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A Lesson In Customer And Loyalty Management From Three Yuppies

November 25, 2015 at 11:34 AM

With virtually every brand setting up shop on social media platforms these days, customers have become immune to seeing “just more marketing” come at them through their screens. But this isn't to  say that social platforms don't have their place in omni-channel marketing. It simply means that maximising your online reach requires a little more than the odd tweet or like. Online communities are an ideal medium for brands to provide customers with a common base to share experiences, discuss news and trends and also discover new value in their brands in the process. South African online kitchenware store – and community - Yuppiechef is a primary example of a business that hit the community management nail on the head, and as a result, has grown into one of the most loved brands in South Africa.

Yuppiechef stratifies its presence to cover all customer touch points  

Yuppiechef's customer-centric website is complemented by an online presence that covers all the major social platforms – as well as less popular ones - that maintain their familiar voice, style and tone loyal patrons have come to know and love. With almost 100 000 Facebook likes,  the propensity to draw new customers in or up-sell to current customers is massive in such a relatively niche market space. Founders Paul Galatsis, Andrew Smith and Shane Dryden think of their business as a customer service business that happens to sell kitchen tools  and it is this understanding of the value of presence in the mind of the consumer that makes the Best eCommerce Retailer for five consecutive years such a prime example of well-executed customer and loyalty management in the online sphere. With only one physical store at its headquarters, it is through smart community engineering that Yuppiechef products are finding homes in thousands of kitchens across the country.

Free offers don't get you the customers you want

One crucial aspect of a successful online presence is knowing how to engage with your intended audience. Yuppiechef took this lesson to heart by communicating to customers in a friendly, but not too familiar tone that draws audiences in with useful and relevant content around their purchases. But why stick to discussing cooking utensils alone when the kitchen has so many talking points? The site has since evolved to become the go-to place for home chefs to polish their culinary skills, foodies to discuss the latest trends, customers to discuss the best products and visitors to download free online magazines. These channels all serve to boost brand awareness and value perception in the mind of the customer. Yuppiechef's view on customer engagement is centred on providing audiences with truly useful information in lieu of flogging them with offers for free items. This underscores the company's commitment to building a community based on a real understanding of who the people are that are buying their products.

Read our blog on going back to the basics for customer onboarding

What lessons in customer loyalty management can we take from Yuppiechef?

I guess the chief take-away from the Yuppiechef experience is that you get the customers you deserve.  And there are few excuses for any business to remain inert in a time when marketing your products – and announcing your brand to the world – is more do-able than ever. As Galatis, Marketing Director for Yuppiechef aptly states,

In today’s connected world the market is a community. Being trusted and favoured by, and engaged with this community is as important as it was in 19th century physical market places where everyone knew everyone.

And while some companies still struggle to find their place in the new digital realm and others simply fade into background noise, the opportunities to initiate, nurture, maintain and build customer relationships that eventually mature into a loyal brand community are there for the taking.

using data analytics for customer engagement

Image credit: http://www.yuppiechef.com/

Luke Turnbull
Luke Turnbull
Luke Turnbull was the Head of Customer and Lead Analytics at Principa, until the end of 2017, after which he returned to his home country of New Zealand. He worked in the financial services industry since 1995, during which time he worked in process, strategy and operational design across a range of organisations in New Zealand, the United Kingdom and South Africa. Luke had been with Principa for 9 years and led consulting engagements with Principa’s local retail clients across the customer lifecycle, with a particular focus on customer engagement and lead generation.

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The 7 types of credit risk in SME lending

