Customer Contact Strategy & Profit Optimization

Proposal
February, 2014

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CHALLENGE
Ross-Simons Jewelry is interested in finding ways to optimize contact strategy across 41
drops. Results have been good, but there is an interest in improving overall results by
leveraging a contact/suppression strategy that factors in book to book cannibalization,
frequency, and cadence of offers.

CURRENT CIRCULATION PLAN

8 Buyer Books
3 Sizes
Slim Jim - Sales
Full Size
Digest - Book of Deals
Circulation

Approximately 18,500,000 per year

41 Drops
Excellent housefile model mailed by demi-deciles
260,000 12 month buyers
Reactivation
13-24 month smaller
8 year reactivation efforts
Top deciles get all 41 drops
Emailing relentlessly
Metrics
50% of orders come in during the first 2 weeks
AOV $250
0-12 Mos $7/Book
Hotlines $20/Book

SourceLink Customer Intelligence Tools

SourceLink utilizes CRISP (Cross Industry Standard Process for Data Mining). When
combined with our proprietary techniques, CRISP ensures best in class modeling and
analytic results. The following chart outlines this rigorous methodology.
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Phase

Activity Details

Business
Understanding

Data
Understanding

Data Preparation

Model
Development

Establish business and modeling objectives

Familiarization with client business

Identify key data sources available

Identify in detail data fields that will be available and
can be used for building the model

Clean the data and format the data

Outlier and Missing Values Treatment
Create modeling dataset
Create appropriate target variables based on
demographic, geographic, product or service and
transaction related variables
Single View Foundation for model development

Exploratory Analysis, Hypothesis Building

Univariate analysis
Develop model on development sample
Validate model on hold-out sample

Evaluate models performance in the real world over

time
Calculate business impact of deploying model
Optimize model based on feedback from evaluation
Present output to business users

Evaluation &
Optimization

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Successful direct marketing programs start and end with the data. That's why SourceLink
continually invests in building and maintaining our National Consumer Database, giving
our clients unprecedented insight into their highest opportunity customer and prospect
audiences.

SourceLinks National Consumer Database

SourceLinks National Consumer Database is our proprietary, enhanced database,
created by us and not sold or used by the wholesale data resource community. We have
more than 200 million consumer records populated on our database. SourceLink doesnt
take compiled data at face value. We analyze it to determine which elements are most
accurate and have the most coverage. This assists in overcoming flaws in individual
data sources and improves overall performance. SourceLink continuously provides
demographic enhancements by using a variety of data sources to cross-validate
information, fill in missing data and continuously model for the most comprehensive
coverage. By way of substantiating the value of our enhanced demographics SourceLink
has utilized validated client customer information for comparison purposes to contrast
typical raw data on national files versus SourceLinks hybrid of multiple sources and
models. Key variables such as Home Ownership, Marital Status and Children in the
Home are examples of demographics that significantly improve modeling and
segmentation results when SourceLink enhanced data variables are used.
Data richness and accuracy are the strength and foundation of our analytics. This
includes our rebuilding and updating of the following variables nationally:

Home Value

Presence of Children in the Home

Household Income

Marital Status

Home Ownership

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Lifestyle/Interest Data

SourceLink Campaign Optimizer sm (Multivariate Testing)

SourceLinks Campaign Optimizer sm uses advanced testing techniques to
simultaneously test multiple variables of your marketing efforts at once while using the
same sample size as a standard split A/B test. We can test up to 32 variables
simultaneously. Campaign Optimizer will allow Ross Simons to conduct campaigns
within a structured testing and learning environment. Multiple contact variables including
catalog format, frequency and cadence can be tested simultaneously. Campaign
Optimizer will provide Ross Simons with actionable insights on each variable tested, as
well as test for interactions between the test elements, providing more detail than
standard split A/B testing techniques. It is a very cost effective way to produce
significant response lift with a single campaign, analysis, and deployment based on
results.

Methodology
SourceLinks proprietary Campaign Optimizersm is based on the Design of Experiment
(DOE) approach to analyze several factors within the same direct marketing effort.
SourceLinks Campaign Optimizer process begins with consultation with Ross Simons
on sample size and the variables to be tested. Elements to be considered in determining
appropriate sample size include the confidence level desired, historical response rates
for similar campaigns, the amount of improvement in results considered significant
(significant effect) and an allowance for sampling errors. The equation below is utilized to
determine appropriate sample sizes.

