BS&T Executive Summit 2006

According to James Thomas, global practice leader, merchant solutions, with MasterCard Advisors MasterCard Advisors, Purchase, N.Y., using analytics tools to zero in on profitable customers is no longer a pie-in-the-sky notion -- it's reality.

Thomas opened the first day of the 2006 BS&T Executive Summit by telling attendees there are ways to target high-value customers but that many banks need to think outside the box to do so. "You can reach customers in a timely way by relying on data and scoring and other applications that are ready to deploy," he explained. "The impediment is thinking outside the bank. You have to think like a retailer. Think of customers as consumers."

The idea is for banks to make their products and services appealing to customers at a more intimate level so that they want to buy products from their FI of choice. Banks need to create a value proposition for consumers. Today, Thomas said, this is not the case. "Most customers bought financial products because they had to," he said. "It was [a choice between] the lesser of two evils. This is not a great environment for cross-selling."

Thomas discussed with the audience some of the methods MasterCard is employing to help its FI clients bridge the gap between banking and the everyday life of consumers. He said there is a need to "tie together consumption with banking products."

To do so, MasterCard first looks at the actual consumer purchase, starting at the transaction warehouse where purchasing behavior is examined. Then that data is pushed to an analytics platform where it is analyzed around demographics, psychographics and attitude. "We're cheating, in a way," Thomas remarked. "We're starting with the end result--the purchase. Then we work our way back so that we go after people with a high likelihood of buying a product. The purchase clusters segment customers based on their consumer behavior. You need these to drive cross-selling and retention."

According to Thomas, banks, and even merchants, can use this information to look at their customers in a new light--one that illustrates where they shop and what they buy. Merchants can look at customers who spend frequently in a certain category, but at a different retailer. In doing so, they can learn what these people look like and market differently to them, said Thomas.

However, none of these measures will work unless banks and retailers have full buy-in from the top, down. "If you can't get the product managers within a bank or store to sponsor your promotions, then you won't get the results you want, despite all the great technology," he cautioned.