Notes Version: Lifecycle Modeling to Increase Response Payment and Retention
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The document discusses how several companies used lifecycle modeling to improve marketing results. Martha Stewart Living used a predictive model to increase payment rates for sweepstakes and direct mail, improve renewal behavior, and optimize insert efficiency. Publishers Clearing House used a model to screen mail prospect orders and qualify responders for offers to improve payment rates and manage payment risk. The models analyzed customer behaviors across touchpoints to find the most profitable segments.
Notes Version: Lifecycle Modeling to Increase Response Payment and Retention
- 1. 9/30/2011 Lifecycle Modeling To Increase Response, Payment and Retention Jennifer Schulties Martha Stewart Living Keith Bergendorff Publishers Clearing House Mary-Jo Checco Alliant A single predictive model can improve marketing results at every customer touchpoint 1
- 2. 9/30/2011 acquisition direct mail alternate media retention reactivation online store email upsell/cross-sell The right segmentation tool identifies the behaviors that drive profitability across the business Martha Stewart Living Omnimedia Jennifer Schulties Senior Marketing Manager Martha Stewart Living Omnimedia Business Challenges • Poor payment on sweeps • Deteriorating bottom-tier response on direct mail • Shifting renewal behavior • Unfavorable insert card/onsert metrics 2
- 3. 9/30/2011 Martha Stewart Living Omnimedia Daily Sweepstakes Payment Martha Stewart Living Omnimedia Daily Sweepstakes Payment Pros Cons • Partner-driven • Less targeted • Exposes brand to new • Low payment on audiences sub offers • Traffic-driver for site • Promotes trial issue of magazine/ generates gross subs Martha Stewart Living Omnimedia Daily Sweepstakes Payment Solution: Use “Mega-Model” to find “good” payers What does a person who pays for a magazine look like? 3
- 4. 9/30/2011 Martha Stewart Living Omnimedia Daily Sweepstakes Payment Mega-Model Insight: Have they paid for other products? How recently? What kinds of products? Martha Stewart Living Omnimedia Daily Sweepstakes Payment Mega-Model Payment Rates per Billing Effort Insight: • 45% of sweeps responders were deemed “good payers” from the model • “Good payers” pay twice as well as the “bad payers” overall 1 2 3 4 5 6 7 Good Payers Bad Payers Martha Stewart Living Omnimedia Direct Mail Response 4
- 5. 9/30/2011 Martha Stewart Living Omnimedia Direct Mail Response Pros Cons • 32-pages of content is • Payment is delayed compelling • Lowest tier not • Free trial offer yields performing well high gross orders enough, but mail • Premium and combo volume needed offer on payment pushes high payment Martha Stewart Living Omnimedia Direct Mail Response Solution Use Mega-Model to find the worst responders before they respond… …and make them an offer they can’t refuse. Martha Stewart Living Omnimedia Direct Mail Response We’re talking about magazine subscriptions, of course… Use Mega-Model score groups to strategically increase response by: • Lowering prices • Adding premiums • Shortening terms And if that doesn’t work… 5
- 6. 9/30/2011 Martha Stewart Living Omnimedia Direct Mail Response Use score groups to selectively cut costs • No premium • Shorter bill series • Less expensive direct mail package Martha Stewart Living Omnimedia Direct Mail Response • Removed premium (cost cutting) and took $1 off subscription price (incentive) on modeled names • Test of bottom tier saw impressive gross response • Payment suffered with lack of premium Martha Stewart Living Omnimedia Direct Mail Response Additional Applications for Mega-Model • Cut bottom tier from mail altogether • Mine marginal compiled lists or other large universes for best names 6
- 7. 9/30/2011 Martha Stewart Living Omnimedia Renewal Behavior Martha Stewart Living Omnimedia Renewal Behavior Challenges • Everyday Food offered as a “combo” subscription with Martha Stewart Living • Everyday Food shares in the revenue, but is perceived as FREE • Even though acquisition offer is a combo, the titles are renewed individually • Renewals of EF are good, but at a discounted price Martha Stewart Living Omnimedia Renewal Behavior Solution Use Mega-Model to: • Segment out best prospective renewers • Offer a slightly higher price to help bridge the gap in revenue 7
- 8. 9/30/2011 Martha Stewart Living Omnimedia Renewal Behavior Mega-Model Test Results • Tested a 60% increase in price to best prospects (from $5 to $8) • Higher price increased revenue by 11% vs. control, but reduced response by 30% • Testing continues as we determine what our end-goals are (revenue vs. orders) Martha Stewart Living Omnimedia Insert Efficiency Challenges • Declining response in subscription cards • Rising paper costs • Still a large enough source of subscriptions, so don’t want to cut completely Martha Stewart Living Omnimedia Insert Efficiency Group Net Index 1 120 2 115 3 114 4 109 5 106 6 115 Mega Model 7 94 Take inserts OUT Application 8 106 of the issue 9 105 10 105 copies going to 11 94 LEAST responsive 12 96 13 95 names 14 97 15 93 16 91 17 91 18 96 19 79 20 51 8
