11 - Analytics 101 for the Marketeer : Segmented Consumer Discounting.

Most marketeers are familiar with the process of setting up customer retention programs where product discounting is used to drive sales. Most of these programs have similarity in operational methodologies but are very different from a business objective standpoint. Some of the common business objectives behind these programs could include

• Rewards & Building Loyalty
• Proactive Retention
• Win Back
• Pure Cross Sell Maximizing bang for the buck ie given a discount budget of 20000 $ and a target segment of 10,000 customers, how do you allocate the budget so that sales conversions are optimized? Is a simple 2$ offer per customer good enough or do you provide variable discounts for different segments? The challenges to a marketer are three fold :
  
  
  • How do you delegate budget across different customer segments?
  • How do you make the process repeatable for most “product offer” based campaigns?
  • How do you build this capability on a digital marketing platform or ESP?

Building a behavioral database, the components and using RFM to objectivize the behavior score have been discussed in some depth in previous blogs. Do jump to the link below to get a jump start on the topic.Smart RFM and Behavior Tracking. Well, the overall objective is to achieve something like the matrix below - a discount management plan if you will. E-RFM & P-RFM of course, are the engagement and purchase behavior indices culled from transactional data –P-RFM From Ecommerce, POS,CRM systems and E-RF from the Campaign Stats output from the ESP or Cross Channel Platform provider.

INC indicates that the current RFM score is higher than the previous one , while DEC implies that the overall score has come down. Though the table above indicates the strategy, the challenge really is in navigating through the complexities of automating this process and subsequently building this into the marketing platform itself so that the process can be repeated and reused. The solution to solving this problem end to end is a five step process.

• Build : the Behavioral database.
• Move :the E-RFM / P-RFM scores into the Marketing Platform as Customer Attributes. You can move the associated discounts into the database or manage the discount banners as personalized content.
• Set up: Campaigns using KRIs as Segmentation Criteria.
• Personalize: Dynamic personalization features in the Marketing Platform to map the right segments to the right content (discount).
• Measure:Campaign Stats to compute overall ROI of the campaign using this methodology. A/B tests can really help fine tune this approach.

As you move on your “Data Driven” marketing journey, you will find opportunities to tweak the discount matrix to just the level of optimization or conversions your business demands. For eg , coming out with empirical weightages for different behaviors and eventually a simple formula for computing optimal discount offers for multiple segments would be a great vision to have as you get started on the “Segmented Discounting” process. Don’t forget to measure how things pan out though !!