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IBM Next Best Action

Tony HocevarBusiness Analytics Growth Markets

Agenda

• Introduction to Next Best Action• Demonstration• Questions

“Data is the new oil”Ann Winblad

Hummer-Winblad

The CMO’s Dilemma: Analyze Effectively or Drown

Global Chief Marketing Officer StudyIBM Institute for Business Value

2011

73% of CEOs identify customer insights as the most critical investment area

Global Chief Executive Officer StudyIBM Institute for Business Value

2012

As the voice of the customer in the C-suite and an officer of the company, the CMO has the responsibility and, increasingly, the credibility to lead a customer-obsessed transformation of the business strategy.

Global Evolved CMO Online Survey

Q3 2011 Forrester/Heidrick & StrugglesForrester Research Inc.

Seeing Customers as Individuals Video

Understanding Each Customer as an Individual

Collect

Interconnect

Analyze

Predict

Act

“Unless a decision has degenerated into work it is

not a decision; it is at best a good intention.

The Effective Executive, 1967by Peter Drucker

I have an offer…Who wants to buy?

let me find a customer to sell to

Direct Mail

F2F

Online, Email

Kiosk

Mobile, SMS

Product AProduct AOfferOfferOfferOffer

OfferOffer

OfferOfferOfferOffer

OfferOffer

Product BProduct BOfferOfferOfferOffer

OfferOffer

OfferOfferOfferOffer

OfferOffer

Product CProduct COfferOfferOfferOffer

OfferOffer

OfferOfferOfferOffer

OfferOffer

Product DProduct DOfferOfferOfferOffer

OfferOffer

OfferOfferOfferOffer

OfferOffer

Agent, IVR

The Old Marketing Approach

let me find a customer to sell to

Online, Email

Mobile, SMS

Product AProduct A

Product BProduct B

Product CProduct C

Product DProduct D

Agent, IVR

I have a customer…What do they need most?

The Next Best Action Approach

Brilliant!Customer

Analytics

Customer

Analytics

Governance,

Prioritization &

Optimization

Governance,

Prioritization &

Optimization

servi

ce

offer

inform

• Customer

Accounts

• Channels

• Customer

Support

• Marketin

g

Buying

Patterns

Recent

Issues

Financial

Profile

Interactio

n Profile

Next Best Action aligns all channels

Next Best ActionNext Best Action

Call Center Agent

Business

Analyst

Next Best Action

Marketing

Support

Offers ListData

Miner

Customer Data Insights

IBM Next Best Action

NEXT BEST

ACTION

Build relationships, one interaction, one decision at a time

Cross-channel delivery of best

actionReal-time

Comprehensive view of a customer

•Improve customer satisfaction

•Optimize revenue•Increase lifetime value

Call Center Agent

Data

Miner

Business

Analyst

Marketing

Support

IBM Next Best Action Demonstration

Dashboard visually shows customer situation

At Risk Valuable Influential

Real-time sentiment analysis feeds dashboard

Action tab recommends action

Dashboard reflects higher customer sat

Behind the Scenes

Data Miner

(insights & predictions)

Marketing

(multiple

offers)

Business Analyst

(optimized

next best action)

Support

(multiple

offers)

Call Center Agent

Data

Miner

Business

Analyst

Marketing

Support

IBM Next Best Action Demonstration

Offers List

Offers are aligned with segments

Campaign includes automated nurturing actions

Case Study

Business Challenge

• Suspects it is wasting money on direct marketing campaigns

• Focusing on products rather than customer knowledge and behavior

• Abundance of data but not using it

Solution• Combine customer segment data with

real P&L data to optimize its marketing spend to focus on programs that deliver the highest return on investment (ROI)

• IBM SPSS and Unica

Outcome

• Increased marketing response rates by 3.1% by more accurately targeting offers to high-value customer segments

• Achieved a 20% reduction in mailing costs and a 17% reduction in printing costs due to the ability to target the most attractive segment for specific offers

• Tennessee’s oldest and largest bank• 5,500 employees• 180 bank locations

Call Center Agent

Data

Miner

Business

Analyst

Marketing

Support

IBM Next Best Action Demonstration

• Offer Response Propensity• Customer Churn Risk• Customer Lifetime Value

Offers List

• Johnny's mother had 3 children. • The first child was named April; • The second child was named May. • What was the third child's name?

