As an online retailer, Shop Direct decided to go beyond rules and scoring in improving debt collection and rehabilitation. They wanted to "take it to the next level" increasing collections while reducing expenditures. They turned to sophisticated but easy-to-use decision optimization to supercharge champion/challenger testing, and empower business users to apply statistical science to balance multiple constraints and ultimately boost results.
Check out this short video where Mark Harrison-North, Head of Risk Strategy, Shop Direct explains why collection optimization was a priority for the online retailer.
Collection Optimization Helps Keep Loyal Customers – Transcript:Mark Harrison-North, Head of Risk Strategy, Shop Direct
What makes Shop Direct unique? Shop Direct’s USP is it’s an online department store, the second largest online pure-play retailer in the UK. We’ve got literally tens of thousands of products but the unique thing about us is that we provide financial services as well, which is about making people’s lives more affordable and more accessible. We are very much a mobile and internet-led business. We are very much into real-time decisioning, authorize every transaction and we are using an awful lot of data, to help make the right, the best and the correct and the most relevant decision for our customers. We are using statistical techniques that have been around for a number of years and to even some of the more modern, complex algorithms that are used within machine learning.
How did the collections optimization project with FICO come about? What was its goal? Shop Direct has been a customer of FICO for a number of years, we’ve got a number of FICO products, from an origination system through to TRIAD, Debt Manager and some fraud solutions as well. In terms of the collections optimization that we have done very recently, that was really a follow-on from previous optimizations that we’ve done and this was really our next step in our journey towards a fully optimized business we did 15 years ago around credit line/credit limit optimization. Giving a customer the right credit limit increase for the right credit limit change, moving into the collections optimization that we’ve done again. Its action/effect models, and what we have done, is to try and understand and build into our strategies the best time to take appropriate contact actions are, and what those actions should be.
Why is collections optimization important to Shop Direct? Our intention is that we will optimize all stage so collections. It’s not just about getting our money back but it’s about doing it in a way that the customer can afford to continue with their life. It is really important for us to rehabilitate good customers. A long-standing customer is a lot more loyal. Optimization is really important for us for a number of reasons. Part of it is around the prioritization of resource but it’s also around making sure that your contacts and your interactions with the customer are appropriate for them.
How has the relationship with FICO grown on this project? Shop Direct has a long relationship with FICO and we very much view that as a partnership, rather than a supplier/customer relationship. They helped us with the initial model builds. Moving forward, we have now built subsequent models without FICO's help to actually build the models but then they have actually gone on to validate some of those for us and that’s a really good stepping stone, before you step out into the world of doing it all on your own.