From Database Marketing to Competitive Advantage - Client ... · PDF file(market research, competitive ... Gartner´s Outlook on 2005 and beyond, Study for UBS: ... Technical Infrastructure

From Database Marketing to Competitive Advantage -Client Analytics to Mature Your Organization

May 23, 2007, Stockholm

Daniel Rüegge, UBS AG

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[t121701] [printed: Juni 8, 2006] [saved: Juni 8, 2006] P:\My Documents\Presentations\20060620 EC Tom Untapped Opportunity\20060608 Untapped Opportunities Client Analytics 9.ppt

Client Analytical Services p. 1

Agenda

Section 1: UBS – A Leader in Wealth Management …… with a Sense of Urgency

Section 2: Client Analytics -Its Role in Executing a Growth Strategy

Section 3: Business Value Creation by Integration of Client Analytics

SECTION 1

UBS – A Leader in Wealth Management …

… with a Sense of Urgency

3



Describing UBSDid you know ?

UBS is one of the world's leading financial firms, serving a discerning client base. As an organization, it

combines financial strength with a culture that embraces change.

UBS is the world's largest wealth manager, a top tier investment banking and securities firm, and a key global asset manager. In Switzerland, UBS is the market leader in retail and commercial banking.

4



UBS – An Integrated Business ModelUBS is a highly integrated and truly global organization focusing on Wealth Management and Investment Banking

Profile: ~78'000 employees in 1'500 offices in more than 50 countries

5



UBS Global WM – Global Presence 1More than 600 offices all around the world …

… benefiting from cross-borderknowledge transfer and product distribution

Notes:1 Status at February 20072 Wealth Management Offices in US

are not shown in the map

6



Global WM&BB – FY06 Key FiguresGlobal WM&BB achieved record figures for all major indicators inFY06

7



UBS Global WM&BB growth strategy

Our growth strategy focuses on:

♦ Switzerland, Asia Pacific, Europe and Americas and opportunistically in other markets

♦ Wealth management worldwide & retail and corporate banking in Switzerland

Bu

sin

ess

Mix

G

eo

gra

ph

ic

mark

ets

♦ Leverage existing franchise ♦ Expand franchise♦ Increase efficiency♦ Drive innovation

Ap

pro

ach

We will grow in all markets and segments

Worldwide WM leaders have << 10% market share

8



Global WM&BB - Business PrioritiesWe will grow by focusing on our defined business priorities

Consistent implementation is our challenge

Industry leadership

in efficiency

Risk management

Leadership

Growth orientation

Perfecting our client experience

Talent development

9



Perfecting our Client ExperienceThe UBS Client Experience is our approach to proactively providing clients with tailored solutions and delivering on our value proposition

We want to be known as the company that bestresponds to client feedback

Client

SECTION 2

Client Analytics -Its Role in Executing a Growth Strategy

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The Importance of Client AnalyticsSuccessful firms continually leverage client insights. Client Analytics is a cornerstone of strategic marketing combining compelling broad marketing and differentiated client focus

Market Trends

♦ A rapidly changing global market environment demands the ability to anticipate

♦ Increased competitive choices implies less client loyalty

♦ Margins are being squeezedleaving less room for error

♦ The financial services business is no longer the big “seller’s market”; client desires are now driving the market

Business Needs

♦ Identify opportunities to differentiate

♦ Reduce risk of wasting resources on bad decisions

♦ Increase the likelihood of identifying and capitalizing onnew business opportunities

♦ Expand effectiveness feedback loop regarding initiatives to improve their future performance

It's about the ability of client anticipation, client focus and efficiency

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Client Analytics: A Powerful Method with Many NamesDatabase Marketing, Data Mining, Analytical CRM, Client Insight/Knowledge Mgmt, Business Intelligence, Data Analysis

♦ Make right, better and faster business decisions based on facts♦ Optimize strategy and sales execution

♦ Extract business relevant information about the relation between individual clients and the companybased on transactional, static, descriptive and external data

Purpose

Essence1)

