Maximizing Campaign Conversion

Rates Using Analytics

June |2010

Maximizing Campaign Conversion Rates Using Analytics

Finding the next best offer for customers is only the tip of the iceberg when it

comes to maximizing ROI from campaigns. Companies need to look into using the

right channel, the right tone of communications, and even the right time to

contact customers to achieve this ultimate objective.

What?

For many years, a majority of companies approached campaign development

subjectively, letting creativity rather than facts be the main driver in designing

campaigns. As more and more companies have been deploying campaign

management solutions and have started tracking how their customers are

responding to each and every offer, science is moving into the driver’s seat.

Today, customer analytics models can not only provide identification of the best

proposition for each prospect, but also define how these prospects would react to

if the proposition is communicated in different ways. Companies now customize

their communication for each customer through analyzing and understanding the

different preferences of their prospects. For example, leading automotive

manufacturers such as Lexus and BMW customize both the messages and the

images they use in promoting certain cars or campaigns to different prospects,

based on their demographics and past behavior - and it completely makes sense,

as the tone of voice or the message a student would react to is completed

different than that of a busy executive, even when the offer is the same for both.

In order to maximize the return on campaign investments using customer

analytics, companies need to analyze and optimize six main components:

Making the Right Offer

Targeting the right customer - Using predictive models for estimating

individual customers’ propensity to uptake any offer, companies can focus

their efforts on the right list of prospects, saving communications spending

and avoiding overstimulation of the prospects they have.

Right Offer Right Communication

RightCustomer

RightProposition

Right Channel

Right Time

Right Message

RightPrice

…with the right proposition - Testing alternative proposition campaign

concepts and offerings (e.g. which product to cross-sell) via market research

or pilot campaigns, companies can identify the list of next best offers for

different customer segments, maximizing the value generated from each

customer.

…at the right price - Using price/discount elasticity models, companies can

also identify the ideal level of price/discount applied for each campaign (e.g.

percent of discount to be offered), where the total value of demand reaches

its maximum level.

Using the Right Communication

Using the right channel - Campaign channel optimization balances the

likelihood of prospects’ response to campaigns with the cost of using each

channel. Using response rate models, companies can optimize the mix of

channels used for each offer.

…at the right time - Different customer segments present different levels of

interest and responsiveness during different times (e.g. during work-hours vs.

weekends), and after certain events (e.g. after they’ve inquired about a

product). Using best-time-to-contact models, companies can contact every

prospect when he/she would be most open to an offer.

…with the right message - Last, but not the least, different customers have

different interests, hence respond to different words, images and tone-of-

voice. Companies can test messages to find out the ideal way of

communicating an offer to each prospect segment.

Parallel to these six components, companies need to take into account the

communication constraints and customer privacy, incorporating do-not-call lists

and using the right frequency of communications with each customer for best

results.

But, Why?

Whether a campaign succeeds or not is heavily determined through the way it is

delivered. A company might have the best value proposition, but if it is not

delivered at the right time, with the right message, to the right person, it would

never catch the attention of its targets, hence would be doomed to failure.

A series of e-mail marketing activities in Dell demonstrates the impact of

optimizing campaign communications, with a staggering increase of 710% in their

campaign response rates through the simple testing of alternatives to find the

ideal design for their e-mail offers (e.g. subject line, image used in offer, number

of configurations listed). A leading telecommunications company in the Middle

East – after a series of campaign tests – realized that percentage discounts were

more attractive for its customers over direct price cuts, even in cases where they

had less benefit for the customer, and resulted in more profitability for the

company (e.g. 15% discount offer on $10 phone bills receiving better response

than $2 discount). Other leading companies report 100% increase in response

rates simply by reaching out to the customers at the right time (triggered by

events or time of day). Such improvements can turn the least successful

campaigns into success stories, and considering the very limited level of

investment required for them makes analytics an inseparable part of campaign

development.

Using the wrong offer, channel, timing or message not only means a waste of

resources in terms of communications costs, but also means decreased

responsiveness for future campaigns, as most customers today are over-

stimulated by overflowing offers they receive from companies. There is no better

way of alienating customers than bombarding them with dozens of irrelevant

campaign offerings.

So, How?

There exist four main steps towards optimizing both the offer and the

communications for campaigns:

1. Building the Data Structure: Developing campaign optimization models

requires detailed campaign results be on hand so that the data can be analyzed.

Every offer, whether successful or not, needs to be recorded, together with the

information on the timing, channel used and content of offer presented to

prospects (along with the prospects demographics or segment). The offer and

communication approach need to be recorded in all their details and categorized

to ensure analysis can be conducted (e.g. the keywords used in the message, level

and type of discount offered, even the colors used in printed offers or the gender

of agent talking to the prospect).

