Read this white paper to learn about the six keys to a structured approach to planning and implementation of a predictive analytics infrastructure. Find out how you can turn customer intelligence data into actionable information for improving the accuracy, efficiency and success of your targeting efforts.
Boosting Marketing ROI
With Predictive Analysis:
Six Keys to Unlocking the Value
Of Customer Intelligence
By Christopher Checco and Bill KastnerMarch 2006Customer ChemistryBoosting Marketing ROI with Predictive Analysis 2
IntroductionAccording to an IDC study1, the use of predictive analysis yields a medianROI (Return on Investment) of 145%, which equates to nearly double the ROI when non-predictive analysis is used. Predictive analysis is nowavailable to the masses and has become a distinct competitive advantagefor those organizations savvy enough to implement it. For those who have not yet taken the plunge, the time has come:Predictive analysis will become a necessity to compete by the end of thisdecade. This is, due, in large part, to its ability to help organizations turncustomer intelligence data into actionable information for improving the accuracy, efficiency and success with which they can target specific customers and prospects, effectively lowering the cost of marketing campaigns. In fact, all ten processes identified by the Gartner Group in its "Top-10 Marketing Processes for the 21st Century" article2 would be wellserved by the application of predictive analysis, either directly or indirectly.The recurring theme in these 10 marketing processes is building strongerrelationships between companies and their customers. Predictive analysisprovides critical insights that help companies address this challenge.
What Is Predictive Analysis and How nCustomer Acquisition: Predictive analysis canIs it Utilized? help identify which prospective customers (i.e.,Simply stated, predictive analysis is the implemen- "prospects") should be targeted. Furthermore, tation of statistical modeling to generate ranked it can identify which specific offers are likely lists based upon customers' propensity to exhibit to be effective, as well as estimate future a certain behavior. What does that mean to customer value.business? nCross-Selling and Up-Selling Opportunities:Predictive analysis can be used in a variety of Predictive analysis can help companies identifycommercial arenas in a number of important ways. which products and services individual customersThe following are a few key examples: are likely to buy. Further, it can help identifyfuture profitability of individual customers whonCustomer Retention: Predictive analysis can add specific products or services.help companies identify which of their customersare likely to churn (i.e., cancel service, stop using Key Benefits of Predictive Modelinga product, etc.). Additionally, it can identify So, why is predictive analysis so effective? likely causes for the attrition at the individual There are several reasons and here are the twocustomer level. most relevant:
1 Predictive Analytics and ROI: Lessons from IDC's Financial Impact Study, Henry D. Morris, IDC, September 2003.2 Analyst View: Top-10 Marketing Processes for the 21st Century, Claudio Marcus and Kimberly Collins, Gartner, CMO Magazine, July 2005.Customer ChemistryBoosting Marketing ROI with Predictive Analysis 3
nSelf-Improving: As an organization learns about data). The data is thoroughly investigated untilthe key factors that affect their business through hidden patterns are revealed. These patternsthe use of predictive analysis, they become transform raw "data" into useful and actionablemore in tune with their customers. This, in turn, business information.allows them to gather more accurate data to usein the predictive modeling process, making the The results of predictive analysis are often measuredresults more focused with each pass. Hence, using a concept called "lift," which represents themarketers can easily recognize the positive increases in the response (or take) rate over andimpacts, such as improvements in response rate above the current hit rate. In Figure 2, a marketeror reductions in customer attrition. is striving to address a customer need through theuse of a product-based campaign. The marketernMeasurability: Predictive analysis allows organi- conducts a conventional analysis by dividing thezations to measure effectively key metrics that customer universe into demographic segment andfeed into ROI analyses. This is mainly due to the sends the offer to 50% of the customer universe.efficient and organized manner in which predic- Over the coming weeks, the marketer calculatestive analysis embeds itself into both business that the response r... [download for more]
