Customer segmentation is one of the most fundamental building blocks in getting to know customers purchasing behavior. Establish initiatives Increasing the share of wallet and becoming the primary card via identification of high-potential cardholders and reduce the passive and inactive customers to boost increased billings, number of monthly transactions, and outstanding balance by account segments. The goal is to reach 30% to 35% of primary customers and 25% to 30% of average customers and decrease low usage customers to 20% to 25% and inactive customers between 15% to 20%.
Credit card data are rich in volume and variety, providing insights into customer shopping and payment preferences. Customer segments should be analyzed for their migration throughout time to understand how stable the primary and average segments are and which ones should be more proactively managed for increasing card activation. Segment migration analysis should then become a continuous monitoring tool, observing change with each scoring cycle. The end requirement was to create rules that combined credit card accounts into segments with very different credit card usage and resulting profitability. The rules separating the customers into segments were required to be based on behavioral attributes of account usage – as this is what could be influenced by intelligent, targeted marketing. Customer segmentation is a cyclical process that requires continuous management and fine-tuning to adapt to changes in data sources, business models, and customer portfolios.
EACH OF THESE CYCLES FOLLOWS THESE KEY STEPS:
• Research and collection of all available data attributes that were indicative of credit card usage.
• A set of rules separating credit cards into different segments and user groups, including primary cardholder, average, passive, and inactive, measuring the appropriate sizes for targeting by different marketing strategies.
• Increasing the share of wallet and becoming the primary card via identification of high-potential cardholders with more than 100 transactions per year.
• Encouraging cross-sales of secondary cards and other banking products based on comprehensive customer understanding.
• Selectively upgrading card limits and tiers for maximum return on risk.
• Retaining the most valuable customers by accurately evaluating customer value and attrition risk.
• Maximizing profitability from payment operations and migrating customers to more profitable payment products and interaction channels.
• Guaranteeing long-term satisfaction and loyalty by increasing relevance in communications of discounts and offers.