EFFECTIVE CUSTOMER ACQUISITION EDEN HANSING FALL 2019Goal: Method: To spend money targeting people that Use a look-alike model on an existing will likely be our customers and waste customer database to determine what less money advertising to people who kind of people our customers are won't become our customers In our business of selling fixer-upper homes online, we want to improve our efficiency in custorner acquisition. We've analyzed secondary data with our existing customer base to find out what differentiated a customer frorn a non-customer and the pattern that we've discovered has proven to be effective at determining a good, potential customer. We want to reach more of the right people. With a univariate approach, we found that there were relevant distinctions between customers and non-custorners; however, through a multivariate approach, we could figure out which variables are the best predictors in finding a custorner, how each variable effects an individual’s likelihood of being a custorner and by how much We have confidence in these results because we create the pattern from one half of the dataset and test the pattern on the other half of the dataset. Then, we compare the model to check if it's similar on oth halves on the set. Utilizing the detailed information that we've gained, we can create a profile of our customer like the one below and tailor our marketing efforts to capture people that fit the profile. We can evaluate customers on an individual level and spend money on the people that will positively contribute to our bottorn-line. We want to target people that invest in real estate, are male, and donate by contributions.Variables that show the largest difference between customers and non-customers are real estate investment, fernaleness, and home ownership. In the indexed graphs below, we see how much customers differ from the average response. For example, customers are close to 80% more likely to invest in real estate than non-customers. Customers are 23% more likely than average to be male, Non-customers are 47% more likely to not own their home, Now we can begin to think that males, who invest in real estate, and own a home could be a good demographic to target Real Estate Investment 10 ‘Customers that we want to “avoid” have the characteristics of groups #7 and #8. We have high confidence that these customers don't like us and we don't need any more information to steer clear of investing rnoney into these people. Customers that fit into the “dubious” segment are ones that dont like us but we have low confidence in that finding. We could test ther further to determine for sure, but it would most likely be a waste of money. ‘Segment Matrix Dubious * O27 Test uett ow Femaleness Home Ownership Customer segments that yield high indexes and make up a lerge portion of the population give us high confidence that these characteristics make up our “core” customer. We should invest marketing efforts into people that fit these qualifications, Customers that fit into our “test” segment are ones that like us but we don't have high confidence in that. Further testing would be needed to decide if we should invest marketing efforts into people that have characteristics of groups #3 and #4. Route rartat oe of $1 306993 nro ara Fouerarat lu of 1959-29599 12 Dountave realestate estmet orate arte of 19599-29599 8 Paes ere Has ose matt elu of es thn S124 2098 4 __tengtofretinceol 5 yours 4S Has a house market value of $124,999-149,999 & Has a house market value of $499,999 or more & 6 Female & Age of 25+ Has a house market value of $289,990-308/422 & #7 Doesn'town home Has a house market value ef $299,999-208 422 & #8 Does own home & Income of $249 999-749,999To get an even better idea of what our customer looks like, we can use a multivariate approach. With a behavior- based segmentation tool, we test all of the variables at once and then narrow down which variables are the most relevant to our goa. We found a pattern that shows how people's character'stics make them look more like @ customer or not. A variable that has a (#) in front of it means that the more of that variable you have, the higher your overall score will be, Negative scores mean that activity looks less like our customer. In the pie chart, the number associated with each variable tells us now much that variable will affect your score relative to the others, We want to investin people that produce high scores on their scorecard. The most significant variables: * Real estate investment (value of 0.164) # Femaleness (value of 0.149) * Donates by contributions (value of 0.137) sResterteinvecmere = Famaleness + Onrshore 1 Donatesty core butions = Typsot aweng ss Markervate 1 Feoxoress 2008 Reger ret «Donec conservative grains We score a set of known customers and non-customers with the scorecard above and then rank ther from the hignest (most similar to our customers) to lowest scores. Then, we group these people into ten equal-sized deciles, The group in the top decile that have the highest scores {people we think look most like our customers), contains the highest concentration of customers, We see that what we observed has verified our explanation. The group in the lowest decile, contains the highest concentration of non-customers. The pattern we found has successfully explained the difference between customers and non-customers, ‘raining Set Declaaeto oes Thins. Test Set {iniRECOMMENDATIONS Place Advertising adjacent to real estate listing Collaborate with real estate agencies Home improvernent publications Partner with charitable organizations Product & Price: # Masculine branding © Ourcustomers yield higher incomes and market value homes which allows our price tobe more inelastic * Ourcustomers consider it an investrnent Promotion: © Messaging centered around investment ee opportunities © Utilize the masculine “working man’ theme alongside images of home improvementUnivariate: Testing each variable individually to see the effect of it on the dependent variable Multivariate: Involving 2+ variables to find a solution Chi Square Automatic Interaction Detector (CHAID): a program in SPSS that allows us to find the single best differentiator for a dependent variable; the segments are predictive of a specific behavior Demographic, attitudinal or behavioral similarity: we assume that similarity generalizes, to consumer products & services Training set and testing set: In a dataset, a training set is implemented to build up a model, while a test set is to validate the model built. Data points in the training set are excluded from the test set Dependent variable: Our dependent variable in this analysis is CUSTOMER to find what variables are the most relevant to people that look like customers Regression: Shows the correspondence between variables to make a score for how much a combination of responses would look compared to the behaviors of exiting customers Confidence: A large enough portion of the population shows that the occurrence is not just by chance Type | Error (false positive): Calling a bad opportunity "good" Type Il Error (false negative): Calling a good opportunity "bad" Inelastic price: The demand doesn't change much as price increases