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Alpha Hotels Marketing Econometrics
Adding the Customer Service Dimension
Discussion Agenda• Purpose and Key Questions• Methodological Approach, Definitions and Context• A New Model Metric: Service Engagement Index (Service-Engagement)
I. Derivation of Service-Engagement MetricII. Service-Engagement & Other Customer Satisfaction MetricsIII. Service-Engagement Correlated with Revenue BookingsIV. Impact of Positive & Negative Service-Engagement on Revenue BookingsV. Service Engagement & Marketing Synergies
• Detailed FindingsI. Decomposing the Importance of Marketing & Service-Engagement DriversII. Marketing Variance & Influence of Service-Engagement DriverIII. Marketing Revenue Returns by Fund-Type, Media, Campaign & Media MessageIV. Marketing Spending Optimization
• Conclusions & Next Steps• Appendix
2
PurposeAdvance Alpha Resorts’s marketing optimization model by adding a variable on customer satisfaction.
1. For transient revenues, what were the key marketing drivers, and how did these contribute to Alpha Resorts performance? What role does the Service Engagement Index play in driving revenues.?
2. How does customer service interact with media in driving Alpha Resorts’s revenue and growth? Are there significant and measurable synergies between the Service-Engagement and Alpha Resorts media?
3. What are the revenue returns across media-fund types, media channels, campaigns and media messages? Does adding the Service-Engagement metric fundamentally change media revenue returns for Alpha Resorts?
4. What specific impact do positive and negative customer reviews have on Alpha Resorts revenues?
5. What is the optimal mix of marketing spending that will maximize revenue for Alpha Resorts in 2012?
Key Questions
3
Methodological ApproachThe journey continues. In this model, we add a metric that measures customer positive and negative reviews (Service Engagement Index) of each of Alpha Resorts’s properties. This metric was derived from online hotel review sites such as Trip Adviser.
4
Two total models were constructed: Total Full Service(MAPE +/- 2.0%) and Select (MAPE +/- 1.3%) transient bookings, 2008-2010 by week
Property Group: FS, & Select
Weeks
WEEKLYREVENUE
TOTAL Alpha Resorts
TRANSIENTS
1. National-Chain Media by Message (TV, Print, Radio,
OOH)2. Travel Card Offer Media
3.Coop Media
5. Room Capacity
8. Macro-Economy
9. Competitive Media (Key Competitive Chains)
6. Avg. Daily Rate (ADR)
7 Customer Service Engagement Index (Service-Engagement)
4. Local Media
5
DERIVING AND ADDING A SERVICE ENGAGEMENT INDEX TO THE ALPHA RESORTS MODELS
Developing the Service Engagement Index (Service-Engagement) from Online Hotel Reviews
6
Net Positive Service-Engagement Index
Positive Reviews
NegativeReviews
Positive Scores
NegativeScores
1. Mine online travel reviews for all Alpha Resorts properties
2. Parse into positive & negative review groups
3. Apply Service Engagement Index algorithm to “score” reviews
4. Time code by week & aggregate metrics
Service-Engagement & Alpha Resorts Satisfaction Metrics
• We use the Service-Engagement metric for customer satisfaction because it was found to be stronger than alternative metrics.
