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W H I T E PA P E R

Big data in banking


for marketers
How to derive value from big data

B NK
2020 PAGE 1 INNOVATION L AB
INNOVATION L AB
FOREWOR D

In Marketing & Sales the main strategic goals are to acquire new customers, develop as well
as to retain existing ones. Financial service organizations generate huge amounts of data such as
purchase history, profile data, browsing history or social media data every single day. Used in a wise
way, marketers can employ data analytics to reach their main marketing objectives more efficiently.

During the last years Big Data has become the buzzword across various industries, but it is difficult
to know exactly what Big Data can do to improve business value and which Big Data applications
marketers should consider to invest both their time and money in.

Our goal in this paper is to show a comprehensive list of data-driven use cases and their value, which
are deployed by successful marketing teams today. Each use case is chosen for its relevancy to the
banking sector and is backed by case studies from real organizations.

We hope you enjoy reading it as much as we enjoyed making it.

Big Data Research @ EVRY

INNOVATION L AB
D EF I N I TI ON

THE DEFINITION
O F B I G D ATA

One of the key problems initially faced with any Big Data research is that the term itself is highly
ambiguous and a quick Google search reveals millions of pages each with their own spin on the
definition of Big Data. This can lead to misunderstandings when talking about the topic. To avoid
any confusion we outline our own Big Data definition right here:

Big data was born out of the necessity of data sets growing so
large and complex that traditional tools are no longer sufficient
to process this data. By aggregating large amounts of data from
many different sources makes big data very powerful for business
decision-making, revealing insights and behaviours faster and
better than otherwise possible with traditional BI.

INNOVATION L AB PAGE 1
I NT RO D U C T I O N

THE TRENDS OF

D ATA A N A LY T I C S
Big Data has been making all the headlines analysis of large and semi-structured data. value potential even further. Combining and
over the last few years, but it is just one data Hadoops ability and flexibility to handle processing all this internal and external data
trend in a long line that appear every decade. increasingly complex data has unlocked was simply not possible using traditional
The difference between these data analytic new opportunities for extracting value and management and analytical tools before the
developments is blurred at best, but the business insights from potentially massive age of Big Data.
underlying technology does appear to give amounts of organizational internal data. Big
some distinction between the old and the Data has also allowed the possibility to enrich
new trends. The technology behind Big Data this internal data with equally vast amounts
is undeniably Hadoop, a software ecosystem of semi-structured external data from public
designed to allow the query and statistical sources and social media, maximising data

OL AP BUSINESS ANALYTICS BIG DATA


INTELLIGENCE
Multi-dimensional St atistical and L arge, semi-
dat a t ables Dat a driven mathematical struc tured dat a
decisions and analysis
repor ting tools

1997 2000 2010 PRESENT

PAGE 2 INNOVATION L AB
I N T ROD U C TION

DATA T ECH NOLOGY SI ZE


The data can range from structured to Technologies such as the Hadoop ecosystem Big data invariably contains large amounts
completely unstructured. Often it has a have been designed from the ground up to be of data, but how much is large? There are no
lot of metadata attached, which can be as able to handle large and complex data, which straight answers, but if the amount of data is
equally useful as the data itself. The scope of are the key features of Big Data. What makes breaking traditional systems and Hadoop is
data sources can be especially large, across Hadoop particularly powerful is its ability to needed to be used, then it is Big Data.
enterprise databases and internet channels. linearly scale with increasing data complexity,
making it an almost invaluable tool in any Big
Data application.

T H E AT T R I B U T E S O F

B I G D ATA
INNOVATION L AB PAGE 3
S O M E WO R DS O N H OW TO U SE T H I S W H I T E PA PE R

The following pages will outline different Big Data use cases relevant for marketing managers in
the banking industry. This is designed in a way that areas of interest can be found easily without
reading from the first until the last page. Every use case will first summarize the top uses of the Big
Data application before each one is explained in more detail. In this booklet we try and focus on Big
Data company examples, however traditional data analytic cases have been included because of
their relevance or because they offer a high data to value potential.
The whitepaper is supposed to be a quick and easy read, therefore icons are used for the different
algorithms explained.

Look out for these symbols for the algorithms:

D ECI SI ON T RE E S CLU ST E R IN G T E XT A N A LY T I CS NE U R A L L I NK A N A LYS I S S U RV I VA L


& RANDOM NE T WO R K S A N A LYS I S
FORE STS

PA GE 55 PAG E 5 6 PA G E 5 7 PA G E 5 8 PA G E 5 9 PA G E 6 0

PAGE 4 INNOVATION L AB
CO NTEN TS

1 2
5 U S E C A S E S TO

ACQU IR E
CUSTO M ERS

D E V ELOP
CUSTO M ERS SENTIMENT
ANALYTICS CUSTOM ER 3 6 0
RE TA IN
CUSTO M ERS Monitor what customers say Identify the customer profile
to increase marketing success Understanding the product
Identify key customers engagement of the customer
to boost word-of-mouth Detect when a customer
marketing is about to leave
Examine customer feedback
to improve products and
services

PAGE 7 PAGE 15

INNOVATION L AB PAGE 5
CO NT E NTS

3 4 5
CU STO M ER NEXT BE ST CH ANNEL
S EG M E NTATI O N OFFER JOU R NEY
Design targeted marketing Enhancing loyalty through Provide more relevant content
programs targeted offers in the preferred channel
Creating loyalty programs Increasing product Recognise multi-channel
based on card usage habits prospensity behaviours that lead to sales
Optimize pricing strategy Product bundling to uplift Measure marketing
Build relationships with revenue effectiveness across channels
valuable customers

PAGE 23 PAGE 33 PAGE 41

PAGE 6 INNOVATION L AB
SEN TI MEN T ANALY TICS

USE CASE

1 SENTIMENT
A N A LY T I C S
Social media has opened new avenues and
opportunities for organizations to connect
with their customers, but the sheer volume
of communications about brands, products
and services; discussed, shared, criticised
or liked on different social platforms can be
overwhelming. Sentiment analytics helps to
rapidly read all this data, providing an executive
summary of what people like and dont like
about a company brand or products. The
reasons behind the sentiment can then be
easily extracted, providing valuable business
insights.

INNOVATION L AB PAGE 7
SE N T I M E NT A NA LYT I CS

TO P U S E S
F O R S E N T I M E N T A N A LY T I C S

1.1 1.2 1.3


M O N I TO R W H AT CUSTOM ERS IDE NTIFY KE Y CUSTOME RS E XAMI N E CU STO M ER
SAY TO I N CR EA SE M A R KETI NG TO BOOST WORD- OF- MOUTH FE E DBACK TO I M PROV E
S U CC E SS MARKE TIN G P RODU C TS AN D S ERV I CE S

Meaningful data includes opinions, feelings The right sentiment analysis tool can also Many consumers freely give feedback and
and attitudes about a brand, topic or keyword, identify the most influential customers product suggestions on social media websites.
which are shared freely in the world wide regarding company brands or products. It Big Data technologies can be used to identify
web. Knowing the opinion and attitude of the enables to engage with the right people who those valuable consumer insights to improve
customers offers profound knowledge in order will spread the word and has much influence on products and services much faster than with
to adjust marketing tactics correctly. a social platform. Exactly those key customers traditional surveys, which only portrays a small
are critical in order to fulfil the goals for a sample group at one specific moment in time.
successful acquisition strategy.

PAGE 9 PAGE 11 PAGE 13

PAGE 8 INNOVATION L AB
1.1 SEN TI M ENT ANALY TICS

M O N I TO R W H AT C U S TO M E R S S AY TO
I N C R E A S E MAR KETING S UCCE SS
Sentiment analytics or opinion mining offers With the help of sentiment analysis it is possi- a large team to give an executive summary and
a deeper understanding of the crowd. It gives ble to understand the sentiment of customers insights hidden amongst the data.
a focus group of millions of customers that and know what they say about new products,
can be tracked, revealing insights in how they services, branding or commercials. Sentiment
think about a certain topic. analysis uses natural language processing and
text mining techniques to read vast amounts of
information that would be impossible for even

BBVA offers a wide range of finanical and non The car manufacturer Kia Motors is always Nedbank Ltd is a large bank in South Africa
financial service products to its approximately eager to find out what customers think and say that realizes great advantages by using social
47 million customers across 30 countries. about their cars. The company uses sentiment media analytics. Analysing various social
BBVA uses social media to determine how analytics tools to detect what is said about the media platforms in almost real-time provides
customers feel about their brand and their brand and products on various blogs, Twitter Nedbanks marketing department information
products. and Facebook. about the marketing campaign, customer
preferences and complaints.
This information is used to adjust marketing For example: Big Data technology has enabled
tactics in order to increase positive feedback the marketing team to examine the power of This technology implementation has
and customer satisfaction. BBVA can then an advertisement spot during the Super Bowl decreased social media monitoring costs
report the success of its media messaging and game, based on the reactions on social media significantly while enhancing marketing
the causes for positive and negative sentiment platforms. success.
can be identified.

