WHITE PAPER

24 SEVEN

New Customer Acquisition Strategy

Based on Customer Profiling Segmentation And Scoring Model

White paper by:

Ravi Vijayaraghavan
Vice-President and Head - Global Analytics

February 2010
 WHITE PAPER

24 SEVEN
New Customer Acquisition Strategy

Table of Contents
Executive Summary 4

Task 4

Challenge 5

Methodology 5

Results 8

Scoring Model 14

Strategy Development 15

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New Customer Acquisition Strategy

Introduction

A customer profile is a snapshot of who your customers are, how to reach them, and
why they buy from you. Deeper understandings of new and existing customers by
collecting customer profile increases sales. This information is used to segment
prospects more effectively, as well as send targeted communications more
precisely to them.

Accurate market segmentation is essential in successfully acquiring customers.

Making the right strategic and operational decisions can result in higher lifetime
customer value and increased customer satisfaction.

Two main goals of market segmentation have remained constant over the years. At
a strategic level, segmentation should help an organization rapidly evaluate new
opportunities. At an operational level, segmentation efforts should yield information
to help craft successful marketing offers to acquire prospects.

The statistical scoring model generates a score value that indicates the probability
of conversion based on segmented group characteristics. This provides a
foundation for more advanced selection of potential customers. Statistical score
value predict prospect behavior more accurately than judgmental score value, but
require much more data, and staff allocation.

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Task

To increase Sales Per Hour (SPH) by applying analytics

Challenge
Customer Acquisition based on demographic and geographic characteristics,
and time-periods optimization management for different segmentation
approaches to define hot prospects
Substantial difference in prospects behavior across various geographical
parameters - time zone, province and postal code
Identify hot acquisition targets by evaluating future potential of each segment

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New Customer Acquisition Strategy

Methodology

I. Selecting the Data Source

Data for modeling can be generated from number of sources. Those sources are
two types: Internal and External. Internal data sources are those that are generated
through activities undertaken by contact center solution providers like dialer
transaction, agent performance etc. External data sources includes lead
information, large prospect database etc.

The data sets used to arrive at Analytical model for analysis are:
i. Lead Information
ii. Agent Background
iii. Dialer Transaction
iv. Job / Campaign Session

i. Data Set: Lead Information

Source: Customer Lead File
Fields Description
Lead ID Lead Identifier
List Code Identification Number for each set of the Lead
File
First Initials Customer’s First Initial (Mr., Mrs., etc.)
First Name First Name
Middle Name Middle Name
Last Name Last Name
Phone Number Home Phone Number
Country Name of Country
State Name of State or Province
City Name of City
Zip Code Zip Code
Time Zone World Time Zone
Product Type Type of Service or Product
Job Name Job Name
Job ID Unique Job Identification Key
Promotional Offer Promotional Offer Codes if any
Discount Code Discounts Codes if any

ii) Data Set: Agent Background

Source: Agent Master
Field Description
Agent ID Agent Identifier
Agent Name Name of the Agent
Gender Gender
Qualification Last Completed Educational Qualification
Experience in Company Work Experience in the Company in Months
Experience in Program Work experience in the Program in Months
Total Experience in the Total Work Experience in the Industry in
Industry Months

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iii) Data Set: Dialer Transactions

Source: Dialer*
Field Description
Lead ID Lead Identifier
Job ID Unique Job/Campaign Identifier
Job Name Job/Campaign Name
Date Date of Call
Time Time of Call
Phone Number Customer’s Phone Number
Agent ID Agent Identifier
Wait Time Wait Time to Connect the Customer to the Agent
Talk Time Time Spent on Call
Update Time Time Spent to Update Call Details
Disposition Code Disposition Code
Call Type Flag Inbound / Outbound Call
Connect Was the Call Connected to the Agent or not
* Dialer time zone to be indicated as well

iv) Data Set: Job / Campaign Sessions

Source: Dialer
Field Description
Job ID Unique Job / Campaign Identifier
Job Name Job / Campaign Name
Job Date Job Start Date
Job Start Time Job / Campaign Start Time
Job End Time Job Campaign End Time
Agent ID Agent Identifier
Login Time Agent Login Time
Logout Time Agent Logout Time
Idle Time Time Spent Idle Between Calls
OB Talk Time Talk Time on Outbound Call
OB Update Time Update Time on Outbound Call

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II. Preparing the Data for Analysis

Data preparation is the most important step in the analysis and model development
process. In many cases it was necessary to combine data from several sources to
create the final data set. Data cleansing is most important and time consuming
process. This involves looking for and handling data errors, outliers and missing
values.
Data Errors and Outliers: An outlier is a single or low frequency occurrence of the
value of a variable. Determining whether a value is an outlier or a data error is an
art as well as a science. Having process knowledge of data is best strength.
Missing Values: Missing values are present in almost every data set. The fact that
a value is missing, however can be predictive. It is important to capture that
information.