Success Factors

♦ Competence center combining business and high level analytical skills

♦ Strategic positioning and integration with related analytical units (market research, competitive intelligence, reporting, , CFO, bus. Intelligence)

♦ The right culture to base business decisions on hard facts, to execute, to measure and to test/experiment in order to learn as an organization

♦ Analytical data mart with client centric data model and history, incl. tools for statistical analysis, data quality and analytical efficiency

1) Gartner´s Outlook on 2005 and beyond, Study for UBS:„Sound analytic… skills are needed to tell relevant from non-relevant, and to interpret events and data in the right way. The need for these skills should not be underestimated… By 2006, demand for… skills and staff will outweigh supply by 2:1.“

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A New Value of Client Analytics TodayThe ability to collect, analyze, and act on data has evolved to a competitive strength in the financial industry.

Bob IngramsVP Consumer Marketing

Bell Atlantic

“… Whoever has the most intimate knowledge of the customer and is able to best forecast what the customer will do and take action preemptively will win”

Thomas H. DavenportData Mining Review

September 2005

“ … Analytics will have a primary rather than supporting role in competitive strategies.”

Bank AnalystMorgan Stanley

Dean Witter

“ In our view, the winners will be those banks that develop and use information to seize market share from less talented competitors.”

See also: Th. H. Davenport, "Competing on Analytics", Harvard Business Review, June 2006

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SA&BD provides ongoing actionable strategic insights and strategic advisory & project management support to market heads and product managers to help them evaluate and develop major business growth opportunities, and conducts advisor effectiveness programs to support the Origination in achieving their growth ambitions.

Role of Strategic Analysis & Business Development

Wealth Mgmt.International

Wealth Mgmt.Switzerland

BusinessBanking

Products &Services

Market Strategy & Development

Wealth Mgmt. U.S.

Advisor Effectiveness Programs

Actionable StrategicInsights

Strategic Advisory & Decision Making Support

Industry & Competitor Analysis

Client Analytical Services

Market Research & Analysis

Strategic Analysis & Business Development

Business Practices Development & Implementation

Sales Development Coaching

Support achievement

of Global WM&BB Growth

Ambitions

Business Strategy Development

SECTION 3

Business Value Creation byIntegration of Client Analytics

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Client Analytical Services in UBSMarket Strategy & Development / Strategic Analysis & Bus. Development

Service Areas

Skills

Infrastructure

Point of Entry

StrategicProjects

Business Opportunities

Sales Initiatives & Campaigns Ad hoc Needs

Expert Know-howin Statistics

Data ManagementProgramming

Know-how in Banking

Client OrientationEfficient Processes

Analytical MartCIBAS

Ad hocData Sources

Definitions Development

ProcessesQuality Assurance


3

2

1

Wealth Mgmt.International

Wealth MgmtSwitzerland

BusinessBanking

Products &Services

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Client Analytical Services: InfrastructureCIBAS holds several million client entities with ca. 2000 attributes and a history of 48 months each (Booking Center CH)

CIBAS Business Layer Data Tables

ClientInfo

Profita-bility

Mortgage LendingAccount Securitie CreditCard Key Club

Net NewMoney

Trans-action

Organi-zation

Reference-dataAddressCorporate etc.

ContactChannel

CIBAS Sources

Client Data, based on account

Client Data, based on custody

Client Data,E.g. Age, Assets

Data on level Account

Data on level Custody

Data on level Custody

position

Data on level Mortgage

Transactional Data summarized

on client level

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Infrastructure: CIBAS Key FactsOutstanding performance is based on dedicated technology

Key indices

♦ Amount of data– Client connections: 7 Million Relations– History: 48 Months– Data: > 5'000 Gigabytes

♦ Hardware– Data Base: IBM, DB2 (UBS Business Data Warehouse)

♦ Realization of System CIBAS– 5 + 16 months for specification + realization (incl. test phase)

♦ Data Processing / Analysis Tools– SAS Base, inclusive DB2 Interface– SAS Statistics– SAS Enterprise Miner

♦ Outstanding performance and productivity

♦ Evaluation / Visualization – Various PC Tools

Getting your technology right enables you to focus on business

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Client Analytical Services: Work StyleCAS provides distinguished services