• We compared our Service Engagement Metric to Alpha Resorts’ own Customer Satisfaction tracking metrics* and found Service-Engagement with significantly higher correlations to revenue bookings
7
Full Service Select Service
Loyalty* 22.3% 21.8%
Willingness-to-Recommend* 22.3% 23.1%
Overall Customer Experience* 21.3% 22.1%
SEI Ratio 79.7% 76.9%
Revenue & Customer Service: Full-Service
12/31
/2007
2/15/2
008
4/1/20
08
5/17/2
008
7/2/20
08
8/17/2
008
10/2/
2008
11/17
/2008
1/2/20
09
2/17/2
009
4/4/20
09
5/20/2
009
7/5/20
09
8/20/2
009
10/5/
2009
11/20
/2009
1/5/20
10
2/20/2
010
4/7/20
10
5/23/2
010
7/8/20
10
8/23/2
010
10/8/
2010
11/23
/2010
-
20
40
60
80
100
120
140
-
2.0
4.0
6.0
8.0
10.0
12.0
Alpha Resorts Full-Service Revenues & Customer-Service Net Positive Ra-tio
Alpha-FS Rev SEI.Ratio
Boo
king
s In
dex
SEI P
os/N
eg R
atio
8
Correl = 84.7%
• The Service-Engagement Positive/Negative Ratio has about a 85% correlation with revenue bookings for Full-Service. This strong correlation suggests that customer service plays very important role in driving hotel demand.
Bookings & Customer Service: Select
12/31
/2007
2/11/2
008
3/24/2
008
5/5/20
08
6/16/2
008
7/28/2
008
9/8/20
08
10/20
/2008
12/1/
2008
1/12/2
009
2/23/2
009
4/6/20
09
5/18/2
009
6/29/2
009
8/10/2
009
9/21/2
009
11/2/
2009
12/14
/2009
1/25/2
010
3/8/20
10
4/19/2
010
5/31/2
010
7/12/2
010
8/23/2
010
10/4/
2010
11/15
/2010
-
20
40
60
80
100
120
140
- 1.0 2.0 3.0 4.0 5.0 6.0 7.0 8.0 9.0 10.0
Alpha Resorts Select Revenue & Customer-Service Engagement Index
Alpha-Select rev SEI.Ratio
Boo
king
s In
dex
SEI P
os/N
eg R
atio
9
Correl = 85.4%
• The Service-Engagement Positive/Negative Ratio likewise has about a 85% correlation with revenue bookings for Select.
Total Alpha Resorts Revenues and Service-Engagement Satisfaction Ratings
-60% -40% -20% 0% 20% 40% 60% 90
95
100
105
110
115
120
125
130
Positive RatingNegative.Rating
Sale
s In
dex
10
• Both the positive and negative Service-Engagement metrics have expected relationships with Alpha Resorts revenues. Negative customer engagement has a significantly larger absolute impact on revenue bookings.
Alpha Resorts Properties and Service-Engagement Satisfaction Ratings
11
• The Service Engagement Index (Service-Engagement) was generated for each of the 412 individual Alpha Resorts properties
12
Marketing Synergies
Separate Effect Combined Effect -
50
100
150
200
250
300
350
400
111
Chain Media & Service-Engagement Synergies
Combined Execution (Synergy)
50% Incr. Chain Media
50 % Incr SEI
Separate Effect Combined Effect -
50
100
150
200
250
300
350
98
Competitive Media & Service-Engagement Synergies
Combined Execu-tion (Synergy)
-50% Comptv Spend
50 % Incr SEI
49% lift
52% lift
Marketing synergies signifies that the simultaneous activation of 2 or more media. Marketing activities generate greater total revenues than when each activity is activated separately & independently. Synergies clearly underscore the importance of multiple touch-point marketing and the necessity for truly integrated marketing messaging & strategies. There were significant “synergies” between the Service-Engagement metric and various Alpha Resorts media.
