Identifying high value customers

1. Identifying and profiling High Value
Business Customer to develop
targeted proposition to further
increase ARPU and profitability
Stefano de’ Rossi - Paola Mandoloni

2. Agenda:
Shifting the definition: it’s all about Customer
Assessing the key CRM systems used to collect and
process Customer data to determine Customer value
Examining examples of tailored promotions developed for
high value business customer
Choosing divers to set business customers’ value

3. Drivers shaping the market
Customers are our most valuable asset

4. ARPU
Average cost
per minute
Traffic
distribution
Average
usage
Customers are our most valuable asset

5. Shifting the definition: it’s all about Customer
Marketing is the process of planning and executing
conception, pricing, promotion and distribution of goods,
ideas and services to create exchanges that satisfy
individual and organizational goals
Marketing is an organizational function and a set of
processes for creating, communicating and
delivering value to customers and for managing
customer relationships in ways that benefit the
organization and its stakeholders.
Source: American Marketing Association

6. Today Italian mobile market is approaching saturation. The
consequence is a radical shift in operators customer strategy. The
purely quantitative growth of the past years must be replaced by the
focused acquisition of profitable customers and the push to
maximize profits from existing customer
Addressing the loyalty challenge
Accomplishing this strategic shift away from the sheer number of
customer to attracting and retaining the most profitable ones, goes
through a systematic customer interaction and insight strategy
• increasing loyalty
• enhancing value

7. The importance of increasing loyalty
Increased loyalty of existing customers creates:
• Reduced dependence on “low price” as a marketing
strategy
• Decreased costs incurred acquiring new business
customers
• Increased efficiency created by familiarity with
customer needs
• Increased margins, higher profits and a greater market
share

8. Loyalty is a behaviour,
not an intention
When profitability and loyalty are considered at the
same time it becomes clear that different
customers need to be treated in different ways
• increase loyalty
• enhance value
Addressing the loyalty challenge

9. CRM approach
A “Customer Centric” approach
Identify
your
customer
Differentiate
your
customer
Interact with
your customer
Customize
some aspect
Source: Peppers & Rogers
121 Field Book

10. Agenda:
Shifting the definition: it’s all about Customer
Assessing the key CRM systems used to collect and
process Customer data to determine Customer value
Examining examples of tailored promotions developed for
high value business customer
Choosing divers to set business customers’ value

11. Identify your customers
The fundamental goal of market segmentation is to identify groups,
segments or clusters of customers that, from a marketing perspective, are
meaningfully different from each other. The purpose of such segmentation is
to create targeted messages that will trigger the desired response of
these customer (either actual or potential) in a more efficient and consistent way
Developing a deep
Knowledge of our
customer
Different CRM
Strategies for
different Customer
Supporting our
channels, sales &
post-sales, with a
unique “vision” of
the customer

12. Dimension & Value
segmentation
S O H O P M I
P L A T IN U M
P R IV IL E G E
PERSONAL
S T A N D A R D
S O H O P M I
P L A T IN U M
P R IV IL E G E
PERSONAL
S T A N D A R D
S O H O P M I
P L A T IN U M
P R IV IL E G E
PERSONAL
S T A N D A R D
Lineemedie
Evoluti -VAS Aziendali
Tradizionali Ricchi
Internazionali
VAS Personali
Intercom
AOM
Fissi Reperibili
Tradizionali Accorti
ARPU/customer Penetrazione
Marginali Ambasciatori
Sfide Diam anti
Potenziale
Sotto la m edia Sopra la m edia
SottolamediaSopralamedia
Potential growth
• High Level caring service
for High Value Customer
• Building more profitable
customer experience
• Different retention
policies
• Tailored offering
• Developing specific
loyalty policies and
campaign for specific
segment
Behaviour analysis
• Improving revenue
opportunities with
specific 121
marketing actions
(cross selling and up
selling)
Strategic CRM framework
1 2 3

13. Segmenting by dimension & value …
1 Customers are grouped by DIMENSION and then by VALUE (value
segmentation)

14. People use mobile services mainly for
business porpouse
People who buy may not be the one who
use
People who use may not be the one who
pays for mobile services (vas warning)
Different dimension…different issues
Strong competitive pressure

15. Margin or Revenue ?
Both Margin and
Revenue curves
have the same
customer
concentration
Furthermore,
revenue has been
verified to be more
stable than margin
which is highly
affected by cost
components
understanding the value drivers

16. such differentiation
allows tailoring the
organization behaviour
to each customer
based on that
customer’s individual
needs.
Averagelines
avg
4,3
avg 303€
Alfa users -Business VAS
Rich & Traditional
International
Personal VAS
OLO
Traditional & Safe
Fixed users
Intercom
ARPU
…. & behaviour
2
….. than by behaviour (traffic and vas clustering) in order to identify different
clusters that reflects different customer needs.

