Enabling Shop Direct to get closer to their customers, improve decisioning and take action sooner.
Shop Direct is the UK’s largest integrated pureplay digital retailer and financial services provider, with annual sales of £1.96 billion and more than 1.4million website visits every day.
Its brands are Very.co.uk, Littlewoods.com and LittlewoodsIreland.ie. The company sells more than 1,800 famous brands, has four million customers and delivers 49 million products every year.
Always looking to improve their customer service, Shop Direct wanted to focus on enhancing their responsible lending practices. Their aim being to ultimately further improve their customer outcomes, reduce revenue losses and reduce the number of customers falling into difficulty.
THEIR THREE CORE FOCUS AREAS WERE TO:
- Enhance their understanding of their customers’ behaviour and changing circumstances within their brands, but also in a wider financial context
- Continue to improve customer outcome
- Prevent their customers falling into bad debt
They approached TransUnion to help them achieve their goal.
At TransUnion we understand that every client has unique aspects and challenges. We work collaboratively at every stage to create tailored applications of our solutions - ensuring the best possible outcomes are generated to address the challenge.
THE APPROACH WE TOOK WITH SHOP DIRECT:
- To gain an in-depth view of Shop Direct’s customers we ran the CallMonitor solution retrospectively over a 12-month period. This provided us with a fuller understanding of what behaviours customers had exhibited during the time frame and highlighted behaviour patterns that could be used to predict how they would act in the future.
- Analysed customers at both extremes of the customer journey. Customers who had defaulted on their repayments and model customers who had continuously made payments.
- Utilised CallMonitor’s scoring abilities to predict which customers where likely to fall into difficulty and what behaviour they exhibited beforehand.
- Deployed an additional score, Cure Score, to identify customers in arrears that were capable of rehabilitation.
CallMonitor: Why and how it works
Make smarter and more responsible lending decisions. CallMonitor, via daily alerts, gives you up-to-the-minute information on your customer’s ability to pay.
Choose the right action for your customers. Cure and Delinquency Scores tell you whether an account will be in a better or worse position in three months’ time.
Take action sooner. CallMonitor provides alerts up to six weeks in advance of traditional bureau calls.
Findings: CallMonitor retrospective analysis
Almost 50% of all Shop Direct’s customers had an alert associated to them, revealing that their customers had being engaging in significant credit activity and/or had experienced a change in their circumstances within the 12 month period.
This insight provided Shop Direct with a deeper understanding of their customers’ behaviours that they could utilise in their customer management strategies – from credit limit reductions and account freezing to next best action contact strategies.
Customers triggering severe alerts such as insolvency, were linked to higher bad rates.
Suggesting that customers with these alerts need quick action to prevent them falling into further financial difficulty.
Interestingly, it revealed that some customers who were flagged as increasing the amount of credit they were using (increasing credit utilisation) and shifting their credit balances around between providers (balance shifting) were five times more likely to fall into arrears then the rest of the customer base.
Taking action to reduce customer lending limits when these customer behaviours are present would reduce the risk of the customer borrowing above their means and allow them to manage their current financial commitments without taking out further credit, adding to the problem.
Findings: Predelinquency Scoring analysis
Early detection and real-time action prevents customers falling deeper into debt and generates profit.
CallMonitor’s Predelinquency Score flags those customers who are showing credit behaviours likely to result with default in the near future.
The score is typically used across high volume, mild alerts to identify the best signals in the data. Against Shop Direct’s portfolio, the Delinquency Score was highly discriminating and identified low-volume segments with higher bad rates.
Where customers displayed a high increase in their Predelinquency score, a significant number of customers then showed a pattern of taking out further credit in the next couple of months suggesting that credit was taken when the customer was already starting to show signs of financial difficulty.
By using the Predelinquency score alone as part of an exposure management strategy, Shop Direct could prevent customers getting into further financial problems by protecting customers from unaffordable debt and the business from financial loss.
Findings: Cure Score and collections strategies
CallMonitor Alerts and Cure Score can improve your collections performance and help you focus on those customers that will get back on track. Cure Score gives Collections and Recovery teams the insight they need to help them prioritise their efforts for the best returns.
- We found there were a number of positive alerts linked to higher cure rates on the Shop Direct collections and recovery base. Customers who were opening new accounts with other providers and displayed balance changes in their credit file were 1 ½ times more likely to get back on track than other customers.
- The Cure score deployed for Shop Direct using positive triggers, provided highly predictive of Shop Directs account curing. The top 20% of customers had a cure rate of over 50%, the top 10% curing over 70%.
- Combining the Cure Score with their collections process, Shop Direct could segment their debt book in a highly efficient and strategic way, optimising both their internal resources and their liquidation rates.
Analysis of the proof of concept provided Shop Direct with the confidence to implement CallMonitor across their entire customer base. This enabled them to gain deeper insight into their customers’ behaviours, take a proactive approach to customer management, improving their experience, and advancing Shop Direct’s decisioning to help prevent bad debt.
“Working in partnership with TransUnion helped us strengthen existing management strategies for the 50% of customers who have experienced a change in their credit profile over the 12month period.” “Since implementing CallMonitor into a live environment, the product has been performing as the retro analysis predicted and is set to generate a good Return on Investment”
Mark Harrison-North, Shop Direct, Head of Credit Risk.
“As a customer centric business, who put innovation at the heart of everything they do, we are proud to have worked with Shop Direct. We have deployed a unique solution that enables them to better understand their customers, protect them from debt and enhance their journey.”
Joe Bolser, Head of Product, TransUnion
- CallMonitor is an alerts-based service that enables brands to get closer to their customers
- In-built scoring makes behavioural patterns easy to identify and combine with contact strategies
- Taking action proactively provides better customer and business outcomes
- TransUnion’s team of expert analysts work with individual businesses to determine what signals and actions would be of the greatest benefit to them and then help them to implement a strategy that delivers results