Direct Marketing, Mail Order, and E-commerce News from the National Mail Order Association
By Steven Permuy
Periodically, I get together with a couple of good friends I knew from high school and go into a recording studio across from the Count Basie Theater in Red Bank, NJ (near the famed Jersey shore) to play songs that were relevant in our teens and then hang back afterwards to watch the engineer work his mixing and mastering magic behind the console. Now, the console features an elaborate equalizer that is used to control, individually, a number of different frequency bands in the recording system, which is used to fine-tune the sound (not altogether different from what you’d find in a home stereo system).
The foregoing reminds me a lot of what Contact Optimization can do for the marketer. That is, to make the best decisions regarding what eligible customers get access to your campaigns through the measurement, arrangement and rearrangement of various promotional, product and individual inputs—getting closer to that fabled market of one.
What’s the mantra?
In direct response, the mantra of ‘testing and learning’ coincides with the precepts of optimization, which seeks to make a system, process or decision as fully functional or effective as possible. It’s a discipline that is exercised broadly in fields afar of direct marketing as Realpolitik foreign policy and treatment planning in medicine, for example, but is no less importantly applied than in the marketing sciences.
Optimization is about testing…testing what? How about testing treatments comprising various product and channel permutations, for example, where each permutation (alternative offer) provides a certain return?
Going For The One
Too often, in the process of ‘hitting numbers,’ are marketers not making the best choice for the individual—i.e., ranking campaign selections in a priority fashion (by deciles)—which culminates in opportunity costs (money left on the table). This is where Contact optimization comes into play because you want to shift from selecting an individual solely on the basis of meeting product campaign quotas, towards selecting the ‘best offer’ based on the ‘best economic contribution’ resident in each individual.
Contact optimization compares a range of offers for each individual supported by a mathematical equation (e.g., the propensity of an individual to take action from a communication, multiplied by the value of that action, less the cost of that communication) that is overlaid with real world business rules or ‘constraints’ (e.g., budget limits and segment exclusions) and “what-if” campaign scenarios that are exercised outside of, but informs, the individual selection; furthermore, it is a statistical methodology for optimizing marketing contribution across silos (multiple channels/campaigns) that applies and integrates those interactions, putting them on a common basis (e.g., ROI analysis across the enterprise).
Grist for the mill (the secret sauce—shhh)
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