The document discusses using customer segmentation and insights to create loyalty. It outlines how OTP Bank Romania used segmentation to categorize customers into profitable "green" and "potential green" segments versus less profitable "orange" and "red" segments. The bank then conducted additional research to understand customers' motivational triggers and establish behavior patterns. This helped OTP Bank Romania design a simple, timely, and mutually beneficial customer loyalty program with key steps like computing average expenses, awarding points, and simulations to estimate program impacts. The document emphasizes that understanding unique customer segments and their needs is essential to maximizing retention of the most profitable accounts.

1. Using customer segmenta/on and insights to create loyalty
Barcelona, 26 November 2010
Roxana Hidan
Deputy Director ‐ Product Management Directorate
OTP BANK ROMANIA
Loyalty: customer retention and communication Avem încredere

2. Agenda
• Introduc/on
• The Importance of Knowing Your Customers
• Using Segmenta/on for Understanding Your Customers
• OTP Bank Romania’s Experience
• Lessons Learned
Loyalty: customer retention and communication Avem încredere

3. Introduc/on
OTP Group
Branches 1507
Employees 30,047
Number of clients ~12.2mn
Profit a[er tax1 84.7 HUF bn
Loyalty: customer retention and communication Avem încredere
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4. The Importance of Knowing Your Customers in general…
• to preserve the most valuable
asset of the Bank Customer
retention
• to provide products and services
which effec/vely sa/sfy
customers needs
Customer Customer Customer
• to understand how and when you satisfaction profitability loyalty
are crea/ng value for your
customers
• to iden/fy and focus on those
Customer
customers which offers the best acquisition
opportuni/es for profitable
growth
Loyalty: customer retention and communication Avem încredere

5. ….and the SMEs’ in par/cular
• Small businesses are different in • The tradi/onal approach of
many ways: compe/ng on price or product
alone is a losing proposi/on.
– Industry Instead you should look for a
– Needs sustainable, differen/ated value
– Capabili/es proposi/on.
– Trust
– Business strategies
Value proposi0on = “Why should I do business with you and not somebody else?”
Loyalty: customer retention and communication Avem încredere

6. Segmentation is essential….
• for understanding where you stand
and obtain more informa/on about
the customers
• for determining customer
distribu/on and porbolio
sensi/vi/es
• for realizing that it is not possible to
serve everybody and that you need
a different approach for each
segment (loyalty, reten/on,
standardiza/on, up or out etc.)
Loyalty: customer retention and communication Avem încredere

7. . . . and begins with an understanding of your data resources
A deeper understanding of small
business customers can be achieved
through the iden/fica/on of
homogenous groups of customers within
the small business segment based on the
following types of criteria:
 Demographic: Non‐financial and
financial characteris/cs
 Behavioral: Product usage and
purchasing paferns
 AFtudinal: Preferences and needs
 Value‐based: Customer value to Bank
Loyalty: customer retention and communication Avem încredere

8. Our experience in segmenta/on is an example…
Customer distributrion • “Green” ‐ the most profitable clients.
This segment generates more than
80% of the revenues;
Green
9%
23% • “Poten/al green” – registering a good
Potential Green cross‐selling ra/o these clients are the
main providers of liabili/es within SME
40%
Orange segment;
28%
Red • “Orange” – the larger SME segment
registering a sporadically product
usage and an income contribu/on
which is not covering the opera/onal
costs;
• “Red” ‐ the inac/ve clients
Loyalty: customer retention and communication Avem încredere

9. …and we looked for addi/onal insights to befer understand our
customers’ needs
I ‐ “Friendly approach/ kind
personnel”
R‐ “Very well trained personnel”
S ‐ “Electronic and on‐line
services”
F ‐ “Short wai/ng /me”
J ‐ “Professional (financial)
counseling”
D – “Loyalty program”
Loyalty: customer retention and communication Avem încredere

10. Designing a customer loyalty program
The Golden rule: keeping old customers is always less expensive than geong
new ones
The risks: any loyalty scheme might generate an immediate decrease in net
revenues if it is not thought through
The general principles of the approach:
o Simple: easy to implement, easy to be explained to sales force, easy to
explain to customers, easy to be understood by the customers.
o Timely: if the /me to receive the reward is too long the risk is that the client
will lose mo/va/on.
o Win/Win: link the customer’s value with the value to the customer
Loyalty: customer retention and communication Avem încredere

11. Key steps to build the scheme
o Compute the average expense paid by o Make simula/ons to es/mate the number
customers for each of the product of new customers to be enrolled or to
included in the scheme migrate from “dormant” to ac/ve
accounts to compensate the decrease in
o Compute the points awarded for each profitability
product based strictly on the difference
among average expense o Design, implement and pilot the workflow
o Decide upon the amount of generic o Construct the marke/ng campaign and
discount to be offered and compute the strategy (branding, message, channels
value of each point etc.)
o Decide the mul/pliers to be used in the o Internal launch of the system presen/ng
first launch of the program its features and work flow
o Design and test the automated tool to o Launch the reward system and make it
incorporate the algorithm of awarding available to customers
points
Loyalty: customer retention and communication
• a Avem încredere

12. Key success factors
• Maximizing reten/on of the most profitable
Define your goal customers
• Maximizing the profit per customer
• Understand where you stand
Segment database • “One size fits all” is not the way
Understand customers • What are the sources of sa/sfac/on/dissa/sfac/on?
mo/va/onal triggers
Gain addi/onal insights • Quan/ta/ve AND Qualita/ve research
Establish behavior • Understand product usage and place safeguards not to
paferns lose revenues
• Increase the probability that your customers will do
Build the bofom line more business with you and that when they call for a
product or service, it is ours they choose.
Loyalty: customer retention and communication Avem încredere

13. Thank you for your aJen0on!
Contact details:
Roxana Hidan
Deputy Director ‐ Product Management Directorate
OTP BANK ROMANIA
Email: roxana.hidan@otpbank.ro
Loyalty: customer retention and communication Avem încredere