2. Running Campaign Tests: In order to identify what combination of offerings

and communications parameters would generate the highest return, companies

need to test alternatives and identify which get the highest return with the lowest

cost for each customer or segment. For companies which have already performed

hundreds of campaigns, this is a matter of analyzing historical data for the

response rates. For the others, either market research or pilot campaign runs with

test cases will yield findings. Since it is practically impossible to test every possible

scenario, companies should follow concept testing approaches, such as conjoint

analysis for this purpose. Below is a sample scenario of test cases, where different

combinations of campaign offerings are tested for the same target segment to

identify the ideal mix:

3. Developing Optimization Models: Each of the six main components listed

require different econometrics, statistics and data mining models to be utilized,

ranging from price elasticity curves to decision trees. Yet, the question in each

case boils down to responding to a simple question based on the learning from

campaign tests: “What is the likelihood of this customer to respond positively to

this offer presented in this specific way?” Having an answer to this question for

each prospect and each possible combination of the offers and communications

alternatives provides the ability to select the option with the highest impact on

customer value for the company.

4. Utilizing Optimization Models: Once a company runs enough tests to identify

the ideal campaigns for each customer and develops optimization models, the

next step is putting them into practice, using them for each and every campaign

the company has to offer. Below is a sample of ideal campaign offerings and

communications for two different customers, which demonstrates the outcome of

such use:

With Focus on Family Needs

With Focus on Business Needs

With Focus on Family Needs

With Focus on Business Needs

30%50%40%60%Uptake

WeekendWork-hoursWeekendWork-hours

PhonePhoneE-mailE-mail

$10 Cash-Back10% Discount$10 Cash-Back10% Discount

Discounted Credit Card

Discounted Credit Card

Discounted Credit Card

Discounted Credit Card

(White Collar)(White Collar)(White Collar)(White Collar)

Case 1.DCase 1.CCase 1.BCase 1.AArea

With Focus on Family Needs

With Focus on Business Needs

With Focus on Family Needs

With Focus on Business Needs

30%50%40%60%Uptake

WeekendWork-hoursWeekendWork-hours

PhonePhoneE-mailE-mail

$10 Cash-Back10% Discount$10 Cash-Back10% Discount

Discounted Credit Card

Discounted Credit Card

Discounted Credit Card

Discounted Credit Card

(White Collar)(White Collar)(White Collar)(White Collar)

Case 1.DCase 1.CCase 1.BCase 1.AArea

Outgoing-Dynamic

With Images of Businessmen

SubscribedSubscribedResult

Work-hoursWeekend

PhoneE-mail

$10 Cash-Back10% Discount

Discounted Credit Card

Discounted Credit Card

Richard Miles

(Student)

John Doe

(White Collar)

Case 2.BCase 1Area

Outgoing-Dynamic

With Images of Businessmen

SubscribedSubscribedResult

Work-hoursWeekend

PhoneE-mail

$10 Cash-Back10% Discount

Discounted Credit Card

Discounted Credit Card

Richard Miles

(Student)

John Doe

(White Collar)

Case 2.BCase 1Area

Companies should see their campaign offerings and prospect bases as two

separate portfolios and use these models to perform the ideal matching between

them. This implicitly requires centralizing all campaign decisions, in order to select

the ideal offering for each customer and the ideal customers for each campaign,

which means limiting the freedom the product and segment managers have over

running their own campaigns independently. As cases such as Royal Bank of

Canada – which had developed a central campaign execution body for this

purpose and became one of the most well-known CRM success stories –

demonstrate, the impact is worth the trouble.

These four main steps simply build the foundation required for analytics-driven

campaign development. Putting them into practice and making the most out of

them requires analytical thinking and a collaborative approach to marketing

across the organization. Buy-in and training across marketing and related

functions are keys to success; hence companies pursuing this approach should not

forget managing change in culture and way of doing marketing throughout the

process.

What Next?

Use of analytics to optimize campaigns requires continuous testing and

development, as expectations of customers, competitor offerings and companies’

own value propositions continuously change over time. Companies should

incorporate this approach into their day-to-day marketing activities. As the next

step, companies can carry the same principles into non-campaign interactions

with the customers, boosting customer satisfaction via using the right channel,

time, and message for their communications with the customers across their life-

cycle.

Forte Consultancy Group | Istanbul Office www.forteconsultancy.com

Forte Consultancy Group delivers fact-based solutions, balancing short and long term impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety of service offerings for numerous sectors, approached in three general phases – intelligence, design and implementation.

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