Customizing the Lending Experience for Your Customers Part 2 of 3
November 2015

"The Right Time”

In the first part of this series we talked about how you can identify the right product for a customer by organizing your customers into financial states. In this article we focus on how to identify the right time to present offers to your customers.

The evolution of a customer from one financial state to another is a result of changes in the consumer’s financial maturity, the economy, and receptiveness to marketing messages. Understanding the triggers of when and how a consumer transitions from one stage to another is the key to knowing when it’s the right time to present a product to a customer.
Financial state change triggers can occur from a number of different life events such as getting a raise in salary, taking a new job, losing a job, graduating from school, starting school, retiring, etc. But they can also occur from changes to financial metrics such as credit scores, debt to income ratios, etc.

As with organizing your customers by cluster analysis there are several statistical methods that can be used to help you identify which variables and marketing methods have the greatest influence on a financial state change. A good starting point for identifying these triggers is by using correlation analysis. Correlation measures the degree two variables move together, between -1 and 1. If the correlation is 1, they move perfectly together, if the correlation is -1, they move perfectly in opposite directions. If the correlation is 0, then the two variables move in random directions.

Let’s look at an example of a fictional person named Bob. Bob is 35 years old, recently got married, purchased a new house and has been a customer for almost three years. Bob’s debt to income ratio (DTI) has decreased from 45%-40% and his credit score has increased from 650-720 during his tenure as a customer. As indicated by the chart below, the variable with the highest correlation to a financial state change is DTI with an -82.90% correlation.

This is purely an example but it illustrates the point of correlation analysis well. If this data were actually several hundred customer’s data and the correlation was this high between DTI and changing financial states from 1 to 2, you would know that DTI is the financial metric to monitor for those people in financial state 1 indicating they are about to change to a new financial state and thus be ready for the products in financial state 2.

Stay tuned for part 3…or download the more extensive study in our eBook.

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