13
Marketing Synergies (continued)
Separate Effect Combined Effect -
50
100
150
200
250
300
350
87
Paid Search Media & Service-Engagement Synergies
Combined Execu-tion (Synergy)
50 % Incr Paid Search
50 % Incr SEI
Separate Effect Combined Effect -
100
200
300
400
500
600
135
Ecommerce, Online, and Service-Engagement Synergies
Combined Execu-tion (Synergy)
50 % Incr Online Media
50 % Incr E-Commerice
50 % Incr SEI
38% lift65% lift
Separate Effect Combined Effect -
50
100
150
200
250
300
350
400
450 145
Service-Engagement and Online Media Synergies
Combined Execution (Synergy)
50 % Incr Online Media
50 % Incr SEI
51% lift
Separate Effect Combined Effect -
100
200
300
400
500
600
84
Paid Search, Online and Service-Engagement Synergies
Combined Execution (Synergy)
50 % Incr Paid Search
50 % Incr Online Media
50 % Incr SEI
38% lift
14
ALPHA RESORTS DETAILED RESULTS: CONTRIBUTIONS AND IMPACT
Decomposing 2009 Total Bookings
15
76.9%
4.4%
2.8%14.2%
0.4% 0.2% 1.2%
Total Select + FS
Base SEI Impact SEI x Media SynergyNational Chain Media Travel Card Offer Media Coop MediaLocal Media
By adding the Service Engagement Index (Service-Engagement) to the model, total marketing contribution expands from 22 to about 28%. Chain-funded media remains the dominant media driver.
Decomposing 2009 Bookings by Group
88.3%
4.1%
1.3%5.5%
0.2% 0.1% 0.5%
Full Service
Base SEI ImpactSEI x Media Synergy National Chain Media Travel Card Offer Media Coop Media Local Media
16
The Select group shows a significantly greater dependence on marketing than theFull-Service group.
47.1%
5.1%6.8%
37.3%
0.9% 0.4% 2.4%
Select Service
Base SEI ImpactSEI x Media Synergy National Chain Media Travel Card Offer Media Coop Media Local Media
2010 v. 2009 Marketing Variance
Full Service
Select
Total
-10% -5% 0% 5% 10% 15% 20%
Base Momentum SEI Impact Media x SEI Synergy National Chain Media Travel Card Offer Media Coop Media Local Media Room CapADR Economy Competv.Media
+11.2%
+6.7%
17
+3.8%
The Service Engagement Index (Service-Engagement) & its interaction or synergy with Alpha Resorts. Media was a significant positive growth driver of revenue bookings.
18
ALPHA RESORTS DETAILED REVENUE RETURNS PER DOLLAR INVESTMENT
19
Marketing Efficiency by MediaAverage Revenue Returns per Dollar
Direct Mail
Airport
Magazine
Ecomm
Paid Search
Newspaper
Outdoor
Online Banners
Social Media
Total Hotel
$0.00 $2.50 $5.00 $7.50 $10.00 $12.50 $15.00 $17.50
$0.95
$2.09
$4.36
$5.92
$6.78
$7.81
$8.02
$9.03
$9.23
$14.42MROI per $ Spend by Media
Due to the synergies across media, Alpha Resorts’s total marketing ROI is greater than the individual components. The addition of Service Engagement Index has changed the order on media returns, with Magazines and Online showing the strongest revenue per dollar.
20
Marketing Efficiency by CampaignAverage Revenue Returns per Dollar
Hotel Card
The Great Times
Business Traveller Campaign
BWB Campaign
Entertainment Campaign
Great Day Campaign
Awaken Senses Cmapagn
Total Hotel
$0.00
$2.50
$5.00
$7.50
$10.0
0$1
2.50
$15.0
0$1
7.50
$20.0
0$2
2.50
$0.48
$3.65
$4.07
$5.03
$7.39
$11.44
$19.41
$14.42
MROI per $ Spend by Campaign
The Awaken & Great Happens II campaigns generated high revenue returns. By contrast, Alpha Resorts Chase & the Great 10K were the weakest campaigns.
21
Marketing Efficiency by Media MessageAverage Revenue Returns per Dollar
Bus.Traveller
Loyalty
Entertainment
Rewards & Value
Experiential
Family
Business. Productivity
Total Hotel
Brand
$0.00 $5.00 $10.00 $15.00 $20.00 $25.00 $30.00 $35.00
$4.51
$6.48
$7.37
$7.49
$9.15
$9.22
$11.44
$14.42
$31.67
Rev. Returns per $ Spend by Message
Business Productivity & Brand messages generate the highest revenue per dollar, while Rewards & Value messages tend to be the weakest.
