Chief Marketing Officers (CMOs) and Chief Risk Officers (CROs) may seem to have little in common. Th

Chief Marketing Officers (CMOs) and Chief Risk Officers (CROs) may seem to have little in common. The CMO has historically focused on driving growth and brand engagement; the CRO has typically focused on safeguarding the bottom line and minimizing unwanted exposure. But the advent of Big Data, sophisticated modeling techniques, and robust algorithms metal are opening a door to cooperation and opportunities that have never been possible before.
Both practices have long developed insights into their customers based on data and analytics. But in the aftermath of the financial crisis, risk managers metal have become increasingly involved in business strategy and decisions. That has coincided with marketing s increased influence on strategy, driven by the unprecedented level of insights into customer behavior and trends that are now possible through analytics.
This convergence creates a new opportunity for both disciplines, in effect, to pool their understanding metal of customer behavior and apply a broader range of sophisticated analytical approaches. By working together, both disciplines can provide more value to the business. metal
We speculate that because CMOs and CROs have historically focused on different aspects of the business, there are few examples of close CMO-CRO collaboration today. We believe, metal however, that there are several specific ways the two roles can work together more closely and learn from each other:
1. Take a customer life cycle approach. metal Marketers recognize that buying behaviors change over time as customers get older, have children, switch jobs, build wealth, and retire. To get a handle on that changing value, metal marketers use an array of data, from prior transactions to predictive analytics.
By contrast, CROs have traditionally segmented customers through a narrower and often static range of data that usually reflects their current financial histories but ignores their brighter, more profitable future potential. CROs can increase market share among underserved customers, such as small business owners and the unbanked (i.e., those without bank accounts), metal by adopting the more dynamic customer life cycle view. After the recession, for instance, one large lender made a practice of looking for rehab customers whose credit suffered metal in the downturn but who had since managed metal to achieve more stable incomes. The lender targeted those customers with more attractive rates rates that reflected the total life cycle value of these customers allowing them to grow at a faster pace than peers while keeping losses within acceptable risk levels.
2. Use risk data as an avenue for innovation. CROs are deeply familiar with the troves of risk data, such as payment habits and internal credit scores, that their companies keep. With a little creativity, CMOs can work with them to monetize that data to create new products and, in some cases, whole new markets.
The marketing and sales team of one major technology vendor, for instance, metal partnered with risk to assemble a range of financing packages to help its mid-market clients fund upgrades, manage invoice payments, and smooth metal cash flows. The risk team helped run the numbers to ensure the client met the right credit threshold, then marketing prepared the package and the reps went to work. The ability to offer financing gave the technology vendor a point of differentiation that helped it beat its revenue projection for the year.
3. Gauge and influence a customer s next best action. Better analytics and understanding of the customer decision journey have allowed CMOs to discern where customers become frustrated, tune out, or turn away. The CMO of a telecommunications company, for instance, found the biggest spike in churn came when customers moved. When marketing dug into the issue, they found the root cause had more to do with the tedium of calling the company and waiting on hold to reactivate an account typically a 20-minute exercise than dissatisfaction with the telephone metal service itself. By updating its website, the company let customers metal renew their service online in a matter of minutes and with just a few clicks stemming the churn by 40%.
The risk function can do the same. Risk managers traditionally wait until a negative event has occurred before taking metal action, rather than looking for ways to intervene ahead of time to change or take the edge off the outcome. A customer prone to overdrafts, for instance, might receive an email when his account dips below a certain level. Mortgage payers with a track record of being more than 15 days late could receive incentives or loyalty points that reward early payment. By pairing behavior patterns in key segments with macroeconomic and demographic data, risk organizations can predict what those patterns portend before the customer sinks into the red or starts shopping for a loan elsewhere.
4. metal Adopt a test-and-learn approach. Marketing leaders know that they have to be prepared to iterat