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Financial institution seeks IBM's help in examining the impact of customer loyalty on its overall performance.
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Business impact IBM developed an analytical model and simulation tool to help this financial services provider understand the impact of customer loyalty on its financial performance. The resulting model helped the company predict a strong relationship between products per customer, customer attrition and customer loyalty that is being used to support the business case for more programs to drive loyalty, including an enterprise-wide service recovery program aimed at improving customer experience across departments.
Issue Customer loyalty, while considered by many to be a "soft" indicator of a company's health, can prove an important differentiator in the crowded financial services field. In a move to distinguish itself from the competition while boosting the bottom line, the client sought to explore the connections between customer loyalty and the products and channels used, and how they contributed to the bank's financial performance.
Executive summary When it wanted to explore a possible correlation between customer loyalty and financial success, the financial services provider looked to IBM for assistance in delving into and analyzing its customer data. To gauge customer loyalty, the bank administered a questionnaire that tracked products held, channels used, customer tenure and servicing costs, and then anonymized transaction data that could link a customer's responses to his or her data. IBM Research and IBM Global Business Services consultants worked together through IBM On Demand Innovation Services to devise an analytical model that used the data mining features of IBM DB2® Data Warehouse Edition to create a Loyal Performance Model. As part of the engagement, IBM consultants provided bank management with a Loyal Financial Performance Simulation tool, and Global Business Services and Research worked together to provide recommendations for future actions based on the data analysis. In combination, the solution will enable the bank to devise a strategy to improve customer loyalty based on a newfound understanding of what factors are tightly correlated to movements in loyalty; what impact the number, sequence and type of products have on loyalty; and how the number and types of channels affect loyalty.
What IBM did Working in concert with IBM Research, the IBM Global Business Services team analyzed the client's banking operations and customer interactions to gain a detailed understanding of the existing metrics and models being used to track customer behavior. Following this preliminary phase, researchers applied a data-driven mining and analytical approach to address the links between customer loyalty and financial performance at the enterprise level. First, IBM defined specific analytical hypotheses to test the impact of loyalty on performance, and built a data analysis environment to process the information. Transaction and loyalty data were then gathered for analysis and IBM Research applied patented techniques to build robust analytical models and developed a simple business-user-focused interface. The end result for the client was a mathematical model, simulation tool and action-oriented recommendations that addressed the impact of products held and channel usage on customer loyalty and financial performance.
The client was then able to use that information to help predict a strong relationship between customer attrition, products per customer and loyalty. The bank is now using the model to drive changes and prioritization of customer experience improvement programs across the bank.
Capabilities applied IBM was able to leverage its practices in customer experience, business intelligence and data mining research to develop a mathematical model and simulation tool and make recommendations that have helped the client understand the correlation between customer loyalty, the products and communications channels offered and the bank's bottom line. With financial institutions seeking new ways to optimize their operations and gain a competitive edge, IBM's expertise in advanced analytics and business intelligence can help companies glean new insight into customer experience and behavior that can have a direct effect on the bottom line.
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Related Case Studies | A large international financial services institution A large financial services institution seeks a technological solution to keeping its customers informed.. |
More on the issue | Focus on: Business optimization IBM is helping companies stay one step ahead of the competition by using advanced analytics to derive valuable business intelligence from complex data. |
More on research | Advances in analytics: Integrating dynamic data mining with simulation optimization Data mining methodology in combination with state-of-the-art optimization technology are applicable to settings in which a large amount of data must be analyzed in order to discover relevant relationships. |
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