Vision 2014: Driving Profitable Growth Through Emerging Consumer and Commercial Customers

  • 84 views
Uploaded on

This session will share how Experian is helping DirecTV acquire more profitable customers by focusing on under served consumers and untapped commercial markets. …

This session will share how Experian is helping DirecTV acquire more profitable customers by focusing on under served consumers and untapped commercial markets.

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Be the first to comment
    Be the first to like this
No Downloads

Views

Total Views
84
On Slideshare
0
From Embeds
0
Number of Embeds
0

Actions

Shares
Downloads
0
Comments
0
Likes
0

Embeds 0

No embeds

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
    No notes for slide

Transcript

  • 1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Driving profitable growth through emerging consumer and commercial customers Ben Arnold DIRECTV Paul DeSaulniers Experian #vision2014 Sung Park Experian
  • 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. G = R⋅ fP ⋅ ne ⋅ fl ⋅ fi ⋅ fe ⋅ L  G = number of advanced civilizations  R = The birth rate stars like our Sun  ne = number of planets like Earth per planetary system  fl = The fraction of the Earth‐like planets supporting life  fi = The fraction of life‐supporting planets where intelligent life develops  fc = The fraction of planets with intelligent life that are capable of interstellar  communication  L = Lifespan of such civilizations Accuracy of estimation The probability of a star supporting this type of civilization is 3,333,333,333 to 1! Dr. Frank Drake –  Astronomer, astrophysicist, founder of SETI  Drake equation – estimates number of civilizations capable of interstellar communication in galaxy
  • 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Girlfriend equation – estimates the chances of finding true love in OC!  G = ? Potential girlfriends Population 3,055,745 3,055,745 Female % 56% 1,711,217 Accuracy of estimation The probability of finding a girlfriend in O.C. is 161,878 to 1! Age 28-50 27% 462,029 Master’s degree 5% 23,101 Single 50% 11,551 I find attractive 50% 5,775 Finds me attractive 10% 578 Likelihood of meeting 5% 29 Subtract my relatives 10 19
  • 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 0% 2% 4% 6% 8% 10% 12% 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 % of applicant 0% 2% 4% 6% 8% 10% 12% 14% 16% 18% 20% 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 % of applicant Accuracy of estimation No information: Cannot assess risk Oldest trade = 10 years Lower risk but imprecise Oldest trade = 10 years Current trades = 5 Lower risk more precise 0% 5% 10% 15% 20% 25% 30% 35% 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 % of applicant Assess the risk of a new applicant for credit or services
  • 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  DIRECTV ► Challenges and opportunities of evolving markets  Extended ViewSM ► Providing credit risk insights of underserved consumer markets  Allscore ► Custom commercial risk solution to score every business inquiry  DIRECTV ► Implementation and results Agenda
  • 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. DIRECTV Expanding market needs
  • 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. DIRECTV overview Note: All numbers reflect estimated 2013 Y/E performance DIRECTV Revenues: $32.8B SKY Brasil (93% owned) Subscribers: 5.4M PanAmericana (100% owned) Subscribers: 6.3M SKY Mexico (41% owned) Subscribers: 6.1M (Not consolidated) DIRECTV Latin America Subscribers: 17.8M Revenues: $6.8B Game Show Network 42% owned (Not consolidated) Sports Networks Subscribers: 5.9M Net Revenues: $0.2B DIRECTV U.S. Subscribers: 20.2M Revenues: $24.7B DIRECTV is the world’s largest pay TV provider with over 37 million subscribers
  • 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. 20142010 The increasing breadth of competition has transformed the Pay TV market 2005 Most of these new and disruptive services are complements to Pay TV; however, there is a small but growing cohort of consumers replacing Pay TV with these services Source: No Pay TV Analysis , April 2013
  • 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Over the same time period, Pay TV penetration has plateaued 2013 85% 2012 85% 2011 86% 2007 86% 2006 85% 2005 84% 2010 86% 2009 88% 2008 87% Overall Pay TV Penetration Percent Source: SNL Kagan
  • 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Rising SAC adds pressure to incremental gross adds decisions 2007 2008 2009 2010 2011 2012 2013 Avg. SAC per Sub $692 $715 $712 $796 $813 $859 $873 $- $100 $200 $300 $400 $500 $600 $700 $800 $900 $1,000 USDs($) Average Subscriber Aquisition Cost per Sub
  • 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Residential ► 1M – 1.5M unique applications per month ● Results in 300k – 400k gross activations per month ► Fee/no fee decision based on credit ● Very few “fee” customers activate ► Pre-extended view ~10% of applications were “no hit” ● All charged a fee ● Very low activation rate Who walks through the door
  • 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Commercial ► Only for specific business segments (public, private, and business viewing) ► If “hit” at Experian – no fee is charged, regardless of score ► ~35% of applications were “no hit” ► Activation rate falls by half when fee is charged Who walks through the door
  • 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Experian solutions for emerging markets Extended ViewSM for consumer
  • 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Approximately 34 million U.S. households – 68 million people – are financially underserved The underserved population Source: FDIC 2011 Household Survey Banked 86 million 72% Underbanked 24 million 20% Unbanked 10 million 8% Total underserved (% of U.S. households): 28% Percentage of ethnic groups who are underserved 55% Black 48% Hispanic 41% American Indians 20% White 19% Asian
  • 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Underserved doesn’t necessarily mean lower incomes Underserved income distribution 28% 12% 5% 2% 0.50% 22% 26% 23% 19% 14% Less than $15,000 $15,000-$30,000 $30,000-$50,000 $50,000-$75,000 At least $75,000 Underserved households by income Underbanked Unbanked Source: FDIC 2011 Household Survey
