What you didn't know you could do with your business data: using business-to-business predictive modeling to your advantage.Marketing professionals are expected to grow revenue by acquiring new prospects, quickly converting them into sales, and then expanding and growing the relationship. However, with marketing costs continuing to rise, budgets remaining stagnant stagnant /stag·nant/ (stag´nant)
1. motionless; not flowing or moving.
2. inactive; not developing or progressing. or declining, and increasingly low response rates, it is more difficult than ever to meet objectives.
One of the most common approaches to developing new customer relationships is to overlay (1) A preprinted, precut form placed over a screen, key or tablet for identification purposes. See keyboard template.
(2) A program segment called into memory when required. customer lists with business attributes such as geography, industry or employee size. This information provides important insight, such as a description of key customer segments. This type of insight also improves marketing execution.
Telemarketing telemarketing, the practice of selling goods or services to customers by means of the telephone or of surveying consumer preferences in telephone conversations. campaigns can be directed to prospects that most resemble a company's best customer segments. However, given the vast number of direct marketing calls targeted toward these prospect businesses, it is critical to ensure the corporate message is heard. The challenge is figuring out how to make this happen.
The answer to this problem is to combine existing customer information with critical external firmographic information (see Figure 1). Marketing analytics and statistical models enable companies to churn churn: see butter. through this information and turn it into business insight that will help achieve revenue objectives. In fact, by applying marketing analytics to the wealth of internal and external business data, marketing executives can execute information-driven marketing strategies that drive better results along each stage of the customer life cycle.
The Dangers Of Using Inaccurate Or Incomplete Data
The foundation of successful information-driven marketing strategies are complete and accurate data. The quality of customer and prospect information directly impacts how targets respond to the offers being made. To ensure the highest level of data quality, there are four pillars Four Pillars may refer to:
Data collection. Companies must start with complete, accurate and timely information about their customers and prospects. The most up-to-date contact information is a requirement for high response rates. Beyond contact information, though, complete firmographic information (shown in Figure 1) and anticipated buying behavior drawn from multiple sources of data improve conversion rates and provide access to new prospects. Receiving this information in a timely manner, particularly information about new businesses, enables a company to capitalize on Cap´i`tal`ize on`
v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. new marketing opportunities. Finally, keeping up-to-date on the latest business changes among customers and prospects helps time the telemarketing campaigns for when prospects are most ready to buy. For example, knowing that a business recently moved into a larger space could trigger an offer for new office furniture, computers or telephone services.
Matching. Once this vast array of business information has been collected from multiple data sources, it needs to be integrated. Accurate matching is vital to success in a variety of ways, as it helps companies do the following:
* Avoid calling the same business multiple times, by identifying and consolidating duplicate DUPLICATE. The double of anything.
2. It is usually applied to agreements, letters, receipts, and the like, when two originals are made of either of them. Each copy has the same effect. business records;
* Precisely append To add to the end of an existing structure. new data or changes in data to existing customers, including a change of telephone number; and
* Provide a more complete multifaceted mul·ti·fac·et·ed
Having many facets or aspects. See Synonyms at versatile.
Adj. 1. multifaceted - having many aspects; "a many-sided subject"; "a multifaceted undertaking"; "multifarious interests"; "the multifarious profile of the customers and prospects.
Unique identifier With reference to a given (possibly implicit) set of objects, a unique identifier is any identifier which is guaranteed to be unique among all identifiers used for those objects and for a specific purpose. . Assigning as·sign
tr.v. as·signed, as·sign·ing, as·signs
1. To set apart for a particular purpose; designate: assigned a day for the inspection.
2. a unique identifier provides a means to track customers over time and to merge information on buying behavior collected across the many divisions of an organization. A unique identifier also helps to match customer records across multiple systems and to update records with new data from outside sources. With information changing so rapidly, a unique identifier improves the ease and accuracy of data processing data processing or information processing, operations (e.g., handling, merging, sorting, and computing) performed upon data in accordance with strictly defined procedures, such as recording and summarizing the financial transactions of a . This identifier should be as unique as a Social Security number.
