Vision 2014: Next Generation Mobile Offers Powered by Optimization

459 views

Published on

Learn how the use of credit and non-credit data, predictive analytics and propensity models can drive high value to define targeting for customer loyalty offerings.

  • Be the first to comment

  • Be the first to like this

Vision 2014: Next Generation Mobile Offers Powered by Optimization

  1. 1. ©2014 Experian Information Solutions, Inc. All rights reserved. Experian and the marks used herein are service marks or registered trademarks of Experian Information Solutions, Inc. Other product and company names mentioned herein are the trademarks of their respective owners. No part of this copyrighted work may be reproduced, modified, or distributed in any form or manner without the prior written permission of Experian. Experian Public. Next-generation mobile offers — powered by optimization Cherian Abraham Experian Tom O'Neill Experian #vision2014
  2. 2. 2©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Mobile offers landscape Are offers the key to elusive monetization in mobile?
  3. 3. 3©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Banking: Mobile has all the growth
  4. 4. 4©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Delivery mechanisms are evolving
  5. 5. 5©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Retail environment is evolving
  6. 6. 6©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Customer’s polygamous relationship to devices
  7. 7. 7©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  What does “wallet share” mean in a digital landscape?  Can we solve “wallet share” without the context of data and analytics?  What’s at stake? Incremental growth in mobile Wallet share Sources: Financial Times, Inside Network, BCG interviews and analysis 1 Percentage of companies pursuing the business opportunity (based on 100 companies observed) 2 Most revenues derived from deals/offers and advertising, followed by merchant acquiring; less than five percent is likely to accrue to issuers Deals and offers will constitute a significant revenue pool Potential revenue pools, 2015 High ($10– >$20 billion/year) Medium ($5–$10 billion/year) Low (<$1–$5 billion/year) Low (<5%–0%) Medium (10%–25%) HIgh (25%– >45%) Competitive intensity1 Deals / offers and advertising2 Unbanked (prepaid / mobile money) International transfers Micromerchant acquiring Domestic transfers Virtual currency
  8. 8. 8©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public.  Mis-alignment of merchant and bank objectives  Customer targeting – beyond transactional data  Offer relevance  Optimal profitability  Automation without sacrificing relevance  Building a feedback loop  Proximity. Propensity. Profitability. Mobile offers Current challenges
  9. 9. 9©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Mobile offers Current challenges 0 0.5 1 1.5 2 2.5 3 3.5 4 2009 2010 2011 2012 2013 NCH 2013 Coupon Stats show redemption rates are struggling +23.1% +3.1% +6.1% -17.1% -3.4%
  10. 10. 10©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Opportunities  Shifting focus from interchange to marketing revenue  Online to offline attribution for merchants – influence future spend Threats  Slipping loyalty in a staged wallet environment  Opportunity loss from irrelevant and un-optimized offers Recommendations  Look beyond transactional data for insights  Build a roadmap for transactional marketing – starting with data quality, merchant value, customer relevance  Offer optimization drives optimal profitability Transactional marketing and data analytics
  11. 11. 11©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Optimization Tom O’Neill
  12. 12. 12©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Arbitrate across local and national offers, from the same or different merchants, and across same or similar offers 1 Marketswitch® Offer Management optimization Experian’s Marketswitch® Offer Management optimization allows client to:
  13. 13. 13©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Understand customer value for each potential offering before targeting 2 Marketswitch® Offer Management optimization Experian’s Marketswitch® Offer Management optimization allows client to:
  14. 14. 14©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Look across any number of factors related to your specific business metrics 3 Marketswitch® Offer Management optimization Experian’s Marketswitch® Offer Management optimization allows client to:
  15. 15. 15©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Assess offers from multiple providers, offer profitability, customer propensity across all your customers to choose those that they are most likely to redeem, and those that are most likely to net the most profit or other business objective 4 Marketswitch® Offer Management optimization Experian’s Marketswitch® Offer Management optimization allows client to:
  16. 16. 16©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Deploy optimized decisioning through both batch and real-time channels 5 Marketswitch® Offer Management optimization Experian’s Marketswitch® Offer Management optimization allows client to:
  17. 17. 17©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Data Warehousing Customer history, analytics and scoring Decisioning Execution $2 Off Next Starbucks $10 Off Next Home Depot $5 Off Next Applebee’s  Online placement  In-app  Email  Text Continuous feedback Where optimization fits
  18. 18. 18©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Operational constraints  Customer contact limits  Vendor / merchant targets  Other business or operating constraints Business objectives  Maximize profitability  Maximize redemption rate Marketswitch® Optimization Marketswitch® Offer Management platform Example Customer data  Redemption rate  Transaction information  Customer history  Profitability  Channel availability Offer/other data  Offering definitions  Channel targets/limits  Offer eligibility  Promotion revenue share  Activation timelines  Vendor partner terms Deliver optimal incentive offerings to customers through real-time touch -points while satisfying customer and partner requirements: Customer 1 Customer 3 Customer 2 $5 Off Next Meal Purchased at Applebee’s Customer 4 $2 Off at Starbucks with Purchase of $10 or More $10 Off at Home Depot with Purchase of $100 or More No Offer
