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Customer Value Modelling

Understanding the dynamics and value of your portfolio is essential to making sure you are able to manage your lending book, from hitting your budgets to setting prices and determining your overall credit appetite. 

Our sophisticated value modelling techniques result in strong predictions of each customer's value over a given time, combining product holding, behaviour and risk factors to ensure a true picture of potential value is known and can be factored into decisions. It allows you to make customer decisions that are most likely to have the maximum impact on a customer's value and focuses your acquisition activity by targeting prospects with high value potential.

We believe that successful value management starts with the development of a dynamic customer value model that must include estimates of customer cost, revenue, risk and attrition to derive a 'value' for each customer. Some organisations have developed a view of value based on past behaviour and current product holdings - this is a good starting point, but a static contemporary view of value isn't enough.

Best practice in determining value (or customer profitability) encompasses an estimate of future revenues from products already held and those likely to be purchased in the future, which is then discounted against a range of current and future costs. 

Lending institutions have additional costs to consider given the risk of customers defaulting on loans. However, our extensive experience in risk and financial services means we can effectively bring risk into the value model and remove the traditional barriers between risk, marketing and finance teams - over balancing offers against credit losses.

Customer value management allows you to:

  • Prioritise investment in each individual customer
  • Target acquisition activity to deliver high value customers
  • Take a long-term view of customer relationships
  • Personalise offers and rewards for customers
  • Understand the most cost effective channels for each customer

 

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