Value of Customer Data

Perhaps the most significant element of any business strategy – digital or otherwise – is understanding the ever changing needs and wants of customers. The landscape is littered with scores of businesses that have lost market share because they were not able to capitalize on changing customer behavior trends. So, having and being able to analyze data that provides insights into customers’ preferences is crucial to the survival of any business.

Big data analytics is the process of collecting, organizing, and analyzing large data sets containing a variety of data types (hence the name big data) to uncover hidden patterns, unknown correlations, market trends, customer preferences, and other useful business information.

This data is then used to determine the appropriate business strategies to meet the customers' current needs, and to anticipate their future needs. The successful players in the digital space not only understand their target customers’ needs, but they are actively engaged in influencing what customers want. Just think about the of customers who are willing to stand in long lines – sometimes for days – just to be the first to get the new Apple iPhones.

Now to apply Digital business concepts to banking, it’s worth noting that Chris Skinner in his book Digital Banking, asserts that "As a digital business, all banking can be broken down into pure bits and bytes, but more than that, a bank can be seen as three digital businesses in one. It is a manufacturer of products, a processor of transactions, and a retailer of services." Based on this premise, banks must begin to understand the shifting expectations of their customers, and develop strategies to meet – and exceed those expectations in an increasingly Digital world.

Another useful concept to consider, as it relates to developing a Digital Strategy, is “Buyology.” Buyology, as defined in Martin Lindstrom's 2008 bestselling book Buyology: The Truth and Lies About Why We Buy, is a term that describes the process of analyzing the factors that influence buyers' decisions in a world cluttered with messages such as advertisements, slogans, jingles, and celebrity endorsements. From a business perspective, this means understanding the core reasons why people buy, and creating opportunities to repeat that buying behavior again and again.

Now we have already seen that banks have been collecting and utilizing digital customer information for decades, so the accumulation of customers’ big data is already occurring.

The next step is analyze this customer data to determine which products are doing well, and which are failing, and why they are doing well or failing.

Are there data points to indicate which customers prefer certain products, and which prefer other products? Keep in mind, one size does not fit all. Big data will also indicate which of the banks’ customers are initiating financial transactions by the banks competitors, which means your customers have purchased products and services from your competitors.

Big data can provide other useful analytics such as:

- Are your customers using the branches? ATMs? Internet? Mobile? If your customers are primarily using mobile devices to make deposits, then you should be communicating to them via their mobile devices to better understand their needs. If they use the Internet via a laptop or computer, then push email messages to them inviting their feedback on the service they receive from your bank.

- Are your customers making loan payments to other lenders from their checking account with your institution? Then you should be offering them the option to convert the loan or consolidate it to your bank at a better rate, because you already know how much they pay each month, and for what type of loan. And since they are your customers, you already know whether they are credit worthy or not.

- Are your customers making payments to other credit card accounts from their checking account with your institution? You should consider offering your customer a credit card with a balance transfer option.

- Are your customers physically depositing payroll checks in the branches rather than using Direct Deposit? Then your tellers should be trained to recognize the opportunity to discuss the benefits of direct deposit with these individuals.

- Are your customers coming into the branch to cash payroll checks that are drawn on your bank? Then someone should be discussing with them the benefits of opening a checking account or obtaining a prepaid payroll card from your bank so they can take advantage of direct deposit, Internet banking, online commerce, and shorter checkout lines at stores.

- Are your customers using convenience checks from other credit card companies to pay down their credit card balances on your credit card? Why didn’t your bank offer these obviously credit-worthy customers the opportunity to pay down balances on your competitors’ credit cards?