Exploiting customer lifetime value (CLV) through advanced analytics
How we helped a financial services client drive business efficiency and boost customer retention by enabling a more strategic use of customer and marketing analytics.
Case Study: Exploiting customer lifetime value (CLV) through advanced analytics
Results
3%
Increase to CLV in the first 6 months of the initiative
18%
Reduction to customer churn rate
12%
Increase to contact centre save rates
9%
Reduction to call handling times
The Challenge
A financial services client was making some strides in analytics maturity and had developed a Customer Lifetime Value calculation which worked well for the business. However, they faced the challenge of how they could make effective use of this metric. Lynchpin’s objective was to:
Understand how CLV varies across the client base
Develop a plan to create a positive impact on the CLV metric
The Solution
With Lynchpin’s expertise in CLV we understood there were 3 key themes which made up the core of Customer Lifetime Value within this organisation.
How much money do they spend?
How long do they stay?
How much do they cost?
In order to influence CLV we needed to draw up some initiatives focussed around these areas and develop advanced analytics solutions to address them via machine learning models.
The initiatives were broken into 3 areas to address the CLV Calculation
How much money do they spend? -> Grow Revenue
How long do they stay? -> Increase Customer Retention
How much do they cost? -> Reduce Costs
For these initiatives to show true success we also consulted with the business on how they could develop customer strategies based on the outputs of the models. The final key to success was in implementing a test and learn framework across all initiatives which looked to constantly monitor and improve model outputs and strategic deployments.
Grow Revenue
Cross-Sell modelling looks at effective ways to help businesses sell additional products or services to existing customers. The objective of cross-sell:
To increase revenue per customer
Using a combination of BI and machine learning techniques (such as Apriori and SPADE) and working with the Product team Lynchpin created a suite of models with a core focus on identifying customers with a high propensity to buy more products.
As cross-sell can be deployed at varying different levels it is important to address the business needs for different outcomes. The below diagram shows an example of how cross-sell can be achieved through different methods.
Retain Customers
Lynchpin created Churn models using Decision Trees to predict when customers were most likely to leave. By selecting Decision trees as our model type the outputs were transparent and business focussed allowing Lynchpin to develop strategies for tackling customers who showed signs that they were about to leave.
The Churn model was then deployed through multiple channels including email, call centre and personalised onsite content. Incorporating the churn model with outputs from the cross-sell analyses enabled retention offers focussed on products that the customers were more likely to be interested in and creating a consistent and personalised service.
Reduce Costs
As a business working within the services industry, cost of servicing customers can have a big impact. Lynchpin worked with the Contact Centre team to build predictive models that scored customers on their ‘potential to be saved’. Overlaying CLV with these models we also developed a Retention matrix for the contact centre. The outputs of this model were deployed within the contact centre to allow agents to select the most relevant strategy based on the model recommendations.
Coordinate Customer Strategies
Recognising that the customers needs are at the heart of the solution, it was important that we enabled targeting and personalisation through consistency and timeliness of messaging and propositions across all customer touchpoints.
Lynchpin applied K-means clustering techniques on customer behavioural data to identify naturally occurring groups of customers.
This resulted in 6 distinct groups of customers with a clear understanding of who they were. The outputs were uploaded to the customer database and made available across the company. Importantly the clusters were also used to refine and update models for churn and upsell allowing for contact strategies to be
tailored to the individuals.
Another important aspect of a customer behaviour is in understanding where they are on their customer life cycle. Working with the Customer Marketing team Lynchpin created a Customer Value Cycle Matrix. The Customer Value cycle utilised aspects of CLV based on their current and future potential value to the
business. Drawing on outputs from our other initiatives further refinement of customer strategies was enabled.
The Results
With the ability to pull many levers on the Customer Lifetime Value metric the organisation was able to have a big impact on overall CLV while also helping to impact core KPIs across multiple areas of the business.
Increase Revenue:
CLV increased by 3% in the first 6 months of the initiative
Retain Customers:
Churn was reduced by 18%
Reduce Costs:
Contact centre save rates were increased by 12%
Call handling times were reduced by 10%
An important outcome of the entire project was also felt across the teams in terms of the collaboration and consistent approach to servicing the customer. With the outputs of each model available across the business and coordinated strategies built which resulted in enhancing business area KPIs as well as the overarching goal of increasing CLV.
Lynchpin help us unlock the millions of data points we have and turn them into valuable insight, which we use on a daily basis to improve our traffic, customer journey and sales performance. Their data scientists don’t just support our internal data and analytics team, they are genuinely commercial and committed to understanding our business, which means the outputs are always in line with our company strategy!
They have worked alongside us for ten years to support our data maturity and had a major impact in turning us from a company with data, to a data driven decision making company. We value our relationship with Lynchpin and fully expect our partnership to be a longstanding one.John Donnellan, Senior Director of Digital Strategy, Operations & Marketing, Canon EMEA
For over eight years, Lynchpin have provided expert support across the web analytics’ piece for John Lewis Finance. Whether it’s building actionable dashboards, advanced reporting and visualisation, deep dive analytics, data engineering and tagging specs, or designing complex attribution models, Lynchpin prove themselves again and again as highly experienced and competent. They have led and driven our analytics strategy and played an essential role in our business growth. Highly personable, their consultants are well known within the office and I would recommend them as a trusted 3rd party business partner.Adam Taylor, Partner & Web Manager, John Lewis Financial Services
The PRISM model guides organisations and marketers to move towards not just identifying and satisfying customer requirements, but using data and analysis to anticipate and predict their needs.Michelle Goodall, Social Media & Digital Transformation Consultant, Econsultancy
We have partnered with Lynchpin for several years now and they have played a key role not just in delivery of day-to-day and project-based initiatives but also in development of our solution design and data collection architecture. Lynchpin’s depth and breadth of expertise and experience as well as their non-partisan ethos – not being tied to specific solution providers – has enabled us to understand both the benefits and the potential pitfalls of different solutions and designs. As a result we have very solid data quality and that’s reflected in the quality of the insight we are able to serve to the business. The team at Lynchpin are flexible, supportive and great colleagues to have. They are a highly valuable part of the extended LexisNexis team.Michele David, Lead Product Owner, LexisNexis Risk Solutions Group
Over the past 5 years, I have worked almost continuously with Lynchpin on various data engineering and analytics projects. They are adept at navigating complex business requirements and helping you to really ‘look under the bonnet’ and understand the power of your data.
We have a great partnership with the team at Lynchpin, they are a valuable support to our business strategy with their extensive experience and knowledge of data engineering.
Throughout a complex website re-platforming project which combined a standard and subscription customer proposition, Lynchpin helped us build an analytics infrastructure which not only met the brief it also went that extra mile to future-proof us.Michelle Corp, eCommerce Director, Lily’s Kitchen
We have enjoyed working with Lynchpin for a number of years now and they very much feel a part of the team. Their in-depth analytics expertise and experience, alongside the ability to fit in with our ways of working have proved invaluable to us.Adnan Chaudhry, Vice President of Marketing Analytics, Research & Planning, Emirates
More client success stories
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