Overtoom and Python Predictions @ Relationship Marketing congres (Stichting Marketing) http://www.pythonpredictions.com http://www.overtoom.nl http://www.relationshipmarketing.be http://www.stichtingmarketing.be

1. The impact and benefits of
improved customer targeting
Relationship Marketing Congres 2009
7th of May 2009 Peter Rademaker █ Wouter Buckinx

2. Customer Intelligence at Overtoom
Overtoom:
Short term impact:
Reduction target size: -10%
Turnover: +28%
Long term impact:
Reduction target size: -10%
Turnover : +10%
The impact and benefits of improved customer targeting 2

3. Agenda
Overtoom International
Python Predictions
Business Problem
Process
Results
Conclusions
Current steps
The impact and benefits of improved customer targeting 3

4. Overtoom International
Business-to-Business distance selling company
(Market leader)
Office and warehouse supplies
Database customers: 95.000 companies
190.000 contacts
230.000 prospects
Database products: 40.000 references
Multi-channel approach:
Catalogues Newsletter
Leaflets Website
E-mails
Integrated CRM
The impact and benefits of improved customer targeting 4

5. Overtoom International
CI status before project
RFM Segmentation (1996)
Before 200.000 monthly mailings
After 95.000 monthly mailings
For a similar realized turnover
Penetration analysis & cloning existing customers for
better prospection (suspects)
Before 250.000 suspects
After 150.000 suspects
Financial scoring code (5 positions)
5=very good position
1=very bad position
External data: update every 3 months
The impact and benefits of improved customer targeting 5

6. Overtoom International
Challenges
CUSTOMER
(acquiring the right customer)
PRODUCT COMMUNICATION
OR SERVICE CHANNEL SELECTION
(the right value proposition) (the right message)
The impact and benefits of improved customer targeting 6

7. Python Predictions
Core Business: Customer Intelligence
History
Customers
The impact and benefits of improved customer targeting 7

8. Python Predictions
Core business: Customer Intelligence
…in order to
Using all …we predict manage
available future customer one-to-one
customer behavior… relationships.
information…
The impact and benefits of improved customer targeting 8

9. Python Predictions
ROI
Enhanced
Predictive
Predictive Modeling
Modeling
Segmentation
Descriptives
Complexity
The impact and benefits of improved customer targeting 9

10. Project definiton
Increase targeting efficiency of current
marketing actions to existing clients
Yearly catalogues
Monthly leaflets
Increase response and turnover
Segmentation Predictive model
Indicate important criteria to distinguish
customers
Profile target group
The impact and benefits of improved customer targeting 10

11. Project definiton
Segmentation is exploratory
Prediction is discriminatory
Segmentation Prediction
Prediction
The impact and benefits of improved customer targeting 11

12. Project definiton
Segmentation vs predictive model
The impact and benefits of improved customer targeting 12

13. Process
Reliable Customer Intelligence
Project Model Model Model
Data
definition building assessment usage
preparation
Data
Assess-
ment - Variable - Partitioning - Implementation
-Goal
Construction - Algorithm - Performance
- Testing
-Timeline
- Exploration selection measures
- Calculation of ROI
-Data
- Transfor- - Feature - Profiling
availability - Industrialisation
mation selection
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
The impact and benefits of improved customer targeting 13

14. Data preparation
Data
4 years of historical data
3 MIO observations
850 variables
Purchase information
Company information
Contact information
Complaint information
Product/category information
Channel information
Seasonality
The impact and benefits of improved customer targeting 14

15. Model building
Data partitioning (train, selection, validation)
Objective assessment
Split models for each action type
Assign response
Logit-based modeling
Variable selection
Reduce complexity
Avoid overfitting
Software
SAS
The impact and benefits of improved customer targeting 15

16. Model building
Variable selection 3 types (summary)
a) Purchase information a
b) Company information b
c) Contact information c
d) Complaint information d
e
e) Product/category info
f
f) Channel information g
g) Seasonality 0 5 10 15 20
The impact and benefits of improved customer targeting 16

17. Model assessment
Rank segments Rank individuals
Segmentation Prediction
Predictio
The impact and benefits of improved customer targeting 17

18. Model assessment
Turnover on data used for model building
Turnover Chart
Prediction
Segmentation
Customer Ranking
The impact and benefits of improved customer targeting 18

19. Model assessment
Field test
Specific marketing actions in 2008
Previous segmentation versus new predictive
model
Representative split of the customer base
The impact and benefits of improved customer targeting 19

20. Model assessment
Response
Response (infield)
Prediction
Segmentation
Customer Ranking
The impact and benefits of improved customer targeting 20

21. Model assessment
Turnover infield
Turnover (infield)
Prediction
Segmentation
Customer Ranking
The impact and benefits of improved customer targeting 21

22. Model assessment
Turnover infield
Turnover (infield)
Prediction
Segmentation
Customer Ranking
The impact and benefits of improved customer targeting 22

23. Model assessment
Turnover infield
Turnover (infield)
Prediction
Segmentation
Customer Ranking
The impact and benefits of improved customer targeting 23

24. Model assessment
Turnover (infield)
Short term
Reduction target size: -10%
Turnover: +28%
Long term
Reduction target size: -10%
Turnover : +10% (average)
The impact and benefits of improved customer targeting 24

25. Model assessment
Impact on target group
Selection shift in existing segments
30000
25000
20000
15000
Predictive model
10000 Segmentation
5000
0
The impact and benefits of improved customer targeting 25

26. Model assessment
Impact on target group
Selection shift in existing segments
30000
25000
20000
15000
Predictive model
10000 Segmentation
5000
0
The impact and benefits of improved customer targeting 26

27. Model assessment
Impact on target group
Target group profiling
segmentation versus predictive model
Recency
1500 1361
1207
1250
1000 Target
672
750 502
Non-Target
500
250
0
Segmentation Predictive Model
The impact and benefits of improved customer targeting 27

28. Model assessment
Impact on target group
Target group profiling
segmentation versus predictive model
Average order size
329
350
279
300
250
200 Target
115
150 Non-Target
100 69
50
0
Segmentation Predictive Model
The impact and benefits of improved customer targeting 28

29. Model usage
Implementation
Automated scoring system
Monitoring data and model quality before and
after marketing actions
Distribution Monitoring: Recency
Reference
New
1 2 3 4 5 6 7 8 9 10 11 12 13 14
Buckets
The impact and benefits of improved customer targeting 29

30. Project Conclusions
Increased targeting efficiency in B2B
Predictive model outperforms existing
segmentation
High # of dimensions incorporated
Detection of important criteria
Substantial impact on response and turnover
Target group profiling
The impact and benefits of improved customer targeting 30

31. Current Steps…
Continuous development of CI environment
Prospects
Suspects
…
Customized product offering
CUSTOMER
PRODUCT COMMUNICATION
OR SERVICE CHANNEL SELECTION
The impact and benefits of improved customer targeting 31

32. █ Visit our websites:
www.overtoom.be
www.pythonpredictions.com
█ Contact information:
peter.rademaker@overtoom.be
wouter.buckinx@pythonpredictions.com
The impact and benefits of improved customer targeting 32