rm world 2014: mmc cross sell using rapidminer
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RapidMiner Case Study: Cross-Sell Modeling
at Modern Marketing Concepts
August 19, 2014
Brian Tvenstrup, Chief Analytics Officer
Agenda
• Why Cross-Sell?
• Barriers to Success Using Traditional Cross-Sell Approaches
• The Cross-Sell Solution Using RapidMiner
• Cross-Sell Use Cases and Examples
• Who Is MMC?
Agenda
• Why Cross-Sell?
• Barriers to Success Using Traditional Cross-Sell Approaches
• The Cross-Sell Solution Using RapidMiner
• Cross-Sell Use Cases and Examples
• Who Is MMC?
What’s the Business Need?
All companies want revenue growth, and often the best source of this
growth is from existing customers:
• Existing customers are already familiar with the company, its brands,
and its products
• Existing customers already have a relationship with the company and
are open to further marketing communications
• Consequently, marketing to existing customers can generally occur at
lower marginal costs than other customer types
• A larger customer share-of-wallet also increases the switching costs
and decreases attrition likelihood for existing customers
Survey Says…
Marketing surveys consistently reflect
the importance of the cross-sell
opportunity:
• Increasing revenue with existing
customers was one of marketers’
top 5 priorities in 2013*
• Increasing revenue with existing
customers was more important than
winning back lost customers or
acquiring new customers**
*Results of the American Marketing Association Annual Marketing Survey, Dec 2013
**Results of the Modern Distribution Management Lifecycle Marketing Survey, April 2014
What Is Cross-Sell Modeling?
A company selling many different products needs to know what products it
should promote to existing customers to maximize both revenue growth
and customer satisfaction
Two basic approaches:
• Cross-sell = selling complementary or unrelated products
• Up-sell = selling higher-margin substitute products
Agenda
• Why Cross-Sell?
• Barriers to Success Using Traditional Cross-Sell Approaches
• The Cross-Sell Solution Using RapidMiner
• Cross-Sell Use Cases and Examples
• Who Is MMC?
Problematic Approaches #1
1. Relying on individual human judgment (e.g., salesperson live
recommendations or rule-sheets):
• Relying on the expertise and intuition of salespeople and account
representatives may yield recommendations not validated by data
• Business-rules approach may be costly to implement and maintain
• New hires will require additional training to share this knowledge
Problematic Approaches #2
2. Universal rank ordering of products by overall price or profit:
• Does not take into consideration important differences between
different types of customers
• Will yield sub-optimal or inappropriate recommendations for many
specific customers
• May alienate customers who perceive lack of fit for their needs
Problematic Approaches #3
3. Creating a custom analytical solution for every account:
• Not scalable because of time and effort required to build custom scores
and solutions
• Does not leverage technology assets – sales data, modeling software,
database infrastructure – to develop a solution that can be deployed
easily for all customers and accounts
What’s the Desired Solution?
Develop individualized recommendations that account for
differences between customers but that are empirically
sound and scalable
• Data-driven approach, so not dependent on human
review and interaction
• Methodologically sound, so recommendations are
reasonable and explainable (at some level)
• Suitable for both inbound and outbound marketing efforts
• Scalable so it can be applied across multiple accounts
and multiple clients with limited resources
• Leverages existing technology assets – sales data,
modeling software, database infrastructure
Agenda
• Why Cross-Sell?
• Barriers to Success Using Traditional Cross-Sell Approaches
• The Cross-Sell Solution Using RapidMiner
• Cross-Sell Use Cases and Examples
• Who Is MMC?
Our Cross-Sell Solution
Using RapidMiner, the MMC Analytics team developed an off-the-shelf
model for use with most accounts. The solution is a modified version of a
basic market-basket methodology using by many e-commerce retailers.
Given that a customer purchases any specific product, the model
examines the history of all purchases containing that product, and an
algorithm is used to rank and then recommend the best cross-sell product
for that customer.
The model can be applied with varying degrees of product specificity:
• Product Line
• Product Family
• Product Category
• Product SKU
Key RapidMiner Process Operators
1. Set Macros for key process parameters
2. Read Database of all relevant transactional sales data
3. Data Pre-Processing (set of operators) to prepare data for analysis
4. FP-Growth to identify candidate itemsets based on Min(Support)
5. Create Association Rules based on Min(Confidence) or Min(Lift) criteria
6. Apply Association Rules to calculate cross-sell scores
7. Generate Attributes to modify the final cross-sell score based on
itemset rules and other business logic (e.g., category sales amount or
prior purchase true/false)
8. Write Database to populate a database table for each client with all
cross-sell scores and ranked product recommendations
Process Screenshot
RapidMiner Implementation
1. For each client, the model is run on most up-to-date sales data
(currently running for dozens of clients across multiple industries)
2. All data processing and scoring is done within RapidMiner Server, with
jobs running from just a few seconds to about one hour for largest
clients (hundreds of thousands of customers and millions of itemsets)
3. Final cross-sell scores and ranked recommendations are calculated
and published to db tables by RapidMiner
4. Other applications retrieve the scores from these tables as needed to
show the correct recommendations for each customer
5. Cross-sell recommendation data is also displayed in a dashboard for
easy exploration and understanding by other internal marketing staff
How Is This Solution Superior?
