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What is Customer Scoring and How Useful Is It for Your Business

what-is-customer-scoring-and-how-useful-is-it-for-your-business

There are many ways to leverage data to analyze customer behavior. From a business perspective, it is important to know the value of the customer to the company. This is known as customer scoring, which is a technique to assess and classify customers based on certain categories.

Initially, this scoring was used by the banking and finance sectors to determine which customers would be given a loan, in which this method is also known as credit scoring. Basically, this scoring is a predictive analysis used to predict the productivity of credit or loans that will be given to certain customers. However, in recent years, the application of this technique is also popularly used in the marketing industry. In short, this technique makes it possible for companies to assign customers to certain categories based on the response they give to the companies’ marketing efforts.

What are its functions?

Thus far, this kind of scoring is traditionally used in banking and finance sectors to determine the credit profitability of a particular customer. However, apart from these fields, the application can vary according to the conditions and needs.

Customer scoring in everyday life is based on two main principles, such as:

  1. Every customer is different: Customers have different behaviors and preferences. You can see it from the frequency of purchases or from the level of customer satisfaction, so it will be more effective for you to customize a service or product with this information.
  2. Important priorities: By searching the data and finding customers who are most likely to make a transaction or purchase, we can make the marketing success rate higher and can maximize the profit obtained.

Specifically, this scoring is used by businesses for the following purposes:

  • Target marketing at the people most likely to accept the service or product being offered. This can be applied to prospective new customers or old customers to make repeat purchases.
  • Predict whether the customer will have a high lifetime value (LTV) or not. If the scoring and customer identification process is carried out correctly, then the customer can receive marketing communications that are tailored specifically to that customer.
  • Predict the probability that customers will lapse sometime in the future, so that they can be contacted intensively before it happens.

Customer scoring has several advantages that can be obtained by companies if applied, such as:

  1. Know the best customer profile, so that it can effectively attract more customers according to that profile.
  2. Identify the market that has the most opportunities and potential.
  3. Improve customer responsiveness to marketing efforts by targeting customers more effectively.
  4. Detect customer groups that have similar or the same characteristics.
  5. Find customers who respond most often and target them with better offers or sales opportunities.
  6. Able to process millions of data in mere seconds.
  7. Building scoring models and campaigns in one integrated ecosystem.

How to do the scoring?

The scoring is based on customer database segmentation. In other words, customer data is the reference for the scoring. The score assigned to each of your customers is calculated from the data you have about them. You can use all types of data to create a scoring system, for example:

  • Socio-demographic data: age, gender, marital status, profession.
  • Psychological data: interests, opinions.
  • Behavioral/habit data: purchase history, recent purchase data, purchase frequency, number of customer service complaints, email response rate, etc.

The next step is to create or use an available scoring approach or method. There are many different ways and methods to calculate customer value or scores. This method is based on numerical calculations and a weighting system to assess various types of criteria. Most management applications also offer scoring functions using their own methods.

The suitability and accuracy of the results of this scoring depends on the accuracy of the selection of criteria and in accordance with the objectives to be achieved, as well as the selection of tools and methods used.

In the end, this method has become a very useful alternative for business activities in any field. Thus some brief information about customer scoring. You can find out more about this topic by reading similar articles such as the one in https://www.ad-ins.com/id/penilaian-kredit/.

References:

https://www.apteco.com/insights/products/apteco-faststats/customer-scoring

https://blog.kale.bismart.com/en/customer-scoring?hs_amp=true

Photo source:

https://www.freepik.com/free-photo/hand-with-pen-application-form_1009348.htm#query=scoring&position=0&from_view=search