Capability: Customer Segmentation

Vulnerability in the water sector

Posted on: 2 November 2020
Vulnerability in the water sector

Covid-19 has meant that 2020 has been a challenging year for all sectors. With a lack of historical data to forward forecast the impact on consumers and their behaviour, there is no way to know what impact this will have on regulatory and business objectives.

For the water sector, this has been particularly challenging. Water companies have spent years building demand and leakage models to ensure that they are as accurate as possible.  With a significant shift in working patterns and individuals furloughed, working from home or made redundant; household consumption has increased dramatically, with a significant drop in non-household use.

On top of this, the UK saw a record breaking dry and sunny spring across the UK, quickly following the wettest February on record – adding further complicating factors to demand models.

Furthermore, UKWIR are working with the water sector to develop a strategy to “achieve zero customers in water poverty by 2030”.  With more customers at risk of becoming financially vulnerable, especially with the furlough scheme due to end this month nd further redundancies on the horizon, understanding which customers are at risk and how you can protect them is more important than ever.

Recently, CACI ran a roundtable to explore this latter point in detail and discuss how water companies can understand vulnerable customers and address water poverty.

We addressed this in 4 key areas:

  • Understanding those that are at risk of becoming financially vulnerable, pre-Covid
  • Using CACI’s movement of people reports to understand who is moving vs pre-Covid levels
  • Understanding how this movement compares to demographic groups
  • What water companies are doing to support vulnerable customers

UNDERSTANDING THOSE THAT ARE AT RISK OF BECOMING FINANCIALLY VULNERABLE, PRE-COVID

In January, CACI released Vulnerability Indicators to support organisations in understanding customers who are at risk of vulnerability from a financial and digital perspective.  The purpose of these indicators is to ensure that organisations are supporting those on lower incomes with appropriate tariffs and ensuring that those that can’t (or won’t) access services digitally are able to access services.

The Financial Indicators include the below attributes, as well as a combined score:

  • Basic Bank Account
  • Disposable Income
  • Young Dependents
  • Financial Situation
  • Likely to Borrow
  • Minimum Payments on Credit Card
  • Equivalised Income
  • Has a Loan
  • No Savings or Investments
  • No Pension
  • Distance to Bank Branch

The Digital Indicators include (as well as a combined score):

  • Broadband Access/Speed
  • Does not Have Mobile
  • Does not Buy Online
  • Does not Use Internet
  • Online Finance
  • “Computers Confuse Me”

USING CACI’S MOVEMENT OF PEOPLE DATA TO UNDERSTAND WHO IS MOVING VS PRE-COVID LEVELS

CACI has been running regular research surveys to a nationally representative sample on an ongoing basis, to see how consumer behaviour is changing. In terms of the latest movement, this is currently sitting at around 74% of pre-Covid movement, with decreased movement following the introduction of the tiered system in the UK:

UNDERSTANDING HOW THIS MOVEMENT COMPARES TO DEMOGRAPHIC GROUPS

When comparing this to Acorn Demographics, movement is highly correlated to affluence, as you can see from this chart below. During Peak Lockdown the lower affluence groups were moving more than the national average (the black line in the chart below).  These groups are highly correlated to those working in the “essential” category, such as Care Workers and Retail Workers:

Compared to the more affluent, who were moving less frequently than the national average (the black line).  This is highly correlated to those that are “Office Workers” so are more likely to be able to work easily from home:

In addition, when we compliment this further with the research we are running, we can see that although the number of those on furlough is reducing, 33% of those on furlough believe they are at risk of losing their job, with 25% of people having less disposable income vs pre-pandemic:

WHAT WATER COMPANIES ARE DOING TO SUPPORT VULNERABLE CUSTOMERS

During the roundtable, we discussed a number of key areas that the attendees are focused on, to support customers:

  • A desire to be more proactive, rather than reactive and use data intelligently to understand those that are at risk. Some organisations are already using demographic, behavioural and contact centre data to understand vulnerable customers and how to support them – others are struggling to make sense of a very busy data world.
  • Consider partnering with organisations where consumers may go if they have not been financially vulnerable before. Linking with organisations such as Citizens Advice is a good place to start.
  • Some organisations where data is not easy to access are looking to partner with other utility companies to present a united front for consumers to access support.
  • Using additional channels such as Social Media and Press Releases partnered with National Debtline is a good way to reach audiences who may be at risk of becoming vulnerable in the future.
  • Also using direct channels such as pro-active emails to promote PSR and alternative ways to pay so you’re directly speaking to all customers (you can of course personalise this using CACI’s segmentations!)

WHAT’S NEXT?