Source: Forbes, 10 brainteasers to test your mental sharpness, Holly Green

Quick Quiz

Find Patterns… Using Powerful Tools

Segmentation

Age +Income +

GeographyPreferred Product

CategoriesPreferred Channel

Participation in Loyalty Program

Use of In-House Credit

Card

Use of Service

Programs

Return / Exchange Behavior

Breadth of Categories Shopped

Length of Time as

Customer

Recency + Frequency +

Value

Response to Media

Time until Repurchase in Key Categories

Annual Spend Level

Annual Transactions

Econometric: Real-estate &

Unemployment

Most segmentation approaches only focus on attributes such as

Find Patterns… Using Powerful Tools

Association

Identify what events occur

together

Social Network Analysis

Anomaly DetectionSegmentation

Real-time sentiment analysis feeds dashboard

What is Text Analytics?

•Puts text into categories to impose structure:

positive, neutral, negative

What are the benefits?•Makes unstructured text “quantifiable”•Can now be mined

STRUCTUREDUNSTRUCTURED

Structure the unstructured: Text Analytics

Modeler interface showing churn propensity calculation

Churn Propensity

Business Challenge

• Protect existing revenue by reducing customer churn

• Improve client service without substantially increasing headcount

Solution

• Use data mining to identify at-risk customers• Provide insights to client services agents to

focus their proactive outbound “health check”calls

• IBM SPSS

Outcome• Reduced customer churn from 1.9% to

1.4% in the first year• Decreased the number of client services

agents needed for same level of contact• Build analytics competence within an in-

house team to quickly extend predictive analytics to new business areas

Case Study

• Communications provider in USA

• Employs >4,000• Revenues >$1.5B

Call Center Agent

Data

Miner

Business

Analyst

Marketing

Support

IBM Next Best Action Demonstration

Next Best Action

• Offer Response Propensity• Customer Churn Risk• Customer Lifetime Value

Offers List

Quick Quiz: What do we know about a shopper if they buy the items below?

• Cotton balls• Hand sanitizers• Washcloths• Unscented lotion• Big purse• Zinc supplements• Calcium, magnesium supplements

87% chance of pregnancy

Kashmir Hill, Forbes, 2/16/2012

Drive Real-time Decisions at the Point of Interactio n

Optimized decisions

+ +Business

rulesOptimization Predictive

analytics

Decision models add rules and span depts

Optimization equation finds the “best” offer

Case Study

Business Challenge

• Agents had to investigate all claims, both high-and low-risk

• All claims took a minimum of three days to settle

• Santam began to feel its good reputation for customer service suffer in the age where customers demand fast results

Solution

• A solution that more effectively assessed risk • Separated potentially fraudulent claims from

lower risk ones in real-time• SPSS Decision Management

Outcome

• Reduced processing time by 90% for lowest-risk claims

• Saved more than US $2.5 million through early fraud detection and prevention in the first six months • The largest short-term

insurance company in South Africa

Call Center Agent

Business

Analyst

Next Best Action

Marketing

Support

Offers ListData

Miner

Customer Data Insights

IBM Next Best Action

NEXT BEST

ACTION

Build relationships, one interaction, one decision at a time

Cross-channel delivery of best

actionReal-time

Comprehensive view of a customer

•Improve customer satisfaction

•Optimize revenue•Increase lifetime value

Next Best Action Logical Architecture

Master Information and System of Record

Updates, Actions + Outcomes

UpdateSandbox

Real-time Decisions

Action +Outcome Deploy

DecisionModel

AdditionalInformation

Capturing Customer's Activity Analytics Management

Deploy Decision Models

Usage

Trigger

ExecuteAction

Internet

Sensorsproducingreadings

Social MediaServices

CustomerConversations

SharedStaging Area

Files

CUSTOMER

ACTIVITY

CUSTOMER

MASTER

PRODUCT

MASTER

INFORMATION

WAREHOUSESANDBOX

Reporting

DataMiner

DecisionManagement

Workbench

DecisionModel

BusinessAnalyst

1000101010001000101010001

?

AutomatedChannel

Customer Channels

HumanOperatedChannel

Outcomes

Action

Context DECISIONENGINE

MARKETINGPLATFORM

Trigger

ENTERPRISE SERVICE BUS (ESB)

Process

Process

Process

Process

APPLICATIONSCEP

DECISIONENGINE

For thorough review read the IBM Red Guide:Smarter Analytics: Driving Customer Interactions with the IBM Next Best Action Solution

Let’s Make a Trade Video