The Data Analytics Blog

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

All Posts

Three Lessons From Great Digital Customer Growth Strategies

March 26, 2019 at 12:17 PM

According to Marketing Metrics: The Definitive Guide to Measuring Marketing Performance, the probability of selling to a new prospect is 5 to 20%, while the likelihood of selling to an existing customer is 60 to 70%. Your customer growth strategy is an easy way to grow your bottom line and improve your revenue. 

In this blog, we look at three of South Africa’s favourite digital brands and their customer growth strategies, and how you can apply these strategies in your business.

Suberbalist’s abandoned cart strategy

While Suberbalist isn't the first to incorporate an abandoned cart strategy, they do it pretty well. 

Superbalist abandoned cart strategy

By following up after a set period, they ensure the cart is actually abandoned, and you didn't just get distracted. They also give you a discount voucher to use at checkout, which provides you with a reason to come back and complete the purchase by creating a sense of added value. They mention that you can contact them if you’re experiencing problems during checkout. And they personalise the email, both with first name and with the items you left in your cart.

It’s a great execution of a well-known strategy.

How can this be applied to your business?

If you're running a similar business, you do the same – but make sure it's executed flawlessly. Many a company attempt an abandoned cart strategy, only to alienate the customer further, preventing the sale from completing.

If your business has a more complex sales process that doesn’t include a cart and straight to checkout, don’t worry, this strategy can still be applied. You’ll definitely have experienced drop-off, leads going cold or working leads who turn out to be future opportunities. There will also be current clients who inquire about other solutions but never continue with the conversation. These should be viewed as “abandoned carts”. They’ve shown interest in a product or service you provide and might have even progressed to a stage where they are engaging with a sales person about it, but they might not be ready to buy. The first thing you can do, (if you are able) is to offer a discount if they do sign up, but remember to wait a pre-determined period before doing so, or you might find you’re offering discounts to everyone. If they are still not ready to take up the offer, then set up a long-term follow-up. This can be on any channel that you or your customer prefer (email, phone call, social media etc.) and should be done after a set time to follow up on whether they would still be interested in your solution. Here it would be good to offer the discount again. Always remember to personalise your communications and add in easy ways for your customer to solve any technical problems they might be experiencing or any concerns they might have.

Takealot’s product bundling strategy

Takealot product bundling strategy

By noting which other product is frequently bought with the product their customer is currently viewing, Takealot can suggest bundles to be purchased together. They make it easy for customers to add both items to the cart by offering to do so with the click of just one button – removing a lot of friction from the process. It is worth noting that this strategy will only work if the two items have a high degree of relatedness, like in the example above.

I’d also like to point out the excellent use of “Free Delivery”, creating a feeling of an advantage gained, and the “Only 4 Left”, creating a sense of urgency, both factors in driving the customer to purchase the product.  

How can product bundling be applied to your business?

Your sales agents can do the same by identifying when there might be a need for an additional solution and even offering to sign them up for it with no extra effort (by using the same or as far as possible, a similar process as for the initial sign up). You could also suggest solutions that are complementary to the solution they’ve already purchased.

To be successful with this strategy, you’ll need to be spot on with your suggestions to avoid annoying customers, so I'd suggest enabling agents with software to make recommendations.

Showmax recommendations

Showmax recommends series and movies based on what you’ve watched.

Showmax content recommendation strategy

They aim to make it easier for their customers to find shows they would be interested in watching, making it easier and less-effort to use the service. This keeps people in the app and prevents suspension of accounts by keeping customers engaged with new content.

How do you do this in your business?

You can implement this strategy in two ways. The first is to think of it as an engagement and retention strategy. By suggesting further actions or uses of your product or service, you’ll prevent churn.

But to use this strategy to grow your share-of-wallet and not just retain it, view it as an upsell suggestion. Your sales agents can make the upsell recommendation, or you can present the offer in the preferred channel of your customer. The suggestion should ideally be based on the buying behaviour of customers with a similar profile or transaction history and not just random recommendations.

Your customer growth and engagement strategy should be based not only in psychology but also on data. If you're interested in using data analytics to inform your customer growth and engagement strategy, take a look at our guide on using data analytics to inform your customer engagement strategy.

using data analytics for customer engagement

Mark Roberts
Mark Roberts
Mark has over 15 years’ experience within the credit life cycle with 10 years’ specialised in Collections and Recoveries having been gained through exposure in both B2B and B2C markets across Europe, UK, and South Africa. With both extensive operational and strategic experience, Mark has successfully delivered and lead a number of initiatives within collection strategy, operating processes, platforms, and payment solutions. He holds a B.Comm degree in Actuarial Sciences from University of Pretoria.

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