The impact and benefits of improved customer targeting

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Overtoom and Python Predictions @ Relationship Marketing congres (Stichting Marketing)

http://www.pythonpredictions.com
http://www.overtoom.nl
http://www.relationshipmarketing.be
http://www.stichtingmarketing.be

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The impact and benefits of improved customer targeting

  1. 1. The impact and benefits of improved customer targeting Relationship Marketing Congres 2009 7th of May 2009 Peter Rademaker █ Wouter Buckinx
  2. 2. Customer Intelligence at Overtoom Overtoom: Short term impact: Reduction target size: -10% Turnover: +28% Long term impact: Reduction target size: -10% Turnover : +10% The impact and benefits of improved customer targeting 2
  3. 3. Agenda Overtoom International Python Predictions Business Problem Process Results Conclusions Current steps The impact and benefits of improved customer targeting 3
  4. 4. Overtoom International Business-to-Business distance selling company (Market leader) Office and warehouse supplies Database customers: 95.000 companies 190.000 contacts 230.000 prospects Database products: 40.000 references Multi-channel approach: Catalogues Newsletter Leaflets Website E-mails Integrated CRM The impact and benefits of improved customer targeting 4
  5. 5. Overtoom International CI status before project RFM Segmentation (1996) Before 200.000 monthly mailings After 95.000 monthly mailings For a similar realized turnover Penetration analysis & cloning existing customers for better prospection (suspects) Before 250.000 suspects After 150.000 suspects Financial scoring code (5 positions) 5=very good position 1=very bad position External data: update every 3 months The impact and benefits of improved customer targeting 5
  6. 6. Overtoom International Challenges CUSTOMER (acquiring the right customer) PRODUCT COMMUNICATION OR SERVICE CHANNEL SELECTION (the right value proposition) (the right message) The impact and benefits of improved customer targeting 6
  7. 7. Python Predictions Core Business: Customer Intelligence History Customers The impact and benefits of improved customer targeting 7
  8. 8. Python Predictions Core business: Customer Intelligence …in order to Using all …we predict manage available future customer one-to-one customer behavior… relationships. information… The impact and benefits of improved customer targeting 8
  9. 9. Python Predictions ROI Enhanced Predictive Predictive Modeling Modeling Segmentation Descriptives Complexity The impact and benefits of improved customer targeting 9
  10. 10. Project definiton Increase targeting efficiency of current marketing actions to existing clients Yearly catalogues Monthly leaflets Increase response and turnover Segmentation Predictive model Indicate important criteria to distinguish customers Profile target group The impact and benefits of improved customer targeting 10
  11. 11. Project definiton Segmentation is exploratory Prediction is discriminatory Segmentation Prediction Prediction The impact and benefits of improved customer targeting 11
  12. 12. Project definiton Segmentation vs predictive model The impact and benefits of improved customer targeting 12
  13. 13. Process Reliable Customer Intelligence Project Model Model Model Data definition building assessment usage preparation Data Assess- ment - Variable - Partitioning - Implementation -Goal Construction - Algorithm - Performance - Testing -Timeline - Exploration selection measures - Calculation of ROI -Data - Transfor- - Feature - Profiling availability - Industrialisation mation selection Phase 1 Phase 2 Phase 3 Phase 4 Phase 5 The impact and benefits of improved customer targeting 13
  14. 14. Data preparation Data 4 years of historical data 3 MIO observations 850 variables Purchase information Company information Contact information Complaint information Product/category information Channel information Seasonality The impact and benefits of improved customer targeting 14
  15. 15. Model building Data partitioning (train, selection, validation) Objective assessment Split models for each action type Assign response Logit-based modeling Variable selection Reduce complexity Avoid overfitting Software SAS The impact and benefits of improved customer targeting 15
  16. 16. Model building Variable selection 3 types (summary) a) Purchase information a b) Company information b c) Contact information c d) Complaint information d e e) Product/category info f f) Channel information g g) Seasonality 0 5 10 15 20 The impact and benefits of improved customer targeting 16
  17. 17. Model assessment Rank segments Rank individuals Segmentation Prediction Predictio The impact and benefits of improved customer targeting 17
  18. 18. Model assessment Turnover on data used for model building Turnover Chart Prediction Segmentation Customer Ranking The impact and benefits of improved customer targeting 18
  19. 19. Model assessment Field test Specific marketing actions in 2008 Previous segmentation versus new predictive model Representative split of the customer base The impact and benefits of improved customer targeting 19
  20. 20. Model assessment Response Response (infield) Prediction Segmentation Customer Ranking The impact and benefits of improved customer targeting 20
  21. 21. Model assessment Turnover infield Turnover (infield) Prediction Segmentation Customer Ranking The impact and benefits of improved customer targeting 21
  22. 22. Model assessment Turnover infield Turnover (infield) Prediction Segmentation Customer Ranking The impact and benefits of improved customer targeting 22
  23. 23. Model assessment Turnover infield Turnover (infield) Prediction Segmentation Customer Ranking The impact and benefits of improved customer targeting 23
  24. 24. Model assessment Turnover (infield) Short term Reduction target size: -10% Turnover: +28% Long term Reduction target size: -10% Turnover : +10% (average) The impact and benefits of improved customer targeting 24
  25. 25. Model assessment Impact on target group Selection shift in existing segments 30000 25000 20000 15000 Predictive model 10000 Segmentation 5000 0 The impact and benefits of improved customer targeting 25
  26. 26. Model assessment Impact on target group Selection shift in existing segments 30000 25000 20000 15000 Predictive model 10000 Segmentation 5000 0 The impact and benefits of improved customer targeting 26
  27. 27. Model assessment Impact on target group Target group profiling segmentation versus predictive model Recency 1500 1361 1207 1250 1000 Target 672 750 502 Non-Target 500 250 0 Segmentation Predictive Model The impact and benefits of improved customer targeting 27
  28. 28. Model assessment Impact on target group Target group profiling segmentation versus predictive model Average order size 329 350 279 300 250 200 Target 115 150 Non-Target 100 69 50 0 Segmentation Predictive Model The impact and benefits of improved customer targeting 28
  29. 29. Model usage Implementation Automated scoring system Monitoring data and model quality before and after marketing actions Distribution Monitoring: Recency Reference New 1 2 3 4 5 6 7 8 9 10 11 12 13 14 Buckets The impact and benefits of improved customer targeting 29
  30. 30. Project Conclusions Increased targeting efficiency in B2B Predictive model outperforms existing segmentation High # of dimensions incorporated Detection of important criteria Substantial impact on response and turnover Target group profiling The impact and benefits of improved customer targeting 30
  31. 31. Current Steps… Continuous development of CI environment Prospects Suspects … Customized product offering CUSTOMER PRODUCT COMMUNICATION OR SERVICE CHANNEL SELECTION The impact and benefits of improved customer targeting 31
  32. 32. █ Visit our websites: www.overtoom.be www.pythonpredictions.com █ Contact information: peter.rademaker@overtoom.be wouter.buckinx@pythonpredictions.com The impact and benefits of improved customer targeting 32

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