IBM Confidential

Customer Intelligence & Next Best Action

The “Art of the Possible” and “Best Practices”

This deck & its contents are IBM Confidential v111

Steven Pinchuk

WW Lead Customer Intelligence / Next Best Action

Advanced Analytics Center of Competence

Global Business Services, IBM

stevenpinchuk@us.ibm.com

These concepts can be applied to:

B2C as well as B2B opportunities

“Distributors” and “Consumers”

A cross industry global perspective on the concepts, functionalities, integrated analytics & their implementations

IBM Confidential 2

Agenda

Meeting your Customer’s Expectations

2

Why IBM

Thought Leadership

Implementing Customer Intelligence

How Does Customer Intelligence Do This?

What Does Customer Intelligence (CI) and Next Best Action (NBA) Do?

Next Steps

IBM Confidential

Expectations: You are competing with everyone for a customer relationship

3

The most important asset

of any company is its

Customers+

The last, best experience that anyone

has anywhere becomes the minimum

expectation for the experiences they

want everywhere…

=

The need to build 1 to 1

personalized customer

relationships

Everyone in your company needs to understand, agree on and then follow one

core strategy for ALL customer interactions

You are competing with EVERYONE for a meaningful relationship with your customer.

Customers will not accept that you cannot give them the same relationship as other

industries – including online relationships like Amazon and Google.

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Customers

WHAT

Your

WANT?

Expectations: Customers want it their way or they will leave to find it.

Respect

my time

&

privavcy

Can You Consistently Give

Them What They Want

ANYTIME, ANYWHERE?

Customers want a mutually beneficial relationship not impersonal campaigns to segments

Do you know

Do not

send me

spam!!!Excite

me

Educate

& Grow

with me

Let me

choose

Nurture

my lifetime

not my

tactical

value

“Predict what I want & give it to me when and how I want it”

Find

me

Know

ME

Or I might

just leave

you or

ignore you

until I want

something

or…4

Once you

break the

relationship it

will cost a lot

to rebuild if I

let you

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Expectations: NBA requires long term vision broken into steps with ROI

NOT

Crawl Walk RUN

Before you begin this journey you need to know where you want to end up…..

Then you can create a multi-step straight line approach to their - with ROI after each phase,

versus trying to piece many small tactical projects together to reach an unknown end state.

5

We need to understand the long term personalization goals and break them into steps with ROI

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Companywide

Web

Mobile Apps

Transactional data

Customer interaction

history

Customer

demographic data

Twitter

Weather

Location*Adapted from Forrester, 2014

Data Sources

structured & unstructured

Expectations: The foundation for customer centricity is integrated companywide predictive customeranalytics

6

Multiple Customer

touchpoints

SMS

E-mail

Direct mail

Social

Mobile Apps

Face to face

Chat

Call center

Social

Mobile Apps

Web

Outbound Batch Mode

Inbound Real Time

Your customer knows everything you have done with them and

should know about them, every interaction…most companies do not

aggregate all this info so to customers they do not seem to care…

Next Best Action Predictive

Analytics Engine & Platform

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Agenda

Meeting your Customer’s Expectations

7

What Does Customer Intelligence (CI) and Next Best Action (NBA) Do?

IBM Confidential

Data availability drives possible types of marketing & degree of personalisation / interactions

Optimal Lifetime Value

advocate

Next Best Action Interactions for these customers increase lifetime value

How to transform our mass market Customers to known and frequent?

Mass Marketing Segment

Based Campaigns

Mass Market

NO contact info

NO individual data

Acquisition

Marketing

1) Micro-segments interactions

& 2) some individual NBA

Contact info BUT not enough

individual data/analysis for

just 1-to-1 NBA interactions

Early relationship

marketing

Known

1) Individual NBA &

2) some micro-segments interactions

Contact info PLUS enough

individual data/analysis for 1-

to-1 interactions & “lifecycles”

Strategic relationship

marketing

Frequent / Loyal

The Market’s Customer Data Type Continuum

What: From mass-marketing to mass personalization based on:

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Customer

Types

Available

Info

Approaches

Used

Lifetime

Value

Type of

Marketing

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Offer 1

Offer 2

Offer 3

Offer 2

Offer 3

Many Departments & FunctionsPerhaps with their own Customer data and/or analysis. Each creates their own view of each Customer & segments & sends their own actions to segments

3 Customer Segment InteractionsSegment members, sharing several attributes, all get the same offer at the same time triggered by the company. This is not personalized beyond a few attributes & probably

3 traditional “Mass Marketing Campaigns”Segments are created & everyone in a segment is sent the same offer at one time. The timing is entirely determined by the company. Offers can go to multiple segments

Mass

Marketing

Campaigns

What: Traditional Mass Marketing Campaigns are not a personalized relationship

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For the “mass market“ & some “known“ Customers….. Less personalized actions relying on segments of customers

Today we use traditional mass market campaigns with one “offer” going to a whole segment of diverse Customers who only share a few attributes in common – and have many that are not shared

IBM Confidential

We add Individual Batch/Real Time Personalized Interactions to existing Mass Campaigns using NBA’s Triggered Customer Interactions (individual campaigns) for “known” and “frequent/loyal” Customers to build 1-to-1 relationships

NBA is indiv batch/real time, personal interactions triggered by individual Customer actions

NBA Models, Rules,

Optimization &

Indiv Customer Data

Possible

NBA actions

You can add NBA personalized interactions & keep using segment based mass marketing campaigns for mass market outbound communications.