INNOVATION L AB PAGE 9
SE N T I M E NT A NA LYT I CS 1.1

HOW
Sentiment analytics is simply the study of be humanly impossible or highly impractical (1). This scoring allows an organization to view
customers sentiment towards any object of to read all the comments in the social sphere to overall sentiment without having to read all
interest. Sentiment analytics is typically done on review sites and blogs to assess customer the comments posted about their products or
over a period of time to measure the success sentiment, text analytics algorithms, such as brand.
of a brand campaign or how rival brands are nave Bayes, are ideal for this type of problem.
perceived compared to another company. Most Nave Bayes can analyse document on its level A LGORITHM S*
data available to an organization to measure negative and positive sentiment and produce
customers sentiment will be available in text a score typically in the ranges from highly
format such as from social media. As it would negative (-1) to neutral (0) to highly positive *See page 52 for Appendix

DATA
An easy source of customer sentiment is from
the social sphere, including social networks,
blogs and review sites. This data is naturally
unstructured and dynamic as new text is
generated continuously. This data is then
suited to measuring sentiment over time
such as before and after an organizations
branding efforts. Internal data gathered from
past consumer surveys and call logs may also
provide a good source to measure the customer
sentiment towards particular products.

PAGE 10 INNOVATION L AB
1.2 SEN TI M ENT ANALY TICS

I D E N T I F Y KEY CUSTOMERS
TO B O O S T W O R D - O F - M O U T H M A R K E T I N G

By targeting customers with high influence, A great product should sell itself in an ideal this can pose a problem. New products need
product awareness can be rapidly increased, world, but even in our world this still holds true a method to kick-start the product awareness
since word-of mouth recommendation is still to a certain extent as word-of-mouth is a very amongst influential customers who are likely to
the most trusted form of advertisement. powerful tool in the marketing arsenal. It works build up a momentum of interest amongst the
great for an established product with an already potential customer base.
entrenched fan base, but for new products

The Ford Fiesta was a big hit in Europe in 2010, Starbucks is something of a pioneer when T-Mobile understands that customers can
but had yet to break the American market. To considering the importance of influential sometimes behave like dominoes. It only takes
help maximise the launch of the Fiesta in the customers. Almost all Starbucks advertising one highly influential customer to switch to
USA, Ford identified 100 of the most influential is done by word-of-mouth and even new another network provider before large numbers
bloggers and recruited them into its Fiesta product ideas are generated by the customer of customers follow in their wake. To try and
Movement campaign, where they were each base using the mystarbucksideas.com portal. find out who the valuable high influential
given a Fiesta and missions such as driving to customers are, T-Mobile uses a mixture of
music festivals. This approach generated a lot customer influence scoring and customer
of buzz around the car at a much lower cost value KPIs to build an influence profile of each
than a traditional television-centred method. customer. T- Mobile can then target these
customers for special attention and take
appropriate actions.

INNOVATION L AB PAGE 11
SE N T I M E NT A NA LYT I CS 1.2

HOW
If highly influential customers are already Link analysis and graph theory can provide an awareness or customers may also be flagged
known, such as those that have been flagged accurate measure of reach by finding which for special attention.
for a high number of referrals then decision customers act as nodes in the wider social
trees can be used to determine the most network. Decision trees can then be used to
important attributes of an influential customer. evaluate the level of interaction this customer
If this information is unknown, the influence has with others. Often each customer is then A LGORITHM S*
of customers in the social sphere can be provided a leadership score, with high scoring
determined by a combination of their reach and leaders offered to try out new products,
level of interaction they have with other people. services or features to spread the product *See page 52 for Appendix

DATA
Internal customer profile may reveal which
customers or clients give a high number of
referrals. This database may also contain the
attributes that can be used to determine if the
customer is influential, such as demographic
information. Link analysis strongly depends on
highly unstructured social network data and
data from third party blogs and review sites.

PAGE 12 INNOVATION L AB
1.3 SEN TI MENT ANALY TICS

E X A M I N E CUSTOMER FEEDBACK
TO I M P R O V E P R O D U C T S A N D S E R V I C E S

Many products and services can be easily Traditional market research tools like customer media networks and logs, helping to improve
improved, if a direct communication with surveys or focus groups are not only time and products and services promptly.
customers exists. Social media platforms are cost consuming, they are also not accurate
great sources of communications to discover since the sample group is rather limited.
improvement opportunities, banks just need Sentiment analysis tools make use of huge
to filter these insights out from the torrent of amounts of communication data from social
information.

Barclays was able to derive actionable insights The computer manufacturer Dell improves its Intuit, an American company that provides
from real-time social media analytics after they products based on sentiment analytics, which a tax service software called Turbo Tax uses
launched their new mobile banking app. enables the company to listen carefully to its sentiment analytics to improve its product
customers on the world wide web. continuously. Tax season only lasts a hundred
The app did not allow young consumers under days, and we measure [customer attitudes
18 to transfer or receive money. This created Negative feedback about overheating on to TurboTax] every day, using what we hear to
negative comments from teenagers as well as a newly released laptop helped them, for drive improvements all the way to April 15. We
from their parents as they could not transfer example, to overcome the problem quickly and dont have time to go through all the customer
any money to their kids. After the data revealed to create a better product for future customers. comments manually, so we need a sentiment
this problem, Barclays improved their app analysis tool that we can rely on and trust.
promptly, adding access for 16 and 17 year-
olds.

INNOVATION L AB PAGE 13
SE N T I M E NT A NA LYT I CS 1.3

HOW
Nearly all sources of customer sentiment will The top 5-10 words that lead to negative or
be available in a text based format, either from positive sentiment can then be extracted from
social media networks or comments written by the Nave Bayes algorithm for each product
staff in call centres and brick and mortar stores. and service. These key words may provide
The Nave Bayes algorithm is an extremely insight on how the product can be improved.
popular method for classifying text and For example the word time might be flagged A LGORITHM S*
documents and is well suited to finding positive for a service, which can then form the basis
and negative sentiments amongst a customer of an investigation of why time is causing this
base. Once these sentiments are found, they service to underperform. *See page 52 for Appendix
can be filtered based on product or service.

DATA
The social sphere including the own Facebook
homepage and twitter can form the basis of
data source for customer sentiment. Twitter
is particularly useful as its openness allows to
search all tweets across the entire network
rather than those just on the homepage.

PAGE 14 INNOVATION L AB
CUSTOMER 360

USE CASE

2 C U STO M E R
360
Understanding the customer as a whole is
important to stay ahead of competitors.

There are several important aspects to


consider when developing a 360-degree
customer-view. The past and immediate
customer behaviour is important to predict
future customer trends and what their most
likely next action will be. The customers
transactions and travel habits are also
important to build a lifestyle profile and discover
new insights. These are just some customer
attributes that are used to build a complete and
holistic customer picture.

INNOVATION L AB PAGE 15
CU STO M E R 3 6 0

TO P U S E S
F O R C U S TO M E R 3 6 0

2.1 2.2 2.3


I D E N T I F Y T H E CU STOM ER UN DE RSTAN DIN G THE DE TEC T W HEN A CU STO M ER
PRO F I L E P RODUC T E NGAGE ME N T OF IS ABO U T TO L EAV E
THE CUSTOME R
Knowing the customer profiles means having Understanding how consumers are using a Analysing customer behaviour is not just
a deep understanding about them, which specific product and then making decisions reviewing past historical purchases, but a
can be used to drive actionable insights. This accordingly makes a big difference. With the tool to forecast future actions and trends of
can lead to improved marketing campaigns, help of Big Data analytics companies can find customers. By predicting customer behaviour,
targeted sales and better customer service. A out how engaged a consumer is with a product. insights can be revealed to stop churn before it
clearer view about the customer profile enables This can help to send the correct marketing is too late.
companies for example to send out triggered message and product when the customer
messaging, which is a good way to reinforce the needs or wants it most.
brand and target customers.