Corporate linkage linkage
In mechanical engineering, a system of solid, usually metallic, links (bars) connected to two or more other links by pin joints (hinges), sliding joints, or ball-and-socket joints to form a closed chain or a series of closed chains. . With plenty of fresh information connected to the right business, the ability to cross-sell customers and target prospects for new business is greatly enhanced. The opportunities don't stop there. Companies can leverage the unique identifier to link seemingly seem·ing
Outward appearance; semblance.
seeming·ly adv. separate businesses, enabling full understanding of a customer's entire corporate family, revealing the total revenue and exposing significant new growth opportunities.
To avoid tying up critical resources and funds to direct the data collection process and establish these four quality pillars, an effective alternative is to partner with a business that has already established a data quality center of excellence.
These four pillars of data quality are the foundation for successful information-driven marketing strategies. Predictive models are only as accurate as the data they are built on.
Marketing Analytics Drive Business Insight
Marketing analytics are based on statistically valid algorithms The following is a list of the algorithms described in Wikipedia. See also the list of data structures, list of algorithm general topics and list of terms relating to algorithms and data structures. that find the optimal combination of business characteristics to identify the best customers. It starts by combining internal customer information (what they buy, how much they buy, when they last bought, etc.) with associated external business information (see Figure 1). Statistical techniques then identify the pattern of business attributes that are most highly correlated cor·re·late
v. cor·re·lat·ed, cor·re·lat·ing, cor·re·lates
1. To put or bring into causal, complementary, parallel, or reciprocal relation.
2. with the events a company is trying to predict, such as the likeliness to buy additional products, expected profit over time or likelihood of attrition Attrition
The reduction in staff and employees in a company through normal means, such as retirement and resignation. This is natural in any business and industry.
Notes: . These analytics are personalized per·son·al·ize
tr.v. per·son·al·ized, per·son·al·iz·ing, per·son·al·iz·es
1. To take (a general remark or characterization) in a personal manner.
2. To attribute human or personal qualities to; personify. to reflect a company's specific product offering, industry dynamic and market channel. The result is a unique score applied to each customer or prospect, used to sort leads from highest to lowest potential.
Targeted Acquisition Programs
Marrying quality information with marketing analytics helps acquire new businesses by expanding markets, by identifying profitable business prospects and by maximizing telemarketing response rates.
While there is greater awareness among business marketers about the power of response models to help maximize sales and marketing dollars, the demand estimators and business clusters A business cluster is a geographic concentration of interconnected businesses, suppliers, and associated institutions in a particular field. Clusters are considered to increase the productivity with which companies can compete, nationally and globally. are extremely powerful tools to help further refine prospect lists and marketing strategies. Demand estimation estimation
In mathematics, use of a function or formula to derive a solution or make a prediction. Unlike approximation, it has precise connotations. In statistics, for example, it connotes the careful selection and testing of a function called an estimator. models identify prospects with the greatest consumption for a specific product or service. Business clusters provide a deeper understanding of specific segments and are employed to create personalized messaging.
[FIGURE 2 OMITTED]
Maximize Sales And Marketing Dollars With Response Models
Response modeling is a well-known best practice for target marketing. Response models are statistical algorithms that summarize sum·ma·rize
intr. & tr.v. sum·ma·rized, sum·ma·riz·ing, sum·ma·riz·es
To make a summary or make a summary of.
sum the diverse set of business attributes into a single number that represents the probability of a business responding to a direct marketing campaign.