Our next blog will be focussed on the impact of Covid on demand forecasting, following a recent roundtable we ran with Anglian Water and Badger Meter.

Following our next Roundtable on “Identifying the New Wave of Vulnerability” we’ll be releasing the key thoughts and findings.

Please do not hesitate to get in touch should you want to hear more!

Your new segmentation is now in place, What’s next?

Posted on: 29 April 2020

So, you’ve delivered a brilliant customer segmentation. You’ve incorporated demographics, lifestyle, engagement and value data, established real clarity and for the first time you can tell your organisation who your customers are, where they are, what they like, what differentiates them, what they want and how you can most effectively engage them.

Now there’s some new challenges – how do you turn this rich new insight into action that drives tangible business value? Equally importantly, how do you get the buy in and engagement from stakeholders and colleagues needed to get the organisational adoption that will make your segmentation a genuine strategic asset?

These are certainly challenges that I have faced on numerous occasions and one I know many marketers, analysts and data leads will recognise.

BUILDING A STRATEGIC ASSET

Typically, a great segmentation can deliver strategic benefits across 3 core areas. I like to break them down as:

  • Better Effectiveness – such as selling more through optimised marketing activity
  • Improved Efficiency – for example, deducing costs through channel optimisation
  • Reduced Risk – such as identifying and puting action in place to support vulnerable customers

Often the business case for the segmentation will have defined goals in theses areas. If not, now is the time to get those use cases defined. Once you have them you will be in a much stronger place to deliver value.

It can take time though to achieve success, so getting moving quickly is important. Once you have them, what’s next?

DATA SCIENCE IN ACTION

This is where getting the data scientists involved can really start to add value. This is often a great place to initiate a collaborative effort with them – you’ve got the opportunity and they have the wizardry to help make it happen.

There are a range of approaches that can work here, but taking the example of a commercial organisation aiming to sell more product to existing customers, we’ve seen the following work incredibly effectively.

In this example, the vision is to combine the customer segmentation you have created with dynamic models that will create an optimised platform for selection and conversion. This approach would ensure that each customer is targeted appropriately with the product most likely to deliver long term value growth.

  • Step 1 – Leverage insights and learnings from your Customer Segmentation to inform tailored messaging. Making your content relevant always makes a difference.
  • Step 2 – Overlay optimised Next Best Product, Channel Preference and Lifetime Value models to inform targeted product offers. Don’t just focus on what a customer might buy next, consider what will build long term, incremental value.
  • Step 3 – Test and refine in a small pilot, be prepared to fail, to learn and improve. It’s rare to get it right first time.
  • Step 4 – Deliver measurable, incremental uplift in product holdings through an integrated programme of optimised communications, founded on the Segmentation and enhanced with Data Science – initiating a cycle, of testing, refining and improvement. It may take a little time, but it will deliver significant results.

In this example this activity combines to inform the delivery of a cross channel marketing programme that will drive ROI from increased sales. We’ve seen this work in multiple sectors, including Financial Services, Retail, Automotive and Media. It is also highly effective in driving positive behavioural change in Public Sector applications.

MAKING IT HAPPEN

The key principle is to test and learn in focussed pilots, to enable the timely realisation of insights that will inform you before you move to a full roll out.

In our experience the approach achieves buy-in demonstrating tangible results, building exec level appetite, growing stakeholder confidence and informing the business case for further investment. It will create success stories that will inform the vision and demonstrate success to the organisation. Your customer segmentation will become the foundation of a transformational initiative.

And that’s a key learning I have taken from my time working with customer segmentation. They are great initiatives and often create the most impact when they are used as an enabler to driving significant business value.

If you’d like to hear more about this or how CACI can help you deliver more from your Customer Segmentation, we’d love to talk. Get in touch at info@caci.co.uk.

Top 5 uses of customer segmentation

Posted on: 12 November 2019
Top 5 uses of customer segmentation

As consumer expectations become more complex, and with brand loyalty increasingly more difficult to maintain, the need to deliver a personalised and tailored customer experience is crucial to your brand’s success. This is true across all industries, with consumers engaging across more channels than ever before, against a background of increasing competition.

WHAT IS SEGMENTATION?

Segmentation is a fundamental tool for marketers, helping you to understand your audience by dividing consumers into distinct groupings based on shared demographics, lifestyle behaviours and attitudes.

When we think of segmentation, it’s easy to simplify the process. Grouping customers by products or services purchased, or demographic factors such as age or gender or perhaps we may go as far as segmenting based on buying behaviour. Assuming that two customers will respond in the same way to the same offer, based purely on their prior purchase or route to purchase is not necessarily going to achieve your desired outcome. Instead, gaining  deeper understanding of consumers and anticipating their needs as individuals is key.