PAGE 17 PAGE 19 PAGE 21

PAGE 16 INNOVATION L AB
2.1 CU STOM ER 360

IDENTIFY THE
CU STO M E R P ROFILE

Knowing the individual profile of the customer Personalization within marketing messaging fraudulent marketing messages. More
allows to send out personalized marketing can be used to achieve a number of goals. This ambitious personalization would be to add
messages. A small touch of personalization might be as simple as being more friendly by personalized content within the message that
can improve customer engagement, security adding the customers name to the start of would directly interest the customer increasing
and loyalty. the message or by adding customer details its engagement.
only the organization would know to prevent

HDFC Bank uses customer lifecycle events to HMV, a British entertainment retailing company OCBC is currently the largest local bank by
boost credit card activations. This is achieved realized that sending the same campaign market capitalisation in Singapore and operates
by targeting promotions with personalized message to all its customers is not appropriate in 15 countries world wide. By responding to
messages to each of the lifecycle segments anymore, as people start treating emails as the customer actions, personal lifetime events
that HDFC had identified. spam and do not open them. The company and demographic profiles OCBC Bank is able to
uses a recommendation system, which achieve higher customer engagement and to
The result of this is a significant increase in analyses customer click streams and which increase customer satisfaction by 20% com-
the number of credit card activations and products fits the customers preferences. HMV pared to a control group.
a reduction in cost per acquisition of each sends out personalized recommendations,
customer. which increased the emails opening by over
70% on mobile phones, and PC mails by 50 %.

INNOVATION L AB PAGE 17
CU STO M E R 3 6 0 2.1

HOW
Classification algorithms such as neural or products that may be of interest to the being advertised. Together these algorithms
networks or decision trees can be used to customer. Recommendation engines using provide powerful insights into how a customer
help determine what content the customer algorithms such as linear regression and will respond to a marketing message.
may or may not be interested in. These may nearest neighbours are used to compare
be lifestyle choices like if the customer is a customers to their peers in a similar fashion
A LGORITHM S*
frequent traveller or life stage events such to the HMV example. This can also be
as is the customer a student. This enables combined with logistic regression to measure
the campaign manager to selectively add the probability that a customer will click an
*See page 52 for Appendix
information from the organizational blogs advertisement in the context of the product

DATA
Customer profile is primarily used to add
personalization to marketing messages. This
includes the customers demographics such as
their post code and their name. Transactional
data may also reveal the customers interests,
which can be used to help add relevant
information to the marketing messaging.

PAGE 18 INNOVATION L AB
2.2 CU STOM ER 360

U N D E R S TA N D I N G
T H E P RO DU C T ENGAGEMENT
O F T H E C U S TO M E R

How the customer uses or doesnt use a Understanding where the customer is in the customer. A customer about to churn would
product can be a sign on how to adjust the product lifecycle can have significant impact on make a better candidate for retention offers
marketing message. the type of marketing communications that is than a loyal customer. Big data can help to
used. For example customers in the acquisition identify in which stage of the product lifecycle a
stage are more susceptible to marketing and customer is in and helps to adapt the message
product research messaging than an ingrained accordingly.

The First Tennessee Bank uses product Also Bank Austria makes use of understanding The retail company Jeanswest knows their
lifecycle stages such as loyal customers, high the product lifecycle to retain their customers. customer engagement well and sends out
value customers, apprehensive customers When a customer shows specific behaviour appropriate offers. For example frequent
and wavering customers to name just a few connected with cancelation of a product, the shoppers receive a thank you offer to show
key segments. For example, re-engagement banking staff detects this and takes according them they are valued, new customers get
messaging may be useful for past high value actions for a renewal. a welcome offer and irregular shoppers are
customers who havent been in contact encouraged to shop again at Jeanswest.
with the bank for a while. Loyal and engaged
customers may prefer more VIP offers.

INNOVATION L AB PAGE 19
CU STO M E R 3 6 0 2.2

HOW
The product lifecycle can be broken into three be taken into consideration as they are likely
broad categories, acquisition, activation and to move between channels as their lifecycle
relationship management. Analysing how often develops. Nearest neighbour and linear
the customer interacts with the company can regression can also be powerful tools on
be a good indicator of which group they belong classifying the customers to product lifecycle
to. This is simply a classification problem, which stage by comparing them to their peers. A LGORITHM S*
can be solved either using neural networks
or decision trees. The customers interaction
across multiple channels would also need to *See page 52 for Appendix

DATA
To accurately assign a product lifecycle stage
to a customer, profile data and transaction
data is needed to determine how they use
the products. Metrics such as customer
engagement can be gained from this data.
Recent clickstream URL referrals and cookie
data gives information if the customer is in the
research stage of the product cycle.

PAGE 20 INNOVATION L AB
2.4 CU STOM ER PROFIL E

DETECT
W H E N A CUSTOMER IS
A B O U T TO LEAV E
Predicting which customers will churn Retaining consumers is easier when an different indicators, potential customer churn
should form a crucial part of an organizations organization understands the customer in can be identified before it is too late.
customer orientated strategy as the cost of a holistic way. Indicators that might point to
acquiring new customers is far greater than attrition can be cancellation of automatic
the cost of keeping the existing customers. payments, customer complaints on customer
calls or on social media. By analysing the

American Express is using sophisticated Tatra Bank, Slovakias first private bank has Customer data of T-Mobile USA includes the
predictive models to analyse historical nearly reached its target of decreasing time and lengths of call, internet usage or peak
transactions and 115 variables to forecast customer churn from credit card holders by times for direct messaging. T-Mobile USA takes
customer churn. The company believes it can 30 percent with the use of predictive models. advantage of this data to prevent customer
now accurately identify 24% of accounts within The bank segments their customers and churn. An example of this is billing analysis,
its Australian branch that will close within the has selected highly personalized retention where the product usage is calculated. If the
next four months and can take according steps campaigns for their customer groups. frequency of calls to contacts who are using a
to prevent them from churning. new providers are increasing this could imply
that friends or family are switching providers,
and the customer might possibly do so as well.
By identifying these customers T- Mobile USA
achieved to decrease their churn rate by 50% in
just one quarter.

INNOVATION L AB PAGE 21
CU STO M E R PRO F I L E 2.4

HOW
Customer churn can be modelled in a number important when predicting churn. This can may reveal that churn is different amongst
of ways, but a popular method is to use a be invaluable information when asking why older customers and younger customers and
random forest or decision tree approach. The customers are churning and not just who will so a different model should be used to model
output of such algorithms is typically a churn churn. Survival analysis is another popular churn between these two customer segments.
score or a probability that a customer is likely approach to predicting when customers
to churn. The advantage of these algorithms will leave and is a powerful tool in predicting
is that they can handle a wide array of fields increase and decreasing hazards in customer A LGORITHM S*
and data types that all might contribute to survival. The advantage of using survival
the churn of the customer. These algorithms analysis is that it is easy to compare different
also intuitively show which fields are the most customer segments across a time series. This *See page 52 for Appendix

DATA
Customer profile and transaction data can
be used to analyse how the customer is using
the product, which in turn can be used as
behavioural indicators of potential churn. Social
data from sentiment analysis may also indicate
if particular segments are unhappy with an
organizations service and are likely to churn.

PAGE 22 INNOVATION L AB
CUSTOMER S EGMENTATIO N

USE CASE

3 C U STO M E R
S E G M E N TAT I O N
Segmentation is simply dividing the
customers into natural groupings that share
similar characteristics or behaviours.
Understanding these groups is necessary to
find needs and wants, that forms the basis for a
sales & marketing strategy.
The concept of segmentation is not new and
frequently used in companies, but Big Data
facilitates to create sharper segments faster.
It helps to see the existing customer base
in new ways, which creates unique business
opportunities.