17. Three main drivers of “potential” have been developed: number of lines, Voice
usage and Vas usage
3
…. & potential capabilities
• Identification of the main variables linked to the key driver whose potential will be evaluated
(activity field, revenues, number of employees)
• Identification of groups of customers with the same characteristics in terms of behaviours,
activity field, revenues, number of employees.
• Selection of the “Benchmark Customers” (best 15%)
• Evaluation of the coefficients that link the variables to the key driver (numeric evaluation)
• Extending the coefficients to all other customer behaving the same group as of “benchmark”
CLIENTI BENCHMARK
ALTRI CLIENTI
Stima delle linee potenziali
Regressione
logaritmica
log(driver b)log(linee) = ααααιιιι ββββιιιι γγγγ* log (driver a)+ * + i * log(driver n)κκκκ +
Evoluti -VAS Aziendali
Tradizionali Ricchi
Internazionali
VAS Personali
Intercom
AOM
Fissi Reperibili
Tradizionali Accorti

18. Marginal Ambassador
Challenge Diamonds
CUSTOMER RANKING
Potential value
ActualValue
+-
+-
Different Customers…different strategies….
• ARPU monitoring
• Churn monitoring
• Consolidate ARPU
• Reduce Churn
• Increase ARPU
• Consolidate Churn
• Increase ARPU
• Prevent & Minimize
CHURN

19. …& level of service
differentiating caring services & levels according to customer value

20. Setting the “benchmark” Customer
Benchmark Customers
don’t seem to be much
“bigger” than non-
benchmark but show
off because of their
high annual
expenditure level and
the avg number of
lines
Benchmark Customers
don’t seem to be much
“bigger” than non-
benchmark but show
off because of their
high annual
expenditure level and
the avg number of
lines
Source: Busacca & Associati
7,3 3,9
0,5 0,3
592 € 310 €
Basic KPI
Avg lines/customer:
Avg lines/employee:
Avg expense/ customer:
Dimensional KPI
Avg number of empl.:
Avg Revenues:
Avg number of locations:
Benchmark
Customer
Non benchmark
Customer
14 13
1,75 € mln 2,18 € mln
2 2

21. Benchmark Customer vs non benchmark: example
Name:
Activity Field:
Employess:
Revenues:
Locations:
Number of Lines:
Lines/Employees:
Lines/Revenue:
Lines/Locations:
Edilizia Frappoli
Construction
15
1 mln €
1
5
0,3
5 E-6
5
MEI Sas
Transport
20
1,7 mln €
2
9
0,4
5,2 E-6
4,5
EDIL Srl
Construction
15
0,7 mln €
1
7
0,5
1 E-5
7
Source: Busacca & Associati
Non benchmark
Customer
Non benchmark
Customer
Benchmark
Customer

22. …integrated multichannel approach
Every interaction with a customer should take place in the context of all previous
interactions with that customer. One goal of every interaction with a customer
should be to acquire additional information about that customer that can help you
make decisions or implement new strategies.
Making every customer interaction a chance to strenghten loyalty and maximizing
arpu

23. Outbound calls
Inbound calls
Web/e-mail
Point of Sale
SMS-MMS
Mailing
….different campaign channel
Interact with
your customer
“Make Every Customer Interaction a Great One “
Sales
Force

24. Agenda:
Shifting the definition: it’s all about Customer
Assessing the key CRM systems used to collect and
process Customer data to determine Customer value
Examining examples of tailored promotions developed for
high value business customer
Choosing divers to set business customers’ value

25. Understand customers’ needs
Statistical
Knowledge
Market
researches
Feed-Back
from the Front
End
Customer
Profiling

26. Customer Profiling Systems
Information
system Index Calculation
0
2 0
4 0
6 0
8 0
1 0 0
Est
Ove st
N or d
Datawarehouse
DWH
User
Interface
Customer Profiling Application
Segmentation Clustering
Cluster 1
Cluster 2
Cluster 3
Data Mining
Reporting
0,3 0,6 0,8 1,2
2,2
3,9
6,4
11,7
20,5
30,3
42,2
51,1
90 9 1 92 9 3 94 9 5 96 9 7 98 9 9 00 0 1
Customer Profiling in TIM

