Predictive Marketing

Chapter 5Play One: Optimize Your Marketing Spending Using Customer Data

Optimizing marketing spend is a vast subject to cover on its own. However, most of the approaches lack customer behavior and predictions as their focal point, which leads to media response optimization, and not true marketing optimization.

When asked to allocate marketing budgets, most marketers immediately think about allocating budget to the most important sources of revenues, the best performing channels and the best performing keywords from a response perspective, ignoring the customer who responds to marketing. However, we want to introduce a different framework to think about marketing spending: the predictive marketing way to allocate spending is based on allocating dollars to the right people, rather than to the right products or channels.

As we have said in Chapter 4, your most important job as a marketer is to optimize the lifetime value of every customer, and the customer equity of your customer base as a whole. Therefore, you need to allocate your budget by taking customer into account. In this chapter we look at the following framework when it comes to allocating marketing budget:

• Create separate plans to invest in acquisition, retention, and reactivation.
• Differentiate your spending on high-, medium-, and low-value customers.
• Find the products that bring in the highest lifetime value customers.
• Find the channels that bring in the highest lifetime value customers.

Invest in Acquisition, Retention, ...