Predictive analytics can be utilized to uncover root causes so that problems can be eradicated. Read this white paper to learn how companies can use predictive analytics treatment and prevention approaches to save time and resources, eliminate root causes of problems, and obtain the actionable insight required to improve marketing effectiveness.
Using Predictive Analytics to
Uncover Root Causes and
Solve Problems vs. Treat Symptoms
By Debbie MayvilleAugust 2, 2006Customer Chemistry Using Predictive Analytics to Uncover Root Causes and Solve Problems vs. Treat Symptoms 2
IntroductionDespite significant investments in technology and an abundance of data,many companies repeatedly struggle to improve results on their market-
ing efforts. Why? In many cases, they are addressing the symptoms ratherthan the causes of their customers' issues.What is a symptom versus a cause? Let's take the example of some-one who visits the doctor for a persistent headache. If the doctor just prescribes aspirin, he is treating the symptom. If he does additionalresearch and uncovers a more serious condition, then he would apply adifferent tactic to treat the cause of the headache. If the root cause is
not diagnosed, a more serious condition could go untreated.Predictive analytics can be utilized to uncover root cause issues for
companies so they can treat problems, not just symptoms. For example,one company compared its marketing communications channels in orderto measure the effectiveness of its offers. It discovered that one channelwas experiencing higher attrition rates than others. Statistical behavioralanalysis helped reveal that the sales force was selling the lowest priceoffering to obtain the highest response rate. Further analysis revealed thatthe initial price was lower only if the customer's usage was low. Heavy-
usage customers incurred additional charges, which resulted in them paying significantly more than they expected. This was the root cause of the increase in churn rate for this channel.The churn was merely a symptom of customer dissatisfaction over thepricing mismatch. By uncovering the real cause of the high churn rates,
the company then was able to create training and incentive programs for
the sales force on how to match pricing levels with customer needs. In treating the root cause, the company successfully eliminated all the systemic symptoms and eradicated the problem. Customer Chemistry Using Predictive Analytics to Uncover Root Causes and Solve Problems vs. Treat Symptoms 3
Band-aid vs. Eradication result, companies may continuously face the sameWhen desired results from marketing initiatives are challenges over and over again.not achieved, many companies try to tackle thechallenge with a Band-aid approach. In other Eradication approach: A methodical approachwords, they attempt to change customer behavior geared to treating and removing the root causeby launching a strategy that targets the behavior issues and all systemic symptoms. This long-termitself rather than the cause of that behavior. The approach focuses on solving strategic issues andpossibility of achieving long-term success with putting barriers in place to prevent the issues fromsuch a response is about the same as it is for doc- occurring again. As a result, companies can stoptors who respond to patients' headaches by always the cycle while increasing return on investment.prescribing aspirin. Dealing with the symptom of aproblem, rather than the cause, does nothing tosolve the problem. Example: The Band-aid Approach DeliversUndesirable ResultsConsequently, companies that do not eradicate the Imagine a customer is dissatisfied because heroot cause end up repeatedly facing the same chal- feels he is over-paying for your company's serv-lenges. The Band-aid approach becomes part of a ices. In response, you provide a one-month-onlyfrustrating cycle in which the company continues to discount. What happens the following monthinvest money to change behavior for the short when the same customer gets his bill withoutterm, but does not solve the core issue, causing any discount? In this customer's mind, he maythe same negative behavior to resurface again and again feel he is not getting the right valueagain. This approach is a reactive short-term strate- proposition, and may look to make a switch togy of dealing with symptoms, in which companies another company. By providing a Band-aid spend their time putting out fires versus setting discount for one month, the company actuallymore long-term objectives and permanently gave the customer time to find a company removing root causes. If the root cause goes offering a better value proposition. The discountunresolved, in many cases, the problem worsens. was a Band-aid-addres... [download for more]