INNOVATION L AB PAGE 23
CU STO M E R S EG M E NTAT I O N

TO P U S E S
F O R C U S TO M E R S E G M E N TAT I O N

3.1 3.2 3.3 3.4


DE S I G N TA RG ET ED C R EAT IN G LOYA LT Y OP T I M I Z E P R I C I N G BU I L D R E L AT I O N S H I PS
MAR K E T I NG P RO G R A MS P RO G R A M S BA S E D O N ST R AT EGY W I T H VA LUA B L E
C A R D U SAG E H A B I TS CU STO M E RS
Big Data segmentation allows to Accurately defining segments Knowing how much a segment With the help of Big Data,
see how customers are really using enables banks to provide highly is willing to pay for a product or profitable market groups can be
products and what issues they personalized cash back offers service is a key business strategy identified and given preferential
care about most. This enables with vertical partners such as food for many companies. Big Data treatment to strengthen customer
companies to discover segments stores, retail or travel companies. segmentation allows to find more satisfaction. Segmentation
that have traditionally been This can significantly increase card of these groups and their price also reveals the attributes of a
underserved. Highly optimized loyalty and card usage. willingness, creating a sliding scale profitable person, enabling banks
marketing messages for each of optimized pricing strategy for the to target high profit potential
the groups can then be developed, customer base. customers.
creating greater resonance with
customers.

PAGE 25 PAGE 27 PAGE 29 PAGE 31

PAGE 24 INNOVATION L AB
3.1 CU STOM ER S EGMENTAT I O N

D E S I G N TA R G E T E D
M A R K E T I N G P ROGR AMS

Targeting the right market groups with customers groups based on lifestyle, life stage an organizations segment that may have
the right offers can significantly increase and special events. This allows for new and historically been underserved or ignored.
marketing effectiveness. more representative cohorts of a customer Once these groups have been discovered, new
base that reveals the needs and wants with customers can be classified into an appropriate
Big Data analytics is able to consider aspects far greater accuracy. The information provides section in milliseconds opening up new
beyond traditional segmentation of customer a marketing team the opportunity to design opportunities in real time advertising.
age and martial status and predict the more personalized marketing programs to

By segmenting Bank of America is able to First Tennessee Bank combines their BBVA makes use of understanding the
remove its assumptions about its customers. knowledge on segments with real P&L data customer lifecycle to target the right offer
This led to a change in its marketing message to improve its marketing effectiveness, to the right customer. The bank groups
from Use the value of your home to send concentrating on programs that deliver the consumers according to life stages, such as
your kids to school to Use the value of your maximum ROI. Better targeted marketing singles, independent professionals, young
home to do what you always wanted to do and programs has led to a 3,1% higher response families and retirees.
increased conversion rates tenfold. rate and marketing costs could be decreased
by almost 20%. This information is than used to serve this
segment accordingly with the appropriate
marketing message and products.

INNOVATION L AB PAGE 25
CU STO M E R SEG M E NTAT I O N 3.2

HOW
The problem of targeted advertising campaigns found a large cluster of customers that had
is finding out what the customer really cares both home equity loans and their own business.
about. This is not a trivial problem, as it requires It took further research to identify this pattern
the use of clustering algorithms to find the was caused by customers using home equity
meaningful patterns within the customer data to build their businesses. In this example the
and then human intuition to link these patterns K- means clustering algorithm was used, which
to real customer behaviours. For example, in the is likely the most popular algorithm for this type A LGORITHM S*
Bank of America case, data was taken from the of problem.
customers in the target demographic who had
home equity loans. From this data researchers *See page 52 for Appendix

DATA
All customer data can be used for cluster
analysis, but better results if the data
is truncated to a particular customer
demographic or product users. An example
would be to investigate students that
use savings accounts. For that the retiree
demographic would not add any meaningful
insights.

PAGE 26 INNOVATION L AB
3.2 CU STOM ER S EGMENTAT I O N

C R E AT I N G LOYALTY P ROGR A MS
BASED ON USAGE HABITS

Customers can be readily grouped according purchasing habits can reveal lifestyle segments rebates at supermarkets and gas stations.
to their card usage habits, which can be used such as fashion conscious-, family orientated-,
to offer them more personalized loyalty or travel oriented groups.
offers. This allows for a marketing team to design
loyalty programs with vertical partners around
Segmentation based on general transaction what their customers really want. For example,
data such as purchase frequency and family orientated customers might appreciate

Singapore Citibank offers customer discounts The Royal Bank of Canada (RBC) designs its Bank of America is employing targeted
at retailers and restaurants based on the loyalty programs based on its customers card marketing programs to increase the card usage
customer transactional patterns. By offering usage habits. This allows the bank to offer their of its customers through its Bankamerideals
this service, Singapore Citibank has a significant customers tailored products, including gifts loyalty program. The Bankamerideals loyalty
increase in its card usage loyalty, retention and for pets like carriers, dog feeders and doggie program includes tailored customer-centric
overall improvement of customer satisfaction. loungers. rewards and charity-of-choice donation.

INNOVATION L AB PAGE 27
CU STO M E R SEG M E NTAT I O N 3.2

HOW
To design effective loyalty programs banks clusters based on meaningful patterns, it took
need to know what their customers consider human intelligence to link these clusters to
important. A clustering algorithm, such as the underlying customers behaviour. These
the popular K-means clustering, helps solve clusters can then form the segments of A LGORITHM S*
this problem by uncovering meaningful your loyalty based programs, maximising the
patterns amongst the customers profile and effectiveness of the loyalty program with each
transactional data. Examples of behavioural segment. *See page 52 for Appendix
clusters using a banks transaction and profile
data include telco users, family man, fashion
ladies, etc. Although the algorithm found these

DATA
Transaction data is primarily used for this use
case, but customer profile data can help narrow
the aim is to design a loyalty program for a
particular demographic.

PAGE 28 INNOVATION L AB
3.3 CU STOM ER S EGMENTAT I O N

OPTIMIZE
P R I CI N G -STR ATEGY

Knowing what customers are willing to pay Taking advantage of data-driven pricing pricing elasticity for each segment. Certain
for a product or service can be a complex strategies needs technology that can capture segments might receive automatic exception
task, but the rewards of accurately predicting and manage large customer data sets, breaking pricing, or will get offered an alternative product
their maximum price point can significantly it down in different segments based on the at a more competitive price point. These
increase ROI. customers willingness to spend on a product strategies are critical in order to maximize
or service. Banks can identify the right pricing profitability and ROI on the existing portfolio.
levels for these customers by identifying the

Customer segmentation for an optimized Ethiad Airways, which carries over 10 millions Fifth Third Bank uses analytics-based product
pricing strategy is widely used in the tourism passengers annually is using Big Data to pricing engine to help acquire new customers.
industry for example by airline companies or optimize their pricing strategy. They have Using data analytics the bank can run scenarios
tour operators. Airlines, such as Ryanair use achieved this by making use of their frequent on how various price points will influence its
algorithms to segment customers to optimize flying programme to develop strategic pricing. customer acquisition and deposit levels. For
their ticket price, maximising their ROI without By examining the frequent flying behaviour, example, the bank can make price predictions
being perceived as being too expensive. This the company can improve pricing by tracking when interest rates will rise in the future and
enables Ryanair to stay competitive whilst upgrade frequency and other transactions. make scenarios where it wants to be with rates
maintaining their low cost ticket mantra. in the market to be aggressive in attracting
customers.

INNOVATION L AB PAGE 29
CU STO M E R SEG M E NTAT I O N 3.3

HOW
Segmenting customers based on price be assigned an optimal price to maximise
discrimination is initially a clustering algorithm ROI. Once these clusters are identified and
problem followed by a classification problem. assigned a price, a classification algorithm such
Clustering can first identify the spending habit as a decision tree is then needed to assign
of certain groups, lifestyles or demographics customer prospects to one of the clusters.
of customers to calculate their willingness Using a classification algorithm post clustering
to spend on certain products. Such clusters prevents the need to continually recalculate the A LGORITHM S*
calculated from banks data include, heavy clusters with every new customer prospect,
spenders, one time buyers, instalment maximising the speed of the algorithm.
buyers etc. Each of these clusters can then *See page 52 for Appendix

DATA
Transaction history and customers profile
are needed to view the customers behaviour
and what their spending potential is. Detailed
customer profile can allow price clustering
based on demographics and lifestyle
behaviours.