III. Transforming the Variables

Before making segmentation, there is a need to understand the data. For this
purpose, variety of numerical summaries (including descriptive statistics such as
averages, standard deviations, pivot tables and so forth) and study of distribution of
the data is needed. Applying graphical and visualization tools to find new insights of
different variables in the database and their importance for effective data analysis is
useful. Sometimes, the format of a variable in the raw database is not sufficient for
analysis. Hence, transform variables in accordance with the requirements of the
algorithm chosen to build the model.

IV. Selecting the Contributing Variables

In practice, all variables were not taken into consideration in the segmentation
approach. One of the reasons being, the time it takes to build a model increases
with the number of variables and another reason would be, blindly including
extraneous columns which can lead to models with less rather than more predictive
power. Some techniques are used to reduce the number of variables that eliminate
marginal and unpredictive variables.

V. Segmentation Based on Contributing Variables

Prospect segmentation is a process that divides prospects into smaller groups
called segments. Segments are to be homogeneous within and desirably
heterogeneous in between. In another words, prospects of the same segments
possess the same or similar set of attributes. For example, forecasting on the basis
of agent cluster rather than individual agent as a predictor variable. This yields more
accurate results, which are parsimonious and are also easy to understand. For this
purpose, we used different statistics and data-mining tools, such as, clustering
(K-means, K-mediods, Kohonen feature maps) to represent a group of variables.

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VI. Training and Testing Dataset Generation

A subset or sample of the database needs to be selected to build models, which are
capable of representing the whole population. Various techniques are available for
generating the training and testing datasets, such as, stratified sampling, cluster
sampling, sampling without replacement. Method selection depends on selection
according to the nature of data. Generally, a stratified sampling technique is used to
split into training and testing data set.

VII. Scoring Model Building

Model building is an iterative process. There is a need to explore alternative models
to find the one that is most useful in solving the business problem. Searching for a
good model may require us to go back and make some changes to the data or even
modify the problem statement. We used logistic regression model. The logistic
regression model computes the probability of the selected response as a function of
the values of the predictor variables.

VIII. Scoring Model Testing

We used different techniques to evaluate the model accuracy on test data set. One
of the key measures is the ‘Confusion Matrix’. This shows the extent of type I, type
II and overall errors. We consider a model is perfect if it shows more than 80%
accuracy during testing. We also use different methods to test the model, such as,
chi-square, p-value, odds ratio, and ROC curve.

IX. Model Evolution

The model generated from the testing phase would not give results for future lead
files as expected. If the expected results generate a certain percentage of error
beyond the acceptable threshold, we rebuild the model considering the recent
dataset along with the earlier dataset. The process was repeated till a stable model
was produced.

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New Customer Acquisition Strategy

Results
SAS Statistical Analysis Software was chosen as profiling, segmenting and
scoring a prospect for this analysis.
Predictive segmentation methods based on statistical analysis produced three
optimal clusters on agent performance. These three different clusters classify
agents as Very Good, Good and Average. Graphical view is depicted in Figure-1
People living within the same geographical boundaries exhibit similar buying
patterns. Segmenting markets along geographical boundaries can lead to more
specialized and focused marketing approaches. Geographical segmentation
was done based on City and Zip Code etc.:
Four city based optimal clusters were performed to make the campaign
strategy. Four groups characteristic is depicted in Figure-2
Six zip code based optimal clusters were performed to make the campaign
strategy. Six groups characteristic is depicted in Figure-3

Each segment’s propensity to buy the services was used to evaluate the future
potential of each segment.

Past call transaction data was used to know the day of a week conversion trend and
hour of a day conversion trend. This trend was utilized to call a prospect at proper
time. A time zone mapping exercise was conducted to guide the dialing strategy.
Graphical view is depicted in Figure-4.

A standard definition of segments was developed which could be used for selecting
potential prospects. Various groups could now more effectively collaborate around
tactical dialing strategies.

