Product Design

Our teams have been instrumental in a number of engagements focusing on optimal product design. Some of these have focused on detailed sensitivity-based pricing, line assignment and management and loan terms. Others have focused on developing the concept and the detailed parameters of new products, sizing and defining the target base and developing the work-flows associated with various decisioning phases.

Sample Cases

Acquisition Pricing

Transformed the external acquisitions framework of a Fortune 100 Financial Services company, with focus on pricing. We developed a sensitivity-based pricing tool leveraging some of the historical test campaigns. We created a response-weighted forward-looking prospect value metric, based on interacting predictive models to be used in offer optimization. Based on the new framework we generated PTI impact between $30 and $40MM for future acquisition campaigns.

Initial Credit Line Optimization

We were brought in to evaluate opportunities for enhancing the existing credit line assignment logic. We ended-up completely redesigning the framework with substantial P&L impact based on a sensitivity-based framework. While this was originally done for a small business card portfolio, the methodology was adopted, with customization, by our client on the even larger consumer portfolio. We utilized random test results and some of the BAU data to develop sensitivity-based segmentations by capturing better balance sensitivities and introducing new spend sensitivities. We developed the segment-level predictive models as well. The new line assignment framework increased downstream profitability by 30 to 40%.

Merchant Loan Product Design

We were part of an engagement leading-up to a launch of a new lending product by one of the top issuers. Our responsibility was to develop an optimal segment-level structure for determining loan amounts and terms at acquisition, in order to maximize the profitability through increasing the number of right-amortized loans, while reducing the number of over- and under-amortized loans. We built an applicant-level spend forecasting capability based on a number of alternative time-series model specifications and spend pattern-based adjustments. We also incorporated select macro-economic conditions. We performed extensive segmentation, simulations in order to optimize the product terms. We delivered the new product construct and framework and increased revenue by more than 20%.

Targeting and Pricing for Collateral Free Term Loans

We participated in this engagement during the lead up to the launch of a new lending product for a major credit card issuer. The objective was to improve the launch of the product by initially targeting a select group of clients that would have high likelihood to enroll, and to define a risk-based pricing scheme that was optimized for profitable growth. DIA approached the problem with client financials as a key data source. Rich data was available that described terms presently available with existing payments between clients and vendors, and the team used this to identify clients that would most benefit from the new product. A pricing scheme was then developed by considering clients that would take the product at different APR and the corresponding return after risk of default and cost of funds.