  19. 19. 19©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Objective: Maximize probable NPV Constraints: 1 - Each customer can be offered only one offer 2 - Each offer can be presented to only one customer Simplified marketing optimization example Offer $5 Off at Applebees $2 Off at Starbucks $10 Off at Home Depot Customer 101 Take Up 10% 4% 12% NPV $2.5 $0.4 $2.4 Customer 102 Take Up 9% 7% 6% NPV $2.25 $0.7 $1.2 Customer 103 Take Up 5% 8% 10% NPV $1.25 $0.8 $2.0 Each of the three customers has been scored with a likelihood of sale and NPV Challenge: Consider three customers, each of whom can be allocated one of three offers Solution using scoring and ranked selection techniques – one customer at a time: $4.50 Solution using scoring techniques and portfolio optimization: $5.45 = 20% improvement
  20. 20. 20©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Approach: By determining the solution for a non-linear utility function that optimally weights each decision option, we get the global optimum through the calculation of each record individually Simplified marketing optimization example Offer $5 Off at Applebees $2 Off at Starbucks $10 Off at Home Depot Customer 101 Take Up 10% 4% 12% NPV 2.5 + 0 = $2.5 .4 + 1.5 = $1.9 2.4 + .2 = $2.6 Customer 102 Take Up 9% 7% 6% NPV 2.25 + 0 = $2.25 .7 + 1.5 = $2.2 1.2 + .2 = $1.4 Customer 103 Take Up 5% 8% 10% NPV 1.25 + 0 = $1.25 .8 + 1.5 = $2.3 2 + .2 = $2.2 Adjust each Decision Option by the following: $5 Off Applebees: + $0 $2 Off Starbucks: + $1.5 $10 Off Home Depot: + $0.2 Scoring each record with the derived utility factor maximizes our total NPV while meeting our defined constraints
  21. 21. 21©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Why does approach matter? The ability to deploy in real-time is critical in digital  Marketswitch® makes a single pass through the dataset and scores each record individually  Decisions are output to a flat file or table Batch deployment Customers D1 D2 D3 D4 D5 D6 D7 D8 D9 1 0 0 0 1 0 0 0 0 0 2 0 0 0 0 0 1 0 0 0 3 0 0 1 0 0 0 0 0 0 4 1 0 0 0 0 0 0 0 0 5 0 0 0 1 0 0 0 0 0 6 0 0 0 0 0 0 0 1 0 7 0 0 0 0 0 1 0 0 0 8 0 1 0 0 0 0 0 0 0 9 0 0 0 0 0 0 0 0 1
  22. 22. 22©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Marketswitch® real-time deployment  Marketswitch® scores each record as that visitor contact occurs  Makes the same exact decisions as the batch roll-out given identical populations Real-time deploymentCustomers D1 D2 D3 D4 D5 D6 D7 D8 D9 2 1 5 1 7 1
  23. 23. 23©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What was the business case? Q: Need was to deliver contextual marketing, such as digital redemption offers, to client’s credit card customers through interactive and real-time channels, based on their transaction history and purchasing needs Marketswitch® Offer Management platform Example
  24. 24. 24©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Why was Marketswitch® chosen? Q: Marketswitch® Offer Management platform Example Produced value recognized across decisioning areas Proved ability to incorporate any number of factors and requirements Provides ability to deploy optimized strategies within a real-time decisioning environment
  25. 25. 25©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. What was the approach used? Q: Phased approach enabling client to establish and broaden the overall platform from optimizing offers within a single vendor partner in scheduled batch processes to optimizing offers across multiple vendor partners and real-time Marketswitch® Offer Management platform Example
  26. 26. 26©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Offer optimization Offer redemption Business Objectives • Maximize Profitability • Maximize Redemption Rate Operational Constraints • Customer contact limits • Vendor / Merchant targets • Other business or operating constraints Customer Data • Redemption rate • Revenue • Customer history / eligibility Offer/Other Data • Offering definitions • Offer costs • Promotion revenue share • Publisher partner terms Example environment How does it work? Marketswitch® Optimization Engine Offer development $5 Off Applebee’s $2 Off at Starbucks $10 Off Lowe’s Expected Performance • Models • Financials • Assumptions $3 Off Friendly’s $10 Off Target $10 Off Lowe’s Expected Performance • Models • Financials • Assumptions $1 Off Starbuck’s $10 Off Wal-Mart $10 Off Lowe’s Expected Performance • Models • Financials • Assumptions Lowe’s $10 off! Marketswitch® Real-Time Optimization Engine Starbucks $2 off! Customer A Customer B Real-time customer / behaviour / interaction data Interface to real-time customer interaction application
  27. 27. 27©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Offer deliveryOffer decisionPurchase activity Real-time customer / behaviour / interaction data Marketswitch® Real-Time Optimization Engine Customer A makes a hardware purchase at Sears • Purchase type • Purchase amount • Purchase time • Merchant Information Interface to real-time customer interaction application Customer perspective How does it work? Lowe’s $10 off! Interface to real-time customer interaction application
  28. 28. 28©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Driving better ROI in mobile offers
  29. 29. 29©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Focus shifts to personalized offers and customer loyalty Future revenue will be driven by shared objectives Decisions are data driven and quantifiable Competing “what-if” strategies will be measured against each other Optimization maximizes business goals in constrained environments Customer offers determined in true real-time at point of interaction Drive insights from current data and make it actionable for the mobile channel Mobile offers Looking ahead
  30. 30. 30©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. For additional information, please contact: Cherian.Abraham@experian.com | @cherian_abraham Tom.ONeill@experian.com Hear the latest from Vision 2014 in the Daily Roundup: www.experian.com/vision/blog @ExperianVision | #vision2014 Follow us on Twitter
  31. 31. 31©2014 Experian Information Solutions, Inc. All rights reserved. Experian Public. Visit the Experian Expert Bar to learn more about the topics and products covered in this presentation.

×