[FIGURE 3 OMITTED]
Industry best practices enhance traditional response models in two ways. First, response models should be developed with a focus to predict the market's receptiveness re·cep·tive
1. Capable of or qualified for receiving.
2. Ready or willing to receive favorably: receptive to their proposals.
3. to specific product offerings, type of promotion and market channel. For example, you should have separate models for your telemarketing campaign and your direct mail promotion to ensure you can align align (līn),
v to move the teeth into their proper positions to conform to the line of occlusion. your prospects to the best channel. Second, continuously feeding campaign results into the model is critical to ensure optimal performance, as offers and competitor offers change over time.
Figure 2 represents an example of an office supply company that used a response model to help the company improve its selection of 500,000 business prospects it would like to mail. The marketing manager wants to maintain the size of the company's prospect list but improve its ROI (Return On Investment) The monetary benefits derived from having spent money on developing or revising a system. In the IT world, there are more ways to compute ROI than Carter has liver pills (and for those of you who never heard of that expression, it means a lot). through increased response. The response model identified segments with response rates that were four times higher than average, or two percent compared with 0.5 percent.
Prioritizing Prospects With Demand Estimators
The second best practice to enhance target marketing and to maximize sales is an analytical technique An analytical technique is a method that is used to determine the concentration of a chemical compound or chemical element. There are a wide variety of techniques used for analysis, from simple weighing (gravimetric) to titrations (titrimetric)to very advanced techniques using called demand estimation. Demand estimators are a great way to further refine marketing lists by targeting and selecting companies with a strong demand for a specific product or service. Additionally, demand models are excellent resources to help retool re·tool
v. re·tooled, re·tool·ing, re·tools
1. To fit out (a factory, for example) with a new set of machinery and tools for making a different product.
2. multichannel Using two or more paths for transmission or processing. It can refer to a variety of architectures including (1) multiple I/O channels between the CPU and peripheral devices, (2) multiple wires in a cable, (3) multiple "logical" channels within a single wire or fiber or (4) multiple strategies. The insight gained regarding potential purchase opportunities can be used to identify the best prospects for a sales force, telemarketing or direct mail campaign.
Demand models are available in two flavors: standard models, which are already built from business bureau data, and custom models, which are built using customer information to define the predictor. Examples of standard demand models are shown in Figure 3. Demand models can add to list selection criteria; for example, how much a business spends on long-distance phone service, how many PCs a prospect has or how much the company consumes in office supplies Office supplies is the generic term that refers to all supplies regularly used in offices by businesses and other organizations, from private citizens to governments, who works with the collection, refinement, and output of information (colloquially referred to as "paper work"). . If none of the standard demand estimator selectors are appropriate, companies can work with a vendor to develop custom demand models that will predict unique products.
Leading edge direct marketers are combining the power of response models and demand estimation models to develop the most effective multichannel strategies. In Figure 4, the "high potential prospects" represent prospects with both a high likelihood to respond and a high demand for a specific product or service. A company would likely assign these profitable prospects to its best channel, such as the direct sales force. The next segment of "medium potential prospects" includes leads with the next highest response and demand potential. To manage costs and to maximize marketing ROI Marketing ROI is a related term to Return on Marketing Investment (ROMI) and is a measure of the effectiveness (see also marketing effectiveness) of various marketing activities. , a less expensive approach to acquiring these accounts could be used, such as telemarketing or mail.
A Deeper Understanding Of Who Buys
The third and most valuable best practice to acquire new customers is the use of business clusters. Business clusters are extremely useful in the following situations:
* A company launching a new product or service, therefore having no experience in identifying the business segments that would be the best prospects;
* A company expanding into new markets and, as a result, cannot simply profile existing customers and select prospects that look like best customers; and
* A company that would like to develop a deeper understanding of its prospects to tailor communications and promotional offers to the business' specific interests.
Increase Profitability With Existing Customers
Existing customers are the best prospects for enhanced products and new services because they have already been sold on the value of your company. But some customers have a greater proclivity pro·cliv·i·ty
n. pl. pro·cliv·i·ties
A natural propensity or inclination; predisposition. See Synonyms at predilection.