In order to provide a professional service in clientanalytics, the client analytical workflow is wellstructured♦ First part, characterized by internal partner interaction and

interactive analytical work

♦ Second part, containing programming, data preparation and plausibility checks

♦ Third part, including data quality assurance and data management

Professional CAS services include three layers

Data Analysis, Interactive Review and Interpretation

Data Check, Plausibility, Explorative Information

Data Preparation and Compilation

Data Quality Assurance

Data Management

Application Management

Technical Infrastructure

Business Understanding& Definition of Analysis Scope

Delivery of Analysis and Communication

of Results

CAS as a distinguished service provider

1

2

3

Professional services for internal partner♦ Clear assignment for each service♦ One person takes the full responsibility for the whole

process: "I take care"

Entrepreneurial service center♦ Transparent work style ensures acceptance by the partner

and general visibility♦ Structured assignment management and stream-lined

processes result in outstanding efficiency

1

2

3

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Client Analytical MethodologiesFour main methodologies in the client analytical universe

Understand Client

Information

Identify Client Groups

ProfileClient Groups

Predict Clients' Behavior

♦ Which clients should be contacted within a life cycle campaign?

♦ What has a "mean young client" saved on her/his account?

♦ Which clients are in mass affluent segments, between 60 and 62 and live in a town?

♦ Which sub-segments do we have in core affluent segments?

♦ What distinct client types buy certain products?

♦ What other products do my high net worth clients need?

♦ How is the client group "product xyz holders" characterized?

♦ What are the most important differentiators between happy and non-happy clients?

♦ What is the difference between buyers and non-buyers?

♦ Which clients will buy which product/service next?

♦ What is the potential in my client book?

♦ How much money will be on private accounts in 2010?

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y

x

Galaxy (view rotated 90°)

Identify Client Groups – Example (1/2)Focusing on best region and looking from best view point to get best clustering results

Universe Galaxy

x

z

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Identify Client Groups – Example (2/2)Four distinguishable client groups for product XYZ were identified and described -> targeted sales concept development

Potential faces to specific client types

ILLUSTRATIVE

XYZ clients

?ILLUSTRATIVE

The clustering process requires no hypothesis... Prepare for surprises and unknown facts

Aggressive -Equity Trader

------------------------------------- High rate of equities- Trade a lot of structuredproducts and equities

- Medium turnover volume- Many WM CH clients

Conservative -Bonds Trader

--------------------------------- High rate of bonds- Trade all different products

- High turnover volumes, particularly in bonds and money market investments

Active - Sophisticated------------------------------

- Diversified portfolio - Trade all different products

- High turnover volumes, particularly in alterna-tive investments, structured products and investment funds

Passive -Unsophisticated

------------------------------------ High rate of bonds and investment funds

- Low trading activity- Low turnover volume

Conservative Strategy Moderate Strategy Aggressive Strategy

Act

ive

trad

erPa

ssiv

e tr

ader

Overview of XYZ client types

Aggressive Conservative Active Passive

Asset Allocation by Client Types (APS)

Pro

po

rtio

n o

f In

vest

ed

Ass

ets

(in

%)

02

04

06

08

01

00

Other Inv.Cash (on Accounts)Alternative Inv.Structured ProductsMoney MarketInv. FundsBondsEquities

Source: Client Analytical Services

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Client Analytical MethodologiesFour main methodologies in the client analytical universe

Understand Client

Information

Identify Client Groups

ProfileClient Groups

Predict Clients' Behavior

♦ Which clients should be contacted within a life cycle campaign?

♦ What has a "mean young client" saved on her/his account?

♦ Which clients are in mass affluent segments, between 60 and 62 and live in a town?

♦ Which sub-segments do we have in core affluent segments?

♦ What distinct client types buy certain products?

♦ What other products do my high net worth clients need?

♦ How is the client group "product xyz holders" characterized?

♦ What are the most important differentiators between happy and non-happy clients?

♦ What is the difference between buyers and non-buyers?

♦ Which clients will buy which product/service next?

