1. Outlier Analytics – Learning From
Those on the Fringe
September |2010

2. Outlier Analytics – Learning From Those on the Fringe
While most companies focus their business intelligence efforts on the masses,
those few examining outliers (consumers who don’t exhibit expected behavior) are
finding hidden gems of information they are using to develop new offerings…
What?
Unexpected events, extreme values, or disturbances are common occurrences in
the world of data analysis, occurrences which are labeled as outliers by those
practicing in the field. Ask any statistician or a data miner what he or she would
do with outliers (e.g. a customer makes 100 calls to a contact center in a week, or,
a small business makes thousands of bank transfers in a month), you’ll usually get
the same answer – “I’d remove them from my analysis.”
Although this practice of removing outliers is, in fact, the prescribed action when
it comes to conducting a traditional analysis aimed at understanding a given
situation or predicting future behavior, such an action prevents one from gaining
insights through these random outliers. It’s in these out of the norm behaviors
and relevant transactions where one can gather unique and interesting insight,
allowing for innovation to blossom.
We recommend companies immediately begin analyzing this data set in a
separate effort from their traditional ones. Such data can yield valuable findings
which can result in an expansion of offerings, development of alternative
treatment methods, or even help see the future in terms of how customers may
behave one day.
Why?
Traditionalists in the business intelligence realm have naturally examined mass
consumer behavior, hoping to identify certain facts that could help their
companies acquire more, sell more, or retain more. The natural tendency has
been to ignore outliers, with the theory being that they hold little value in terms
of trying to understand them, sell to them, or cater to them. But it’s really these
unique outliers that can pave the way for the future – the unique way in which
they interact with or use the products and services of a company can help that
company identify how to push their boundaries in terms of innovation.
Take 3M for instance; renowned for its uniqueness, 3M is a company that has
constantly strived to cater to those people we normally deem as on the edge -
from astronauts to war zone doctors, Hollywood make-up artists to mountain
climbers, this innovative company is defined by products that originated thanks to
these outlier consumer segments. Today, world-over, individuals across all
segments use such 3M products as high-strength bonding tape or scouring pads,
products inspired by those that can be deemed as on the fringe.

3. Customer analytics efforts that focus on the behavior of outliers can help
companies identify how to excel in such a manner, resulting in service offerings
catering to such outliers’ needs. Take Bharti Airtel, for example, a mobile operator
from India that identified a segment of farmers with low voice traffic that were
frequently using certain value added services such as weather forecast. In
cooperation with farmers associations, the company launched an innovative
service package for farmers. The package, which includes critical information on
seeds, fertilizers, market prices, and weather (temperature, rainfall, wind
conditions), also allows farmers to communicate with agriculture experts about
crop problems. Farmers can take photos of particular crop problems and send
these photos to agriculture experts by using MMS service. Agriculture experts
with local market knowledge discuss and help to resolve the problems.
But How?
We recommend a four-step approach for identifying outlier customers,
understanding their nature, and making the most out of the knowledge gained.
Getting Most Out of the Outlier Analytics
1 2 3 4
Identify Outlier Analyze Comprehensive Understand the Create New
Customers Behaviors Root Causes Offerings
1. Identify Outlier Customers: In order to benefit from the behavior patterns of
outliers, they first need to be identified. There are three main sub-categories of
outlier behaviors:
 Exceptional Behavior: Extreme usages of a product or a service are
considered in this category, behavior which is not expected from a traditional
consumer. Examples of this include a customer who logs onto an internet
banking account more than 30 times a day, or a small business that
purchases hundreds of plane tickets in a week.
 Unexpected Behavior: Cross analysis of certain product or service usage with
other descriptive dimensions may reveal such behaviors. If a customer who is
not considered as a prospect for a certain product or a service (by looking at
similar customers’ behaviors in a customer base) converts into a consumer,
he/she can be considered as an unexpected behavior outlier. A very low
value customer who signs onto a very expensive annually contracted product

4. or service bundle can be an example of such a case in the
telecommunications industry.
 Untriggered Behavior: An unlikely behavior that emerges without any efforts
of the company can be considered as an untriggered behavior outlier. A once
upon a time subscriber who comes back years later to make a purchase can
be considered as an example of this.
Companies need to examine their own situation and marketplace facts to
hypothesize about which scenarios to examine relative to the above behavior
categories. Each company has its own set of scenarios to consider and devise, as
the varying market and sector factors dictate a company-specific examination be
conducted.
2. Analyze Outlier Customer’s Comprehensive Behaviors: After outliers are
identified under three sub-categories by looking from several perspectives, a
customer analysis base needs be established. Analysis on this base will reveal
possible correlated behaviors of the outliers in other dimensions and also will be
used to understand how customers deviate from the regular customer base in the
remaining behavior dimensions. Comparisons should be made for the periods
before and after the outlier behaviors are observed.
3. Understand the Root Cause: Since outliers deviate significantly from the
regular customer base in terms of how they behave, information that is derived
from the observations will not be enough to answer why they deviated. In order
to understand the certain needs and motives that drive them, companies should
consider conducting various methods of market research to identify the root
causes of the behavior. Understanding why certain customers interact with the
company’s channels, products, or services in a given way can only be truly
understood through talking directly with said customers.
4. Create New Offerings: As a final step, new offerings would need to be
developed to capitalize on the findings. Whether it’s the launching of a new
pricing scheme, a new product, or a new channel of communication, benefits can
only be obtained through creating a unique offering meant to satisfy the needs of
the unique outliers. As with all new offerings, they should be tested through pilots
with the outliers to ensure acceptance by the outlier sub-groups.
What Next?
Companies need to make the examination of outliers a common-part of their
business intelligence practices. Business intelligence units need to work hand-in-
hand with marketing, sales and product development units regarding the possible
benefits of outlier analytics. Regular get-togethers and workshops should be
planned to ensure continuity of such practices.
The effects of innovation derived from the insights from the outlier analytics
should be measured and monitored as well in order to create momentum around

5. the practice. Once the benefits are realized of such efforts, the more likely it will
be that such types of analytics become a part of day-to-day business.
About Forte Consultancy Group
Forte Consultancy Group delivers fact-based solutions, balancing short and long term
impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety
of service offerings for numerous sectors, approached in three general phases –
intelligence, design and implementation.
For more information, please contact
info@forteconsultancy.com
Forte Consultancy Group | Istanbul Office
www.forteconsultancy.com