  • 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Built from: ► Premier AttributesSM ► Rental data ► Full file public records  Score range 400-990 ► The higher the score the more creditworthy the consumer  12–14 month performance window Extended ViewSM Score  No hit to bureau  No trades on bureau (inquiry and/or public record only)  External collection trades only  Less than five open or closed trades on bureau  No open trades with updates in the last six months Untapped! FCRA compliant credit score designed to assess the creditworthiness of underserved consumers who have limited or no traditional credit history
  • 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Population distribution No credit trades Thin file: External collection only Thin file: Stale credit; no trades reported in six months Thin file: four or less credit trades Full file: five or more credit trades 82% 8% 3% 6% 1%
  • 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Extended ViewSM Score Risk levels Prime 30% Subprime 70% 82% 6% 8% 1% 3% 30% of the underserved population will perform as prime credit consumers
  • 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Retail ► Point-of-sale  Utilities  Auto  Telecommunications, energy and cable  Bank card How are clients using this tool today?
  • 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Experian solutions for emerging markets Allscore for commercial risk assessment
  • 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Established businesses have business credit and commercial credit score  Emerging business credit risk lacking or non-existent  Creditor challenge – how to accurate assess commercial risk? ► Deposit assessment decreases acceptance  Experian solution: ► Allscore – score every commercial inquiry! ► Customized scoring solution using ● Traditional business credit bureau attributes ● Geographic risk of client portfolio ● Geographic risk of all businesses in U.S. ● Cannot be used for declination! Allscore background
  • 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Allscore background Client portfolio  Bad rate by 5-digit ZipTM  Number of businesses ZipTM 12347 Bad rate 7% ZipTM 12343 Bad rate 4% ZipTM 12344 Bad rate 6% ZipTM 12346 Bad rate 4% ZipTM 12345 Bad rate 5%
  • 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Allscore background Client portfolio  Bad rate by 5-digit ZipTM  Number of businesses Client portfolio  Zip CodeTM 12345 and 12346 have enough businesses ZipTM 12347 Bad rate 7% ZipTM 12343 Bad rate 4% ZipTM 12344 Bad rate 6% ZipTM 12346 Bad rate 4% ZipTM 12345 Bad rate 5%
  • 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Allscore background Client portfolio  Bad rate by 5-digit ZipTM  Number of businesses Client portfolio  Zip CodeTM 12345 and 12346 have enough businesses Client portfolio  Zip CodesTM without enough businesses get bad rate for the SCF = 3 digit ZipTM of 5.2% ZipTM 123 Bad rate 5.2% ZipTM 123 Bad rate 5.2% ZipTM 123 Bad rate 5.2% ZipTM 12346 Bad rate 4% ZipTM 12345 Bad rate 5%
  • 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Logistic regression modeling method  New geo-risk attributes ► Attributes based on geographic location – 5 digit ZipTM, SCF (ZipTM 3), CBSA – Core Based Statistical Area, state, population ► Risk of client portfolio’s commercial customers by geography Allscore model development methodology ● Geographic risk stabilized by business density – risk weighted by concentration from smaller to larger region ● Risk of all emerging credit businesses by geography ▲ Identified emerging credit businesses from Experian commercial database ▲ Emerging credit businesses defined as young and thin
  • 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Multi-segment model ► Experian “hits” using traditional credit attributes ► Experian “no-hits” using geo-risk attributes Allscore model development methodology
  • 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. DIRECTV emerging market solution Implementation and results
  • 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Model build ► Performed historical analysis using archive data  Issues with sample size ► Most “no hit” customers don’t activate ► Has secondary impact to performance of new subs Extended ViewSM implementation
  • 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Launched October 2013  Tail end of credit scoring waterfall ► Implemented as stand alone product  Reduced “no hits” by 20% ► Scored population skewed toward higher risk (expected result)  30,000 incremental gross activations exclusively from Extended ViewSM ► Mitigated risk of unknown behavior via calibration ► Mix is riskier than overall base – but better than just bottom end subs ► Lifetime Value (LTV) range from $200- $2000 Extended ViewSM implementation
  • 30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Launched September 2013  “No hits” reduced to 12% of inquiries scored (65% reduction)  Increased potential gross additions by 4.5k annually ► This included now charging a fee to normal Experian high risk subs ► Partially tempered as we did not charge a fee to all high risk subs ● Began charging a fee to new business segments Allscore implementation
  • 31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Quality and quantity were significant enough to allow us to raise our fee and still maintain incremental gains in subscriber additions ► Reduces the take rate of fee subs (desired) to help mitigate risk  LTV range from $600 – $5000 Allscore implementation
  • 32. 32©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Leaders push boundaries and take risks  DirecTV took risks to expand into previously unknown markets ► Blind risk versus calculated risk ► Calculated risks = calculated benefits Conclusion
  • 33. 33©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: Paul.DeSaulniers@experian.com Sung.Park@experian.com Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  • 34. 34©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.