Knowing what your customers have done in the past provides a reasonable measure of what they will do in the future. That is what spending pattern analysis is all about. What if there was a way to know with the same degree of accuracy what your customers are thinking and what their goals are?
Target marketing revolves around target audiences and customer profiling. No two individuals are alike no matter how similar their profiles are, so capturing the target’s attention and converting it into a paying customer using this approach is inefficient. How inefficient it really is becomes apparent when we look at advertising. Advertising channels boast of their reach and the general consensus is that a greater reach is better. A conversion rate of 3% is considered good, which means that for every million that sees an ad, only 30,000 will become paying customers. In war terms (and marketing is based on warfare principles), this means that for every 100 shots fired, only 3 enemies are taken out. Efficient?
Billions are pumped into advertising each year based on customer profiling. Marketing is a sunk cost – an investment – so it does not directly affect the price. Indirectly, however, it forces the price upward. When preliminary numbers are run, the marketing expense has to generate a sufficient return to warrant the investment. If it fails to do that, the budget will be sliced until the outcome is acceptable. What if there was a way to raise the conversion rate by changing how customers are targeted?
Projectional targeting is currently only available for financial institutions in conjunction with internet banking. It is still in an experimental stage, but shows great promise. Instead of segmenting the market based on earnings, age, gender, spending pattern and all the other typical variables, it extracts information on what the target actually wants to do. As such, it is an invaluable tool in the development of new services as it provides insight into what the target really wants although it may not have the means to get there … yet.
By applying projectional targeting to its existing customer base, any financial institution that offers internet banking services can gain insight into customer wants and desires that fall outside the scope of conventional market segmentation. This method enables the financial institution to anticipate customer demand ahead of time and package it in a service that fits near-perfectly. It is far more accurate than surveys as it does not limit customer options and results in considerable savings arising from advertising. The only advertising needed is to strengthen the overall image and introduce new services.
Implementing projectional targeting
Projectional targeting (only available for financial institutions that offer internet banking services) calls for an expansion of the internet banking platform that offers an entirely new dimension for customers. That dimension is used to derive the goal-driven customer profile. Implementation takes from 6 – 12 months depending on the strength of the financial institution’s IT development department. It is introduced in stages to prevent customer overload. Once the customer grows comfortable, the dimension is expanded. When fully implemented, insight into customer future goals unfolds.
The process is analysis intensive and makes use of sophisticated statistical methods to reconfigure the customer profiling structure. It is run alongside traditional profiling as the latter is necessary for pricing and budgeting purposes.