Focus on uplift analytics to reduce customer costs

Luke McKeever, chief executive of Portrait Software, argues that digital campaigns have to be targeted well to ensure analytics prove value for money.

Today, more so than ever, marketers are under pressure to deliver tangible, measurable results. At the same time however, they are facing increasingly competitive markets, greater ad-fatigue, higher customer expectations, a proliferation of new media and sales channels, more marketing communication opt outs than ever before, and shrinking marketing budgets.

Sound familiar? In order to meet revenue and profit objectives, marketers must concentrate their efforts on engaging existing as well as prospective customers with relevant and meaningful information, taking a long-term view of customer retention and business value.

Despite reduced resources, organisations must be able to communicate effectively with their customers if they hope to maintain and build sales levels. Marketing professionals are reporting that poorly targeted marketing campaigns can prove costly and that operating principally on volume just doesn’t cut it anymore.

Rolling out a scattergun strategy cannot be an effective approach to addressing the specific needs of individual customers, and in some cases it can even prove detrimental to sales.

Organisations can only optimise the impact of their marketing campaigns if they have a clear understanding of which customers will react most positively to a specific marketing contact. A more targeted strategy, fuelled by intelligent analytics, can help companies reduce marketing costs while increasing results.

If an organisation is able to effectively segment its customer base, and determine how each segment is likely to behave, they can ensure that their marketing spend is optimised to generate a greater overall campaign ROI.

Uplift modelling is an analytics-based approach to marketing which predicts the direct effect that a marketer’s actions will make on the behaviour of customers. With uplift, a target market is generally divided into four sectors: ‘Sure Things,’ ‘Lost Causes,’ ‘Persuadables’ and ‘Sleeping Dogs.’

This segmentation allows marketers to focus efforts primarily on the ‘Persuadables,’ those who are most likely to respond positively to marketing contact by buying (or renewing), but wouldn’t have done so if they hadn’t been approached.

Similarly, uplift modelling prevents an organisation from wasting time and money targeting customers that are already a ‘Sure Thing’ and will buy regardless, as well as those that are a ‘Lost Cause’ and will never buy, regardless of an organisation’s marketing outreach.

Additionally, these insights also help marketers avoid the ‘Sleeping Dogs’ – those customers that don’t want to be disturbed and are likely to react negatively to marketing contact, perhaps prompting them to actively investigate a competitive product. In addition, this type of customer modelling helps to reduce a company’s long-term cost of fulfilment, helping marketers avoid promoting special offers or incentives to customers who were going to buy or renew anyway.

The insights provided by uplift modelling dramatically increase campaign profitability by allowing businesses to target fewer people and still produce a higher response rate. Organisations across many sectors are now successfully using uplift modelling in a wide variety of on-line, outbound and inbound channels to increase the length and value of their customer relationships.

Financial Services, for example, is one area that has embraced such strategies head-on, with some staggering results. Realising that engaging successfully with each customer was key to building its market share, one high street bank has reduced its program costs by 40% by integrating uplift modelling into its campaigns – significant savings for any company looking to decrease spending without negatively impacting ROI.

Another large Fortune 500 company has used uplift modelling to increase the incremental revenue delivered by monthly catalogue mailings, compared to existing response and value based targeting. The company has increased its revenue by $2.5M per month with fewer, more targeted mailings.

When it comes to reducing marketing costs, ensuring a campaign is relevant and targeted is key to success. Poorly targeted marketing campaigns can be extremely costly and still fail to produce the desired results.

Building intelligent uplift analytics into the foundations of a marketing strategy ensures the right message or offer is targeted to the right person, helping ensure higher campaign ROI as well as reducing customer churn.

Those organisations that manage to fully understand the needs of their customers and make relevant and timely offers are the ones that will ultimately succeed.

Predictive analytic techniques like uplift can deliver valuable insight for optimising marketing campaigns and reduce overall costs – a welcome advantage in any economic climate – but when budgets are shrinking and pressure to deliver is growing, the critical benefits of such insights cannot be overstated.

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