Are we missing the point on measurement?

Datamine Directors, Sally Carey and Paul O’Connor recently flew to Sydney to teach ADMA’s Database Statistics and Modeling course. Observations of the Australian marketplace in general, and direct activity within organisations there, was that tighter marketing budgets are driving the need for more accountability and hence, a greater focus on measurement.

The majority of Australian organisations that attended the course are measuring the success of individual direct marketing campaigns, by using control groups to test campaign effects, which is a definite positive in the current business environment.

A key finding from the course was that measurement appears largely restricted to the direct marketing aspect of business while broader marketing activity is still going largely unmeasured. A wider observation was that the same is true for operations management and HR, where a lack of sound measurement means these business functions are not being optimised.

All of this means that businesses that should be information rich are not benefiting or gaining transparency in areas that could significantly improve productivity, reduce costs and optimise sales results.

It’s clear that not only could businesses benefit from measuring on a broader scale both in a marketing and business operations arena, but most are not engaging in modeling to a depth where they can gain real and useable business intelligence.

An example of using modeling successfully to optimise business processes can be found with the Department of Corrections. Datamine took Department data and forecasts from the Ministry of Justice and were able to predict the future staff costs associated with the increasing number of prisoners. Quantifying these costs enabled a strong evidence-based business case to Treasury.

An easy to use forecasting tool was also developed from the model to give a six month long forecast of the expected number of prisoners. The Department of Corrections have been using this application in-house to help them plan and manage their operations.

Despite the benefits, resistance to modeling amongst businesses is still widespread and can be largely attributed to a fear of ‘leaping into the unknown’ and the fact that statistical modeling requires a different skill set to basic campaign measurement.

Beyond that, are we really willing to be that accountable? Or are we shying away from potentially discovering things that we don’t want to see, or have to report? The predictions and retrospective explanations that modeling can yield are powerful, so it is worth removing barriers to this valuable tool.  

Let’s look at a few practical examples; with the increased focus on retention in the current marketplace, churn modeling can enable you to see which customers are most likely to leave, so that you can target these people with a specific communication or offer.

Westpac have used a range of customer data sources to create a ‘love model’ which is able to give each of their customers an accurate commitment measure. By not only measuring, but modeling based on customer loyalty, Westpac can segment their customer base and clearly see those who feel aligned with the Westpac brand and those that do not. The bank is now armed with valuable information enabling them to confidently direct the best possible communications to their customers.

Other key areas where modeling can help your organisation consist of profitability analysis to identify and focus on those customers most valuable to your business. Or how about predicting customer order value and likelihood to respond, which can drive cost savings for your campaigns and increase return on investment? Demand forecasting models can also assist with resource and stock management, enabling you to optimise your operations.

Business questions for which modelling can provide a valid answer:

• How much should I spend on marketing for my new product launch?
• How do I predict my staffing needs?
• Who are my most lucrative customers?
• Who are my best prospects to cross sell to?
• Who is likely to leave me and how will that impact my business?
• How do I explain, and plan for, variation in my turnover, attendance or subscriptions?
• Am I spending too much on one channel of communication and can I optimise my spend for better results?

For more information on how Datamine can help measure and manage key resources and performance areas for your business, call a Dataminer on 09 303 2300.