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Portfolio Pathing: Turning Analytics into Actionable Intelligence

By: PWelsh on August 14, 2015

portfolio-pathing

In an earlier blog post, I discussed how behavioral segmentation aims to address the issues that traditional segmentation fails to do so. Historically, “traditional” or demographic segmentation has been used to target customers and prospects. Demographic segmentation classifies customers and prospects according to various demographic criteria and then these different subsets are targeted with different marketing activities and engagement.

On the other hand, behavioral segmentation divides customers and prospects into subsets based upon their attitudes, uses, knowledge, past purchase behavior (if applicable), and how they have previously engaged with the brand.

However, before brands can even begin to think about utilizing segmentation to its maximum potential, brands need to have a thorough understanding of exactly who their customers are and the behaviors they exhibit. At Customer Portfolios, our highly strategic and analytical approach to delivering actionable insights from data is called Portfolio Pathing.

Portfolio Pathing helps to define baseline behavioral segments and provides a retail marketing strategy focused on driving incremental revenue. Specifically, Portfolio Pathing identifies:

1. Future value creation. Future value creation is defined as the observation of customer behavior that is indicative of high future value potential. For retailers, this means understanding exactly which customer sets are poised to generate the most revenue. Not all customers are created equally and once these segments have been identified, marketers can begin creating lifecycle marketing programs that begin the nurture stream to help customers match their lifetime value.

2. Attrition risk. This is behavior that indicates a customer’s propensity to lapse. By identifying the behaviors that are most closely associated with customers who are likely to lapse, retailers can put these customers in a nurture campaign that is designed to encourage them to take action within the optimal window of time for driving a repeat purchase. By placing these customers into a nurture stream, it helps keep customers engaged and ultimately, helps grow the customers’ lifetime value.

3. Acquisition optimization. This is the prospect composite that demonstrates the potential to become an elite customer based on channel preference. Customers have a tendency to make a repeat purchase through the channel that they initially purchased through. By identifying which customers have the potential to be top or ‘best’ customers, marketers can try to accelerate engagement through the customers preferred channel of communications with content that is relevant to their previous purchase behavior.

4. Next best offer identification. Leveraging historical purchases to model next best product recommendations based on ease and value. Historical data often shows that customers are most likely to purchase the product that they previously bought. Thus, during the lifecycle, customer ease would be recommending the previously purchased product or a similar product from the same product category. However, customers have a higher future value when they move cross-category. Therefore, during the lifecycle, product value would be recommending a product that moves the customer across category, which helps to drive a higher lifetime value of the customer.

Portfolio Pathing is a strategic exercise that arms brands with actionable insights about their customers and their behavior. By knowing this information, brands can make better and smarter marketing decisions that in turn helps generate incremental revenue.

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