  It is common knowledge in the industry that the credit risk assessment of a consumer applying for credit is far less complex than that of a business that is applying for credit. Why is this the case? Simply put, consumers are usually very similar in their requirements and risks (homogenous) whilst businesses have far more varying risk elements (heterogenous). In this blog we will look at all the different risk elements within a business (here SME) credit application. These are: Risk of proprietors Risk of business Reason for loan Financial ratios Size of loan Risk industry Risk of region Before we delve into this list, it is worth noting that all of these factors need to be deployable as assessment tools within your originations system so it is key that you ensure your system can manage them. If you are on the look out for a loans origination system, then look no further than Principa’s AppSmart. If you are looking for a decision engine to manage your scorecards, policy rules and terms of business then take a look at our DecisionSmart business rules engine. AppSmart and DecisionSmart are part of Principa’s FinSmart Universe allowing for effective credit management across the customer life-cycle.  The different risk elements within a business credit application 1) Risk of proprietors For smaller organisations the risk of the business is inextricably linked to the financial well-being of the proprietors. How small is small? The rule of thumb is companies with up to two to three proprietors should have their proprietors assessed for risk too. This fits in with the SME segment. What data should be looked at? Generally in countries with mature credit bureaux, credit data is looked at including the score (there is normally a score cut-off) and then negative information such as the existence of judgements or defaults; these are typically used within policy rules. Those businesses with proprietors with excessive numbers of “negatives” may be disqualified from the loan application. Some credit bureaux offer a score of an individual based on the performance of all the businesses with which they are associated. This can also be useful in the credit risk assessment process. Another innovation being adopted internationally is the use of psychometrics in credit evaluation of the proprietors. To find out more about adopting credit scoring, read our blog on how to adopt credit scoring.   2) Risk of business The risk of the business should be managed through both scores and policy rules. Lenders will look at information such as the age of company, the experience of directors and the size of company etc. within a score. Alternatively, many lenders utilise the business score offered by credit bureaux. These scores are typically not as strong as consumer scores as the underlying data is limited and sometimes problematic. For example, large successful organisations may have judgements registered against their name which, unlike for consumers, is not necessarily a direct indication of the inability to service debt.   3) Reason for loan The reason for a loan is used more widely in business lending as opposed to unsecured consumer lending. Venture capital, working capital, invoice discounting and bridging finance are just some of many types of loan/facilities available and lenders need to equip themselves with the ability to manage each of these customer types whether it is within originations or collections. Prudent lenders venturing into the SME space for the first time often focus on one or two of these loan types and then expand later – as the operational implication for each type of loan is complex. 4) Financial ratios Financial ratios are core to commercial credit risk assessment. The main challenge here is to ensure that reliable financials are available from the customer. Small businesses may not be audited and thus the financials may be less trustworthy.   Financial ratios can be divided into four categories: Profitability Leverage Coverage Liquidity Profitability can be further divided into margin ratios and return ratios. Lenders are frequently interested in gross profit margins; this is normally explicit on the income statement. The EBIDTA margin and operating profit margins are also used as well as return ratios such as return on assets, return on equity and risk-adjusted-returns. Leverage ratios are useful to lenders as they reflect the portion of the business that is financed by debt. Lower leverage ratios indicate stability. Leverage ratios assessed often incorporate debt-to-asset, debt-to-equity and asset-to-equity. Coverage ratios indicate the coverage that income or assets provide for the servicing of debt or interest expenses. The higher the coverage ratio the better it is for the lender. Coverage ratios are worked out considering the loan/facility that is being applied for. Finally, liquidity ratios indicate the ability for a company to convert its assets into cash. There are a variety of ratios used here. The current ratio is simply the ratio of assets to liabilities. The quick ratio is the ability for the business to pay its current debts off with readily available assets. The higher the liquidity ratios the better. Ratios are used both within credit scorecards as well as within policy rules. You can read more about these ratios here. 5) Size of loan When assessing credit risk for a consumer, the risk of the consumer does not normally change with the change of loan amount or facility (subject to the consumer passing affordability criteria). With business loans, loan amounts can range quite dramatically, and the risk of the applicant is normally tied to the loan amount requested. 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In the graph below the performance of an industry is tracked for two years and then projected over the next 6 months; this is then compared to the country’s GDP. As the industry appears to track above the projected GDP, a positive outlook is given to this applicant and this may affect them favourably in the credit application.                   7) Risk of Region   The last area of assessment is risk of region. Of the seven, this one is used the least. Here businesses,  either on book or on the bureau, are assessed against their geo-code. Each geo-code is clustered, and the projected outlook is given as positive, static or negative. As with industry this can be used within the assessment process as a policy rule or within a scorecard.   Bringing the seven risk categories together in a risk assessment These seven risk assessment categories are all important in the risk assessment process. How you bring it all together is critical. If you would like to discuss your SME evaluation challenges or find out more about what we offer in credit management software (like AppSmart and DecisionSmart), get in touch with us here.

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