27. KPI Indicators
Offers performances monitoring
and trends
Target for the New Voice offering
Analysis One to One
CRM Strategy: Loyalty and Retention
Customer Profiling is a tool for…
Churn prediction (Lock In)
Achieving segmentation &
Cluster modelling

28. Business
Knowledge
Data
Understanding
Data
Preparation
Descriptive
& Cluster
analysis
Customer
Value
Modelling
Segmentation
Customer
Quality
Business
Understanding
Setting up the knowledge
TIM success is built on Customer knowledge
To understand and forecast their NEEDS
To achieve a SEGMENTATION
To differentiate SERVICE & OFFERING

29. VAS
• PC Card
• Byte Blackberry
• MMS (Trad-Interatt)
• WAP navigation
• Unitim-Intranet
• SMS
DEMOGRAPHICSTRAFFIC
Understanding the value drivers
Customers are different … one size doesn’t fit all
Segmentation to identify like-minded customers:
based on behaviour first, then demographics
• Call statistics
• International
• Other Mobile operator
• Roaming
• Intercom
• Incoming/Outgoing
• Mobile/Fixes
• Employees
• # of lines
• Corporate Revenues
• Location
• Industry
• Billing information
• Credit history

30. Complex utilisation of Customer Data
Integration
of
models
Customer X
Target Client
Customer X
Target Client
Optimal offer
Customer X
Target Client
Optimal offer
Optimal channel
Customer X
Target Client
Optimal offer
Optimal channel
Optimal time
Customer
targeting
Customer
profiling
Channel
optimization
Contact
optimization
…………………
…………………
…………………
…………………
…………………
………………
………..……..
…………………
…………………
……………
…………………
Right offer To the right people With the right communication channel At the right time

31. Customer Contact Sequence
AcquisitionAcquisition
TimeTime
ValueValue
•Selective
acquisition
policy
•Welcome
•actions
•one2one campaigns
•tailored offers
•cross-selling
•up-selling
•loyalty program
Loyalty &Loyalty &
DevelopmentDevelopment
LockLock in &in &
RetentionRetention
•Value Based renewal activities
•Needs & value based retention
•“risk index based”
•lock in program

32. Prepare Program Campaign
Target group ChannelOffer
Offer C
Not-responders
Call A
Specific
group of
Customer
High
Value
Low
Value
Control group
Offer A
Offer B
Offer D
Control group
Responders
Not-responders
Responders
Not-responders
Responders
Not-responders
Responders
Call B
Mail C
Mail D
Mail A
Mail B
Calll C
Call D
DESIGN CRITERIA
• Cluster Value
• Churn Risk
Behaviour
characteristics
• Cost
• Effectiveness
• Behaviour
• Propensity to accept
• Alternative channel
• Time period

33. ex-ante ex-postSeasonal effect
ARPU (euro/customer)
+-
+ 8%
+ %20
+ %12
ControlCluster
T-1 T0 T1
EX-ANTE EX-POST
LOCK IN
CAMPAIGN
TargetCluster
Methodology
Monitoring: Ex Ante vs Ex Post analysis
Outgoing Voice (min.)
Vas Usage
Note: all data are just for examples

34. ProPro--activeactive
ReactiveReactive
Lock – In plan
Pre-Exit Call
Exit Call
@
Results and Feedback analysis
Lista
Clienti
Target
setting
Potential of
reference
Lista
Clienti
Outbound
call
Direct
appointment
Complaints
or request for churn
Lock in
campaign
Outbound calls
Direct
appointment
request for churn
Outbound calls
Retention: churn management

35. Customers at
risk
Retention offer
to keep
profitable
customers
Potential of
reference
Monitoring
Lines with
considerable
monthly
expenditure for
several months
in succession
Warning Indicators: Differentiated
offerings based
on customer risk
profile
• Expenditure level
• Outgoing traffic
reduction with
steady incoming
traffic
• MNP request
• Customer
Satisfaction level
Dynamic
management
• effectiveness
measurement of
implemented
actions
• dynamic analysis
of customers at
risk
• monthly update of
customers
database
Retention: Lock-in plan
Customers that generate the highest value are constantly kept under observation
and their behaviour is analyzed in depth to intercept any possible signal of risk

36. In search for loyalty ?….
Get a dog