Research in the age of Pragmatism

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Research in the age of Pragmatism

ReinterpretRedesignReinventXXII Annual Seminar XXII Annual MRSI Seminar, 17-18 December 2012, Gurgaon1Making Consumer Segmentationa Real Time ProcessOpen New Doors

XXII Annual Seminar2Anjan Kumar Ghosh, Senior Vice PresidentBhavesh Mansinghani, Research DirectorHansa Research XXII Annual MRSI Seminar, 17-18 December 2012, GurgaonBackgroundOur client is a leading player in the financial services space offering consumer finance and financing capital requirements of SMEs

Client product portfolio:Consumer durable loanPersonal LoanSmall Business LoanLoan against property

Current business environment suggests the following facts and hypotheses:Higher the affluence of the customers, higher is the ticket size for their loanServicing cost as a proportion of ticket size is lower for the high ticket loans

Although CIBIL and internal audits ensure that creditworthiness of customers is evaluated properly before loan disbursal, the system currently does not ensure appropriate targeting of the loan to the consumer segment

So the need was to set up a system that facilitated effective targeting of offerings in the marketXXII Annual MRSI Seminar, 17-18 December 2012, Gurgaon

Key client questions and thought for research

Key questionsAre we reaching the affluent audience?At the time of loan application, is it possible to assess the affluence level of an individual?

Thought for ResearchIdentify indicators to measure the affluence level and create affluence segments of current customersBasis the affluence segment of the current customer base, identify cross-selling and up-selling opportunitiesIdentify variables that can be included in the loan application form, to assess the affluence segment for new acquisitions; thus aid in better targetingXXII Annual MRSI Seminar, 17-18 December 2012, GurgaonAre we reaching the affluent audience?Decoding AffluenceApplying the HPI Construct on the existing customer baseAffluence profile across business verticalsImplications for the marketer

XXIInd Annual MRSI Seminar, 17-18 December 2012, GurgaonDecoding affluence Handicapped in situations where the target group is intrinsically homogenous Conventional SEC not strongly correlated with affluence Possible number of segments limited to currently available options MHI Patently unstable on account of hesitance to disclose the correct MHI leading to over claims or under claims Problem maybe accentuated amongst SMEs Scientific method to segregate and target the consumers basis a more direct measure of affluence

MHISEC

HPIXXII Annual MRSI Seminar, 17-18 December 2012, GurgaonHousehold Premiumness Index (HPI)An established system of classifying consumers, based on indicators from the Indian Readership Survey (IRS)It covers ownership of durables, consumption of FMCG categories, and demographic measures.The HPI philosophy : If a home is premium, it necessarily gets reflected in product consumption or ownership.Defining premiumness : Something that is desired by most but affordable for few. Hence, we define premiumness as inverse of penetration.Non-judgmental approachConsistent across all types of products/servicesScores obtained for all indicators are aggregated for a household and indexed to a maximum of 1000.Provides the opportunity to define as many segments as desired by the marketerXXII Annual MRSI Seminar, 17-18 December 2012, GurgaonTask involves profiling client customers through variables that determine affluence and go into computing HPI

Census being unrealistic, estimation needs to be done through a sample survey of clients customers

Sample selection needs to ensure representation of customers for its various product verticals

Within a vertical, the sample of current customers ought to match the universe profile on key variables, in order to have an accurate measure of affluence

Applying the HPI Construct on the existing customer baseXXII Annual MRSI Seminar, 17-18 December 2012, GurgaonEnsuring representation of the sample The primary research to ascertain HPI was conducted amongst a representative sample that was drawn randomly from the current customer database, after stratifying them on basis of relevant parameters for each business vertical.

The sampling variables used are listed below

Consumer Durables(CD)Personal Loans(PL) Small Business Loans (SBL)Loan Against Property (LAP)BranchBranchBranchBranchNo. of yrs since enrolledNo. of yrs since enrolledNo. of yrs since enrolledNo. of yrs since enrolledStatus : Live / ExpiredSalaried / Self employedSource of acquisitionEMI (1.05L)Credit program codeLoan Amount (>1lac, 2200,10Lacs|Month & Yr of purchase,Please tell us about your fridge280L or lessGreater than 280LDo not ownPlease tell us about your TVNormal TV Normal -Flat TVLCD/LED PlasmaSize of the TV21inch or lessBetween 21-30 inch30inch or morePlease tell us about your washing machineSemi AutomaticFully AutomaticDo not ownType of internet access at home?BroadbandDial-upWireless data cardDo not ownPlease indicate your level of educationSSC/HSCDiplomaGraduatePost GraduateWhat type of credit card do you have? Platinum/TitaniumGoldSilverOthers_________Do not ownWhat type of insurance do you have?LifeCarMedicalPropertyPlant & MachineryOther _____________Do not ownHave you traveled abroad in the last year?YesNo DECLARATIONXXIInd Annual MRSI Seminar, 17-18 December 2012, GurgaonWhat did we achieve?We could evolve a set of classification variables which are good enough to identify heterogeneity in a largely homogenous audience

Apply an algorithm to categorize customers into a particular segment on a real time basis, at the time of loan application

HPI coupled with LCM opens an opportunity for a REAL TIME SEGMENTATION PROCESSXXIInd Annual MRSI Seminar, 17-18 December 2012, GurgaonThank YouXXII Annual MRSI Seminar, 17-18 December 2012, GurgaonAppendixXXII Annual MRSI Seminar, 17-18 December 2012, GurgaonSegmentation VariablesXXII Annual MRSI Seminar, 17-18 December 2012, Gurgaon