Data Mining On the Fly
It wasn't too long ago that telemarketers could boast about running profitable campaigns that involved setting up a few phone lines and working their way through the telephone book.
Those days are over. As call volume increased, so did consumer backlash. The Direct Marketing Association's Telephone Preference Service ballooned, and a total of eight states have state-wide do-not-call lists on the books.
Marketers have fewer records to work with, but now those records are treated as a starting point. Instead of calling blindly, telemarketers are among the most technologically advanced of marketers. Data mining techniques allow them to call those who are likely to respond, minimizing unwanted interruptions and maximizing response.
Technology has lifted response, if not to the lofty rates of telemarketing's salad days, then enough to keep programs in the black. So if the old ways are finished, good riddance. The new high-tech methods are here.
Partners First had a mandate at its inception: to use advanced analytical techniques to manage and grow its credit card portfolio.
The tools that the Baltimore-based card marketer had at its disposal were the same as most others': primarily telemarketing and direct mail. But instead of conducting business as usual, Partners First enhanced its efforts with a multi-level data mining program that turned its outbound telemarketing program into a technological tour de force.
"We believe that data mining is the future of telemarketing," says Tony Branda, director of marketing management at Partners First. "We use the analytics to improve our targeting effectiveness using both internally developed models and models at FutureCall," its Colorado Springs outsourcing partner.
By calling smarter with a multi-level modeling method, Partners First has slashed its customer acquisition costs by 50 percent.
A Card Marketer Emerges
Partners First's resources are solely focused on marketing and managing credit cards, and this dedication enables it to market more effectively.
In January 1998 Partners First was created by combining credit card portfolios from Harris Bank and BankBoston.
Harris Bank, the U.S. subsidiary of Bank of Montreal, wanted to outsource the business of marketing and managing its portfolio. A partnership was then formed by Bank of Montreal, BankBoston and First Annapolis Marketing, a credit-card marketing and management company, and the joint venture was named Partners First. When BankBoston and Fleet Bank announced merger plans in 1999, BankBoston then sold its interest in Partners First to Bank of Montreal.
Says Branda, "We basically have become one of the larger marketers in the country. We're about the 15th biggest mailer, with about $1.8 billion in credit cards outstanding with 1 million customers."
In the Data
The company didn't grow by prospecting recklessly, even in this era of easy-come, easy-go credit. To succeed in card marketing, a company must have scale, data-mining expertise and a strategic marketing focus.
"We are a very analytically driven credit-card company," he explains. One of Partners First's strategies is to use telemarketing as a follow-up to direct mail. As a second contact, telemarketing is effective because with modeling, the company can be more selective about whom it calls and what offers it makes. Follow-up telemarketing facilitates cross-selling of balance transfers and Partner Rewards, the Partners First loyalty program.
"We try to be selective about the telemarketing that we're doing," says Branda. "We don't want to call everyone, just like we don't mail to everyone."
He continues, "A lot of marketers still do what I call the old way of doing business: Call everyone and don't worry about rebuttals—just get the account. We're not about 'get the account.' We're about getting the profitable account."
Partners First works to get profitable accounts through multiple rounds of data mining and segmentation. The process begins deep in the prospect database and continues to the front lines of its outsourced call centers with FutureCall.
Data mining has enabled Partners First to establish its hallmark: serving specific customer segments on an integrated basis. Says Marc Bellanger, telemarketing manager at Partners First, "What that means is from the beginning, with acquisition, all the way through to customer service, we have designed customized approaches to our customer segments."
To identify these segments, Partners First takes its prospect file seriously.
"Data mining is not an option for us," says Bellanger. "It's a core strategy. The prospect file is where the targeting and modeling begin, which for telemarketing are typically response and activation models."
Partners First works with Acxiom Corp. to develop and maintain its prospect system of more than 50 million records.
While Partners First has one mission—issuing profitable credit cards—it has many products. Marketers use predictive models to better segment prospect lists by gaining an understanding of who the best customers are for each offer. Products and offers are customized at the individual level based on a prospect's propensity to respond and be profitable.
Card marketers must balance between a campaign's profitability and response rate. If marketers don't use data mining techniques to sort through available data, they risk marketing the wrong products to the wrong customers.
Customers may take the card, but if the marketer does not sell something of value to the right prospects, they may never use the card or be profitable. Conversely, if marketers make an irresistable offer (e.g., ultra-low interest rate), its customers may sign up and use the card at record rates. However, the accounts won't be as profitable as they would be with a higher interest rate that attracts lower response.
Partners First walks a fine line to determine the acquisition offers that are most likely to elicit response while bringing the most profit for each prospect.
Increasing Activation Rates
"Historically telemarketing activation rates have been lower than with direct mail," says Branda. Predictive modeling has helped improve this in combination with cross-selling account enhancements and other fee services such as Partners Rewards. This program allows members to earn free and discounted travel on any airline with no blackout dates.