Benefits:
The model can be made available for all accounts with minimal custom
coding required for implementation.
Limited staff involvement needed to get this model implemented, and no
specific product knowledge needed to utilize the base algorithm.
Model output can be continuously updated and reapplied as new data
becomes available.
Model can be adjusted for seasonal purchasing patterns by varying the
time window evaluated for purchasing behavior (e.g., most recent quarter
versus year-over-year quarter)
Agenda
• Why Cross-Sell?
• Barriers to Success Using Traditional Cross-Sell Approaches
• The Cross-Sell Solution Using RapidMiner
• Cross-Sell Use Cases and Examples
• Who Is MMC?
How Can It Be Used?
Product Aggregate Applications:
Select the best customers to cross-sell a given product (family, category,
etc) if a given product has a special promotion scheduled
Identify the top cross-sell recommendations for each customer and store
that information on the record so it can be referenced in any live
interactions with that customer
Variable data elements can leverage these recommendations to populate
multi-channel communications:
1. Direct Mail
2. Email
3. Tele Sales call scripts
4. Website-based promotions
How Can It Be Used?
Product-Level Applications:
E-commerce sites can utilize shopping cart contents to generate real-time
recommendations for additional items
Phone orders could utilize similar real-time product recommendations
Variable data elements can leverage these recommendations in follow-up
communications (e.g., day-after purchase):
1. Direct Mail
2. Email
3. Tele Sales OB call scripts
4. Website-based promotions upon re-log-in
Example Case: RapidMiner Dashboards
Example Case: RapidMiner Dashboards
Example Case: RapidMiner Dashboards
Example Case: RapidMiner Dashboards
Example Case: RapidMiner Dashboards
Digital Engagement Center Example
Digital Engagement Center Example
Desktop
or Tablet
Mobile
Phone
What Does This Mean for Our Clients?
With this approach, we are now doing the following for our clients:
1. Deploying automated follow-ups (email, phone, and/or direct mail)
based on sales data we receive
2. Tailoring outbound offers to customers, noting the product with the
best cross-sell opportunity for each customer
3. Choosing the best customers for product-specific promotions
4. Applying the same models on accounts managed by clients’ field
sales organization, producing smarter sales follow-up
5. Supporting real-time online marketing displays, based on knowledge
of the customer
Agenda
• Why Cross-Sell?
• Barriers to Success Using Traditional Cross-Sell Approaches
• The Cross-Sell Solution Using RapidMiner
• Cross-Sell Use Cases and Examples
• Who Is MMC?
WHO IS MMC?
World’s Leading Sales and Marketing Optimization
What Is Sales Optimization?
A number of market segments that have traditionally supported
marketing and sales are starting to coalesce into a new
segment which we call sales optimization.
Marketing/Sales
Automation
Hard work for
companies to do
internally and
requires significant
skills and investment
Marketing
Vendors
Tactical solutions
(DM, EM, TM,
digital, online, etc.)
but not part of an
integrated strategy
CSO
Sales reps are
expensive vs. a multi
channel approach
Agencies
Offer strategy but
little implementation
support
Sales
Optimization
Preference-Based Sales and Marketing
Increase in
Engagement and
Adoption
Reduced
Noise
&
Improved
Focus
Improved Financial
Outcomes
Determine
Communication
Preferences
Targeting &
Segmentation
Automate Planning,
Execution & Testing
3
Which
Targets
What
Channel Budget &
Frequency
Flawless
Execution Testing &
Measurement
2 45
Preference Marketing Process
Scoring &
Segmentation:
Evaluate targets
based on current
volume, growth
opportunity,
geography, and other
factors.
Identifies the best targets
and segments them in
an improved way vs.
value deciles or simple
RFM.
Propensity Data:
Use proprietary database
of preferred
communication
channel to find the right
channel for the right
message.
RAPT:
(Resource Allocation
Planning Tool)
Our data-based strategic
tool allows us to
understand the best use
of a given budget for a set
of targets.
Communication
Plan:
Repurposing of approved
brand content to release
automatically based on
Next Action rules.
All channels launched
under one roof for
simplicity and speed.
Reporting:
Use of control groups
and near real time
reporting to measure
effectiveness and value
based on a standard
measurement strategy
to tie costs to
outcomes.
1
Modern Marketing Concepts Inc.
Facility MethodRelationshipsExperience
• Intelligent
campaign
management
platforms
• Proprietary
channel
preference data
• Proprietary
channel
receptivity
scoring
• Over 28 years
experience in
multichannel sales
optimization
• Over a Billion
dollars in revenue
for our clients
annually
• Vast expertise in
Healthcare and
Building Products
• Integrated
analytics, inside
sales force,
creative agency,
digital tactics,
direct mail,
fulfillment, etc.
• Relationship with
all major 3rd party
data providers
• State-of-the-art
HQ in 75,000
SQ facility in
Binghamton, NY
• Global company
with 350+
employees
• Sales
Professional
Certifications
THANKYOU
Changing the way the world markets and sells
Contact:
Brian Tvenstrup
Chief Analytics Officer
Modern Marketing Concepts, Inc.
607.744.3368
btvenstrup@mmcweb.com
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