Who Let The (“Sleeping”) Dogs Out?
What are ‘sleeping dogs’ and why you shouldn’t market them
Today’s cross-sell efforts are focused on deepening customer relationships. Most companies target existing customers using traditional response modeling to determine responders vs. non-responders to find which customers to treat. However, this somewhat antiquated method of targeting existing customers can come with some serious repercussions.
Uplift, or incremental response modeling, is an analytical technique that helps identify what ‘purchasing’ state the customer is in. This technique is based on the fundamental premise that each customer, whether treated or not, will behave differently. Some customers actually will buy what you’re offering whether you treat them or not. These are your “Sure Things”. Customers who will only buy if treated are “persuadable” and this is where your resources and marketing dollars must be focused. “Lost causes” will not buy your products, and “sleeping dogs” often will defect if treated. To visualize, your customer falls in one of four boxes for every product at any moment in time. It is your job to know where they fall to know if you should treat them or not.
Treating someone considered a sleeping dog not only can discourage the customer from buying, but worse, bring focus to the entire banking relationship and cause the customer to churn. The very action designed to deepen the customer relationship can create an adverse reaction. Don’t worry, an individual identified as a ‘sleeping dog’ doesn’t always remain in this state. Factors that drive “right customer, right offer, right time” determine whether a customer is considered a sleeping dog or not and this state can change over time.
Traditional marketing and offer management strategies determine success simply by measuring offer response rates and set the bar so low that a measly three percent response rate is deemed successful. The effectiveness of marketing and offer management strategies should be designed and measured based on the positive or negative impact treating a customer can bring. Only then do you see the true benefit of these strategies and uplift modeling most effectively identifies targets and determines success.
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