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Customer Onboarding: It’s All About First Impressions

October 13, 2015 at 10:07 AM

In my experience as a marketing professional, potential customers almost never just decide to walk away from a purchase - unless given sufficient reason to do so. And, if you’re wondering how a promising list of leads managed to slip through your fingers, it might be time to refocus on the basics of your on-boarding strategy. 

While there isn’t a definite methodology for conducting 100% watertight on-boarding strategies, certain fundamentals exist that should remain top of mind during this seminal stage of your hopefully long and prosperous relationship with your customer. So, here are a few back-to-basics considerations if your leads and sales funnels are dwindling.

Is my offering correctly aligned to my market?

If your sales, marketing and product teams look to each other for the answer to this question, there’s a problem. Product alignment is the first – if not most crucial - step to a successful onboarding game plan. You see, regardless of the marketing spend behind a great product, conversions will be slim-to-none if a product doesn’t speak to the persona’s pain-points. As Peter Drucker famously asserted, “The aim of marketing is to know and understand the customer so well that the product or service fits him and sells itself.” Well, yes, but as marketers we all know that no product really sells itself. Instead, it’s when a company really believes in what it has to offer, and takes the necessary time and effort to know its market, that great things happen. For me, Uber is a perfect example of a company that was acutely aware of the crowded market space it was entering, but understood the pain-points so well that their execution and delivery resulted in a disruptive business model that will have its ripples felt far and wide – and for some time to come. Here’s an insightful case study  on how the company turned the transportation industry on its head.

Are my customer metrics doing my onboarding strategy justice?

Once product alignment is achieved, it’s time to collect as much information about your leads as possible. Why? Because companies who “know and understand the customer” are perfectly positioned to pre-empt any “push-back” on committing to the purchase. And, if your acquisition strategy has made enough of an impression on your leads for them to engage with your brand, be sure that they expect the same level of interaction throughout the on-boarding stage. Industry analysts Forrester Research put it into context quite succinctly, “It’s not enough to have a world-class digital capability for acquiring new customers. Empowered customers expect the same type of seamless experience, improved efficiency, and heightened responsiveness in all subsequent interactions with your brand. But to be efficient and responsive, you need the right customer insights – and the tools to share them with relevant departments – to build an on-boarding strategy that can speak to the unique and varied customer concerns that exist within their respective segments.

Is your onboarding strategy adapting to changing times?

It’s no secret that market spaces are becoming increasingly competitive and that consumers are enjoying a power-shift that is steadily tilting in their favour. These developments bring with them both challenges and opportunities to differentiate oneself amongst competition who are equally eager to do the same. This makes the acquisition and onboarding stages so central to building a customer base that remains loyal in times when loyalty can at best be described as fleeting. As we strive to know more about our customers, we’ll increasingly look to our data to bridge the divide and make those all-important first impressions that can so easily make or break our relationships with our customers.

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

using data analytics for customer engagement

Julian Diaz
Julian Diaz
Julian Diaz was Head of Marketing for Principa until 2017, after which he became Head of Marketing for Honeybee CRM. American born and raised, Julian has worked in the IT industry for over 20 years. Having begun his career at a major software company in Germany, Julian made the move to South Africa in 1998 when he joined Dimension Data and later MWEB (leading South African ISP). Since then, Julian has helped launch various South African technology brands into international markets, including Principa.

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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. The loan/facility amount will of course change the ratios (mentioned in the last section) which could affect a positive/negative outcome. The outcome of the loan application is usually directly linked to a loan amount and any marked change to this loan amount would change the risk profile of the application.   6) Risk of industry The risk of an industry in which the SME operates can have a strong deterministic relationship with the entity being able to service the debt. Some lenders use this and those who do not normally identify this as a missing element in their risk assessment process. The identification of industry is always important. If you are in manufacturing, but your clients are the mines, then you are perhaps better identified as operating in mining as opposed to manufacturing. Most lenders who assess industry, will periodically rule out certain industries and perhaps also incorporate industry within their scorecard. Others take a more scientific approach. 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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