According to Branda, telemarketing has proved to be an effective selling vehicle because it facilitates the ability to interact with the customer in a live conversation. The dynamic nature of the channel facilitates rapid cycle testing and market research.
Modeling on the Fly
A new layer to the data mining mix is real-time modeling with FutureCall.
"We have a very different approach to telemarketing from most other credit-card companies," says Branda. "We view telemarketing as a good way to build balance transfers and accounts. With FutureCall, we put into place some very flexible modeling techniques to be able to do that. Basically we're doing real-time modeling on the fly, which enables us to identify people who are profitable. We then find look-alike prospects based on our actual results during the first few days of the campaign."
FutureCall uses its TactiCall strategy to achieve this objective. Using the prescreened, modeled and targeted data that Partners First supplies, reps begin calling the prospects in a random order. Once enough records have been called, FutureCall analyzes response data against all data in the file. Usually, FutureCall has enough responses to begin this analysis in the first 100 to 500 hours of the campaign.
Next FutureCall's analysts create a model based on Partners First's marketing objectives, whether to maximize balance transfers, response, or "contactability," a model that predicts the likelihood of reaching prospects based on those who have been reached successfully. The model will differ widely depending on Partners First's objectives for the campaign. Explains Branda, "If you want to maximize balances, you may trade off a little bit on response."
FutureCall scores the remaining records so that Partners First can prioritize leads. Within a few hours, FutureCall can apply the model and begin testing it. Results are reviewed daily and the model is refined according to response results. Or, if objectives change, the model can be rebuilt from the ground up.
The benefit of TactiCall is that it filters the targeted prospect file through a layer of current data. Branda says that FutureCall's modeling on the fly has given the company double-digit lift in sales and balance transfers.
Achieving significant improvement involves management of data, but also of the call itself through savvy script design. Branda notes that in the case of credit-card marketing, it's essential that phone reps don't push too aggressively to force prospects to take cards they don't want.
"Maybe you rebut once or twice, but you don't rebut five times," Branda says. "If they don't want the card, let it go."
While most companies prefer reps who close as many sales as possible, Partners First doesn't want to maintain credit accounts for people who don't use the card. Instead of boosting card acceptance rates through aggressive sales techniques, Partners First wants to boost its activation rate among the customers who hold the card. One way to do so is cross-selling a balance transfer or fee service at the time of card acceptance or as a follow-up.
"If you have a balance to move, once you put that on the account, you're going to be active by default," Branda says. By targeting those with a likelihood to complete balance transfers, Partners First has boosted its activation rate.
"It's a combination of good data mining techniques with good offers, good scripting and good performance tracking at vendor," he adds.
Partners First develops its scripts with a team consisting of Branda and Bellanger; Sandra Alexa and Reegan Albright from FutureCall; and Al Kleeman and Tracy Murgash of A.S. Kleeman and Associates, Partners First's telemarketing broker. Each script goes through the same testing period as a response model.
"We monitor results daily and tweak and redesign the script as necessary in the first couple weeks," says Branda. "Once we have a champion, we build a new challenger to see if we can beat that champion."
Tweaking may be a matter of testing premiums, offers or approaches. Partners First might customize its rewards program to offer a specific category of rewards to a defined segment. For example, an offer may include airline or travel partners based on a segment's redemption and usage data.
In addition to using call monitoring to track rep performance and tweak scripts, FutureCall offers clients a high-tech product called ScriptPath.
Says Sandra Alexa, FutureCall's vice president of marketing, "All of our scripting is online, so ScriptPath is able to mark the path the TSR takes on any given call. It tracks rebuttals and questions and answers. You can see how the script is being used, and see which questions are being asked most often. You see how effective the script is, and what kinds of objections customers are raising. It takes script analysis to the next level."
Partners First and FutureCall monitor script performance on a daily basis, and, like the response model they use, can change the script at any time. Still, while the tool is helpful, Branda still finds that technology can only improve results so much. "It's the marketer who knows what rebuttals to give or what strategy to take," he says.
Finding benefits and communicating them still is the province of human beings, not machines. After all, although data mining helps identify likely prospects, personal day-to-day decisions determine customers' behavior.
"The goal of credit card marketing is really to get people to reach for your card first," Branda explains. "Position one in the wallet is what everyone strives for."
While data mining technology helps get the card into the wallet, it's the marketer who gets the customer to hand it to the cashier at the checkout counter.
Partners First Facts
Operations Headquarters: Baltimore
Branch office: Boston
Number of Cardmembers: 1 million
Total Outstanding Balances: 1.8 billion
Database Manager: Acxiom Corp.
Telemarketing Partners: FutureCall, A.S. Kleeman and Associates, IRT, Telespectrum
Processor: First Data Resources