PAGE 30 INNOVATION L AB
3.4 CU STOM ER S EGMENTAT I O N

BU I L D RE L ATIONS HIPS
W I T H VA L U A B L E C U S TO M E R S

In todays competitive market, banks need Segmentation can be used to identify loyal profitable and high potential customer groups
to find out which segments are strategically and profitable groups but beyond this, it can while decreasing investment into low profit
valuable. Then extra care needs to be taken also find which segment is likely to evolve to segments.
to strengthen the customer relationship with an important one in the near future. Armed
these valauble segments. with this knowledge companies can strive
to increase the market share of these more

Caesars Entertainment, owner and developer Barclays is making use of segmentation Zions Bank employs Big Data to derive insights
of Caesars Entertainment casinos, takes by targeting students with personalized about the growing Hispanic community.
advantage of Big Data analytics to improve its advertisement and attractive offers. The According to Bank Technology News, data
customer relationship with their most loyal objective of reaching out to this market analytics helps the bank identify Hispanic
customers. The company is using customer segment is straightforward. Students most consumers within its geographic footprint and
data from its loyalty program, web clickstreams likely pick a bank for the first time and Barclays see their education levels, home ownership,
and from real-time play in slot machines tries to keep these customers in the long term affluence and other factors. The bank then
to identify the most profitable and loyal when they will become profitable customers. breaks the segment down into groups and
customers, making sure they are satisfied at all identifies financial needs for each. Based on
times. these segmentation insights the bank could
strengthen the customer relationship and has
grown its Hispanic customer base 10-15% for
the past few years.

INNOVATION L AB PAGE 31
CU STO M E R SEG M E NTAT I O N 3.4

HOW
Dividing customers based on their profitability customer can be defined by a KPI such as a retention cost, profit by unit sale, discount rate
is a popular application in customer standard profitability measure, which takes a and historical value are needed.
segmentation. Like most segmentation- snapshot of a customer at a single point in time
based tactics, a clustering algorithm such a to define its profitability. The customer lifetime A LGORITHM S*
K-Means can be used to find natural groupings value also makes a good profitability measure
of valuable customers and which traits lead to that indicates how the prosperity of a customer
these customers being significant. A valuable might increase or decrease over time. To *See page 52 for Appendix
calculate these KPIs the customers churn rate,

DATA
Some key data is needed to measure customer
profitability. This includes demographics, the
type frequency and occasions the product
purchases and the time and type of marketing
contacts. That data would typically come from
marketing and sales data.

PAGE 32 INNOVATION L AB
N E XT BE ST OFFER

USE CASE

4 NEXT BEST OFFER

Next best offer allows an organization


to increase its up-sell and cross-sell
opportunities by predicting what the
customer wants next.

This is achieved by analysing the customers


market basket and finding the patterns
between products to forecast future
purchases. Leveraging this knowledge can
ultimately lead to improved marketing ROI,
customer loyalty and sales results.

INNOVATION L AB PAGE 33
NE XT B E ST O F F E R

TO P U S E S
FO R N E X T B EST O F F E R

4.1 4.2 4.3


EN H A N C I N G LOYA LTY ME ASURIN G P RODUC T P RODU C T BU N DL I N G TO
T H RO U G H NEXT B E ST OF F ER . P ROP E N SITY UP LIFT R EV EN U E
Offering a customer an additional product that Product propensity scoring can be used to Determining which products are most likely to
suits his or her wants and needs will not only boost revenue by offering customers products be purchased together is essential in order to
increase sales it can also strengthen customer or services that they really want. develop highly effective product promotions
relationship. Relevant offers might increase the and to increase revenue.
interest and customer stickiness to banking
products.

PAGE 35 PAGE 37 PAGE 39

PAGE 34 INNOVATION L AB
4.1 N EXT BE ST OFFER

E N H A N C I N G LO YA LT Y T H R O U G H
N E XT B E ST OFFER

Next best offer can find the products Next best offer is commonly used to re-engage marketing messages being perceived as spam.
customers want and when they want it, which with customers, reminding them of the brand Generating personalized offers in a timely
can enhance customer loyalty and increase or service while simultaneously opening fashion can help drive loyalty and increase ROI
sales. cross- and up-selling opportunities. Picking from existing customers.
the wrong products to offer the customer can
cause a disjointed feeling between customer
and organization or perhaps worse, the

Tesco has focused its Next best offer strategy Netflix is a completely data driven company
on increasing sales to regular customers and and can accurately predict what movies its
enhancing loyalty with targeted coupon offers. customers like and hate. To achieve this, Netflix
Shoppers who buy diapers for the first time at feeds all its customer data into a recommen-
a Tesco store are mailed coupons not only for dation system that takes into consideration
baby wipes and toys but also for beer, since all aspects about the customer, from viewing
Data analysis revealed that new dads tend to behaviours to customer profiling. Netflix then
buy more beer, because they are spending less use predictions generated from the recom-
time at the pub. mendation engine to make tailored movie
recommendations based on each customers
preferences.

INNOVATION L AB PAGE 35
N E XT B E ST O F F E R 4.1

HOW
Linking the customers market basket or bank accounts and related products once in
historical transactions to products they may their lifecycle and targeting marketing efforts
want to buy in conjunction with past purchases towards these customers to soon or too
is often achieved through Market basket late can cause banks to miss an opportunity. A LGORITHM S*
analysis. Market basket analysis employs the Decision trees are particularly useful in this
link analysis technique where links obvious regards as they can be used to score suitable
or otherwise are found between products. timings for a marketing messaging, based on *See page 52 for Appendix
Once links are found timing is also key as past customer experiences.
some products are highly time sensitive. For
example, customers may only take out student

DATA
Transaction history of the customer is the most
important data for this use case. Profile data is
also required to help predict the customers life
stage events to optimize the timing of marketing
messages.

PAGE 36 INNOVATION L AB
4.2 N EXT BE ST OFFER

M E A S U RI NG
PRODUCT PROSPENSITY

Identifying the products or services Measuring a customers product propensity product or service being the next best offer for
customers are most likely to be interested in involves scoring each product or service based the customer.
for their next purchase is a valuable piece of on the customers peers, historical purchases
information for any marketing managers. and behavioural characteristics. This scoring
can then be used to produce a product or
service ranking, with the highest ranking

Westpac, a bank operating in Australia and A pioneer in Next best offer is Amazon. The
New Zealand with 812,000 customers, are company employs collaborative filtering to
successfully making use of next best offer to predict a customers product propensity
drive their cross sales. Using the next best based on the customers peers. From this,
offer methodology, Westpac measures each Amazon generates its you might also want
customers product propensity across their and customers also bought campaigns
range of products and services. From this for each product purchased and viewed by
information, Westpac is able to subscribe extra the customer. This has led to a significant
banking products to 37% of its customers increase in Amazons cross sales and revenue.
through its branch staff and 60% to this
customers who communicate through its call
centre staff.

INNOVATION L AB PAGE 37
N E XT B E ST O F F E R 4.2

HOW
A customers propensity towards a certain income or demographics. The top attributes
product is an interesting case as it involves can then be uncorrelated using a method such
using historical data to score the likelihood of as PCA and used as the inputs for the linear
future purchasing habits. Scoring for product regression algorithm. Linear regression can A LGORITHM S*
propensity is typically achieved through then simply score customers propensity for
a classification algorithm such as linear each product as a percentage.
regression and decision trees. Decision trees *See page 52 for Appendix
can help to find significant attributes that
companies want to consider in their propensity
calculation. This may include the customers

DATA
The customers propensity towards a certain
product can be measured through both their
own historical purchases and their peers.
This requires customer profile data and their
transaction history.

PAGE 38 INNOVATION L AB
4.3 N EXT BE ST OFFER

P RO D U C T BUND LING
TO U P L I F T R E V E N U E

Bundling products that go well together For banks to move forward, they need to offer bundles, based on preferences, banks can shift
can differentiate an organization from its tailored products or bundles of products and customer utilization and revenue significantly.
competitors. The banking world can apply services.
product bundling to increase cross and
upselling in a better way. On average, people have three to four banks
with two or more products in each bank. Using

Manulife Financial makes use of data analytics Eircom is an Irish provider of


to bundle the deposit and credit account. As telecommunications services that makes
Canadas first flexible mortgage account, the use of predictive models based on customer
bank offers a mortgage with checking and behaviour information. The predictive
savings, using the net balance to calculate the modelling enables Eircom to find the most
specific interest which positions the account popular bundles to offer their customers
to serve as the clients primary current account. and allows product development to use this
knowledge to find more innovative ways to
obtain new customers and retain existing ones.

