Maximizing Campaign Conversion Rates Using Analytics Document Transcript
Maximizing Campaign Conversion Rates Using Analytics June |2010
Maximizing Campaign Conversion Rates Using AnalyticsFinding the next best offer for customers is only the tip of the iceberg when itcomes to maximizing ROI from campaigns. Companies need to look into using theright channel, the right tone of communications, and even the right time tocontact customers to achieve this ultimate objective.What?For many years, a majority of companies approached campaign developmentsubjectively, letting creativity rather than facts be the main driver in designingcampaigns. As more and more companies have been deploying campaignmanagement solutions and have started tracking how their customers areresponding to each and every offer, science is moving into the driver’s seat.Today, customer analytics models can not only provide identification of the bestproposition for each prospect, but also define how these prospects would react toif the proposition is communicated in different ways. Companies now customizetheir communication for each customer through analyzing and understanding thedifferent preferences of their prospects. For example, leading automotivemanufacturers such as Lexus and BMW customize both the messages and theimages they use in promoting certain cars or campaigns to different prospects,based on their demographics and past behavior - and it completely makes sense,as the tone of voice or the message a student would react to is completeddifferent than that of a busy executive, even when the offer is the same for both.In order to maximize the return on campaign investments using customeranalytics, companies need to analyze and optimize six main components: Right Offer Right Communication Right Right Right Right Right Right Customer Proposition Price Channel Time MessageMaking the Right Offer Targeting the right customer - Using predictive models for estimating individual customers’ propensity to uptake any offer, companies can focus their efforts on the right list of prospects, saving communications spending and avoiding overstimulation of the prospects they have.
…with the right proposition - Testing alternative proposition campaign concepts and offerings (e.g. which product to cross-sell) via market research or pilot campaigns, companies can identify the list of next best offers for different customer segments, maximizing the value generated from each customer. …at the right price - Using price/discount elasticity models, companies can also identify the ideal level of price/discount applied for each campaign (e.g. percent of discount to be offered), where the total value of demand reaches its maximum level.Using the Right Communication Using the right channel - Campaign channel optimization balances the likelihood of prospects’ response to campaigns with the cost of using each channel. Using response rate models, companies can optimize the mix of channels used for each offer. …at the right time - Different customer segments present different levels of interest and responsiveness during different times (e.g. during work-hours vs. weekends), and after certain events (e.g. after they’ve inquired about a product). Using best-time-to-contact models, companies can contact every prospect when he/she would be most open to an offer. …with the right message - Last, but not the least, different customers have different interests, hence respond to different words, images and tone-of- voice. Companies can test messages to find out the ideal way of communicating an offer to each prospect segment.Parallel to these six components, companies need to take into account thecommunication constraints and customer privacy, incorporating do-not-call listsand using the right frequency of communications with each customer for bestresults.But, Why?Whether a campaign succeeds or not is heavily determined through the way it isdelivered. A company might have the best value proposition, but if it is notdelivered at the right time, with the right message, to the right person, it wouldnever catch the attention of its targets, hence would be doomed to failure.A series of e-mail marketing activities in Dell demonstrates the impact ofoptimizing campaign communications, with a staggering increase of 710% in theircampaign response rates through the simple testing of alternatives to find theideal design for their e-mail offers (e.g. subject line, image used in offer, numberof configurations listed). A leading telecommunications company in the Middle
East – after a series of campaign tests – realized that percentage discounts weremore attractive for its customers over direct price cuts, even in cases where theyhad less benefit for the customer, and resulted in more profitability for thecompany (e.g. 15% discount offer on $10 phone bills receiving better responsethan $2 discount). Other leading companies report 100% increase in responserates simply by reaching out to the customers at the right time (triggered byevents or time of day). Such improvements can turn the least successfulcampaigns into success stories, and considering the very limited level ofinvestment required for them makes analytics an inseparable part of campaigndevelopment.Using the wrong offer, channel, timing or message not only means a waste ofresources in terms of communications costs, but also means decreasedresponsiveness for future campaigns, as most customers today are over-stimulated by overflowing offers they receive from companies. There