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Digital Alchemy - Marketing Optimisation Whitepaper


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Digital Alchemy - Marketing Optimisation Whitepaper

  1. 1. Marketing Optimisation Most database marketers know about the opportunities available through Event-Based Marketing (EBM) and Marketing Automation (MA). Some, however, may not know about the link that is required to maximise EBM and MA capabilities. That missing link is Marketing Optimisation (MO). As its capability has come far beyond combining the essential strategic marketing tools together, it should not be overlooked. It is important not to confuse MO with other tools or techniques. MO is the central decisioning hub for all marketing campaign executions and is required for fine-tuning your ongoing campaign development. What is it? MO is a systematic, multi-dimensional process that selects and prioritises the offer or campaign so that it is optimal for both the business and the individual customer. It does this by taking into account the interdependency of financial targets, business constraints and customer needs. Typically MO is driven by behavioural models and uses mathematical algorithms to determine the best combinations of products, offers, customers and channels to maximise profit while simultaneously allowing for contact rules and business constraints such as limited budget or channel capacity to be harmoniously applied. EBM and MA depend on MO to form an effective triumvirate and all 3 key tools need to be correctly aligned and working in unison to be really successful. MO therefore leverages and maximises EBM and MA capability to convert traditional communication into a real-time interaction with each customer. Before you can achieve real strategic database marketing you need to implement and balance MO, EBM and MA, hence: MO+EBM+Automation = Customer Centric Marketing. Key features of Marketing Optimisation: Business rules and user-defined constraints: These set the communication parameters, providing guidelines for allocating priorities and resources to each competing interest and potential scenario. Then, they direct offers to the right customer in accordance with their attributes, characteristics, propensities and preferences. © Digital Alchemy Limited. All rights reserved.
  2. 2. Triggers based on circumstances and customer behaviour: MO looks across eligible target groups and identifies predetermined event triggers. The decisioning process then considers all competing campaigns, ranks and scores offers and applies the rules and constraints to select the most suitable campaign configuration for each customer interaction. Integrated predictive modelling and related analysis: Campaign and customer-level prioritisation is integrated with data mining, predictive modelling and experimental design. Experimental design principles are used to test customers’ responses in different scenarios to vary marketing stimuli and to collect data for the measurement of campaign performance and the refinement of predictive models. Causal inferences can then be drawn with some confidence of the likely effects, and treatments can be designed to optimise those effects. Predictive modelling draws on the analytics to anticipate and recommend the best mix of campaign variables to present to the customer at any moment in time. The prioritisation process manages multiple predictive models to ensure that optimised decisions are made in terms of communication channels, campaigns and treatments for each customer. Why do you need it? Without contact rules driven by your campaigns, you might be over-contacting your customers As your database grows and if it is enabled for MA and EBM, you can launch more campaigns in a short space of time. Consequently, dozens of potential offers can be sent to thousands of potential customers through many communication channels. If you have a large target group and implement many daily campaigns but have no contact rules, you run the risk of over-contacting your customers with multiple and potentially conflicting communications. That is why you need to think carefully about the right strategy to optimise your rules and constraints, to save your customers from contact fatigue and your business from excess churn. The use of algorithm assures every communication is reliable and satisfying MO provides more systematic and reliable results by using algorithms to calculate and prioritise the optimal marketing mix, combining the most appropriate offer, channel and time while accounting for individual customer attributes, preferences and circumstances. It also calculates and maximises the profit generated from each individual customer, campaign and treatment. This would be far too complex without a Marketing Optimisation program. © Digital Alchemy Limited. All rights reserved.
  3. 3. MO balances out customer and business needs Optimisation takes into account and balances all key variables while simultaneously allocating priorities in accordance with both customer and business needs. This enhances ‘external’ customer engagement while maximising ‘internal’ factors such as financial goals, benchmarks, contact rules, channel management, resource availability, internal business constraints and so on. Recommend the next best action helps to engage with customers MO recommends the next best action and the most relevant conversation to engage with customers at the appropriate time, which in turn supports your customer retention. MO provides flexibility in using variety of interaction channels Flexible interaction management is essential in an evolving, fast moving, multi-dimensional environment. MO enables the selection and application of different outbound offers as well as the management of reciprocal inbound responses. Financial services company using Marketing Optimisation strategy Characteristics: - In the prior six-month period the company had made 11.1 million customer contacts through mail and telephone - 4 product areas and 28 different offers - 3.6 million contactable customer population - Outbound cost was $10 million and the contribution was $29.4 million Result: Scenario View Contribution ($000s) ROI % Increase contribution Business as usual By campaign 29,396 2.94 Optimised By individual customer 51,920 4.78 77 Source: DMA © Digital Alchemy Limited. All rights reserved.