- 9. 9/30/2011 Martha Stewart Living Omnimedia One Model, Many Solutions, Higher ROI • Daily Sweepstakes Payment • Direct Mail Response • Renewal Behavior • Insert Efficiency Publishers Clearing House Keith Bergendorff Assistant Vice President of Analytical Services Publishers Clearing House Business Challenges • Convert prospects into long-term customers • Order response and payment rates for prospect mailings in decline • Attaining profit goals requires shifting consumers to high-margin merchandise offers • Extend PCH business across media channels 9
- 10. 9/30/2011 Publishers Clearing House Mail Prospect Order Screening Publishers Clearing House Mail Prospect Order Screening Challenges • All PCH mail offers are Bill-Me so managing payment risk is essential • PCH needs included: – Ability to qualify responders for Bill-Me offers – Improvement in pay rates on “sub-standard” lists • Tests of scoring lists prior to mailing ineffective Publishers Clearing House Mail Prospect Order Screening Solution • Required a tool to improve fulfillment decisioning • Tested and rolled out with custom Alliant profitability model applied at order stage • Combined profitability score with re-developed PCH internal payment model to create a “Behavioral Profitability Score” 10
- 11. 9/30/2011 Publishers Clearing House Mail Prospect Order Screening Publishers Clearing House Mail Prospect Order Screening RESULTS: “Mail Prospect” Behavioral Profitability Score • Substantial increase in prospect mail volume – Back-end score allows expansion into mail lists and segments not previously viable due to low pay • Substantial increase in new paid buyer generation • No significant deterioration in pay-up rate! • Combined score generates significantly higher margin dollars than single internal scoring solution Publishers Clearing House “One-Timer” Segmentation 11
- 12. 9/30/2011 Publishers Clearing House “One-Timer” Segmentation Challenge • Speed is a key factor in successfully re-promoting new mail buyers – Response declines rapidly with time elapsed before first customer mailing • Was not viable to re-mail new buyers until first payment received (6-12 weeks after order) • Internal payment model anemic due to lack of predictive data for new buyers Publishers Clearing House “One-Timer” Segmentation Solution • Reapply Alliant profitability scores already appended to all responders • New internal model uses Alliant scores to create a new One-Timer Behavioral Profitability Score • One-Timer score allows for payment segmentation • Huge improvement vs. previous internal model using only transactional data and demographics Publishers Clearing House “One-Timer” Segmentation RESULTS: “One-Timer” Behavioral Profitability Score • Enables mailing the highest scoring half of new One-Timers without waiting for payment – Reduced interval between first order and first customer package from 6-12 weeks to 3 weeks • Significant increase in overall order response and conversion to Repeat Buyers • Lift in order response and future value more than compensates for decrease in overall payment rate 12
- 13. 9/30/2011 Publishers Clearing House Online Prospect Scoring Publishers Clearing House Online Prospect Scoring Challenges • Payment rates for online orders abysmal • Publishers unhappy with paid subscription rates • Can’t offer merchandise and make a profit • Insufficient internal data to identify who is appropriate for Bill-Me offers • Order screening improved pay rates, but it’s not good marketing to solicit orders and then reject them! Publishers Clearing House Online Prospect Scoring Solution • Apply scores from same Alliant profitability model in Real Time at sweeps registration • Combine profitability scores with internal Real Time model to create “Ensemble Model” • Use Ensemble Model score to segment offers – “Prime” names get merchandise offers – “Restricted” names get magazine offers – “Lows” receive partner offers only 13
- 14. 9/30/2011 Publishers Clearing House Online Prospect Scoring RESULTS: “Ensemble” Behavioral Profitability Score • Targeted offers in online path and email deliver: – Much improved profitability for merchandise sales – Much improved pay rates for subscription sales – Minimal rejection of orders on back end – “Lows” routed immediately to partner email programs, improving partner revenue • Quality of new acquisition sources can quickly be evaluated via average profitability score Publishers Clearing House Profitability Scores + House Data = Increased ROI • Mail Prospect Order Screening • ‘One-Timer’ Segmentation • Online Prospect Scoring Lifecycle Modeling to Increase Response, Payment and Retention Questions & Answers Mary-Jo Jennifer Keith Checco Schulties Bergendorff 14
- 15. 9/30/2011 Lifecycle Modeling to Increase Response, Payment and Retention Thank You! Mary-Jo Jennifer Keith Checco Schulties Bergendorff 15