Figure - 1: Cluster 3: Very Good Cluster 2: Good Cluster 1: Average

Agent Based Segmentation: SPH vs Agent Cluster

0.9 0.78
0.8
0.7 0.65
0.6
SPH

0.5
0.4 0.32
0.3
0.2
0.1
0
Cluster 1 Cluster 2 Cluster 3
Agent Cluster

Figure - 2: City Based Segmentation

Cluster_PCF 3 Digit N_PCF 3 Digit Conversion

Cluster 1 68 0.10
Cluster 2 204 0.06
Cluster 3 184 0.04
Cluster 4 184 0.02
Cluster 5 204 0.02
Cluster 6 154 0.02
2.5

City Based Segmentation: Conversion vs City

2.0

0.12 0.108
1.5

0.1
Conversion

1.0
Prin1

0.08 0.069

0.06 0.048
0.5

0.04 0.029
0.0

0.02
-0.5

0
Cluster 1 Cluster 2 Cluster 3 Cluster 4
City
-1.0 -0.5 0.0 0.5 1.0 1.5 2.0
Prin2

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Figure - 3: Segmentation Based on First 3 Digits of Zipcode (PCF3Digit)

Cluster_PCF 3 Digit N_PCF 3 Digit Conversion

Cluster 1 68 0.10
Cluster 2 204 0.06
Cluster 3 184 0.04
Cluster 4 184 0.02
Cluster 5 204 0.02
Cluster 6 154 0.02

2.5
Zip Code Based Segmentation: Conversion vs First 3
Digit of Zip Code

2.0
0.1
0.08

1.0 1.5
0.08
Conversion

Prin1
0.06 0.053
0.041
0.033
0.04 0.026

0.5
0.017
0.02

0.0
0
Cluster 1 Cluster 2 Cluster 3 Cluster 4 Cluster 5 Cluster 6

-0.5
First 3 Digit of Zip Code
-0.5 0.0 0.5 1.0 1.5 2.0 2.5 3.0
Prin2

Figure - 4: Trend Behavior: Day of a Week and Hour of the Day

Week Day Trend: Conversion vs Week Day

0.045 0.0416 0.04
0.038 0.037 Hourly Trend: Conversion vs Hour in a Day
0.04 0.034 0.035 0.09 0.081
0.035 0.08
Conversion

0.03 0.07

Conversion
0.025 0.06 0.048
0.05 0.043 0.041 0.04
0.02 0.037 0.036 0.035 0.034 0.037 0.038
0.04 0.034
0.015 0.03 0.024
0.018
0.01 0.02
0.005 0.01
0 0
Monday Tuesday Wednesday Thursday Friday Saturday 1 2 3 4 5 6 7 8 9 10 11 12 13 14
Time (in hours)
Week Day

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New Customer Acquisition Strategy

Scoring Model
The scoring method was used to find out a score value of a prospect based on a
collection of evidence as a whole while considering numerous dimensional groups.
This provides a foundation for more advanced selection of potential prospects.
Statistical score value predict prospect behavior more accurately than judgmental
score value. Logistic Regression statistical model was used to score a prospect.

A decile analysis was done to know the top scorer where conversion is high. It also
helped to make an overall segment a prospect as hot, warm and cold. A graphical
plot of decile chart is given below to visualize hot, warm and cold.
Hot Prospect: Score Value (0.61 – 0.80 and 0.81 – 1.00)
Warm Prospect: Score Value (0.41 – 0.60)
Cold Prospect: Score Value (0.0 – 0.20 and 0.21 – 0.40)

Decile Chart Based on Probability Score

8.00%
7.00%
% of Conversion

6.00%
5.00%
4.00%
3.00%
2.00%
1.00%
0.00%
0.0 - 0.12 0.21 - 0.40 0.41 - 0.60 0.61 - 0.80 0.81 - 1.00
Score Value

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New Customer Acquisition Strategy

Strategy Development
Whom to call: Prospect selection strategy
Predict prospects score (based demographic variables, geographic
variables) using scoring model. Find out which decile it belongs to and
classify as hot, warm or cold prospect
When to call: Dialing Strategy
Select weekday using “Weekday time zone wise conversion trend” table
Select hour of a day using “Hourly time zone wise conversion trend” table
Initial stage makes ‘X’ number of dials to a particular prospect phone number
to make maximum 3 connected dial
If prospect is not connected then make second stage ‘Y’ dials after keeping
an interval of time gap
Who will handle the call: Agent allocation strategy
Initial stage selects Skill (Very good, good and Average) based agent
allocation to convert a prospect to customer
Second stage allocates mixture proportion of very good, good and average
agent group to hot, warm and cold prospect

The product strategy group to define the product specifications and develope an
acquisition plan for a new product or service

The campaign group to identify the best geographical area and partnership
strategy

The Analytics research team can drill down deeper into the segment for new
insights about prospect attitudes towards support

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