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Who Are Your Future Clients?

November 30, 2015

By Consulting Group

Whether we are talking to large corporates or fintech start-ups we get asked the same question in many different ways – who are our future clients?

A product should always be designed to be engaging and inspire loyalty, but market penetration, rather than loyalty, will always be the biggest driver of growth. The average number of products held by Australian personal banking customers is 2.0.1Think about it from your own experience and  this probably rings true. I personally only hold a current account and a credit card with ‘my’ bank. The home insurance, mortgage and FX services went to other brands a long time ago, and while I generally try to follow a ‘Black Swan’ approach, in this respect I suspect I’m fairly typical.

Big multinational consumer brands invest in extensive (or expensive) external qualitative and quantitative research to help them understand the future, but smaller brands, faced with similar penetration and frequency of buying challenges need to generate their own insights.

So given a highly competitive marketplace, the need for increased penetration to grow a brand and limited cross selling opportunities, how can we analyse existing customer data so we can tell a start-up CEO or a corporate divisional director with any level of confidence who their new clients will be over the next 3, 12 or 48 months?

Start-Up

Early stage start-ups don’t have existing customer data and therefore we help them to analyse publicly available data, insight from research reports and initial data they have gathered to build out a model of their most probable client demographic. With this information to hand, we recommend a process of rapid prototyping. This means the concept can be tested with a relevant group of potential users and then (with appropriate regulatory approval) the reach can be extended to newly identified prospects and adapted according to their feedback. After further iterations, timely use of services such as ‘google surveys’ and solid WOM marketing techniques the product can begin to build its customer base by focusing on units of 10, then 100, then 1000.

Established Businesses

For established businesses the data analysis opportunities are more significant, especially if the company can combine data from the often present legacy silos. If both customer details and product usage data is available, then it is possible to combine the two elements to get to an answer.

Part 1: Customer Segments

Retail finance companies have an advantage because of the amount of customer data they are required to capture.  Services such as Experian’s FSS or CICI’s Acorn customer classification tool makes unlocking this data and mapping it against the third party classifications a relatively simple process and enables the business to confidently identify existing customer segments.

customer segments

Part II: Product Adoption

Remember we are trying to predict who the future clients will be, not who they already are and this is when product usage and customer behaviour analysis comes in. In retail finance customer purchase frequency is an issue, whether trading equities, investing in an ISA, setting up a SIPP, getting a loan or exchanging currencies frequency varies a lot. Analysing how customers use both established and new product to interact however frequently and their behaviour can give significant insight to a business.

We still think one of the best ways to illustrate this is by looking back at the adoption of, first the internet, and then mobile by retail finance customers. Remember when customers using the internet were in a minority? Understanding that group of customers and their behaviour early enabled a brand such as Hargreaves Lansdown to secure a competitive advantage and grow their market penetration. They now account for close to 35% of the DIY investing market. This opportunity for new providers to penetrate the market has now arisen again through mobile. Just look at the speed of growth of an app such as Revolut in the mobile payments / FX space compared to other finance brands.

product_adoption_2

Confident Strategic Decisions

The result of this analysis is clearly defined customer demographic segments, with subsets relating to product adoption and behaviour, for example early adopters of a new mobile service or product functions such as ‘social sign on’. These newly defined behavioural clusters can be used to enable a business to target clearly defined audiences with new product developments.

The point is that excessive and expensive analysis of customers from a loyalty and cross selling perspective is not the holy grail, but knowing who your future customers are likely to be based on existing customer subsets behaviour, enables company executives to make more confident strategic decisions and ultimately increase market penetration.

1Mundt, Dawes & Sharp 2006

 

Rapid Prototyping for Finance

October 12, 2015

By Consulting Group

Last week Dominic Crosthwaite from Black Swan Partners and Matthew Lenzi from our partners Hanno joined forces to lead a rapid prototyping workshop at Level 39 in Canary Wharf.  In attendance were the six finalists of the 3DS Fintech Challenge:Algodynamix, CheckRecipient, Passfort, Quarule, My Stock News and Percentile.  A brief round of introductions kicked off the workshop with each start-up explaining what they hoped to learn from the event and Matt outlined the basics of rapid prototyping.

What is Rapid Prototyping?

Rapid prototyping is the process of a designing and creating products over very short periods of time, measured in hours and days. In contrast to traditional development methods, it emphasises iterative design over extensive documentation and seeks to use innovative techniques such as real-time feedback and designing directly in a browser to speed up delivery.

Hanno see it as much a philosophy as a technical skill and Matt emphasised a number of core beliefs necessary to be successful:

  • Explore new ideas, learn through actions and get real time feedback. Hanno’s preference is using design thinking
  • Build communities on social media as co-creation is key – there is a group of people for everything and early adopters will be supportive

Identify Your Target Audience

A prerequisite of successful rapid prototyping is the identification of the target audience. Dominic explained its importance and how Black Swan Partners approach these challenges for clients. The obvious risk is that if you collaborate with the wrong users, then you will invalidate the benefits of rapid prototyping and could develop with the wrong end user in mind. This process of client identification includes:

  • Review of publicly available marketing reports and data sources including the FCA’s Customer Spotlight segmentation research
  • Paid for services such as Experian’s financial strategy segments
  • Where relevant, analysis of existing client activity data

The analysis of existing data and information rather than bespoke research can accelerate the learning around audience segments and enable the full benefits of rapid prototyping to be realised.

Uber from a Rapid Prototyping Perspective

Uber London was struggling to sign up drivers at the same rate as in the US and asked Hanno to create a website to attract and onboard drivers – in 2 weeks. The first step was to get an Uber account, use it to get to work every day and talk with the drivers. Writing a journal allowed Hanno to utilise the the driver’s feedback and through a combination of collaborative tools, Hanno co-created the site with both the Uber team and the drivers Uber was targeting. Through this process the cultural nuances between the US and the UK became apparent; the London drivers predominantly used mobiles instead of desktops, the majority highlighted English as their second language, wanted to be able to share the Uber opportunity with friends and classed driving as their full time job. Instead of lengthy and costly focus-groups, Hanno responded by creating a mobile first website written in clear and concise language that emphasised the flexibility of working hours and that could be easily shared.

We also took time to talk through another case study, Transcence, an excellent product that allows conversations to be transcribed onto smart phones in real-time, helping the hard of hearing engage in conversations. In one week, Hanno built and iterated through 10 prototypes and at the end of the sprint delivered several validated prototypes and insight into how to solve the next challenge. As well as the case studies, there was a lot of interest from the room in what tools are used in the process. Some of the key tools are listed below:

Tools Description
Google Docs Online document creation, storage and editing
Mural Online brainstorming, synthesis and collaboration
Skype Instant Messaging and video chat
Middleman Static websites
Bootstrap Responsive, mobile first projects
InVision Prototyping, collaboration and workflow platform
Balsamiq Wireframing platform
BugHerd Bug tracker and client feedback
Unsplash High resolution photos
Squarespace Website creation
Asana Work tracking
GitHub Software building

 

The work-shop then moved into an open discussion with all the participants discussing how rapid prototyping could apply to their start-ups both within a b2c and b2b context.

We received very positive feedback from participants, the sponsor Dassault Systems and their partner Deutsche Böurse. Everyone at Black Swan Partners and Hanno would like to wish the six finalists luck with the remainder of their accelerator programme!

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