Using RFM Analysis in the Segment Builder (SAP Library

Using RFM Analysis in the Segment Builder

Use

You can apply the results of an RFM analysis to optimize a campaign. In this way, you can restrict the target group addressed by a campaign to just those business partners with a relatively high probability of responding to the campaign. RFM analysis can be applied in this way to refine your target group.

You can restrict the target group in the Segment Builder by using the response probability of a business partner as the characteristic. This response probability is determined in the SAP Business Information Warehouse (SAP BW). It is dependent on the type of offer that is to be promoted in a campaign and on the channel with which the campaign is to be performed. For this reason, you can create different response rate models for separate sets of requirements in SAP BW and then use these models as the basis for different attributes in the Segment Builder.

Prerequisites

Settings in SAP BW

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1. You need to have performed RFM modeling (for more information, see the section Structure link Campaign Optimization using RFM Analysis).

2. You need to have executed a current segmentation for the RFM segmentation model that you wish to use.

Settings in SAP CRM

To be able to use the results of the RFM analysis in the Segment Builder, you need to create in SAP CRM a source with particular settings and then assign this source to a selection attribute list. Proceed as follows:

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1. In the SAP Menu, choose Marketing ® Segmentation of Business Partners ® Marketing Segments ® Maintain Data Sources for Segment Builder ® Create Data Source.

2. Make the following settings and save your data source. You can either enter the technical name directly or use the possible entries function (F4).

¡ Origin Type: InfoSet

¡ Name: RFM Analysis (CRM_MKTTG_RFM)

¡ Business Partner: CRM Marketing: GUID for a Member of a Target Group (CRMT_MKTTG_RFM_RESPONSE-TG_MEMBER_GUID)

¡ Sampling InfoSet: RFM Analysis (CRM_MKTTG_RFM)

¡ Sample: CRM Marketing: GUID of Target Group (CRMT_MKTTG_RFM_RESPONSE-SAMPLE_GUID)

¡ Description: Enter an appropriate description, such as RFM Analysis

3. In the Find tab page, select a selection attribute list to which you would like to add one or more RFM characteristics. For example, you can add a characteristic that provides the probability of a response to a mailing campaign and another one for the probability of a response to a telesales campaign.

4. To include a characteristic in the selection attribute list, choose Assign Data Source.

5. Select the data source that you created in steps 1 and 2.

The data source is now included in the selection attribute list.

6. Expand the node that has just been added and select the characteristic CRM Marketing: Response Probability of a Customer.

7. In the context menu for this characteristic (accessible with the right mouse button), choose Properties.

8. In the Attribute Details tab page, make the following settings:

¡ Change the description according to how the characteristic is used, such as RFM for Mailing, or RFM for Telesales.

¡ Select the characteristic type RFM ANALYSIS. The characteristic type determines how the Segment Builder is displayed graphically.

9. In the Filter Conditions tab page, enter the following variables (you can either enter the technical name directly or use the possible entries function (F4)):

¡ CRM Marketing: RFC Connection BW (CRMT_MKTTG_RFM_RESPONSE-RFC_DEST)

¡ CRM Marketing: RFM Segmentation Model (CRMT_MKTTG_RFM_RESPONSE-SEGMENT_VERSION)

¡ CRM Marketing: RFM Response Rate Model (CRMT_MKTTG_RFM_RESPONSE-FORECAST_VERSION)

These variables are used by the CRM System to apply the settings for RFM analysis that you have made in your SAP BW (see the above section Settings in SAP BW).

10. For each variable, choose I in column S (sign) and EQ in column OP (option).

11. Assign the appropriate value to the respective variable:

¡ Enter the RFC connection to the SAP BW system in which you have made your settings for RFM analysis.

¡ Enter the RFM segmentation model that you created in SAP BW.

¡ Enter the RFM response rate model that you created in SAP BW.

12. In the context menu for the characteristic you renamed in step 8, choose the Create Filter option.

13. Set up filters for the response probability based on your experience and using the categories low, medium, or high. These filters are used to provisionally divide up the business partners. You can call up this rough division in the Segment Builder under Distribution. Later on, you can use the Segment Builder to change these filters depending on the user and to create more filters.

This graphic is explained in the accompanying text

Set up another filter in each case and call it something to the effect of No prediction possible and limit it to all values under zero. This is necessary because the system allocates a response probability of -1% to all business partners for whom there is no RFM segmentation available.

Example

You could create filters like the following:

· Cannot be predicted < 0 %

· Low 0 through 1 %

· Medium 1 through 2.5 %

· High > 2.5 %

14. If you would like to include more RFM characteristics in your selection attribute list, return to step 4 and proceed again from there. As a rule, you select a different RFM response rate model for a different characteristic (see step 10).

Features

When you select in the Segment Builder the attribute list that has been set up using the above steps, the response probability characteristics that you added are available for restricting the target group. When you select a characteristic, a detail screen appears, displaying the distribution of the target group according to the filter values. You can choose pushbuttons to call up prediction and simulation screens, which enable you to find out the potential effect that different target group restrictions have on respective key figures. Beside the graphic in each screen, there is an extensive details list showing all the extrapolated values.

You can use the following screens:

· Distribution

The Distribution screen shows how many business partners appear in the different filters.

· Profit Simulation

The Profit Simulation screen allows you to estimate the profit made with a campaign addressing a given target group. Here you specify the anticipated costs incurred by addressing a business partner and the anticipated profit from each positive reaction. As an extra option, you can set fixed costs for carrying out the campaign.

The system can now use the extrapolated response rates from the RFM analysis to estimate the overall profitability of a campaign addressing this target group and assuming the anticipated figures. Furthermore, the system proposes a filter that you can apply to the attribute to increase profitability and it estimates the optimum profitability with the given figures.

In the form of a detailed graphic, the system shows the effect that the different filter restrictions have on the attribute. The possible filter values can also be varied according to a "greater than/equal to" condition: a piecewise reduction of the current target group is simulated by eliminating the business partners with the smallest response probability, and the corresponding estimated response rates/campaign profit are shown. You can change the costs and profit figures interactively so that the extrapolated effects are immediately visible, giving you an insight into how sensitive the target group is to these parameters.

· ROI Simulation

In the ROI Simulation screen, you can perform the same simulation for the target value Return On Investment. The campaign execution costs (that is, the sum of the fixed costs and the variable costs multiplied by the number of business partners addressed) represent the amount invested in the campaign. This usually produces a different optimum filter value determined by the system. The display and the interaction options are the same as in the Profit Simulation screen.

· Number of Business Partners

In the Number of Business Partners screen, a graphic shows the effect of different filters applied to the number of business partners in the target group. If you want to address a particular number of business partners, you can select one of the filters that leads approximately to the desired target group size. Check also the effects the filters have on profitability and on the ROI.

· Number of Responses

In the Number of Responses screen, a graphic then shows the anticipated number of responses for each of the different filters applied.