Here we highlight the benefits of customer segmentation specifically for the financial services industry, however it is relevant across all industries and CACI can support all sectors with segmentation.

FINANCIAL SERVICES CUSTOMER SEGMENTATION

Fresco is an off the shelf segmentation created specifically for the financial services sector. It divides the UK into 12 segments and 45 sub-segments based on an individual’s life stage, affluence and attitude to money, providing a universal vocabulary with which to describe customers, prospects and the market.

Many clients have taken Fresco at micro segment level (134 segments) and combined transactional and market research data to reaggregate Fresco, building a powerful and bespoke solution tailored to their organisation.

Here are just 5 of the ways you can leverage segmentation to improve your customer experience.

1. Customer Insight

Financial marketers need insight to deliver the right message, about the most appropriate products, services and advice, to the right customers. Adding a segmentation to a new customer means you can immediately start to communicate to them in the right way whilst knowing limited transactional information about them.

Looking at customers solely through the products they hold could mean you are viewing two customers with similar mortgage products as being broadly the same type of person and communicating with them accordingly. But, when viewed in terms of the Fresco segmentation, those two customers might turn out to be two completely different individuals, with very different attitudes to life, money and risk.

Understanding whether your customer is a Successful Professional, a Stretched Renter or a Retired Homeowner informs the type of products and services they might be interested in and the types of channel and messaging they are most likely to respond to.

Fresco can provide strategic insights into your customers, enabling you to evolve communications to suit your audience at an individual level.

This detailed customer insight provides in depth analysis of your most valuable customers by Fresco segment, so you can start to find more like them. This could be anything from buying direct marketing lists or buying lookalike Fresco audiences using display advertising or connected TV to understanding area penetrations of Fresco segments for location of out of home advertising.

2. Proposition Development

The insights you gain when using a segmentation can also help you plan for the future. If you are attracting an older demographic and your customer database is dominated by segments such as Low Income Elderly and the Road to Retirement, you may need to review your proposition and develop products that are more suited to a younger audience, in order to expand your customer base.

Nationwide Building Society built a bespoke segmentation combining customer data, Fresco and market research allowing them to understand their individual members at a glance, and offer them the right products, services and advice to help them with their banking needs.

This new toolset helped Nationwide to better understand its customers’ needs, and develop compelling, targeted products, services and marketing messages, resulting in Nationwide winning significant new business among younger members.

3. Understanding the market

As well as understanding your individual customers, it’s also important that you have an overall understanding of the market in which you operate. Having a view of the UK population will help you to understand what share of the market you have and how your share is made up compared to the market as a whole.

Money Advice Service needed to understand the total UK market to ensure its advice services were reaching the right people, at the right time. To deliver accurate messaging, it was essential to Money Advice Service that they understood the different requirements of consumers and how to group them into addressable segments.

Fresco was used as a building block and mapped to research they had conducted, and the resulting segments have been used to help with targeting. This segmentation is used to build their engagement strategy and ensure support is focussed on the right customers, and that they’re targeting the core customer groups through appropriate channels.

4. Branch performance

The same philosophy can be used to understand local area analysis and branch performance. Understanding the population in the catchment area of each of your branches helps when making decisions about whether the branches are serving the local population with the correct branch format in a more digital world.

Fresco’s segmentation allows you to answer fundamental questions that will help determine whether or not your branches are in the right areas and serving the needs of your customers. For example; do they need the same size of premises? Should they be on the high street and open more convenient hours? Should they be providing financial advice for a younger audience or assisting in the transition to digital channels for an aging population? With Fresco you can start to understand the needs of your customers and ensure your branches are operating in a way that suits the customers in the area, as opposed to every branch simply working in the same way.

5. Understand your audiences’ digital behaviours

By combining segmentations with digital consumer insight data from the likes of Ipsos’ iris, you can align your digital marketing tactics with the behaviours of your target audience.
When cross-referencing online behaviours with Fresco segments you can gain a better understanding of exactly what your audience are searching for and dispel any preconceptions of who would be behind certain search terms.

For example, it’s easy to assume that young professionals would be the primary group searching ‘first time buyers’, but it can also be Asset Rich Greys, as it is likely parents may be helping their children get on the property ladder. Knowing what your audience are searching for will allow you to feed these common search terms into your PPC and content tactics to ensure you’re attracting your target audience.

Similarly, understanding your target market’s online journey will help you to know where to make yourself most visible. If Asset Rich Grey’s are visiting aggregator sites, you need to be sure that your brand is present across these sites with the right messaging, to enable you to reach that target market.

To find out more about how you can leverage off the shelf segmentations in your marketing and improve on your customer experience, contact us at info@caci.co.uk