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SOURCELINK SOLUTION
CUSTOMER CONTACT OPTIMIZATION STRATEGY
Ross-Simons wishes to utilize their marketing budget in the most efficient,
targeted manner to ensure the highest Return On Marketing Investment (ROMI).
ROMI is greatly influenced by controlling frequency, optimal catalog selection and
minimization of cannibalization. By combining sophisticated statistical models
and processes SourceLink can produce a contact plan tailored to each customer
by analyzing historic strategies and trends along with performing advanced
statistical tests. This includes:
Segmented Profiles of customers
Optimal catalog format and sequence
Optimal contact frequency for customers
Contact suppression targets and intervals
Re-engagement of customers after appropriate intervals

Statistical Methodologies:
Modeling techniques that may be employed include:

Decision Trees
Regressions
Neural Networks
Ensemble Models
Next Book to Buy From

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The analysis will take place in five phases, 1) Segmented Customer Profile 2) Campaign
Optimizer Multivariate Testing 3) Contact Optimization Analysis 4) Strategic Deployment
Consultation and 5) Attribution Analysis (response and revenue).

Segmented Customer Demographic and Transactional Profile

o SourceLink will utilize the name and address of Ross Simon customers
and append hundreds of variables including demographics, lifestyle
characteristics and socioeconomic variables.
o Ross Simons transactional data will also be leveraged as a dimension of
the profiles
o Potential segments include
Customers who buy from each catalog
Multi-title Customers / Best Customers based on RFM
Generational

Campaign Optimizer
o Using multivariate analysis and design of experiment to test multiple
factors, cadences, and channel mixes.
o Run multiple experiments over a pre-determined time period
o Produce analysis that quantifies the effect of individual factors and their
interactions
Contact Optimization / Marketing Analysis
o Using the historical analysis and campaign optimizer data to analyze
contact strategy
o Suppression modeling and analysis
Chronic non-responder model
Cannibalization analysis/model
Unprofitable customer analysis
Strategic Deployment Consultation
o Recommend segmentation approaches based on customer profile.
o Create an individualized plan/calendar for each customer as part of an
ongoing test and learn campaign approach.
o Continual refinement of cadence, frequency, suppression and targeting
for incremental improvement.
Revenue Attribution
o Using five dimensions to analyze the effectiveness of the contact
optimization and accurate calculation of revenue to each channel and
campaign
o Five dimensions:
Order of events
Frequency
Event Correlation
Time Decay

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Effectiveness

Ross-Simons Data Required: Initially, 3-5 years of Ross-Simons mail files and
responders as well as pertinent customer data (TBD). Additional results data will
be required for program reporting and analysis.
Deliverables:
Customer Profile PowerPoint presentation by webinar. This can be
delivered in person with a one day strategy session for an additional
charge.
Multivariate Test Plan
Quarterly Contact Plan (increasingly leveraging learnings each quarter)
Suppression Score (bottom of the circulation identified with model(s)
focused on identifying the bottom targets not the traditional approach of
just the lowest of the top targets)
Optimization Score (top tier of the circulation identified with model(s)
focused on identifying top targets)
Attribution Analysis
Timing:
Multivariate Test Plan 2 weeks from signed Statement of Work. The
initial plan will cover 60 days and subsequent plans will be quarterly. The
first test cells will not leverage learnings from the customer profile, which
will be incorporated into subsequent plans when available.
Customer Profile 5 weeks from receipt of customer data.
Analysis and Recommendations Initial analysis will be ad hoc
beginning 8 weeks after the first multivariate tests have dropped.
Standardized monthly reporting will be developed at 6 months.
Investment:
$51,000 Modeling and Analysis / $40/M model scoring
$9,000 Upfront Setup. $3,500 per month. We can also offer to end the contract
at the end of six months at Ross-Simons option if the program was not getting
the desired results.

BENEFITS

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The benefits of this approach are that Ross-Simons can continue to leverage models
and methodologies that have been successful while identifying new opportunities for
significant incremental gain in the overall health of the customer portfolio. Rather than
focusing exclusively on response, Ross-Simons can leverage some quantity of mail
circulation against other business objectives such as AOV, reactivation, and overall
profitability. Because it is a tradeoff approach, this can be accomplished without a drop
in results or an increase in costs.

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