CableCo* has faced increased competitive pressures from satellite TV and telecommunications providers in recent years, who have enjoyed significant growth in the Pay TV and broadband markets. Bain was hired to help CableCo grow its share of high-value customers by winning back more of them from the competition and retaining existing customers longer. Experimentally designed direct marketing campaigns would be a central means of accomplishing these goals.
After working across the organization to understand the critical drivers of current marketing success, Bain helped develop and test a set of offers in-market, by employing experimental design techniques. As opposed to the traditional champion-challenger approach, or A/B testing, the use of fractional factorial analysis allowed our media consultants to launch a subset of potential in-market offer combinations to test a number of different variables. Mathematical formulas then allowed us to model response rates for every possible combination of variables, 576 in all.
A second analytical tool was developed to project the financial impact of all offer combinations. This Net Present Value (NPV) model used both observed and modeled response and conversion rates as inputs, as well as key financial inputs based on CableCo's business-as-usual financials. The model allowed CableCo to not only determine what drives direct marketing conversion rates, but also to predict the actual financial impact of all potential offer combinations.
Experimental design improves testing performance through massive variance in the campaign:
The experimental design test yielded offers that achieved three to four times the response rate of the existing champion offer, and the marketing organization learned which variables caused consumers to respond. The test also demonstrated that the richest offers, such as those that included expensive equipment, were not among the stronger factors in determining customer response.
Bain helped CableCo prioritize and scale up the highest ROI direct mail campaigns to roll-out nationwide and helped CableCo develop an advanced analytics marketing capability in-house, to run subsequent multivariate direct marketing campaigns.
A cable company's direct-mail test uncovered the unexpected:
The increased response rate from the best performing direct marketing offers delivered between 50,000 and 125,000 new subscribers and millions of dollars in revenue. Since the conclusion of this work the organization has developed in-house multivariate marketing campaign design capabilities and is now using this approach to create new campaigns targeting different customer segments.
Experimental design techniques delivered higher direct marketing returns for CableCo:
* We take our clients' confidentiality seriously. While we've changed their names, the results are real.