As the best of the best golfers converge in Pinehurst, NC at the US Open Golf Tournament, it seems only natural to relate golfing to marketing optimization. I assure you this is not a stretch - please read on.
You see, everything in life is an optimization problem that must be solved. Time spent on an activity versus the quality level output from that activity - whether it’s at work, at home, or even on a hobby. For me, my golf game is one big optimization problem. You might ask – well what do you have to optimize against in this situation?
For those of you not familiar with golf, you are assigned a handicap based on your skill level. With this handicap the following formula is applied:
This system is used so differing skill level players can compete against each other in tournaments, etc. A very good player will have a low handicap (3) whereas as a less skilled player has a higher handicap (20). An example of how handicaps work are as follows: A good player shoots a 76-3= 73 while a less skilled player shoots a 92-20=72. The less skilled player would win the match, because their net score is lower.
The optimization side of this problem is – how much do I want to invest into lowering my handicap and what is the payoff for that investment? One thing for I must consider are the constraints – what am I limited by when attempting to lower my handicap? Wow – time, money, innate athletic skill, the goodwill of my family and coworkers for spending endless hours on the golf course, and the list goes on and on. Unfortunately – the constraints are keeping me from getting my handicap to where I would ideally like it – but that leaves room for future improvement right?
Just like my golf game, marketing for many organizations is one big optimization problem. Questions marketers may ask that are indicative of the need for optimization may include:
- How much time, money, and resources do we invest into marketing to our customer base?
- How do we optimize what we spend versus the return on marketing investment (ROMI)?
- How do we optimize so that we are contacting customers at right time with the right marketing offer over the right channel?
- How do we avoid over contact or customer saturation?
You’ll notice that these questions are age old and are not specific to certain industries. But how are organizations solving this optimization problem inside of marketing today? Well, they are doing it in a few different ways:
Priority Based Optimization – Every customer and offer gets assigned a priority. The priority of the customer is then matched to the priority of the offer, e.g. Customer Segment 2 of 10 that contains 10 customers receives the 2nd highest prioritized offer.
Rules Based Optimization – If a customer performs a certain action, e.g. purchases a product on the company website, then they receive a certain offer. Simply put, this is conditional optimization – where if a customer exhibits a behavior or meets a condition, then they receive a certain offer.
Analytical Optimization – Optimizes via an analytical algorithm against the entire set of customer data, not just a portion or segment and treats each customer individually – assigning the best offer to them. Based on rules, constraints, and contact policies – the optimized offer in some cases may be no offer. This optimization technique is rooted in operations research methodologies.
So which method is the best becomes the next question – and the answer is – it depends. Simple optimization problems can use simple optimization techniques – like priority based or rule based optimization. More complex optimization problems really require analytical optimization. SAS Marketing Optimization uses analytically based optimization and is helping some of the largest organizations in the world solve their most complex optimization problems.
Here are a few examples:
- Loyalty New Zealand has taken model development and campaign execution and optimization activities from 20 days down to under 30 minutes using SAS Marketing Optimization.
- Canada's Scotiabank has seen a 50% improvement in ROMI as a result of SAS Marketing Optimization.
- Leading Czech banking organization Ceska Sporitelna has seen a 38% increase in campaign profitability as a result of SAS Marketing Optimization.
So when complexity of marketing is high, and simple prioritization methods won’t reap the results you are looking for – I urge you to consider SAS Marketing Optimization – which will allow your marketing organization to optimize against a number of constraints - from direct mail budgets to online advertising inventory to call center resource thresholds.
Of course, marketing optimization is way too much fire power to improve my golf game, but for complex business problems it's spot-on. In the meantime, the action in Pinehurst has me inspired, so I guess I’ll be hitting balls on the range this weekend.