gave a good introduction to model-based, data-intense market segmentation.