## September 11, 2007

### E-Mail Marketing Challenge: Assigning Customers To Versions

Deciding who receives a version of an e-mail campaign is a challenge.

You seldom read common-sense logic that explains what you should do, partly because it is hard work, partly because vendors want to monetize this process by doing the work for you.

Let's review a simple example, one that clearly outlines the challenges we all face.

The table below illustrates seven e-mail subscribers, and the amount each customer spent on Mens and Womens merchandise over the past year.

 Cust # Mens Womens One \$50 \$0 Two \$0 \$900 Three \$400 \$200 Four \$0 \$0 Five \$1,335 \$1,335 Six \$0 \$600 Seven \$150 \$150

Based on the purchase habits of these seven individuals, we have to assign three customers to the Mens version, and four customers to the Womens version.

Method #1 = Prioritization: One of the easiest strategies is to prioritize one version of the e-mail campaign over another. In other words, the database marketer may decide that the Mens version receives top priority. In that situation, the three highest-spending Mens customers get the Mens version, with everybody else receiving the Womens version.
• Mens Version = Customer Number Three, Five and Seven.
• Womens Version = Customer Number One, Two, Four and Six.
Had the Womens version been prioritized first, the assignment would have looked like this:
• Mens Version = Customer Number One, Four and Seven
• Womens Version = Customer Number Two, Three, Five and Six
Notice the challenge with this method. While this is the easiest method to execute, the method results in the version with the highest priority receiving the best customers. This means that the version with the highest priority will generally perform best. The version with lower priority will generally not perform as well.

Method #2 = Versions Based On Spend: In this case, customers are assigned to versions based on which merchandise division the customer prefers. This works well in theory. Notice in our case that customer numbers four, five and seven spent equal amounts in each version. Therefore, we have the following situation:
• Mens Version = Customer Number One and Three.
• Womens Version = Customer Number Two and Six.
• Ties = Customer Number Four, Five and Seven.
The database marketer could randomly decide which of the three customers with ties receives the Mens version, and then allocate the other customers to the Womens version.

Method #3 = Versions Based On Expected ROI: Experienced e-mail database marketers assign an expected ROI to each customer, for each version of an e-mail campaign. In this case, each customer is "scored" based on the demand per e-mail / ROI expected from the customer, if mailed either version of the e-mail campaign. The Womens version of the e-mail campaign is expected to perform twice as well as the Mens version of the e-mail campaign. Let's look at the "scores":

 Cust # Mens Womens One \$0.106 \$0.163 Two \$0.085 \$0.329 Three \$0.164 \$0.213 Four \$0.085 \$0.163 Five \$0.397 \$0.794 Six \$0.085 \$0.252 Seven \$0.126 \$0.187

When we score each customer based on expected sales per e-mail sent, we see a problem, don't we?

The Mens version is expected to perform half as well as the Womens version. So, when evaluating each version of the e-mail campaign, we come to the logical conclusion that we should only have one version of the e-mail campaign ... the Womens version ... right?

Now go sit down in the office of the Mens Merchandise Executive, and tell him/her that we won't be sending an a Mens e-mail to our customers, because customers don't respond to Mens merchandise. After you make that statement, cover your ears and duck!!!!

So, you're left with a tough choice. What you have to do is assign the best customers to versions, "subject to constraints". In this case, the constraint is that we have to send three Mens e-mail versions to customers, yet we want to maximize the total ROI for the campaign.

A good tool to solve this problem is "linear programming". I don't have enough room to go into all the math here, but if you use software from Unica (the folks who brought catalogers the "Affinium" campaign management tool), you can purchase an add-on that does this for you. The add-on isn't cheap, but you're likely to recoup your profit in short order.

Of course, there are many, MANY ways to solve this problem. Here's an opportunity for you to share your thoughts. How would you attack this challenge?

#### 5 comments:

1. Could we add purchase frequency and timing to the customer records? Knowing more about the purchase patterns would help the decision.

For example, I (as a man) might buy men's stuff all year and women's stuff in December (Xmas gifts). An email campaign in March would then know to classify me as a "man" for that email. Not my field, so not sure if databases are up to this kind of granularity...just musing!

2. Absolutely, purchase frequency and timing of purchase are important.

Eventually, there are too many dimensions for the human mind to balance. That's where a model comes into play ... the model looks at all the factors simultaneously, and weights them appropriately.

Databases are very much up to this kind of granularity.

Good ideas, Mark!!!

3. Anonymous9:10 PM

What about adding recency to frequency? Creating an RF score and then creating mailings based on these segments would be a way that I would approach it.

Your mailing database could then include "If" statements to display content based on previous purchases categories i.e. men vs. women. Recent behaviour is a better predictor of future behaviour than the Monetary model alone.

What do you think?

4. What do I think? I think you're right!! Adding information to break ties and improve assigment of customers to versions is a good idea!

5. E-Mail marketing gains significance

E-Mail marketing sits down by E-Mail marketing is still before telephone marketing and advertising letters the range direct marketing in the next three years most strongly at meaning wins. 42% of the enterprises use already E-Mail as marketing instrument. 55% of the US enterprises increased of 2001 to 2002 the budget portion for E-Mail marketing, only 5% it lowered. The electronic serial letter nearly pulls thereby up with the traditional mail.

E-Business : For some days is present a new standard work dmmv within the range e-marketing: the dmmv Praxishandbuch „E-Mail marketing “.

Direct portal: Delivra experience in numerous seminars and. Like that the practice manual is not only a summary of all current aspects, which are decisive for the conversion of successful E-Mail marketing actions, but it answers also comprehensively the questions, those
emerge again and again in the practical work.

On-line marketing practice: Delivra practice manual to E-Mail marketing will the requirement fully fair to seize the really important aspects approximately around the E Mail marketing. In 12 chapters the author describes clearly and scarcely, which is to be considered from address production to progress control.

Viennese newspaper: The practice manual deals in the basic part both on the different forms E-Mail marketing, the structure of the own distributor and with legal questions. Black Tipps for the content wise and formal organization of responding enamels and new type character as well as extensive information supplies to success measurement. Abundance from expert pieces of advice to the topics customer orientation and integration of enamels in marketing-mix round the comprehensive manual off.

ONE to ONE: In practice it often hapert with E-Mail marketing, since application type and legal basic conditions are unknown in many enterprises. Delivra helpful Tipps for successful E-Mail marketing therefore in the practice practice „E-Mail marketing “

Internet magazine: Missing know-how is the principal reason for the weak development in email marketing.

Communication right: A summary of the current practice questions approximately around E-Mail marketing offers the new techniques. Well understandably and provided with grey supported tips one represents, how E-Mail marketing revolutionized the direct advertising market and which empirical values was in the meantime collected.

On-line-network-learn: The” practice manual - E-Mail marketing “is not only a summary of all current aspects, which are important for a successful employment of E-Mail marketing. Rather answer it descriptive many questions, which emerge again and again in the daily work.

BMS: On which it arrives, so that enamels arrive, Dr. Torsten betrays black in his new book. It answers therein which practical men in seminars asked. Thus practice-relevant, convertible information makes the book an easily readable manual.

iBusiness: E-Mail marketing does not only cut off in the cost efficiency comparison outstanding, but offers by its specific development various customer-oriented application type. With this practice manual enterprise a means is given to the hand, in order successfully to use this instrument.

Note: Only a member of this blog may post a comment.

### A Classic File Power Catastrophe

Macy's, known in 2014 as "America's Omnichannel Store" by a Management Team no longer associated with the brand, repres...