Date post: | 17-Aug-2015 |
Category: |
Business |
Upload: | lara-zaccaria |
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Increasing Profit
by Improving Predicted
Coupon Redemption
Group 6Aparna Sosale | Melanie Kaiser | Lara Zaccaria | Tove Perlhede | Christer Lundmark
Strategic targeting to narrow down the most valuable
customers.
Increase ROI
WHY PREDICTIVE MODELLING?
• To support business decisions with strong, actionable insights gathered from customer data.
• To highlight future possibilities for better investment opportunities.
1
Optimal number of people to send the
coupons to
BENEFIT OF PREDICTIVE MODELLING
2RANDOM MODELLING HUMAN JUDGEMENT PREDICTIVE MODELLING0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
14%
25%
39%
3
Removing Insignificant
Variables
Examined Ideas
Low P-Value
Significant Variables If formula New
Variables
PROCESS OF MODEL CREATION
FINANCIAL BENEFITS
4
Total No. of Customers to Target 15,000,000
Total No. of Targeted Customers Cost to Target Per Customer
Total Cost to TargetAverage Prediction
Total No. of Redeemed CustomersGross Profit from Redeemed Coupons
Gross Profit from Redeemed CustomersNet Profit
Return-on-Investment
2,250,000€ 0.15
€ 337,50039%
886,500€ 0.90
€ 797,850€ 460,350
36.4%
1,800,000€ 0.15
€ 270,00043%
766,800€ 0.90
€ 690,120€ 420,120
55.6%
3,000,000€ 0.15
€ 450,00035%
1,050,000€ 0.90
€ 945,000€ 495,000
10%
15% 12% 20%
6
12% 13% 14% 14% 15% 17% 20%€ 380,000
€ 400,000
€ 420,000
€ 440,000
€ 460,000
€ 480,000
€ 500,000
€ 520,000
0%
10%
20%
30%
40%
50%
60%
€ 4
20
,12
0
€ 4
39
,33
5
€ 4
43
,47
5
€ 4
59
,90
0
€ 4
60
,35
0
€ 4
89
,60
0
€ 4
95
,00
0
56%50% 46% 46%
36%
28%
10%
Net Profit Return on Investment (ROI)
Cut-OFF
Ne
T P
RO
FIT
RO
I
FINANCIAL BENEFITS
RESULTS OF DIFFERENT CUT-OFFS
5
Maximum ROI
12% 12% (55.6%) 20% (€495,000)
Beyond 15% Net Profit
increases, ROI decreases
Best Cut-Off
Maximum Profits
€
MODEL IMPROVEMENT
Increase ROI
Cut-Off
Most valuable customers
‘Special K Last Time Bought’Day & Time
Redeemed cou-pons of category
cereals.
6
Other Special K Products
• This will lead to the ultimate short-term goal to an increase in profit and Special K cross-sales.
8
Personal Shopper
Sally
Future of Virtual
Assistants
Good Morning Philippe! Would you like to shop
today?
RETAIL OF THE FUTURE