rm world 2014: mmc cross sell using rapidminer

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?

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?




• 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


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


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?




• 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?




• 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

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?




• 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

[email protected]

rm world 2014: mmc cross sell using rapidminer

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