1. Finding Diamonds in The Rough
Are Some of Your Worst Current Customers Your Future
Cash Cows?
October |2009

2. Finding Diamonds in The Rough I Are Some of Your Worst Current
Customers Your Future Cash Cows?
The oft-neglected customer who represents little value today could be an
important asset for your company tomorrow – the trick lies in identifying them.
Companies in the telecommunications and banking sectors that have begun
managing customers based on their value have taken that first important step in
effectively dedicating their resources proportionately, providing a higher level of
service to more valuable customers. This is often reflected through the offering
of dedicated customer service representatives, tiered loyalty cards, and
personalized products and services, among other practices.
The reason why this is considered only the first step, however, is because one
segment of customers is often neglected by companies and not treated in a
differentiated manner – this segment, for this article’s purpose, will be called the
“future cash cow” segment.
Customers in the future cash cow segment can be identified as follows:
 The monthly or annual value they generate through the products or services
they currently purchase does not warrant their being identified as high-value
customers.
 They have the potential to:
o Spend more in the current assessment period and thus could become high-
value customers (current share of wallet – short-term potential cash cow).
 An example of this is a prepaid mobile phone subscriber that splits his or her
spending with different telecoms – if he or she chose one provider, their spend
would be significant enough to be deemed a high-value customer.
o May spend more in future assessment periods to become high value
customers (future share-of-wallet – longer-term potential cash cow).
 An example of this is a banking customer that currently generates little value
for the bank, but in the future, as his or her wealth and needs change, will
generate enough income for the bank to be deemed a high-value customer.
This article will address the identification of short-term potential cash cows,
customers which can be targeted through various campaigns and outbound sales
efforts to rapidly acquire substantial assets for your company. How longer-term
potential cash cows can be identified will be addressed in a future article.
Identification of Short-Term Potential Cash Cows
Among your customers are a significant number of them who don’t give you all
their business, for one reason or another. These customers split their category
spend in one of two ways. The first, splitting spend vertically inside one product
line – an example is the above mentioned case where a customer splits his or her
spending with different prepaid mobile phone service providers. The second,
splitting spend horizontally across a range of products – an example of this is
where a customer holds his or her current account with one bank and his or her
mortgage with another.

3. While there are numerous ways to identify these customers, we will highlight
some of the main methods that can be used…
Telecommunications
 The customer generates significant value in one product or service line but
does not own other products or services, and, has similar demographic
characteristics to those of high value customers. An example of this would be a
fixed line subscriber who generates relatively significant value and lives in an
apartment building or neighborhood where a majority of his or her peer
residents (those of a similar age, gender, household size, etc.) have ADSL
packages and mobile phone lines with the company. There is a strong likelihood
this customer is splitting his or her spend horizontally among several telecom
companies and is a good candidate to pursue as a short-term future cash cow.
 The customer has a disproportionate inbound – outbound rate, receiving a
significant level of calls (a level those who are high value customers exhibit) but
making few. This may be an indication of the customer using another provider
for a majority of outbound calls. Analysis among high value customers to
determine a relative corresponding outbound rate to a given inbound rate can
help identify such customers.
 The customer has exhibited behavior at any time in the past that
corresponded with an annualized behavior which would qualify the customer to
be a high-net worth customer. An example of this would be a customer who met
the threshold requirements of the telecom operator to be considered a high net
worth customer for a short-term period (a month or quarter), but, did not exhibit
this behavior over the course of the required period (usually a year). Odds are,
this customer has churned some of his or her business to another operator, and,
if won back, could join the high value customer segment.
Banking
 The customer is receiving a relatively significant salary payment (similar to
those deemed as high net worth and only holding a current account with the
bank) to his or her current account but transferring it out soon after it arrives
every month. These customers are ripe for the picking as their potential value is
self-evident.
 The customer is making monthly mortgage payments out of his or her
account in installments that can then be used to estimate the value of the
mortgage he or she is paying off. Based on the value of the customer’s current
account and mortgage, his or her likelihood of being considered a high-net worth
customer can be easily calculated. A similar observation can be made about
credit card product ownership – electronic fund transfers to accounts in the
customer’s name at another bank are a tell-tale sign.
 The customer has characteristics which deem that he or she must be holding
other products with the bank, but has chosen not to do so and opted to work
with another bank. Customers with similar salary payments, living in a similar
neighborhood, of a similar age and household size stand to own a similar set of
banking products. Those characteristics common in the various high value
customer sub-segments should be identified through analysis. This information
can then be used to identify potential high value customers.

4. To effectively be able to do the above, extensive analysis will need to be
conducted by a data mining expert. Based on the data on hand regarding the
customer, the query criteria will need to be fine-tuned on a case-by-case basis to
ensure the most optimal leads are produced, leads which yield the highest
possible return.
Generating leads is the first part of the effort in obtaining short-term cash cows –
effective sales pitches, product / service bundles, discounted pricing, customized
campaigns, etc., will likely need to be utilized to convince the customer to give
full share-of-wallet to the company. As it stands, he or she already has a reason
for not switching their alliance over to just company.
Understanding the reasons why any given sub-segment of customers has chosen
not to give their full share-of-wallet is needed here to ensure the right offer is
made to the right customer. Testing offers will be an effective method to
determine the right mix of product & service, price, and pitch. Looking at
competitor’s offerings is another, particularly around those products or services
least held by these short-term potential cash cows.
Utilization of the above listed methods for identifying potential high value
customers should become a standard marketing practice in telecoms and banks.
Such methods to acquire business and increase the high value customer segment
base are extremely cost efficient, and, if tried and tested, very effective.

5. About Forte Consultancy Group
Forte Consultancy Group delivers fact-based solutions, balancing short and long term
impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety
of service offerings for numerous sectors, approached in three general phases -
intelligence, design, and implementation.
For more information, please contact
info@forteconsultancy.com
Forte Consultancy Group | Istanbul Office
www.forteconsultancy.com