Marketing investment optimization

• IBM provides companies with a new level of sophistication in managing their marketing budgets with the goal of ensuring an investment approach that maximizes the revenue and profit yield per dollar spent over a discrete time horizon.
• Customer Equity Lifetime Management Solution uses a 'financial' investment-based approach to forecast, plan, and budget marketing activities, based on a scientific framework of leading-edge algorithms. It leverages data and tools from existing marketing information and decision systems, such as Siebel, SAS, Epiphany, etc. Read more below!

IBM research indicates that only 30 percent of companies regard their CRM investments as successful. Furthermore, the investment made by many companies in marketing activities is a key component of their overall SG&A spend. However, most of these companies cannot effectively measure the return on investment they receive in terms of increased sales or revenue. Areas such as mass media and education promotions continue to remain "blind faith" investments.

The ineffectiveness of many of these programs can be attributed to:

• The inability to develop a single view of the customer
• A lack of business processes and technology solutions to effectively coordinate customer-focused activities at every customer touchpoint
• The inability to provide customers with a consistent, value-enriched experience across channels
• The tendency to take a reactive approach to customer information, rather than leveraging it to deepen customer insight and build loyalty
• Customer segmentation, transaction/purchase pattern analyses and churn predictions that do not provide an understanding of the actions and sequences to optimize customer value within the marketing budget and risk constraints.

Marketing managers need an enhanced level of business insight to control marketing spend while increasing customer value. The Marketing Investment Optimization solution set provides a more sophisticated segmentation and targeting strategy that helps to improve ROI using advanced analytic tools and techniques.

The IBM Marketing Event Optimization (PDF, 167KB) takes a unique approach using analytics to determine the most profitable mix of marketing investments that align to a specific set of customers. Using IBM's patented horizontal marketing methodology, this approach develops a per-customer management plan based on expected returns, campaign costs, promotional interaction, minimum and maximum pieces per campaign and overall budget for a given period. The goal is to maximize profit over all customers in a way that does not over-invest in the "best" customers, under-invest in the "worst" customers or ignore rising stars.

The IBM Customer Equity Lifetime Management (PDF, 112KB) was designed to dramatically enhance the ability of Marketers to deliver higher returns on marketing investments. The solution models the customer relationship as a journey through various critical states in the customer lifecycle and recommends actions and a budget for each state/time to maximize lifetime value and minimize risk. The results include improving customer targeting efforts, developing long-term relationship programs, and maximizing ROI for each customer/segment. Marketers using CELM can also simulate results of targeted campaign-product-customer mix policies and manage the cost/benefit and effectiveness of resource allocation.

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