The marketing cube: NEXT LOGICAL PRODUCT (NLP)

The questions still remain. ‘How do I save my customers?’ ‘What strategy should we be using?’ The study alluded to earlier, conducted by the American Banking Association, also concluded that the number of products owned by a household is associated with retention. More services in one household translate into higher customer retention.

A next step might then be to determine what product to offer customers to enhance the cross-sell success rate. Not only do marketers want to sell the service and accrue the associated revenue, they also desire to reduce the chances of balance diminishment.

What many marketers have been using to address this problem is a ‘next logical product’ model. Here a prediction is established for each customer concerning the product most likely to be accepted by the individual. A final output might look something like Table 4. Imagine a customer warehouse, with four new fields created. These four fields would be referred to as:

—          1st most logical next product

—         2nd most logical product

—         3rd most logical product

—         4th most logical product

A new field would be created for each service offered. Table 4 depicts only four products.

Table 4


Customer
number


Most logical
next


Next most
logical


Next most
logical


Next most
logical


product


product


product


product

1001

Cheque account

Insurance

Savings

Retirement

1002

Retirement

Mutual fund

Brokerage

Money fund

1003

Credit card

Life insurance

Home equity

Brokerage

1004

Savings

Retirement

Cheque account

Credit card

1005

Life insurance

Brokerage

Credit card

Mutual fund

Now assume there are four customers with the characteristics shown in Table 5. The next logical product calculation is added to provide a more complete picture of the customer. This structure permits the marketer to select that product to which the household may be most receptive.

Table 5


Profit


Potential


Probability of


balance


diminishment


Possible
action


Next logical
product

High

High

Mine for more of them

IRA

High

Low

Service and protect them

Brokerage

Low

Low

Focus them elsewhere

Savings

High

High

Intervene and rescue them

Savings

Representative APR 391%

Let's say you want to borrow $100 for two week. Lender can charge you $15 for borrowing $100 for two weeks. You will need to return $115 to the lender at the end of 2 weeks. The cost of the $100 loan is a $15 finance charge and an annual percentage rate of 391 percent. If you decide to roll over the loan for another two weeks, lender can charge you another $15. If you roll-over the loan three times, the finance charge would climb to $60 to borrow the $100.

Implications of Non-payment: Some lenders in our network may automatically roll over your existing loan for another two weeks if you don't pay back the loan on time. Fees for renewing the loan range from lender to lender. Most of the time these fees equal the fees you paid to get the initial payday loan. We ask lenders in our network to follow legal and ethical collection practices set by industry associations and government agencies. Non-payment of a payday loan might negatively effect your credit history.

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