[Latin pr to remain and buy additional products than others. How do you identify loyal, high growth customers?
One of the easiest and most underused approaches is cross-sell modeling. Using a suite of products or product upgrades, cross-sell models enable companies to pinpoint existing customers with a propensity to purchase additional products or services. By contrast, lifetime value models more holistically identify profitable customers by evaluating the entire relationship across products and over time, while retention models focus on accounts with a high likelihood of leaving. Interestingly, the greatest impact and success on growing customers occurs by using these models in a coordinated fashion.
Identifying Untapped Potential With Cross-Sell Models
Take this scenario: a large telecom company is experiencing low penetration of its technologically advanced products. Because these products have higher profit margins, the telecom company decides to conduct a telemarketing campaign targeting its existing customers to improve penetration. A cross-sell model is developed to pre-qualify leads for its telemarketing team by identifying customers who are most likely to need the more sophisticated telecom equipment.
The cross-sell model identifies business segments that are six times more likely to purchase the advanced telecom products. Before using the model, the average cross-sell penetration was about two percent. After the model is implemented, the client identifies segments within its customer file that had projected cross-sell rates of 10 percent and 15 percent. The cross-sell model provides the knowledge to direct efforts to the right customers in order to achieve maximum results.
Reduce Retention Costs By Targeting Customers Most Likely To Leave
Analytical analytical, analytic
pertaining to or emanating from analysis.
control of confounding by analysis of the results of a trial or test. tools can also help retain customers. The strength of retention models is driven by a combination of external business factors and information from your customer file. The model built for this consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee
business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a uses external factors such as industry, geography and number of employees, as well as internal data such as length of time as a customer, billings or revenue and the type of consulting contract. The ability to quickly identify which customers are likely to leave is powerful, particularly if the company would like to develop a retention program to increase the chances that these customers continue to purchase its products and services.
Information-Driven Marketing Strategies = Profitable Sales And Marketing Efforts
Never before has the need for a deep and personal understanding of business customers and prospects been greater. The success of marketing campaigns is dependent on the relevancy of the communication and on the ability to gain the customer's attention. As the marketplace becomes more and more crowded, marketers are increasingly turning to predictive modeling as their competitive advantage. Analytics empowers marketers to convert readily available data about customers and prospects into important knowledge that translates into higher profits.
Predictive modeling improves campaign ROI, whether you are acquiring new customers or growing your relationship with existing customers. So reach out to statisticians Statisticians or people who made notable contributions to the theories of statistics, or related aspects of probability, or machine learning: A to E
Market Segment Deciles Cumulative Response Rate 1 2.0% 2 1.2% 3 1.0% 4 0.9% 5 0.8% 6 0.7% 7 0.6% 8 0.5% 9 0.5% 10 0.0% Average Response Rate = 0.44 Figure 1. Note: Table made from bar graph. Market Segment Deciles Cumulative Attrition Rate 1 55.0 2 36.0 3 25.0 4 17.0 5 11.0 6 10.0 7 7.0 8 5.0 9 2.0 10 1.0 Clients in segment 1 are three times more likely to take their business elsewhere Average Attrition Rate = 18% Figure 4. Note: Table made from bar graph.
If you are interested in purchasing reprints of this article (in either print or HTML HTML
in full HyperText Markup Language
Markup language derived from SGML that is used to prepare hypertext documents. Relatively easy for nonprogrammers to master, HTML is the language used for documents on the World Wide Web. format), please visit Reprint reprint An individually bound copy of an article in a journal or science communication Management Services online at www.reprintbuyer.com or contact a representative via e-mail at email@example.com or by phone at 800-290-5460.
For information and subscriptions, visit www.TMCnet.com or call 203-852-6800.
BY Jan Rowland, Ph.D., D & B Sales and Marketing Analytics
Jan Rowland, Ph.D. is vice president of D & B Sales and Marketing Analytics (www.dnb.com/us/).