22
MARKETING SPENDING OPTIMIZATION
23
Revenue $ Contribution Current Spend Optimized Spend0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Optimization by Fund Type
Spend Optimizations:By Fund Type
• Spending optimization moves dollars from less to more productive media in order to maximize revenue and growth. This solution has identified a plan which can boost Alpha Resorts’s revenues by +17% and calls for moving more dollars into chain-funded media.
24
Revenue $ Contribution
Current Spend
Optimized Spend
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
The NBT Campaign
The Great Times
BWB Campaign
N/A
Hotel Card
Great Day
Awaken Senses
Revenue $ Contribution
Current Spend
Optimized Spend
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Paid Search
Outdoor
Online Banners
Newspaper
Social Media
Magazine
Ecomm
Direct Mail
Airport
Optimization by Campaign
Revenue $ Contribution
Current Spend
Optimized Spend
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%Reward & Value
Brand
Loyalty
Family
Experien-tial
Bus. Produc-tivity
Bus.-Traveller
Enter-tainment
Optimization by Media Optimization by Message
Spend Optimizations:By Campaign, Media and Message
• Across the campaigns, media & messages, more investment is indicated for Paid Search, the Great Day Promotion campaign and Brand/Business targeted media messages.
25
ALPHA RESORTS DETAILED RESULTS: CONTRIBUTIONS AND IMPACT
• This model illustrates and demonstrates the relevance and importance of adding a customer service metric to Alpha Resorts’ marketing mix optimization models.,
• The metric used in this model is called the Service Engagement Index (Service-Engagement). This metric was found to be stronger than alternative service tracking metrics and is derived from a scoring algorithm applied to Online Review Sites individual hotel property reviews from 2008-2010. This metric was found to be highly correlated with Alpha Resorts revenues at 75% + and illustrates the importance that customer satisfaction plays in driving Alpha Resorts’ revenue.
• When including the Service-Engagement metric into our models, we found a significant interaction and synergy with Alpha Resorts & competitive media spending. The net effect of these interactions actually increased the overall impact of Alpha Resorts’ media and also increased revenue returns for media by over $3 per dollar invested.
• From a strategic standpoint, we have learned that:– Customer satisfaction is an important driver of Alpha Resorts’s business and plays a key role in driving
overall growth for the Alpha Resorts brand.– That improving customer satisfaction interacts and enhances the impact and productivity of media and
marketing.– Improving customer satisfaction also insulates Alpha Resorts from some competitive media effects.– That negative customer reviews have a larger absolute impact on Alpha Resorts’s revenues than positive
reviews and that minimizing the negative is an important task and strategy going forward 26
Conclusions & Next Steps
27
APPENDIX
12/31/2007 7/1/2008 1/1/2009 7/1/2009 1/1/2010 7/1/2010$0
$20
$40
$60
$80
$100
$120
$140
$160
ModelActual
Total model R2= 96.6%. Total model holdout R2=96.6%. MeanAverage Percent Error (MAPE) = +/-2.0%.
Alpha Resorts Transient Full-Service Model Validation
28
12/31/2007 7/1/2008 1/1/2009 7/1/2009 1/1/2010 7/1/2010$0
$20
$40
$60
$80
$100
$120
$140
ModelActual
Total model R2= 99.1%. Total model holdout R2=99.3%. MeanAverage Percent Error (MAPE) = +/-1.3%.
Alpha Resorts Transient Select Model Validation
29
Michael Wolfe CEO Bottom Line Analytics GlobalE: [email protected]: 770.485.0270
www.bottomlineanalytics.com
Masood Akhtar Managing Partner, (EMEA)Bottom Line Analytics GlobalE: [email protected]: +44 7970 789 663
www.bottomlineanalytics.com
EMEA USA