The Data Analytics Blog

Our news and views relating to Data Analytics, Big Data, Machine Learning, and the world of Credit.

All Posts

Relationship Marketing Techniques You Have To Nail

September 22, 2015 at 10:35 AM

At Forrester Research’s Groundswell for Excellence in Social Media Awards ceremony held in April this year, winners were recognised for their innovative use of social media to drive awareness of their brands, delight customers with quality content, and reach more people than could ever have been possible in a world without tweets and shares. I’ve been somewhat puzzled by talk of social media, as a marketing platform at least, being on its last legs. The way I see it is that social is only shifting into higher gear and looking at how this year’s Forrester Research winners leveraged the medium to up their relationship marketing game, social media is still very much alive and kicking. You can read more about this year’s winners and submissions here.

Social media relationships are the currency of digital marketing

As a category at the Forrester awards, Social Relationship Marketing highlighted the efforts of companies who turned to social platforms to engage existing customers and boost brand awareness, manage relationships, and engage customers to help them get the most out of their products. Autodesk, which won in the B2B relationship category, engages in proactive customer support with their “Total Community” strategy which involves leveraging social and online communities to “…foster peer-to-peer support, drive greater brand affinity, and solidify relationships with its customers. [Our strategy] has evolved to focus on collaborating with and anticipating the needs of customers.” With nearly 200 000 Twitter followers and a bustling brand community, Autodesk updates, guides, informs, delights and interacts with customers and cultivates invaluable brand affinity in the process. This level of exposure has helped Autodesk build on existing relationships and use those in-roads to attract new customers in the process.

From social butterflies to community organisers

Brand communities are communities of people who share an affinity to a brand and have become the portals of choice for customers seeking to filter their personal news stories to focus on their interactions and experiences with brands, their products and their services. These communities can almost be considered a natural next step in the social media evolution  with customer-centrism fuelling the need for more sophisticated engagement strategies. Branded communities complement social platforms in the sense that they allow businesses to offer tangible after-sales value and spur customers on to spread the word. This Forrester blog explains quite succinctly how branded communities are helping companies expand their reach and foster awareness in a saturated social landscape. For further reading, also check out how food and beverage giant, Knorr, has managed to garner 10.7 million Facebook likes and a huge following of their “What’s for Dinner” campaign by building both social and branded communities into their relationship marketing strategies.

There is no such thing as digital strategy, only strategy in the digital age

One of the great effects of the internet is that it has brought people together in ways unimaginable say, twenty five years ago. This has challenged traditional norms and also democratised the customer/business dynamic to the extent that mindful and measured engagement is no longer reserved for the VIP customer, but has become the birth-right of every consumer of your product. Social media, in its current and future iterations, will continue to offer new opportunities for customer relationship marketing, and companies that welcome them will reap the rewards of their current and future social engagement strategies.

data-analytics-for-customer-acquisitions-guide

 Image credit: http://blog.printpapa.com/

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.

Latest Posts

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.

Collections Resilience post COVID-19 - part 2

Principa Decisions (Pty) L

Collections Resilience post COVID-19

Principa Decisions (Pty) L