Improving targeting effectiveness with Booking Propensity Scores

Value-based scoring is typically used to retain the best customers and not waste time and money on those with little/no value.  A good scorecard will greatly improve return on marketing investment.

Radar recommends a value-based (RFV) scorecard.  This is the simplest, and still in our experience, the most effective form of bespoke scoring.  Each customer’s score is calculated by ascribing values to: 

• Recency - how recently have they made a booking 
• Frequency - how often do they transact with you
• Value - how much do they spend with you/what profit do they deliver

Scores for R, F and V are often applied in non-linear fashion.  The skill of the analyst is in determining how to apply the scoring to give the best performing scorecard.

This type of scoring will tell you who is worth spending your marketing budget on, and who is not worth wasting it on – based on current and predicted value to the business.  The scorecard can be used to drive both targeting and communication frequency.  However, it does not give insight into customer needs or behaviour and is not therefore used to inform proposition/product, message or media selection. 

In addition to driving increased ROI from marketing activity, the BPS is also invaluable in optimising the investment in customer service and resources dedicated to those customers most likely to generate a disproportionate value and profit. It becomes a significant strategic asset for the business.

Radar will provide a value-based scorecard based on recency, frequency and value of transactions, that will enable the client to allocate marketing spend to the most productive parts of their database.  This will be achieved by allocating all bookers to one of a relatively small number of score bands which can then have a contact strategy (marketing spend and communication frequency) governed by propensity to book.

For example, the top band of a BPS scorecard developed by Radar for a travel client delivered an annual re-booking rate of 53% against an average of 8% across the entire base, but with less marketing spend allocated than in previous years.  The same method can also be used by sales agents to allocate customer service effort proportionate to customer value.  

The objective is to provide the client with a scorecard that will drive retention activity.  It will fulfil certain criteria:

• Simple to use and understand
• Provide a foundation for future targeting sophistication
• Works across all customers and products (current and future)
• Consistent across time and customer base
• Measurable
• Allows marketing budget to be allocated to people who can be influenced (not those who would have bought anyway)
• Simple to migrate customers from one band to another

The approach for this project would be:

• Develop the scorecard
• Report key statistics/insight by score band
• Present the bands and analysis to the client and identify any additional work/clarification that might be required
• Carry out any further adjustments to the band cut-offs and issue the final report pack 
• Upload the scores and score bands against each individual into the customer summary on the the client’s Radar system ready for use for campaign selections

Automating the scorecard and segmentation re-cast

It is recommended that the scorecard and subsequent band allocation be re-cast annually.   This is especially relevant for travel where holidays tend to be purchased on an annual cycle.  By re-casting the scores The client will be able to see movement of customers both up and down the bands and gain a year-on-year view of how their customer base is performing in terms of actual and potential value.  This in turn will help the client to refine their contact strategy for each band.

Radar will automate the scorecard re-cast process within the Radar system so that we can run the re-casts rapidly, without the need to repeat the entire process.   

The automation suite will include:

• Allocating new customers to a special ‘new customer’ band with its own contact strategy at each overnight update
• Maintaining a snapshot of each historic year’s score bands to allow reporting on migration, change in band size and make-up etc

Please speak with your Account Director if you'd like more information on Booking Propensity Scores and how to use them within your business.