is no betterway of alienating customers than bombarding them with dozens of irrelevantcampaign offerings.So, How?There exist four main steps towards optimizing both the offer and thecommunications for campaigns:1. Building the Data Structure: Developing campaign optimization modelsrequires detailed campaign results be on hand so that the data can be analyzed.Every offer, whether successful or not, needs to be recorded, together with theinformation on the timing, channel used and content of offer presented toprospects (along with the prospects demographics or segment). The offer andcommunication approach need to be recorded in all their details and categorizedto ensure analysis can be conducted (e.g. the keywords used in the message, leveland type of discount offered, even the colors used in printed offers or the genderof agent talking to the prospect).2. Running Campaign Tests: In order to identify what combination of offeringsand communications parameters would generate the highest return, companiesneed to test alternatives and identify which get the highest return with the lowestcost for each customer or segment. For companies which have already performedhundreds of campaigns, this is a matter of analyzing historical data for theresponse rates. For the others, either market research or pilot campaign runs withtest cases will yield findings. Since it is practically impossible to test every possiblescenario, companies should follow concept testing approaches, such as conjointanalysis for this purpose. Below is a sample scenario of test cases, where differentcombinations of campaign offerings are tested for the same target segment toidentify the ideal mix:
Area Case 1.A Case 1.B Case 1.C Case 1.D (White Collar) (White Collar) (White Collar) (White Collar) Discounted Discounted Discounted Discounted Credit Card Credit Card Credit Card Credit Card 10% Discount $10 Cash-Back 10% Discount $10 Cash-Back E-mail E-mail Phone Phone Work-hours Weekend Work-hours Weekend With Focus on With Focus on With Focus on With Focus on Business Needs Family Needs Business Needs Family Needs Uptake 60% 40% 50% 30%3. Developing Optimization Models: Each of the six main components listedrequire different econometrics, statistics and data mining models to be utilized,ranging from price elasticity curves to decision trees. Yet, the question in eachcase boils down to responding to a simple question based on the learning fromcampaign tests: “What is the likelihood of this customer to respond positively tothis offer presented in this specific way?” Having an answer to this question foreach prospect and each possible combination of the offers and communicationsalternatives provides the ability to select the option with the highest impact oncustomer value for the company.4. Utilizing Optimization Models: Once a company runs enough tests to identifythe ideal campaigns for each customer and develops optimization models, thenext step is putting them into practice, using them for each and every campaignthe company has to offer. Below is a sample of ideal campaign offerings andcommunications for two different customers, which demonstrates the outcome ofsuch use: Area Case 1 Case 2.B John Doe Richard Miles (White Collar) (Student) Discounted Discounted Credit Card Credit Card 10% Discount $10 Cash-Back E-mail Phone Weekend Work-hours With Images of Outgoing- Businessmen Dynamic Result Subscribed Subscribed
Companies should see their campaign offerings and prospect bases as twoseparate portfolios and use these models to perform the ideal matching betweenthem. This implicitly requires centralizing all campaign decisions, in order to selectthe ideal offering for each customer and the ideal customers for each campaign,which means limiting the freedom the product and segment managers have overrunning their own campaigns independently. As cases such as Royal Bank ofCanada – which had developed a central campaign execution body for thispurpose and became one of the most well-known CRM success stories –demonstrate, the impact is worth the trouble.These four main steps simply build the foundation required for analytics-drivencampaign development. Putting them into practice and making the most out ofthem requires analytical thinking and a collaborative approach to marketingacross the organization. Buy-in and training across marketing and relatedfunctions are keys to success; hence companies pursuing this approach should notforget managing change in culture and way of doing marketing throughout theprocess.What Next?Use of analytics to optimize campaigns requires continuous testing anddevelopment, as expectations of customers, competitor offerings and companies’own value propositions continuously change over time. Companies shouldincorporate this approach into their day-to-day marketing activities. As the nextstep, companies can carry the same principles into non-campaign interactionswith the customers, boosting customer satisfaction via using the right channel,time, and message for their communications with the customers across their life-cycle.
About Forte Consultancy GroupForte Consultancy Group delivers fact-based solutions, balancing short and long termimpact as well as benefits for stakeholders. Forte Consultancy Group provides a varietyof service offerings for numerous sectors, approached in three general phases –intelligence, design and implementation. For more information, please contact email@example.com Forte Consultancy Group | Istanbul Office www.forteconsultancy.com