  4. 4. What is in it for you? Makes the most of every marketing opportunity: MO allocates an appropriate campaign or offer together with an appropriate communication to deliver through the preferred channel; this enables you to engage with your customers as though you are having a one-on-one conversation with them. Ensures customer satisfaction: In contrast to using EBM and automation in isolation, a mix of EBM, MA and MO ensures that you can talk with customers using the most relevant conversation at the right time. The nature and tone of the dialogue can be aligned to the customer or segment profile. It is evident that MO greatly enhances the functionality of EBM and MA and delivers improved results. Eliminates the risk and waste of making conflicting offers or communications: An effective customer touch plan based on rules and constraints plays a key role in prioritising the most suitable offer to the customer, resulting in higher relevancy and stronger customer engagement. Enables enhanced metrics capability: Associated data granularity facilitates more precise measurement of costs, product, channel and timing, making it possible to determine the most profitable campaigns before execution. Improves churn rate, response rate and ROI: Marketing communication activities can be tuned for maximum financial payback (ROI) across all campaigns. Optimisation can maximise an organisation’s overall ROI or any other specifically defined business objectives, such as churn and response rates. Facilitates a real-time dialogue: An unguided dialogue lacks reality and relevance to a customer. Therefore, one-on-one interaction can only be effective when MO is implemented. © Digital Alchemy Limited. All rights reserved.
  5. 5. Unica implementation Case Study: AIS Situation: The telecommunication market in Thailand is rapidly changing and competitive. In order to differentiate itself, AIS needed to maintain and grow revenue while building loyal customer relationships with a low churn rate. Solution: AIS implemented Automation and Optimisation to improve marketing programs. AIS was able to design, test, execute, and analyse all marketing programs, including right-time, cross- campaign optimisation and cross-channel communication strategies. The model scores in Optimisation helped to determine the optimal communication across all individual customers, which improved the overall outcomes. Data composition: Transactional data is a subset of MDB which comprises of transactional data, customer’s profile, campaign history, data from third parties etc. All these components are shaped into a Single Customer View in the MDB. Outcome: Marketing productivity increased significantly as follows Reduced campaign design and testing time by 50 percent Reduced high-value customer churn by 50 percent Enabled marketers to integrate customer data across all touch points generating response rate increases of 10 percent Due to productivity enhancement, AIS increased its campaign volume by 25 percent © Digital Alchemy Limited. All rights reserved.
  6. 6. What are the requirements? A sound technology foundation: For MO you need the technological capability to support marketing database development, data mining, analytical modelling, EBM and marketing automation toolsets. A well prepared technological structure and design is essential, it also provides a suitable platform to grow your journey to customer centric marketing. An intelligent and logical approach to execution processes and rules, including: • Global contact rules and a clearly defined contact plan • User defined business constraints • Campaign frequency • Channel choice • Flexibility with campaign timing and sequencing • Understanding of potential offer conflicts • Well developed strategies Channel flexibility: You need an ability to mix and match channels in order to maximise effectiveness and deal with customer preference. This is a particular challenge for OTM and DM channels, as they traditionally rely on volume to maximise operational efficiency. With MO you have the ability, as well as the need, to produce more campaigns with smaller volumes and the communication channels must be able to respond to this. “An enterprise wide contact strategy is an important key to success for the marketing organisation. Optimal contact strategies help marketers reduce contact fatigue, lower opt-out rates, reduce costs and embrace customer-centricity.” - Suresh Vittal and David Frankland Forrester September 2009 © Digital Alchemy Limited. All rights reserved.
  7. 7. In conclusion, If intelligence is to be harnessed to drive marketing activities, Marketing Optimisation needs to be embedded at the epicentre of the campaign management process. MO is also the only way to effectively exploit Event-Based Marketing; EBM is just a compelling theory unless it is accompanied by MO. The prioritised rules and constraints essential to MO also cause marketing automation tools to work to their maximum and in turn this delivers optimum value from the toolset. So while EBM ensures that customer conversations occur at the right time, driven by circumstance or behaviour, and MA implements the communication whenever it is triggered, it is MO that enables customer conversations to be most appropriate and profitable with all factors combining at the optimal level. These three tools are a total package - do not split them apart! About Digital Alchemy Digital Alchemy Limited (DA) is Asia Pacific’s leading Database Marketing Services Provider. DA’s team of professionals are dedicated to working with clients to improve their marketing efficiency and to capture latent customer value. Established in 2003 and operating in Sydney, Melbourne, Auckland, Bangkok, Hong Kong, Nanjing, and Singapore, DA has been contributing to the success of an expanding breadth of clients including leading companies in financial services, telecommunications, motoring services, media and other industry sectors. “This document has been prepared for the purpose of providing general information and should not be relied on in substitution for individual professional advice. Copyright in this document is owned by Digital Alchemy Consulting Pty Limited, and except as permitted under the Copyright Act 1968, no part of it may be reproduced by any process, electronic or otherwise, in any material form or transmitted to any other person or stored electronically in any form without the prior written permission of Digital Alchemy Consulting Pty Limited.” © Digital Alchemy Limited. All rights reserved.
  8. 8. Reference Cited “Case study: AIS Reduces Churn with Targeted, Timely Marketing” <> © Digital Alchemy Limited. All rights reserved.