INNOVATION L AB PAGE 39
N E XT B E ST O F F E R 4.3

HOW
Finding which products naturally go well to this problem as it follows the logic: similar the most useful in this particular use case.
together has been a challenge for anyone customers will purchase similar products.
wishing to develop an effective cross- and up- A pitfall of this approach is the dynamically
selling campaign. Historically link analysis has changing situation of the customer, who may
proved extremely effective at finding products look very different from the time they bought
that sell together, even if the link at first may the product. Decision trees are a strong
be obscure or non-obvious. This technique is candidate for cross-selling problems as they
widely used in retail to aid in product placement. can show the attributes of the customers who
Nearest neighbour is also a popular approach buy certain products. This perhaps makes them

DATA
Customer profile and transaction data is
needed to build an effective cross selling
model. Care should be taken as many products
in financial services are bundled with other
products or have been bundled in the past.
This creates a situation where some product
data can be synonymous with entirely different
product data, so extreme care and business
knowledge is required to find these cases.

PAGE 40 INNOVATION L AB
C H A N N EL J OUR NEY

USE CASE

5 CHANNEL JOURNEY

With so many ways a customer can interact


with a company, including mobile, social
media, clickable ads, stores, TV and
publication platforms, keeping track of the
customer journey can be a difficult task.

Big Data helps by taking a holistic view of the


entire customer journey and experiences on
each channel. This can be used to find patterns
of usage that lead to sales, or where and which
channels are underperforming. From this
knowledge, banks can optimize the funnel
conversion, increase messaging effectiveness
and measure marketing results across all
channels.

INNOVATION L AB PAGE 41
CH A NNE L J O U R NE Y

TO P U S E S
FO R C H A N N E L J O U R N E Y

5.1 5.2 5.3 5.4


PROV I D E M O R E R ECO GN ISE GU ID E CU STOMERS TO MEASURE MARKET I NG
R E L E VA NT CO N T E N T M U LT I -CH A N N EL LOW COST CH A N N EL S EFFEC T I VENE SS
IN THE PREFERRED B E H AV IOU RS TH AT AC ROSS C HANNEL S
C H A NNE L L E A D TO SA LE S
Customers may not use all Big data analytics allows Sometimes different channels The customer may purchase a
channels in the same way and so companies to recognising patterns can provide the same service, product in one channel, but had
messaging on each channel should of channel usage in their customer but at widely different costs to made the decision to purchase
reflect this. Some segments may segments and how successful a company. Aided by Big Data it because they had seen an
prefer to research products on a journeys lead to sales and where analytics, guiding customers to advertisement in another channel
blog before visiting the website unsuccessful channel journeys fail. low cost channels requires robust the week before. The question is
and landing pages could adapt to This then allows to optimize the self- service and a customer driven how much credit should be given
this by displaying relevant offers funnel conversion by optimizing approach to provide a quality and to each channel for selling the
and further reading linked to their bottlenecks and fixing points of intuitive service. product?
research. high drop off rates in the customer
channel journey.
PAGE 43 PAGE 45 PAGE 47 PAGE 49

PAGE 42 INNOVATION L AB
5.1 CHA N NEL JOUR NEY

P ROV I D E M OR E R ELEVANT CONT ENT


IN THE PREFERRED CHANNEL

Sending the right message through the Big data analytics can be used to accurately find are using channels may also highlight areas
right channel can be just as important as the which channels customers are using and how where banks need to focus resources, such
message itself. they are using them. This knowledge can form as which channels are used for complaints or
a strategic advantage to reach specific target which are primarily used for research.
segments in the most cost effective way and
maximising marketing budgets. How customers

HDFC bank is the 5th largest bank in India OCBC bank is headquartered in Singapore Bank of China has created a new online
by assets with an estimated value of 39 and has assets estimated to be over 59 banking platform to examine data from various
billion. HDFC uses their knowledge of the billion. OCBC identified a significant market channels accessed by its global customer base.
channel journey to personalize the customers segment moving to online channels and the The online platform integrates customer-
experience on their channel of choice. expectations of these channels are growing facing systems such as branch, phone, mobile
For example, an ATM would recognise the with rapid pace of technology. One of OCBCs and web services for Bank of Chinas 100 million
customers preferred language from previous core principles is to deliver a high quality service customers. This enables Bank of China to
interaction on the organizations website. through the channel of choice, by adapting to provide the right content at the right channel.
Coupled with other preferences measured what the costumer expects.
across a wide range of channels has decreased
time at ATMs by 40% and helped reduce
operational costs.

INNOVATION L AB PAGE 43
CH ANNE L J O U R NE Y 5.1

HOW
Measuring the customers channel of choice data can assess if somenone is researching
can be achieved by building a profile of each the product or is a frequently returning
customer based around the frequency of customer. Decision trees can also be employed
interaction on each of the channels. The to find the attributes of customers who use A LGORITHM S*
type of contact can also be measured either particular channels and what purpose they
through engagement metrics or text analytics. use them for. This information may aid in
For example, text analytics can be used to future segmentation and in the design of the *See page 52 for Appendix
measure if a person has made a complaint, channels.
while analytics from URL referrals and cookie

DATA
Data from online usage from cookies, URL
referrals and metrics can be used to determine
which online channels the customers are using
and what they are using them for.

PAGE 44 INNOVATION L AB
5.2 CHA N NEL JOUR NEY

R ECO G N I ZE MU LTI-C H ANNEL


B E H AV I O URS
T H AT L E A D TO S A L E S

Knowing how customers use different Customers may use multiple channels to both This knowledge can be used to help optimise
channels can help financial institutions to research and purchase banking products. funnel conversion for both lead and sales
optimize them and to increase sales. Understanding these patterns in channel management and also be used to locate which
behaviours can help uncover which medium channels are over and underperforming.
is generating sales either indirectly through
customer research or directly through sales.

Vodafone recognised their traditional approach GE Capital is a financial service branch of the MoneySupermarket measures offline and
of measuring the customer channel journey American conglomerate General Electric. online user interactions across a range of
using cookies was adversely affecting their GE Capital understands that people are channels looking for its interest in holiday,
return to basket email campaign. This was omni-channel users and that their journey to car hire and hotels to target customers for
due to 40% of their customer base using GE Capitals products can vary greatly from travel insurance. By combining data across all
their phones for emails, which use different person to person, but each one expects a channels to build a customer profile has led to a
cookies than their laptops, so information smooth transition from channel to channel. By 33% increase in attribute revenue.
about their abandoned shopping basket was understanding how customers migrate from
lost between channels. To solve this, Vodafone different channels, GE Capital has optimized
deployed deep linking data analytics to track its customers experience across online and
the customer across channels and platforms offline channels, increasing both customer
and they now deliver a completely cookie-free satisfaction and marketing efficiency.
experience. Return to abandoned baskets has
since increased by 30%.

INNOVATION L AB PAGE 45
CH ANNE L J O U R NE Y 5.2

HOW
Tracking the user interaction across the Tracking customer between online channels multichannel marketing managers. The type of
diversity of channels is a challenging task. is typically achieved through cookies, URL interaction types across the channels can be
Metrics such as customer engagement on referrals and matchback. Measuring the measured using a combination of text analytics
each channel linked to the customer profile influence of offline media can be achieved and decision tree classification.
should give an indication on which of the directly by using promotional codes and
segments are using each channel. campaign specific tags. A LGORITHM S*
Other metrics such as navigation page to
content page ratio should also indicate the These however, are not always available, so
efficiency of the online and mobile channels. A/B testing and measuring lift associated *See page 52 for Appendix
with an offline campaign are often used by

DATA
Customer profile data will be required to
view which and how customer segments use
channels. Offline metrics such as channel
performance, time stamps and any comments
made about the customers visit can be used
to build a picture of their offline journey, while
online metrics gained from cookies, webpage
JavaScript, tracking codes and Matchback are
used to build the online journey.