Many Departments & FunctionsPerhaps with their own Customer data and/or Customer analysis. Each creates their own segments & actions & sends their own actions to segments

NBA Individual Personalization

Mass

Marketing

Campaigns

What: Individual Next Best Action Personalization

For some ‘known’ Customers and most ‘frequent/loyal’ Customers customer triggered 1 to 1 interactions can build

longer relationships …..

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Agenda

Meeting your Customer’s Expectations

11

How Does Customer Intelligence Do This?

What Does Customer Intelligence (CI) and Next Best Action (NBA) Do?

IBM Confidential

Next Best Action

ContextFeedback

Information

2

Facts,

Recent Events,

Options

Decision Input,

Actions and

Outcomes

3

5

Decision

Process

Action

Additional

information *

4

3

1. An activity occurs that triggers NBA to take action. This is a TRIGGER or “use case”. Examples are industry specific and can impact many areas of a company.

2. The context from the activity is passed to the decision process.

3. The decision process augments the context with stored information and runs the decision model.

4. One or more actions are recommended to the activity.

5. Actions sent to Customers & other internal/external areas

6. The activity feeds back the results. Used to tune the model over time. Process continues until stopped.

7. Triggers can be any combination of inbound / outbound data; batch mode / real time actions, across any channel - selecting the best one for that interaction

5 Implement the Actions

* Watson & SMA can gather social & external/internal unstructured data & apply it to NBA Customer

profiles or event triggers

Marketing Loyalty Operations Supply Chain

ProductDevelopment

How: NBA’s Decision Process Loop

Once NBA is set up, events seen in data trigger these steps…

12

USE CASE Data

Signals a Trigger Event

Trigger / Interaction

1

How: Summary- Next Best Action Personalization –Outbound batch and inbound real time gives known & frequent/loyal customers 1 to 1 personalized interactions

For “Known” Customers and most “Frequent/Loyal” Customers we can use Next Best Action to build customer triggered 1 to 1

personalized interactive relationships ..and still use campaigns for “Mass Market” customers

You can add NBA personalized interactions & keep using segment based mass marketing campaigns for mass market outbound communications.

Many Departments & FunctionsPerhaps with their own Customer data and/or Customer analysis. Each creates their own segments & actions & sends their own actions to segments

Mass Marketing

Campaigns

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Predictive

Customer

Intelligence

Customer

Intelliegence

Optimizer

IBM Services

Core

Components

How: CI Functionalities That Deliver a Next Best Action Advanced Integrated Solution

Diagram below shows how the 3 components of CI join into one integrated solution. Can Be a Cloud Business Solution, Onsite or a Hybrid

IBM Services: Consulting, Research, Managed Services, On Premise & Cloud

Additional Thought

Leadership

(Customer Insight Industry Solutions)

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Overview: Feature Vectors combined with Action Clusters turn an ever expanding amount of Customer profile variables into actionable segments for targeting.Feature Vectors enable the inclusion of behavioral and social media data into the personas and segmentation to understand Customers better and assure theCustomer(s) are ready for the action(s).

Creates Customer voting record for each variable

Feature Vectors can be sourced, captured, or modeled

Unique Clustering technology organizes Customers into distinct groups based on combination of scores

Clusters can easily be updated when data is refreshed or new variables are available

How: CI Component #2– CI Optimizer

Feature Vectors / Action Clusters

Unlocks the unique DNA of each Customer and then groups Customers that are similar together

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Uses a mathematical framework to model decision making where the results are uncertain in order to recommend the next best outcome.

Considers long term implications of the next action using a state-based model

Allows for incorporating business constraints in action allocations

Typical CRM Process

Bargain

Hunter

Repeater

Loyal

Customer

Valuable

Customer

One Timer

Repeater

Churner Churner

Repeater

Loyal

Customer

Potentially

Valuable

Campaign /

Interaction A

Campaign /

Interaction B

Campaign /

Interaction C

Campaign /

Interaction E

Campaign /

Interaction D

Current marketing policy

Optimized marketing policy

Customer A’s path under…

Overview: The NBA Optimizer – Lifetime Value Maximizer determines appropriate sequence of actions across Customer states to reach desired outcome

How: CI Component #2– CI Optimizer

NBA Optimizer - Lifetime Value MaximizerDetermines the appropriate sequence of actions across Customer states to reach the desired outcome

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IBM Confidential 17

Agenda

Meeting your Customer’s Expectations

Implementing Customer Intelligence

How Does Customer Intelligence Do This?

