The micro finance industry has been successful in catering to the needs of the growing population by considering the weaker sections of society and offering services that would benefit them. In spite of many such firms operating in this market space, the majority of the micro financing operations take place in developing nations, such as Indonesia, Serbia, and Honduras. Additionally, the growth of the micro finance sector can be attributed to the rise in the number of credit providers across economies.
The micro finance sector is evolving as a result of the growing number of credit providers. As a result, developing customer retention strategies has become the main priority for micro finance institutions (MFIs). Some MFIs emphasize on improving customer service as a way to gain a competitive edge, yet this does not necessarily diminish attrition. A comprehensive understanding of the customer and an analysis of the reasons for leaving an institution is required to develop an effective customer retention strategy.
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Let’s take a look at some of the factors that will influence the growth prospects of the micro finance firms over the next few years:
- KYC and Security Challenges: Micro finance companies usually offer services to individuals who possess insufficient official identification and those who cannot provide tangible This makes it extremely difficult for such institutions to provide banking services to clients without the required documents.
- Cost of Outreach: Serving the unbanked populations of the world includes servicing small loan amounts and servicing remote and sparsely populated areas of the planet, which can be dangerously unprofitable without high rates of process automation and mobile delivery.
- Geographic Factors: Geographic factors play a significant role in determining the success of micro finance firms, as these factors make it difficult to communicate with clients of far-flung areas, which creates a problem in the growth and expansion of the organization.
The Business Challenge
Micro finance is seen as one of the effective tools that can address poverty alleviation by engaging the financially underserved in sustainable economic activities.
The client, a reputed micro finance firm with business units spread across the globe, wanted to develop a robust statistical model to analyze the lifetime value of its customers. The client also wanted to leverage customer lifetime value predictions to identify and retain the most profitable customers. Additionally, the client was looking at reaching out to a larger customer base through effective marketing strategies that are aimed at developing better customer relationships.
The Solution and the Business Impact
The solution – strategies that we recommended based on our analysis to enhance customer value.
The customer lifetime value prediction study offered by the team of experts at Quantzig helped the client in the micro finance space identify channels to improve the quality of the services provided to its customers. Moreover, based on customer lifetime value predictions, the client was able to develop marketing strategies to further enhance their relationship with customers. It also helped the micro finance firm reduce attrition levels by targeting the right customers.
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Customer Lifetime Value Predictive Insights
Customer lifetime value is a critical metric for businesses operating in any industry, and the micro finance firms are no exception. Predicting the customer’s lifetime value enables firms to identify and measure the value of their customers to gain a distinct competitive advantage over those who do not. Customer lifetime value predictions also help companies gain better insights into the strategies and personalized interactions, which help in increasing the customer’s lifetime value.