Lifecycle Modeling to Increase Response Payment and Retention

Jennifer Schulties Martha Stewart Living

Keith Bergendorff Publishers Clearing House

Mary-Jo Checco Alliant

To Increase Response, Payment and Retention

LifecycleModeling

can improve marketing results

at every customer touchpoint

1A single predictivemodel

direct mailalternate

media

email

upsell/cross-sell

acquisition

online store

reactivationretention

The right segmentation tool identifies the behaviors that drive profitability across the

business

Martha Stewart Living Omnimedia

Jennifer SchultiesSenior Marketing Manager

• Poor payment on sweeps• Deteriorating bottom-tier response on direct mail

• Shifting renewal behavior• Unfavorable insert card/onsert metrics


Business Challenges


Daily Sweepstakes

Payment

Pros• Partner-driven• Exposes brand to

new audiences• Traffic-driver for

site• Promotes trial issue

of magazine/ generates gross subs

Cons• Less targeted• Low payment on

sub offers

Daily Sweepstakes Payment


Solution:

Use “Mega-Model” to find “good” payers

What does a person who pays for a magazine look like?



Mega-Model Insight:Have they paid for other products?

How recently?What kinds of products?



Mega-Model 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

Payment Rates per Billing Effort



Direct Mail Response


Pros• 32-pages of

content is compelling

• Free trial offer yields high gross orders

• Premium and combo offer on payment pushes high payment

Cons• Payment is delayed• Lowest tier not

performing well enough, but mail volume needed



SolutionUse Mega-Model to find the worst responders

before they respond…

…and make them an offer they can’t refuse.



Use Mega-Model score groups to strategically increase response by:

• Lowering prices• Adding premiums• Shortening terms

We’re talking about magazine subscriptions, of course…

And if that doesn’t work…



Use score groups to selectively cut costs

• No premium• Shorter bill series

• Less expensive direct mail package



• 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



Additional Applications for Mega-Model

• Cut bottom tier from mail altogether

• Mine marginal compiled lists or other large universes for best names



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

Renewal Behavior


SolutionUse Mega-Model to:• Segment out best prospective renewers

• Offer a slightly higher price to help bridge the gap in revenue


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)


Renewal Behavior

Challenges• Declining response in subscription cards

• Rising paper costs• Still a large enough source of subscriptions, so don’t want to cut completely

Insert Efficiency


Mega Model Application

Group Net Index1 1202 1153 1144 1095 1066 1157 948 1069 10510 10511 9412 9613 9514 9715 9316 9117 9118 9619 7920 51

Take inserts OUT of the issue copies going to LEAST responsive names

Insert Efficiency


• Daily Sweepstakes Payment

• Direct Mail Response• Renewal Behavior• Insert Efficiency

One Model, Many Solutions,Higher ROI


Publishers Clearing House

Keith BergendorffAssistant Vice President of Analytical Services

• 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

Business Challenges


Mail ProspectOrder

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

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”



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



“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


“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



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



Online ProspectScoring


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!

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



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



• Mail Prospect Order Screening

• ‘One-Timer’ Segmentation

• Online Prospect Scoring

Profitability Scores +House Data =Increased ROI


Questions & Answers

Mary-Jo Checco

Jennifer Schulties

Keith Bergendorff

Lifecycle Modeling to Increase Response, Payment and Retention

Thank You!

Mary-Jo Checco

Jennifer Schulties

Keith Bergendorff

Lifecycle Modeling to Increase Response, Payment and Retention

Lifecycle Modeling to Increase Response Payment and Retention

Business

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