What Does Customer Intelligence (CI) and Next Best Action (NBA) Do?

19

IBM Confidential

Platform and Tool Chest

YOU - develop the Customer interactions to target with YOUR optimization strategy and roadmap

IBM & YOU Select and align the NBA Tool Chest assets to implement YOUR Customer strategy

Building your “Framework of Optimized Customer

Interactions”

+

+

=

=

NBA is a diverse set of integrated analytical solutions & systems that you apply as desired to attain your Customer

personalization & optimization goals.

NBA is offered as a Stand Alone, Cloud Business Solution or Managed Solution implementation

NBA is not a black box, it is a customizable solution platform with a specialized tool chest & architecture you can control.

Next Best Action

“Architecture & Tools”

Customer Data

“Building Supplies”

Implementing Next Best Action/Offer Using PCI

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IBM Confidential 19

Agenda

Meeting your Customer’s Expectations

Thought Leadership

Implementing Customer Intelligence

How Does Customer Intelligence Do This?

What Does Customer Intelligence (CI) and Next Best Action (NBA) Do?

21

IBM Confidential

Leverage social interactions to build informed personality insights for NBA’s personalization engine.

These personality insights are used by PCI to add a persona to individual Customer profiles. Personas can

guide how to interact with that Customer.

Outputs personality characteristics

that are divided into three dimensions

Analyzes:

Tweets

Social Profiles

Content

Allows for

Lead Generation

Customer Segmentation

Product Recommendation

Personalized Customer

Care

Relevant Marketing

Thought Leadership: Lifecycles – Watson Personality Insights

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0

10

20

30

40

50

60

70

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Value of B

ehavior

Actions in each interaction over time

Actions based on recent client actions in dotted circles

Actions based on place in lifecycle in solid circles

> Could be event based marketing <

1 to 1 Trigger Based Marketing Targets behaviors in the lifecycle or life events where known opportunities or losses occur due to actions or expected patterns

Next Steps – Lifecycles & Life Events

Thought Leadership: Next Steps

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IBM Confidential

CARO Individual Personalization – Filters actions & interactions against what the Customer

is predicted to want to assure ALL interactions are optimal

CARO

personalized

filter & actions

Mass

Marketing

Campaigns

CI indiv batch & real

time personal via

interactions triggers

CARO Customer Profile

Models & Rules

Many Departments & FunctionsEach department uses the same CARO Customer data/analysis & can create their own actions and sends them to the Customer but they are all held until CARO selects the optimal actions based on a trigger or a CARO analysis

Overview:

Adding a live predictive Customer profile, the same one used in NBA, that filters all interactions with each Customer to assure their individual strategic relationship is nurtured This assures only appropriate interactions that increase a Customer’s lifetime value. reach the Customer. One bad interaction can cancel many good interactions and ruin that strategic individual relationship.

Using NBA’s Individual Batch and Real Time Personalized Interactions PLUS CARO Personalized Customer Interactions

All actions are held by CARO until CARO determines an action is optimal and needed. This action does not have to be triggered by an interaction, however, NBA triggers can still propose actions.

Thought Leadership: Customer Activated Relationship Optimization (CARO)

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Why: IBM Has 3 Applications That All Apply & can share the Customer Intelligence (CI) Predictive Analytics Engine

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Watson Engagement Advisor –

• A truly smart, interactive and personalized shopping interface.

• Watson can learn all a company's products and services.

• People ask natural language questions and Watson asks its own questions to clarify what people want.

• Using the CI customer profile a personalized recommendation is made by Watson

Providing personalized offers in parallel with a Pricing or Revenue Management System.

• Many companies price based on market segments.

• When a known customer tries to buy a product

• their PCI personal profile can be used in parallel with the normal segment based approach

• to create a post pricing adjusted price or create a personalized offer with value added items.

1 to 1 personalized customer interactions –

• As described in the preceding slides in this deck

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Agenda

Meeting your Customer’s Expectations

Why IBM

Thought Leadership

Implementing Customer Intelligence

How Does Customer Intelligence Do This?

What Does Customer Intelligence (CI) and Next Best Action (NBA) Do?

28

IBM Confidential

The Forrester Wave: Big Data and Predictive Analytics Solutions, Q2, ‘15

“IBM assembles an

impressive set of

capabilities, putting

predictive at the center.

No matter how an

organization wants to

get started with

predictive analytics,

IBM has an option for

them. […] IBM’s

predictive analytics has

the power to take on

truly big data and

emerge with critical

insights.”- Forrester

Why: IBM Is #1 in Big Data Predictive Analytics and that is NBA

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