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Forecasting Customer Behavior

June 25, 2013

Forecasting customer behavior in banking is not easy. In today’s competitive market, customers are taking greater control of their banking relationships. They are switching banks, changing their behavior and demanding improvements. Analysis solely based on historical buying data is just one piece of the puzzle and highly limiting by a single data model. Why limit your analysis on one data model when you can process many data models simultaneously?

What banks need is predictive analytics which encompasses past behavior with a variety of variables including information about a potential customer’s present financial situation, bank business rules and product knowledge, historical buying behavior,  demographics, financial goals, and product eligibility. Predictive analytics help to predict customer behavior for purchasing deposit, loan and investment products; to predict customer behavior related to interactions with banking personnel; and to segment customers and prospects for target marketing.

Ignite uses Decision Tree Analysis as the basis for its predictive analytics. The Company’s algorithms use this modeling technique to handle complex and simultaneous analysis of thousands of variables to model an entire population and determine which customer behaviors best predict their actions. Decision tree-based models using CHAID (Chi-Square Automatic Interaction Detection) and CART (Classification and Regression Trees) are used to detect non-linear relationships in the data automatically and create segments. That is tech-speak for being able to detect and reveal hidden relationships in seemingly unrelated data that reveal valuable insights about your customers.

Why use predictive analytics?

  • Improve the effectiveness of the branch, online channel and customer service center in terms of profitability and customer satisfaction.
  • Seize new profit opportunities such as cross-selling and up-selling.
  • Drive down the cost of customer data.
  • Support customer-centric thinking and drive it throughout the organization.
  • Integrate the power of customer into your sales and marketing organization.
  • Unlock the potential found in your customer and prospect base for new markets and micro-segmentation.

Banks can implement this in just a few months using existing processes and technology. For more information, click here.

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