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Optimization in the World of Marketing

Optimization in the World of Marketing. Neil Skilling. “The Proposition”. Portrait: “an up close and clear picture of a single person or individual” 1:1 A True Relationship. Traditional Marketing: “uniform campaigns designed to attract an entire defined population ”.

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Optimization in the World of Marketing

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  1. Optimization in the World of Marketing Neil Skilling

  2. “The Proposition” • Portrait: • “an up close and clear picture of a single person or individual” • 1:1 • A True Relationship • Traditional Marketing: • “uniform campaigns designed to attract an entire defined population” The Portrait Proposition: The Perpetual Portrait“Achieve a 1:1 relationship with your customers”

  3. Portrait Software at a Glance • 300 enterprise customers worldwide • Founded in 1986: 20+ years heritage in CRM innovation • Recognised as leader by Gartner in Intelligent Dialogue Marketing • Acquired Quadstone Analytics (2005) • Acquired Oslo based Million Handshakes (2008) • Main offices in UK, Oslo and Boston, USA Portrait Software International partner network

  4. We have 300 enterprise customers worldwide

  5. Different types of Marketing • Above the line • Brand building, awareness • Billboards, television, internet banners • Below the line – targeted marketing • Direct Mail • Outbound calling • Email • etc • B2C operations: Retail, Telecommunications & Financial Services predominate

  6. Grow: • Predict value/profit potential • Cross-sell response to best next product Customers • Nurture: • Proactive retention • Increase satisfaction • Control costs: • Increase revenues • Reduce cost to serve • Predict who to leave? Value • Acquire: • Target predicted high value, low Churn • Avoid predicted high risk cases • Retain: • Churn prediction • Savability (offer ROI) • Churn reasons drive messaging & processes Customer Lifecycle Management

  7. III Customers Targets action will be most effective in Targets Core Idea of Targeted Marketing Goal: Maximize ROI on targeting spend Reducing attrition Increasing spend Decreasing losses

  8. Human “makes up” rule by looking at data Machine builds predictive model (“on-line”?) Human “makes up” rule Human uses software to build predictive model Modelling software Automated or Real-Time Modelling software Word Processor Segmentation, Profiling, Visualization How is the model created? MODELLED MADE UP

  9. Demonstration

  10. Typical Gains Chart

  11. Not much better than random ...

  12. Worse than random ...

  13. Measuring Success • Did my campaign go out of the door? • Did I send as many as I could? • Did I spend all of my budget? • How many responses did I get? • What was the value of those responses? • How much did it cost to generate those responses? • How many of my responses were incremental

  14. How to Measure Campaign Success (Uplift) • Uplift = Treated Responses – Control Responses • Uplift can only be measured against a control group or background response rate • Campaign profitability is measured from Uplift only not total responses • What was the average cost per incremental response? • Where did the Uplift come from? • Can we target on Uplift only?

  15. Wanamaker’s Lament “I know half the money I spend on advertising is wasted, but I can never find out which half” – John Wanamaker

  16. Fundamental Segmentation for Retention LOST CAUSES SLEEPING DOGS   Yes LEAVE IF TREATED SURE THINGS PERSUADABLES   No No Yes LEAVE IF NOT TREATED

  17. Positive impact No impact Negative impact Persuadables: Only stay if treated 1 Sure Things Stay whether you treat or not 2A 2 1 2 3 Lost Causes Leave whether you treat or not 2B Sleeping Dogs Stay unless you treat 3 Incremental Impact for Retention

  18. Positive impact Negativeimpact No impact Case Study: Mobile Phone Retention I • Overall campaign reduces churn by 4.8 pc pt • Targeting 42% by Uplift also reduces churn by 4.8% • Targeting best 70% by Uplift reduces churn by 5.7% • Targeting best 65% by ROI improves campaign ROI by 27 pc pts. Incremental value c. €1.75m p.a.

  19. Negativeimpact Positive impact Noimpact Case Study: Mobile Phone Retention II • Overall campaign increases churn by 1 pc pt • Targeting no one leaves churn unaffacted • Targeting best 40% by Uplift achieves 1.8 pc pt reduction in churn • Targeting best 20% by ROI improves campaign ROI by 800 pc pts. Incremental value c. €40m p.a.

  20. Multi-Campaign Optimization • Multiple potential offers with predicted ROI • Constraints • Channel volumes and costs • Contact limits • Typical 3-6 month planning timeline • Challenge is now to balance this against real-time interactive prompts

  21. Europe (Headquarters) The Smith Centre, The Fairmile Henley-on-Thames, Oxfordshire, RG9 6AB, United Kingdom T: +44 (0)1491 416600 F: +44 (0)1491 416601 Edinburgh 39 Melville Street Edinburgh EH3 7JF, United Kingdom T: +44 (0) 131 220 4491 F: +44 (0) 131 220 4492 Oslo Maridalsveien 87, Bygg 10461 OsloNorway T: +47 22 38 91 00 F: +47 23 40 94 99 Americas 125 Summer Street 16th Floor Boston MA 02110, USA T: +1 617 4575200 F: +1 617 4575299 Asia Pacific Level 7 15-17 Young Street Sydney NSW 2000 Australia T: +61 2 8004 9600 F: +61 2 9276 2799 www.portraitsoftware.com Strictly Portrait Software Confidential, June 2008 24 June 2008 Investor briefing - page 21 Investor briefing - page 21

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