Marketing on the Internet by Mr A. Goldstuck (http://www.worldwideworx.com/)
Steps to implement marketing optimisation by a local bank (Just for clarity I used to work for this local bank)
This discussion is all about Marketing optimisation. The theory goes that if you combine the probability of selling a product and NPV of that product for many products on a single customer then you can maximise the value creation to the enterprise. So to get this right you need:
- The NPV of all your products
- The Probabilities of selling the product for a specific customer
This for me is where it all comes together, world of statistics meet world of financial modeling. To understand the title of the blog I need to spend some time in the world of statistics, you see to get the probabilities we need to build models that say customer X has Y probability of taking this product. These models will use any customer attribute that helps predict a sale and that makes logical sense. These attributes change over time so a customer can have one probability this month and another the next month. Furthermore these probabilities can be different for the different products on offer for a given customer.
However the NPV's of the products don't really move around month to month, so since the probabilities are changing the best product to sell to a customer is changing month to month. The marketing optimisation will attempt to maximise value for the organisation by picking the product that has the highest potential value for that customer, which is the right decision for the enterprise.
Now enter division Acme of the enterprise. Acme has a manager who needs to manage the sales of her division, to do this she needs to budget a number of products sold and the estimated value that creates. Acme believes that when it comes to getting leads to sell on the Enterprise will do that in a fair manner. What the manager doesn't know is her product has the third lowest NPV out of the ten sold in the Company.
To maximise value the Company starts its path down the route of marketing optimisation starting a division who's only purpose is to optimise marketing. In the first month all leads are allocated according to probability and NPV, as Acme has a low NPV they get zero to no leads.....there goes "fair manner" In the second month all the probibilities have changed and the top NPV product is stuck with too much sales capicity as all the leads are allocated to other higher value creating products, this makes managing something like a call centre almost impossible.
This is a pretty simple example but a very real one, and one with no easy solution. The spirit of optimisation is correct and in the long run will maximise value but how does each division manage sales or set budgets? Is the best solution to forget about budgets and just trust the optimisation to maximise value? I think this is a very good one given you have very good management of marketing execution, but I fear it would require a whole new business management model and consolidated marketing channels (think one call centre to sell them all)
I look forward to hearing from my vast number of readers on any solutions you might have.
Marc