♦ What is the potential in my client book?

♦ How much money will be on private accounts in 2010?

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Shifting Paradigm: Look Through Your Clients EyesLearn from previous successful sales patterns and develop a sense for clients' affinities towards your products

Product Shelf

Classical Database Marketing: Product push

Product Shelf

Client's preference!Individual client

All client

*) Source: International People Index (www.interpedix.de) - May 2006

*)

*

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Client Advisor

Reveal Additional Potential in the Client Advisor Portfolio

Fact 1: Client affinities helps CAs to detect untapped potential on clients they may not have thought at so far. It's a kind of combined best practice

Fact 2: CAs pursuing successful strategies (e.g. CA 1) get help- In bearing the interesting clients in remembrance- In getting a fresh look onto their individual clients

Fact 3: CAs with new or large client portfolios (e.g. CA 4) get help - In prioritizing and developing their clients

Summary: Affinities help in many ways- detects additional potential - saves time - increases sales rates - supports client experience

Learn as an organization: Pool everybody's successful selling strategy

Sell-Strategy

♦ high

♦ medium

♦ high

♦ low

Closing Rate

Sell-StrategyAffinity

Sell Strategy & Individual

Recommendation

♦ CA 1

♦ CA 2

♦ CA 3

♦ CA 4

Client Advisor

♦ CA 1

♦ CA 2

♦ CA 3

♦ CA 4♦ very high

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How to Learn from a Four-Year History of Sales?Predictive modeling characterizes buyers vs. non-buyers of XYZ

Previous XYZ Buyers

Clients without XYZ

Buyer 1

Purchase of XYZ

Buyer 2

Buyer 3

Time

Non-Buyer 1

Non-Buyer 2

Non-Buyer 3

Time

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Affinities Help to Prioritize CA's Client PortfolioPilot client advisors confirm potential for >50% of affine clients

Believein salesEvaluation of the client list by pilot client advisors

~ 50% of affine clients are ticked off as potential XYZ-buyers and have partially been in discussion in the past

> 90% of non-affine clients are also not-affine from a CA perspective

Quotes from involved client advisors

"Affinities make sense, bear the interesting clients inremembrance, and help to prioritize the own client portfolio"(Client Advisor 1)

"Affinities are correct, zoom in on the interesting clients, help toprioritize in sizable portfolios, and will lead (in combination withown client perception) to increased sales rates" (Client Advisor 2)

CA view

Get input and exchange with sales experts

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Caring about the tree, caring about the forestPr

oduc

t XY

Z P

enet

ratio

n (%

)

Additional XYZ Potential (% of affinity clients)

Sales Team X

CA1

CA6

CA3

CA4

CA2

CA7

CA5

A lot of untapped potential and low

penetrationPrio 1

A lot of untapped potential despite high penetration

Reshape the World: Where Do We Invest Our Energy Best?

0

110% Ambition Level

90% Ambition Level

0% Penetration

low potential despite low penetration

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And All Information Is at Client Advisor's FingertipAn integral part in Client Book Development System

Illustrative

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Learnings on getting the horse power to the road

Client Analytics as a Competitive Advantage

Analytics Implementation Communication

Professional Centre:

♦Talents

♦Processes/Set-up

♦Infrastructure & Technology

♦Efficiency

Refine along SpecificBusiness Questions

Constantly Innovate

Integrate ActivityPortfolio into Business Priorities

Begin with the end in mind

Integrate information intooperative Systems

Deliver/contribute to creation of salesinformation, collateralsetc.

Integrate the use of information into Sales Trainings et al

Show / quantifyexpected businessimpact of analyticalactivities

Measure early wins

Get pilot groupsinvolved, createreferrals

Develop and executecommunicationconcept(stakeholders)

Constantly communicate

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Thank you!

D. Forster 2004

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Contact Information

Dr. Daniel Rüegge

Market Strategy & Development


Talstrasse 65

P.O.Box

CH-8098 Zurich

Tel. +41-44-234 26 29

Fax +41-44-234 26 83

[email protected]

UBS AGPostfach8089 Zurich

www.ubs.com