Comparison of two algorithms of predictive models in Artificial Intelligence and Machine Learning: Neural Networks using Tensorflow vs XGBoost.
Fine-tuning: Tune parameters / hyperparameters, iterate over the output, compare performance to finally selected best option.
Apply trained model to real data: The output is a list of Customers with High probability to Buy.
Define strategy for retargeting:
Define and implement A/B testing for email campaigns
Evaluate performance of the tests
The application of the model drives to an increase of +25% in Conversion Rate
This CR drove to an increase of 4% Month over Month in Number of Purchases
The correct application of predictive models in our customer base has allowed us to detect specific behaviors at the customer level: customers with a high probability of buying during the next month. Actions on that information – sending emails with specific content – have substantially improved a key element of our business: the number of sales.
Life Time Value: Optimizing Marketing costs
Optimize the marketing costs, spending the right money in the right Marketing Channel
Our client is an ecommerce with online marketing costs of more than 10M per year.
We will calculate the Life Time Value (LTV) of each of the company’s clients and we will make an aggregation to find out the average LTV per Acquisition Channel.
Obtain, clean, and prepare data needed for the project.
Calculate LTV by Acquisition Channel
Segment our population by Acquisition Marketing Channel
Calculate Number of Purchases & revenue Margin of each cohort in next 12 months.
We aggregate the information, obtaining the number of purchases and the average Revenue Margin per channel in each of the next 12 months.
Define strategy for Marketing Cost Optimization:
Based on the results obtained, we recalculate the budget and ROI of each Acquisition Channel.
We observe that although Payment Channels are more profitable in the short term (SEM), when we look at 12 months, Cheap Channels actually generate more purchases (Direct, CRM)
Direct overtakes SEM in terms of RM in month 7
CRM overtakes SEM in terms of RM in month 10
We conclude that customers from Cheap Channels are more loyal → Are we wasting investment in SEM ??
When we look at optimizing the costs of Acquisition Channels, we must look at the long term and not only at the time of acquisition.
Once we now understand the actual ROI of our Acquisition channels, we can recalculate and analyze the actual costs of each channel.