Many marketers still make the mistake of trying to sell extra products purely for the profit of the company, rather than basing it on what's best for the customer. Neil Hayward gives his tips on how to determine the next best offer.
By Neil Hayward, SAS Global Customer Intelligence Practice
Back in 1995, I recall an argument with a colleague (who at that time was head of retail for a financial services organisation in the UK) whose position was that the branches were there to serve our customers rather than sell to them and that customer satisfaction through great service was his key focus. My contention was that selling, when done properly, was great service - it provided opportunity for the customer; the customer benefited. The fact that the company also benefited was of no consequence, at least from the customers perspective. He didn’t agree and neither did the counter staff, given how they had been trained.
Clearly, times have changed. Organisations are increasingly realising the value behind understanding the customer and that making a pertinent product or service recommendation to them at the right time is part of the act of serving the customer. A wide spectrum of published research, from universities and analysts alike, indicates that the typical response rate to a well-positioned selling offer in the inbound service channels is more than 40%.
Now, admittedly, much of this falls into the category of "...and would you like batteries with that?", which requires no real insight or intelligence. But in many cases, the complementary cross or up-sell offer to make is not nearly as clear cut and requires strong insight into both the customer's needs and the precise nature of the prevailing situation. To give some idea of the value here, a mid-sized European bank once calculated that just a 0.1% increase in cross-sell rates for its main lending range would net an additional $4m in revenue.
So, clearly, the concept of next best offer is important, as is the benefit of each incremental fraction of uplift in response and conversion rates. The problem is that most marketers, when pushed, consider the evaluation of next best offer to be a simple process: one that takes all products and services that are available, calculates which one is most likely to hit home for a customer and how much revenue it will make, then sell it. It's a product and an organisation-centric view of the process that does little for the customer experience. Also, such a process doesn't take all of the nuances into account: marketers can do so much better.
Here are some rules and guiding principles on how to optimise offers to ensure you’re doing what's best not only for the organisation, but also for the customer:
- Stop thinking of next best offer and instead think of next best action
The first thing to consider in any interaction with the customer is whether a selling proposition is appropriate at all. Is there a complaint to handle or an issue to fix? If so, at what cost? Is the customer about to walk? What discount do we have to make to keep them? Is there a customer-care service opportunity that would create customer loyalty that is of greater value than any cross-sell ever could be? Decisions on what to do under these circumstances need to take into account the current and future lifetime value of the customer, the risk of them leaving, and even the scale and scope of their social network.
- Is there something in the shopping basket?
The most obvious and predictive driver of next best offer is that the customer has just bought something, or there is something already in the shopping basket. Market-basket association analysis, potentially augmented with sequence analysis, can help you determine the inter-relationships between product purchases and help determine recommendations on the basis of 'people (like you) who bought product X also bought product Y'. It is the use of analytical techniques such as these that drove an increase of 10% in the response rate of cross and up-selling offers for one major US online gift retailer, and allowed them to increase the rate of repeat business they were getting by around 25%.
- Look out for compelling events
Assuming that there isn't a complaint and there is nothing in the shopping basket right now, is there anything else that might be indicative of customer need? Can we use insight from the customer's previous navigation of your website – perhaps they clicked on certain items or viewed certain forms. Equally, is there anything significant about the customer's use of existing services or products - perhaps the first use of a product facility or an accelerating increase in the amount that they use a specific service. These are all things that can be trapped using the right analytical technologies and serve to trigger calls to marketing action - in other words, an event-based next best offer. These types of trigger analytics are at the heart of the 'hot leads' generation capability of one of the leading US banks, helping them increase branch sales by more than 300% year-on-year.
- Synchronise inbound and outbound marketing
OK, so no complaint, nothing in the basket and the customer is pretty dormant – until now. So, what to offer? Well, perhaps you have recently sent a particularly attractive offer through the post or via an e-mail (or are going to do so in the next couple of weeks). Synchronising your outbound marketing actions with the inbound conversation will allow you to follow up or coordinate with offers that have just been made through other channels. All this needs is for your inbound next best offer decision-making technology to understand what your outbound marketing systems have done. And, for that matter, vice versa. For this, shared contact-history records are a must. No more conflicting offers or over-solicitation through the different channels.
- Do the product-push thing
Only if none of the above are relevant is it then appropriate to do what most marketers would naturally do – and that is to take all the products and services that are available, calculate which one is most likely to hit home for a customer and how much revenue it will make, then offer it.
Building infrastructures and processes that ensure these rules are followed is not simple but with the technology and systems that are around today, neither is it that difficult. The whole concept around next best action, as opposed to Next Best Offer, is so valuable that it’s worth taking the care to get it as right as possible to deliver an experience that not only will your customers cheer but will make you significant profit from 'selling as a service' - something that even my ex-colleague from 1995 would agree with.