Banks and Market Basket Analysis can make up for an alluring pair. And ‘pairing of ‘products or service offerings’ raises in context when financial institutions want to dig deeper into the product-customer connection to serve the customer better, maximize value from targeted marketing and promote personalized experience.
In addition to the association unearthed between banking products, affinity analysis offers rich insights when significant customer information is included as part of the analysis. Serving the customer well is better achieved by keeping the customer at the forefront, rather than products, in this market basket analysis exercise.
Putting a customer-first face also means that banks read the need of the customer even before the customer realizes it. For one banks that offer a range of offerings from credit cards to investment schemes and insurance products can connect customer behaviors to the offerings and tap into affinity analysis to unearth potential cross sell and upsell opportunities.
Customer-focused Market basket analysis for banking
From putting a product perspective in terms of turning the lens on loans, cards, insurance and wealth management with regards to market basket analysis, banks can reap more value by putting a customer twist to the affinity analysis.
From the data at its disposal, a bank can unearth different pairings of service offerings that are being used by customers. For instance, a customer using of credit card has also turned a patron for the bank’s home loan offer. There would be more of these basket-pairs in terms of service offerings being consumed by the same customer.
Now with the customer-focus stitched into market basket analysis, demographic variables are brought in to understand customers’ banking behavior better. This also helps narrow down the target market with the insights acquired from the exercise. This type of market basket analysis for banking exercise takes us through a likely scenario of this type:
- Co-occurrence of Credit cards and Home loans are unearthed with both being consumed by 553 customers
- Men (age group 28 to 35, working in technology sector) that have consumed Credit cards and Home loans amount to 383.
The affinity analysis now offers rich insight in terms of unearthing sequential patterns aided by the inclusion of customer demographics. This can also set a campaign rolling for men belonging to the mentioned class or category having availed only one of these two service offerings covered in the scenario.
Affinity analysis is also another string to the bank’s marketing bow to reap value from targeted offers. With the customer twist to the market basket analysis for banking exercise, insightful information on banking behaviors can be extracted from customer data with demography and time sequence adding more value to the understanding.
With the co-occurring banking products from the customer database for a specified time sequence pinpointing a specific target group (say men aged between 30 and 40 and working in Private sector), action in the form of targeted offerings can pave the way for increased sales, personalized customer experience and increased customer loyalty.
Affinity analysis and the credit card connection
Banks can tap into market basket analysis in more ways. Take credit cards for instance. Affinity analysis can be put to use in identifying products co-occurring frequently in credit card transactions. This sets a train of events – from understanding customers’ affinity towards products to taking advantage of correlations in optimizing loyalty programs.
A leading financial institution wanted to gather insights around credit card customers by unearthing ‘customers’ affinity towards products’. Saksoft built the market basket model to help the financial institution use intelligence extracted from the model to improve marketing effectiveness, realign loyalty program and increase customer retention.