PAGE 46 INNOVATION L AB
5.3 CHA N NEL JOUR NEY

G U I D E C U S TO M E R S TO
LOW COST C HANNEL S

Assisted self service on online channels is Replacing high cost channels with low cost towards a consistent and intuitive service is
facilitating to migrate customers away from alternatives is helping reduce costs and being helped by Big Data analytics measuring
traditional brick and mortar stores. increase organisational efficiency. Aiding the effectiveness of the channels and applying
customers during this channel migration has techniques to increase self- service efficiency.
put increased pressure on assisted self-service
and delivering a constant experience across
the multi-channel market. Part of the drive

HSBC found the primary barriers for internet UniCredit transaction system was originally
banking were customer habit, security developed with an internal employee focus and
concerns and a lack of confidence. They now later re- developed with a consumer online
have an active migration strategy to address centric approach. This enabled UniCredit to
these concerns. Part of the HSBC migration retain customers and increase their volumes by
strategy is to enable customers to undertake 25-50%, by guiding transactions to lower cost
increasingly more complicated banking channels.
activities via the internet.

INNOVATION L AB PAGE 47
CH ANNE L J O U R NE Y 5.3

HOW
Converting customers to low cost channels action can all help measure how effective online products.
must ensure those are intuitive, but can also mediums are. Classification algorithms such as
handle a range of complex banking activities. To a decision tree using these metrics can then
understand how good the ways of distribution help score the entire online experience and find
are at this, requires metrics and classification areas of the channels that need addressing.
algorithms to score the effectiveness of the For example, links to information pages for a
A LGORITHM S*
channel for each segment. Metrics such as product may be situated off screen and a score
engagement, content/navigation scores, drop based system may show people who visited
*See page 52 for Appendix
off rates, time-stamps and number of clicks to these pages are not as well informed as other

DATA
Data from online JavaScript and time stamps
can indicate the kind of content and how long
the user has been viewing the page. This is then
combined with the profile data to determine how
each customer is using the channel.

PAGE 48 INNOVATION L AB
5.4 CHA N NEL JOUR NEY

M E A S U RE MAR KETING EFFEC T I VENE SS


ACROSS CHANNELS

Being able to track and measure marketing Identifying the value of marketing across
effectiveness across channels allows different media usage is a serious challenge
marketing managers to optimize their for a business to improve their marketing
budgets delivering higher ROI on their campaigns in a rapidly changing environment.
marketing campaigns. So data analytics can be used to improve
the gut feeling approach when it comes to
marketing measurement.

PKO Bank Polski, a leading banking institution Laurentian Bank of Canada uses data analytics
in Poland, employs a multi-channel campaign to aid its understanding of the performance,
management platform. By using this platform, factors and influence of its marketing
the bank can perform analytics across its campaigns across its various channels. This
channels to develop a clearer picture of its allows Laurentian Bank marketing managers to
overall marketing effectiveness leading to a appropriately change its campaigns accordingly
higher ROI. when they are not performing well.

INNOVATION L AB PAGE 49
CH ANNE L J O U R NE Y 5.4

HOW
Measuring campaign effectiveness across against the cost of the channel. Text analytics
the different mediums requires various metrics can also be used to measure the types of social
to determine offline-online and online-offline sphere interactions, which are classified by the
interactions, this is typically achieved by decision tree. A LGORITHM S*
measuring associated lift and ROI lift. Decision subsequently
trees can then be used to score each channel,
indicating its performance and how many *See page 52 for Appendix
indirect/direct sales the channel generates

DATA
Measuring online click streams, tracking codes
and cookie data is required to build a complete
picture of the users online journey. This is then
combined with the customer profile and Ad-
statistics from all the mediums used to build a
picture of channel performance.

PAGE 50 INNOVATION L AB
A P P EN D I X

APPENDIX
ALGORITHMS

Data is the lifeblood of the Big Data use cases


discussed throughout this white paper, but
equally algorithms are the organs turning
data into insights and value. Both are equally
needed to turn these Big Data use cases from
theory into reality. This next chapter discusses
the algorithms that are used to turn data into
business insights.

INNOVATION L AB PAGE 51
CH A NNE L J O U R NE Y

ALGORITHM
INDEX

DECISION T RE E S CLU ST E R IN G T E XT A N A LY T I CS NE U R A L L I NK A N A LYS I S S U RV I VA L


& RANDOM NE T WO R K S A N A LYS I S
FORE STS

PAGE 55 PAG E 5 6 PA G E 5 7 PA G E 5 8 PA G E 5 9 PA G E 6 0

PAGE 52 INNOVATION L AB
A P P EN D I X

ALGORITHMS
D EC I S I O N TR EE S & R ANDOM FORE STS

Decision trees are one the most powerful data important fields for a particular data set, which
mining techniques, as they can handle a diverse then can be used in other algorithms.
array of problems. One of their core strengths
comes from their ability to handle almost any Random forests is a technique used to boost
data type, numeric, nominal or otherwise. the efficiency of decision trees models by
creating an ensemble of slightly varying
Decision trees work by splitting data up along decision trees that model the same target. By
its dimensions into smaller data cells, with the having slight variances between the decision
aim of decreasing the overall entropy of the trees acts as a safety net between possible
data within each cell. Each cell is then treated errors and noise of an individual decision tree.
independently and is further split until a target Each tree in the ensemble then votes a target
entropy level is reached. To maximise the field, where the winning target field is then
efficiency of this process, the decision tree assigned to the data.
tests all variables to find the most important
variable that decreases the entropy by the
largest amount in the cells after the split.

A typical decision tree would be used to classify


data into a predefined target field. An example
field might be high probability of churn or even
a numeric value such as an estimated price in
the case of regression trees. Decision trees
are also used to explore which are the most

INNOVATION L AB PAGE 53
A PPE ND I X

ALGORITHMS
C LU ST E R ING

Cluster detection is simply the automation of to the data. Although they are undirected,
finding meaningful patterns within a data set. cluster detection is often used to solve directed
Often the problem in data mining is not a lack problems, because clusters are sought to solve
of patterns but identifying which patterns are some business purpose. In marketing clusters
useful amongst the noise of possibly hundreds are nearly always called segments, which is a
of competing patterns within the data. Cluster popular application of the clustering technique.
detection helps penetrate this noise by finding
clusters of data that form natural groupings K means is probably the most popular
within the data set. For example, one such clustering algorithm used to find segments
cluster might contain active people who have a within a data set. K-means works by assigning
low risk of heart disease, or trees with needles a K number cluster seeds randomly with the
do not lose their leafs in winter. Clusters datas dimensions. Data points are assigned to
essentially breaks a complex problem up into the nearest cluster seed, which is then moved
much smaller manageable pieces where a to the average position of the data points.
human can then easily identify the underlying This process is carried out iteratively until
pattern. After clusters have been detected, convergence.
they are often themselves the object of study.

Cluster detection is often employed as an undi-


rected technique as there is no target variable.
This is unlike the other algorithms discussed in
the chapter, which prescribe a target variable

PAGE 54 INNOVATION L AB
A P P EN D I X

ALGORITHMS
T E XT A N A LY TICS

With the amount of text being generated in on whether you expect them to have or not to
organizations, both internally on reports or have an influence on the stock market. Nave
CVs and online in the social media sphere Bayes is perhaps the popular algorithm for text
and news reports it has become humanly analytics. Bayes formula was made famous for
impossible to read all these documents. Text its use in determining the probability of medical
analytic algorithms assist by automating tests false positive and false negatives rates.
the reading process and providing a brief
summary compiled from possibly thousands of Nave Bayes is a slight modification of Bayes
documents. Text analytics algorithms heavily formula to determine the probability that
rely on probability theory and the rarity and certain words belong to documents of
occurrence of certain words, which can be used particular classes. For example, the word Viagra
to predict the meanings and themes of the is heavily associated with spam emails and
text. today nave Bayes is widely used in identifying
spam emails and is used in almost every email
Text analytic techniques are a form of checker to date. The nave part of nave Bayes
classification algorithm so a target field for come from the fact the algorithm treats each
the algorithm is clearly defined. In sentiment word independently and document is simply
analysis, typical target fields would be negative, viewed as a bag of words. Wider context of the
neutral and positive sentiment. As text analytics words is then subsequently lost using nave
are probabilistic models the output field can Bayes.
be scored, for sentiment analysis the scoring
is typically between -1 (negative sentiment) to
+1 (positive sentiment). Another example of
target fields would be to classify news articles

INNOVATION L AB PAGE 55
A PPE ND I X

ALGORITHMS
N E U R A L NETWOR KS

Artificial neural networks form a powerful class Neural networks are a classification type
of classification algorithm that can be used for a algorithm, which means they assign data to a
wide range of problems. They are based on the predefined target field. The target field would
neural networks found in biology and the human typically be a scoring function, such as the
brain, where nodes are activated by a signal that customers propensity towards a particular
in turn transmits a response signal to activate product, or an estimated value for a house. The
other nodes. In artificial neural networks, each algorithms are, however, considered a black
node is comprised of a combination function box, as they cannot tell you why a certain result
that receives various incoming signals and was produced. This can restrict the use of
calculates the total received signal based on a neural networks when the question is why does
set of weights. person/ event A lead to action B, but they are
exceptionally powerful in answering what is the
A transfer function then outputs a signal based most likely action B given person/event A.
on the total revived signal from the combination
function. Neural networks are designed to work
with numerical values that are approximately
within the same range. For example, using the
fields wage $65,000 and age 45Yr, the wage
field would heavily basis the algorithm as wage
orders of magnitude higher than age. This can
be corrected by adjusting the units so wage
could become $65K, which is only 20 units
away from 45Yr.

