Global Customer Segmentation Framework for Financial Health S E P T - PowerPoint PPT Presentation

Global Customer Segmentation Framework for Financial Health S E P T E M B E R 2 0 1 8

Presenters Niall Saville Fanuel Omondi Otieno Associate Partner Data Processing Manager Dalberg Advisors Dalberg Research

Dalberg Overview Design Strategy DATA + STRATEGY + DESIGN We use data, strategy, and design to generate actionable insights and build innovative products and services. Data Analytics Research Our mission is to leverage the best of the private and public sectors to raise global living standards and mobilize effective responses to the world’s most pressing issues. Capital Implementation

THE WORLD WE LIVE IN Enormous untapped market potential in emerging economies with billions of people Limited data and a poor understanding of the vast majority of people in those economies Limited usage of digital products – especially digital financial services – caused by poor product fit

THE WORLD WE ENVISION We need a holistic, specific, actionable understanding of consumer markets in emerging economies New data driving a textured, nuanced • and differentiated understanding of consumers in emerging economies Segment-specific insights and • opportunities that are scalable and actionable Tailored offerings (strategies, products, • messages, and channels) to develop and seize untapped opportunities

Global Customer Segmentation OUR APPROACH Most FSPs in emerging markets use basic • contextual and demographic variables for DEMOGRAPHIC BEHAVIORAL segmentation, overlooking important patterns and Who are they? How do they behave, thus failing to engage BoP customers share and learn? Understanding the psychological and behavioral • dimensions of financial decision-making will help providers improve products tailored to the needs of the BoP and marketing efforts PSYCHOMETRIC Our team use a segmentation approach based on • How do they think, what demographic, behavioral, and psychometric drives them? variables Integration of demographic, behavioral, and psychometric variables

By the Numbers 1.86 billion people 6 countries 35 segments 11,500 surveyed 650+ variables measured

How We Did It S U R V E Y D A T A S E G M E N T P R O D U C T A N D D E S I G N C O L L E C T I O N I D E N T I F I C A T I O N S E R V I C E D E S I G N We conducted follow-up We created an extensive We ran the survey to 1,200 - We used a K-Medoids HCD research in India and 3,000+ people across each statistical method to identify survey questionnaire Pakistan to co-design market customized for each and size 4-6 segments in segment specific offerings country each market Using in-depth HCD, we We employed a stratified We grounded our analysis in Leveraging our quantitative data, • • • • designed a survey with over randomized sampling country specific qualitative we conducted follow-on design 100 questions on contextual, method to achieve a data and insights that we research to capture segment- behavioral, and psychometric nationally representative generated through initial HCD specific needs and aspirations, and variables respondent pool research co-design tailored offerings We made each survey The questionnaire took 45- We identified clusters with We used this understanding to • • • • relevant to country contexts, minutes in total similar characteristics based on prototype segment-specific factoring in local nuances, K-medoids approach, which product concepts with consumers questions on media, and groups respondents into and identified channels to target, feedback from local financial clusters based on common modes of communication, and service providers survey responses message framing

A Mixed-Methods Approach Combined tools and approaches from HCD, market research, behavioral science Varied approach helped us surface psychological dimensions of financial decision making, and allowed us to test concepts along the way Helped us understand the contextual, behavioral and psychometric variables that matter the most in financial decisions and behaviour Leveraged behavioral science to see how that our understanding relates to the global literature

Qualitative Research Output 76 IN-DEPTH USER PROFILES Deeply grounded data analytics Relatable insights and holistic human understanding Test targeted offerings against beliefs of real people Rich and compelling storytelling

Sample Survey Questions Type Example Questions Demographic and • What is you relationship to the household head? • Demographic: Age, Gender, household context, education, employment situation, transactional • On average, how many people do you speak to using your social network, socio-economic status questions phone? • Financial approach/management: basic • Which messaging service do you use? FPS usage, main money interaction channels, phone access Example statements: Rate each of these Example • Self-efficacy Psychometric statements on a scale of 1 to 5 with 1= strongly disagree • Conscientiousness to5=strongly agree: questions • Trust in people • You always return a favor. [Dependability] • Respect for authority • Most people can be trusted. [Trust] • Dependability • When I get what I want, it’s usually because I worked • Safety of saving hard for it [Locus of control] • Where do you find valuable and trustworthy Behavioral • How individuals: information on financial matters? Engage with the community questions • How often do you take part in religious services or o Manage their day-to-day lives ceremonies? o Seek advice o • Suppose somebody close to you gains a lot of wealth Respond to risk o and decides to give you a gift. Please tell us how much you spend on family, save in a bank, keep at home, spend on a future expense or spend on equipment

Data Analysis • Cluster Analysis o Grouping of set of objects in such a way that objects in the same group (called a cluster) are more similar to each other than those in other groups • Silhouette width criterion SEGMENT IDENTIFICATION We used a K-Medoids statistical method to identify and size 4-6 segments in each market We grounded our analysis in country • specific qualitative data and insights that we generated through initial HCD research We identified clusters with similar • characteristics based on K-medoids approach, which groups respondents into clusters based on common survey responses.

Clustering Output 35 SEGMENTS Defined through statistical analysis Interpreted and enriched with DIGITAL YOUTH RESILIENT FARMERS COMMUNITY PILLARS HCD insights and storytelling Kenya, 25% of pop. Tanzania, 17% of pop. Nigeria, 19% of pop. drawn from user profiles Robustly described in terms of contextual, behavioral and psychological characteristics 4-6 segments per market INLUENCERS SKEPTICAL INDIVIDUALISTS CAREFUL STRUGGLERS India, 18% of pop. Myanmar, 17% of pop. Pakistan, 37% of female pop.

Financial Health Framework Planning and Prioritization ▷ Deliberately shaping income, building reserves, To understand individuals’ current financial health, and cultivating receivables to achieve priorities we quantitatively examined their behavior along the five dimensions of the BMGF-CFSI-CFIA* Building Reserves ▷ global financial health framework Building reserves by storing value in a manner that balance their unique needs for financial liquidity, security, and returns Planning and Prioritization Cultivating Building reserves Shaping Expenses ▷ receivables Managing the size and timing of expenses to better meet needs and aspirations, and manipulating expense size and timing to better match expected income Cultivating Receivables ▷ FINANCIAL Receivable Reserves Cultivating access to financial resources a person can obtain, Potential HEALTH but does not currently hold; e.g., building reserves to establish credit, and making investments in social safety nets Income Shaping Income ▷ Managing the size and timing of earnings, and improving Shaping Shaping income reliability to best meet need and aspirations Income expenses

Four Kenyan Segments Vulnerable Resilient Educated Open Pessimists Cultivators Elites Individualists A mix of younger and Typically female farmers Generally males in the top Mostly males with primary older people. Vulnerable with primary or secondary two socioeconomic status or secondary education pessimists are mostly education who farm. They brackets who are formally who perform casual work females with limited demonstrate strong employed or self- or farm. They have volatile education who rely on financial health behavior employed. They exhibit the incomes but save on a their family for support. and use diverse social strongest financial health semi-regular basis. Open They use formal and financial tools. Resilient behaviors and use diverse individualists have low informal financial Cultivators have a deep financial tools. Educated trust in people and social products infrequently. connection with their elites are conscientious and financial networks, but are They have low self-esteem community and strong optimistic about the future. open to new things. and low openness to new belief in a better future. things.