Data Byte - Revenue Segmentation
Revenue segmentation estimates a customer's current revenue generation and potential for additional revenue with new product openings. Customers are then categorized into groups based on this information for actionable insights.
Understanding Revenue Segmentation: Estimating Current and Potential Customer Revenue
We calculate each account's estimated value at the product level by combining spread and fee income. These estimated values are then aggregated at the customer and household levels, segmenting them into high, medium, and low revenue categories. This creates the baselines for the Estimated Current Revenue (ECR).
We use a proprietary model to predict a customer's profitability for each owned product based on relevant demographic factors for each product type. This creates the Estimated Potential Revenue (EPR). High, medium, and low segments are for each product, customer, and household.
Comparing Estimated Current Revenue with the Estimated Potential Revenue, including current and likely future product purchases, highlights the profitability gap. Customers with low current but medium or high potential revenue are ideal targets for additional products, using an omnichannel communication program to boost engagement and product ownership.