1. Segmentation. Scoring. Profiling
Segmentation. Scoring. Profiling. Or how to get maximum profit from your Database?
Valeria Pavlyukovskaya
PPE Group Commercial Director

2. Data Direct is one of PPE Group companies
PPE Group ( – leader in distance selling in Russia (mail order, e-commerce, telesales)
Databases:
Mail Order: 22 mln. prospects and buyers (3 mln. buyers)
E-Commerce: > 1 mln. prospects and buyers (400K buyers)
Data Direct was founded in 2001 in order to manage PPE databases + to sale Group services to external companies

3. Presentation structure
3 MAIN STEPS
IN ORDER TO OPMIMIZE YOUR DATABASE EFFICIENCY
Database Segmentation
? – METHOD TO USE
? – WHAT FOR
? – HOW TO PUT INTO PRACTICE (DM ACTIVITIES PLANNING, BUDGETING)
Scoring
? – HOW TO DEFINE OPTIMUM POTENTIAL WITHIN EACH SEGMENT FOR CONCRETE DM ACTION
Profiling
? – WHAT ELSE CAN WE DO TO IMPROVE MORE ACTION KPIs
? – HOW CAN WE USE PROFILING METHOD IN ORDER TO DEFINE BEST WAYS TO RECRUIT POTENTIAL CUSTOMERS

4. Database = Search of your potentialv
1 TON
2 GRAMS
Философия бизнеса описывается простой формулой: из одной тонны горных пород добывается в среднем 2 грамма золота. В лучших местах до 18 грамм.

5. Segmentation: What for? 1st step to improve your activity KPIs
Random selection: Response Rate = 0,5%
Your Database:
prospects
clients (buyers)
Random selection from buyers: 5% RR
How to get 10% RR?

6. RFM-segmentation
used for Database segmentation in Europe and USA since 1963
adequate for all types of Databases: retail, e-commerce, mail order … B2C and B2B businesses
based on 3 criteria of client’s activity: Recency of last purchase (action), Frequency of purchases (action) and sometimes Monetary ($ spent in Company)
allows Company to develop optimal Contacts Plan for prospects and existing clients and to optimize budget figures

7. Self-descriptiveness : 80%
RFM-segmentation: R-recency, recency of last purchase
Self-descriptiveness : 80%

8. RFM-segmentation: F-frequency, number of purchases
Self-descriptiveness : 60%

9. RFM-segmentation: combination R and F
Self-descriptiveness: 90%

10. RFM-segmentation: how do we regroup our 25 segments?
In order to get as a Result global marketing segments we analyze each of 25 segments Response to several standard actions
Final Segments
Very Good Clients
Good Clients
New Arrivals
Casual
Purge
Sleeping

11. Where do we use these segments? = For each action results analysis
Unique standard for Actions Archives → Platform for planning and DM activities optimization
Opportunity to define NORMS (AOV, Latency) for each Segment → Operational Warning System
Operational tool for Concrete Action efficiency estimation

12. Where do we use these segments
Where do we use these segments? = For global business efficiency estimation

13. Database seasonal KPIs
If Rule 20/80 works for you?
And who is the Gold of Your Business?
SEASON duration should be defined depending on company actions regularity/rhythm (1 per month, quarter, 6 months..)
As a result of identical periods comparison (Q3 2004/2005) we can identify at once problem KPIs → Operational Monitoring
All these DB KPIs let us for 95% precise next seasons budget forecast
Knowing 1) Volume of your Active DB at the end of Season
and 2) Average qty of Orders per Season and
3) Average Turnover Per Each Active Client
You can Calculate Qty of Orders and Turnover
for next Seasons

14. Segmentation allows you to personalize your Annual Action Plan
3/ Response = from History + Test
1/ Actions for your Future Action Plan are chosen on the basis of your Historical Actions Results + Tests
2/ Potential in Each Segment for the beginning of Each Season is calculated on the basis of TRANSFORMATION RATE + possible FACTOR

15. Add Average Order Value (historical or planned) = Your Have Your Budget!
Usage of Pure Historical Data or History + Improvement depends on your future marketing plans
Monitoring of Planned Budget is realized with already mentioned tools: Action KPIs + General Database KPIs

16. Scoring: 2nd step to improve Action results
Answers to the question: “What should I do if Segment X gives me Response lower than Break Even Point?”
Score model is a system of criteria with concrete weights allowing us to identify the weight = probability of each client to answer or not to your offer
Based on all information on each client you have in your database: Region, Age, Gender, Lifestyle data … etc
Application of Score Model to the concrete Segment allows to identify final potential corresponding with Current Action Objectives (for example: 7% Response Rate for Product Offer of 230 USD)

17. Do we need more? Scoring. Recency 80% Frequency 60%
RF = Database Segmentation = 90%
How to obtain 10% more?
Check: Monetary, Age, Region, Gender, Product list, …

18. How score works History Score Recency Frequency Monetary Age Gender
Region
Product X
0-30 days
+ 20
2 orders
+ 5
1200 rb
+ 2 35
- 4
female
+ 0
Southern
- 0.5
yes
+1.5
total 24

19. How score works History Score Recency Frequency Monetary Age Gender24
History
Score
Recency
Frequency
Monetary
Age
Gender
Region
Product X
31-60 days
+ 12
3 orders
+ 6
2500 rb
+ 3 55
+ 2
female
+ 0
Far East
+1.5
yes
+1.5
total 26

20. How score works History Score Recency Frequency Monetary Age Gender24
History
Score
Recency
Frequency
Monetary
Age
Gender
Region
Product X 26
365+ days
- 5
1 orders
+ 1
5000 rb
+ 4 40
+ 0.5
male
+ 1
Central
+1.5 no +0
total 3

21. How score works History Score Recency Frequency Monetary Age Gender24
History
Score
Recency
Frequency
Monetary
Age
Gender
Region
Product X 26
days
+ 3
6 orders
+ 5 3
8000 rb
+ 5 55
+ 5
female
+ 0
North-West +1 no +0
total 19

22. How score works History Score Recency Frequency Monetary Age Gender24
History
Score
Recency
Frequency
Monetary
Age
Gender
Region
Product X 26
days
+ 0
1 ordr
+ 1 3
600 rb
+ 0 45
+ 1.5 19
male
+ 1
Volga -1
yes
+1.5
total 4

23. How score works 24 24 26 26 3 19 4

24. How score works
“A” 26 24 19
Score > 5 4
“B” 3

25. Best combination: segmentation + scoring
Identify exact Segment potential responding to Expected Result
Very useful in work with Low Segments (Purge, Sleeping, even Prospects)
More additional information on client in your database → More precise Scoring Model you get
Depending on Company’s opportunities TEST of each your New Action allows you to do 95% forecast of this Action future results (for extrapolation)

26. Profiling: 3rd step to improve Action results
Answers to the question: “How to optimize Concrete DM Offer?”
Knowing the Profile of customers you are interested in (their habits, preferences, social status) you can choose optimum Marketing approach to them
Comments: the horizontal scale shows the index of over- and under-representation. This index shows the ratio of the response rate in each group to the average rate.

27. THANK YOU FOR YOU ATTENTION!
questions?
contacts:
Тел