PAGE 56 INNOVATION L AB
A P P EN D I X

ALGORITHMS
LI N K A N ALYS IS

Link analysis was built around the need to find Areas where link analysis has been particularly
relationships and connections in this ever- successful include identifying key sources
more-connected world. It answers questions of information on the web by analysing links
such as who is friends with who on Facebook, between pages, finding influential customers
which drugs are being prescribed to which from call pattern data to recruit new
patients, who is calling whom on the telephone subscribers from competing networks and
and which webpages bridge language barriers. understand physician referral patterns to gain
The answers to these and many other related insight into insurance fraud. In some cases the
questions are all contained within the data, links between objects are explicitly recorded,
where Link analysis is able to take direct such as HTML encoding between webpages
advantage. or call logs on telephones. These sources of
information, however, can take significant
Link analysis is part of a subset of mathematics data preparation before they become useful.
called graph theory, which represents the Other sources of information may only imply an
relationship between objects as edges and implicit link between objects, in these cases the
the objects themselves as nodes. Link analysis data scientists challenge is to identify the links.
falls under the category of both direct and
undirected data mining. A popular use of link
analysis is to create new variables to be used
by other modelling techniques, but link analysis
can also be used in an undirected way by
exploring the properties of the graph itself.

INNOVATION L AB PAGE 57
A PPE ND I X

ALGORITHMS
S U RV I VAL ANALYS IS

Survival analysis, sometimes called time-to- The insights gained from this understanding
event analysis is a technique to explain when can be directly used in the marketing process
you should start worrying about an event. and help determine how long groups of
Survival analysis was born from studying survival customer will stay with the organization and
rates of hospital patients and manufacturing therefore how profitable a particular customer
failures, but used for marketing it can tell you segment will be.
when you can expect a customer to leave
your service or stop buying your products. Survival analysis is calculated using survival
By providing answers to these questions, curves and hazard probabilities, where
survival analysis provides snapshots of the databases of tens of thousands to millions of
customers product lifecycle and tell you when customers are used in the calculation. Every
you should start to worry about your customer survival curve starts at 1 and decreases to 0
relationship. Survival analysis has historically as customers begin to leave the organization.
been a powerful tool for answering the following Often the curve will never reach 0 as some
questions: people with long tenures will always remain
When is a customer likely to leave? active. Survival curves of different customer
When will the customer move to a new groups then provide a direct way of comparing
customer segment? the under and over performance of different
The next time a customer will narrow or segments, indicating that segments value to
widen their interaction with the organization the organization.
Which factors are likely to increase or
decrease customer tenure?
Quantitative effects of various factors on
the customer tenure

PAGE 58 INNOVATION L AB
METHOD OLOGY

M E T H O D O LO GY

Our research began by finding hundreds of


industry examples across the financial and
related sectors to build an overview of what
Big Data could do for banks. We as the Big
Data Research Team at EVRY then grouped
the industry examples and reviewed them in
our team. Patterns soon started to emerge,
forming groups and strategies of Big Data
methods that can be applied by marketers in
the banking sector. Based on our profound
research we could extract the information and
value out of the various sources to build the
many comprehensive use cases that can be
found in this whitepaper.

INNOVATION L AB PAGE 59
M E T H O D O LO GY

1 2 3

CO N D U CT I N G F I LT E R I N G INTERNAL REVIEW
SECONDARY RE SEARCH INDUSTRY EXAMPLE S IN BIG DATA TEAM
Finding industry examples of Big Data across Grouping of use cases Forming comprehensive use cases
the financial and related sectors

Conference notes Extracting business value


Industry studies Prioritize most important usage
Academic books & articles Outlining algorithms
Vendors commercial information Informing on data sources
Internet articles

PAGE 60 INNOVATION L AB
WHY EV RY

W H Y E V RY

When it comes to Big Data within the and finding workable Big Data solutions. This
Norwegian banking market EVRY is placed research forms the cornerstone of EVRYs Big
in a unique position. EVRY has extensive Data projects, but we are not just researching
expertise in handling Norwegian banking data Big Data, EVRY is currently developing and
and understands the unique demands of the experimenting on several practical Big Data
Norwegian banking culture. We not only have solutions. Combining this research and
the internal resources and competencies to practical knowledge enables EVRY to not only
develop the right solutions, EVRY is the only advise on which Big Data solutions are best for
provider who has the access to and expertise the banks, but also recommend how the banks
of Nordic Bank Inhouse and public data to might deploy their solutions and what pitfalls
deliver truly Big Data solutions. We also take and challenges they might face.
researching Big Data in banking seriously,
identifying the problems facing banks today

For more information, please contact us.

INNOVATION L AB PAGE 61
AU T H O RS

AUTHORS
O F T H I S W H I T E PA P E R

YO O K- P E I S H EE DAVID C RO M PTO N HILLE RICHTER SVENN-PET TER M HLE


I NNOVATION MAN AG E R DATA S CI E NT I ST BU S I NE SS R E S E A RC H INTE RAC TION DE S IGN
F IN AN CIAL SERVIC ES B I G DATA RE S E A RC H B I G DATA R E S E A RC H BIG DATA R E SE ARCH

YOOK-PE I . SE E @ EV RY.COM DAV I D.C RO M P TO N @ E V RY.CO M H I L L E . R I C H T E R @ E VRY.CO M SV ENN- PET TER .MAEH L E@EV RY.CO M
+47 9220 5704 +47 9061 9 1 5 5 +47 9809 1342 +47 9443 4706

PAGE 62 INNOVATION L AB
S OU RCE S
AMAZON
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BANK AUSTRIA
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BANK OF AMERICA
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BANK OF AMERICA
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BANK OF CHINA
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BARCLAYS
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launch/
BBV
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BBVA
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CAESARS ENTERTAINMENT
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tainment_9thapril.pdf
CITIBANK
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DELL
GNIP: Amanda Bridenhagen (2013): http://blog.gnip.com/tag/sentiment-analysis/
ETHIAD
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EIRCOM
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FIFTH THIRD BANK
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FIRST TENNESSEE BANK
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customer-loyalty-white-paper.pdf

INNOVATION L AB PAGE 63
S O U RC E S

FORD FIESTA
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GE CAPITAL
Business Wire (2013): http://www.businesswire.com/news/home/20131125005618/en/GE-Capital-Retail-Bank-Study-
Reveals-
Rise#.U4wuXPmSxB0
HDFC
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plementation-awards
HDFC
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HSBC
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INTUIT
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MANULIFE FINANCIAL
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MONEYSUPERMARKET
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NATIONWIDE
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tomer-Decisioning/ Portrait-Interaction-Optimizer/PDFs/Nationwide-case-study.pdf
NEDBANK
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NETFLIX
Ravi Kalakota (2012): http://practicalanalytics.wordpress.com/2012/01/05/analytics-case-study-schwan-foods/
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Campaign-Management-Platform/ Digital Alchemy
ROYAL BANK OF CANADA

PAGE 64 INNOVATION L AB
S O URCE S
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TESCO
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-what-your- customers-want-before-they-do/ar/1
T-MOBILE USA
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UNICREDIT
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INNOVATION L AB PAGE 65
PAGE 66 INNOVATION L AB
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