Contemporary Analysis

Data Science

Grant Stanley

Predictive Analytics improves M&A Activity

There have always been two major ways to expand your business:  Grow it, or Buy it.  This brings up some interesting questions about which is more beneficial.  The correct answer is usually based on cost of customer acquisition and customer lifetime value.  Right now, with the cost of client acquisition being so high, companies are turning to buying distressed businesses.  One, it eliminates competition, and two, the customers can be acquired "on sale".  While mergers and acquisitions are common across all industries, there seems to be a significant propensity for growth by buying in the banking industry.

The unique problem that is causing an increase in the " buy them" thought process is that in banking their revenue generating power has dwindled with the decline of interest rates.   Not only that but as clients leave for competitors by natural attrition, there is a dire need for new customers.  Buying seems to solve both of these.

While it may solve the issue of new customers at a reduced cost, how to transfer the old customer base to the new bank has always been a major problem.  First, you have a bevy of new customers who have not gone through your buying process.  You have no idea who they are and why they are in the product they are in.  Secondly, you can fix problem number one by keeping the staff from the bought bank, but they're not sure if the customers are in the correct products anymore either because they don't know what products they have to sell.

Grant Stanley

Net New Sales: Sell More by Selling Less

"Selling more by selling less", is a phrase that most salespeople write off.  They can't believe that you can increase sales by focusing less on acquiring new clients, and more on your current customers.  This is a basic misunderstanding and over simplification of the sales equation.  Most salespeople focus only on new people. They fail to recognize the huge crowd of people that have already decided to become clients.  They forget about their current clients. They have already been sold, and are waiting to be called again.  But you have already sold them you say?  Sure, weeks, months, and sometimes years ago.  Don't your think they are ready for something else?  They are.  Salespeople just don't know how to resell to someone that already knows their game, and therein lines the trouble. Learn how we helped increase customer loyalty by reselling current clients. 

Sales is not about new sales, it is about net new sales.  To increase net new sales, salespeople have to also be concerned with reducing the number of their current clients that are lost each month to customer churn.

Current clients.  I find it fascinating that sales people never think of their current clients as leads for more sales. I think this stems from bad Customer Service Management systems that do not allow salespeople to keep track of when customers are ready to be sold another product, and management's lack of understanding about how salespeople should be trained and compensated.  But why?  Why cant sales...

Tadd Wood

Dear Community Banks: This is Why Your Customers are Leaving

I recently had to make a deposit and fix a small issue with my bank account. I think my community bank has maybe 5 locations in the entire midwest, which means that everyone is cheery and I can always expect christmas lights in the winter and maybe cookies on the table when I walk in there. The staff are attentive and wonderful and always call me sir. "Is there anything else we can do for you, sir?"

Yes. Yes, local community banks, there is something you can do. But it's less for me and more for you.

The smiles are great and sometimes I consider visiting the bank if for no other reason than to be surrounded by people who's job seems to be to boost my self esteem at all costs and make me forget the cruel, harsh realities of this world. It is icing on an otherwise mundane task of paying the bank a visit.

But do you think this is why customers are staying with you?

Grant Stanley

How to Increase Customer Lifetime Value

While many business make substantial investments to improve customer acquisition, they often fail to invest in improving their customer lifetime value.  Customer lifetime value is the average monthly net profit per customer divided by the monthly churn rate.  Learn how to calculate customer lifetime value here.  Companies can increase customer lifetime value by making investments to improve customer loyalty, crossing selling, and up-selling.

Improving customer loyalty, reducing customer churn, allows you to increase net new sales.  Net new sales = # of New Customers - Customer Churn.  Your sales and marketing teams work hard to bring in new customers, and customer churn erodes their efforts.  Fortunately, improving customer loyalty and reducing customer churn, increases the return on investment from customer acquisition, improving your customer lifetime value.

To reduce customer churn, you need to know each of your customers.  You need to know who is most likely to leave and why.  Knowing who is most likely to leave allows you to contact them before they leave.  Knowing why people leave, allows you to fix your systems.  The who is a short-term fix, the why is a long-term fix.  For small companies, knowing the who and why might be obvious.  However, for companies with thousands or millions of customers this becomes very difficult.  

Let's look at the impact of increasing customer loyalty on revenue.  

Tadd Wood

Get More Sales from Your Current Customers

Since 2008, we have been helping our customers learn how to get more sales from their current customers.  One of the quickest, easiest, and most profitable ways to start is using the data you already have.  Using data from your accounting and CRM system it is possible to determine which of your current customers can be made more profitable, more loyal, and which are the most likely to buy more from you.  Learn more, Download our Case Study.

Contemporary Analysis specializes in using predictive analytics to forecast consumer behavior.  Using a statistical technique called multinomial logistic regression, we can use patterns in your past data to predict future events.

Grant Stanley

How to Calculate Customer Lifetime Value and Cost of Customer Acquisition

While it is important to focus on new client acquisition, it is equally and perhaps more important to focus on improving your relationships with your current customers. This will help you improve your customer lifetime value. Customer lifetime value is the amount of net profit you receive from each customer. As a general rule, the average customer lifetime value needs to be 3 to 5 times the average cost to acquire a customer.

Improving customer lifetime value will help you have a sustainable and profitable business. To stay in business, the net profit from each customer has to be more than the cost to acquire each customer.

Customer Lifetime Value is the average net profit that can be attributed to a company's entire relationship with a customer.

Categories

See all