2. Lifecycle Modeling To Increase Response, Payment and Retention Jennifer SchultiesMartha Stewart Living Keith BergendorffPublishers Clearing House Mary-Jo Checco Alliant

3. 1 A single predictivemodel can improve marketing results at every customer touchpoint

4. acquisition direct mail alternate media retention reactivation online store email upsell/cross-sell The right segmentation tool identifies the behaviors that drive profitability across the business

5. Martha Stewart Living Omnimedia Jennifer Schulties Senior Marketing Manager

6. Martha Stewart Living Omnimedia Business Challenges Poor payment on sweeps Deteriorating bottom-tier response on direct mail Shifting renewal behavior Unfavorable insert card/onsert metrics

7. Martha Stewart Living Omnimedia Daily Sweepstakes Payment

8. Martha Stewart Living Omnimedia Daily Sweepstakes Payment Cons Less targeted Low payment on sub offers Pros Partner-driven Exposes brand to new audiences Traffic-driver for site Promotes trial issue of magazine/ generates gross subs

9. Martha Stewart Living Omnimedia Daily Sweepstakes Payment Solution: Use “Mega-Model” to find “good” payers What does a person who pays for a magazine look like?

10. Martha Stewart Living Omnimedia Daily Sweepstakes Payment Mega-Model Insight: Have they paid for other products? How recently? What kinds of products?

11. Martha Stewart Living Omnimedia Daily Sweepstakes Payment Mega-Model Insight: 45% of sweeps responders were deemed “good payers” from the model “Good payers” pay twice as well as the “bad payers” overall Payment Rates per Billing Effort

12. Martha Stewart Living Omnimedia Direct Mail Response

13. Martha Stewart Living Omnimedia Direct Mail Response Pros 32-pages of content is compelling Free trial offer yields high gross orders Premium and combo offer on payment pushes high payment Cons Payment is delayed Lowest tier not performing well enough, but mail volume needed

14. Martha Stewart Living Omnimedia Direct Mail Response Solution Use Mega-Model to find the worst responders before they respond… …and make them an offer they can’t refuse.

15. Martha Stewart Living Omnimedia Direct Mail Response We’re talking about magazine subscriptions, of course… Use Mega-Model score groups to strategically increase response by: Lowering prices Adding premiums Shortening terms And if that doesn’t work…

16. Martha Stewart Living Omnimedia Direct Mail Response Use score groups to selectively cut costs No premium Shorter bill series Less expensive direct mail package

17. Martha Stewart Living Omnimedia Direct Mail Response Removed premium (cost cutting) and took $1 off subscription price (incentive) on modeled names Test of bottom tier saw impressive gross response Payment suffered with lack of premium

18. Martha Stewart Living Omnimedia Direct Mail Response Additional Applications for Mega-Model Cut bottom tier from mail altogether Mine marginal compiled lists or other large universes for best names

19. Martha Stewart Living Omnimedia Renewal Behavior

20. Martha Stewart Living Omnimedia Renewal Behavior Challenges Everyday Food offered as a “combo” subscription with Martha Stewart Living Everyday Food shares in the revenue, but is perceived as FREE Even though acquisition offer is a combo, the titles are renewed individually Renewals of EF are good, but at a discounted price

21. Martha Stewart Living Omnimedia Renewal Behavior Solution Use Mega-Model to: Segment out best prospective renewers Offer a slightly higher price to help bridge the gap in revenue

22. Martha Stewart Living Omnimedia Renewal Behavior Mega-Model Test Results Tested a 60% increase in price to best prospects (from $5 to $8) Higher price increased revenue by 11% vs. control, but reduced response by 30% Testing continues as we determine what our end-goals are (revenue vs. orders)

23. Martha Stewart Living Omnimedia Insert Efficiency Challenges Declining response in subscription cards Rising paper costs Still a large enough source of subscriptions, so don’t want to cut completely

24. Martha Stewart Living Omnimedia Insert Efficiency Mega Model Application Take inserts OUT of the issue copies going to LEAST responsive names

25. Martha Stewart Living Omnimedia One Model, Many Solutions, Higher ROI Daily Sweepstakes Payment Direct Mail Response Renewal Behavior Insert Efficiency

26. Publishers Clearing House Keith Bergendorff Assistant Vice President of Analytical Services

27. Publishers Clearing House Business Challenges Convert prospects into long-term customers Order response and payment rates for prospect mailings in decline Attaining profit goals requires shifting consumers to high-margin merchandise offers Extend PCH business across media channels

28. Publishers Clearing House Mail Prospect Order Screening

29. Publishers Clearing House Mail Prospect Order Screening Challenges All PCH mail offers are Bill-Me so managing payment risk is essential PCH needs included: Ability to qualify responders for Bill-Me offers Improvement in pay rates on “sub-standard” lists Tests of scoring lists prior to mailing ineffective

30. Publishers Clearing House Mail Prospect Order Screening Solution Required a tool to improve fulfillment decisioning Tested and rolled out with custom Alliant profitability model applied at order stage Combined profitability score with re-developed PCH internal payment model to create a “Behavioral Profitability Score”

31. Publishers Clearing House Mail Prospect Order Screening

32. Publishers Clearing House Mail Prospect Order Screening RESULTS:“Mail Prospect” Behavioral Profitability Score Substantial increase in prospect mail volume Back-end score allows expansion into mail lists and segments not previously viable due to low pay Substantial increase in new paid buyer generation No significant deterioration in pay-up rate! Combined score generates significantly higher margin dollars than single internal scoring solution

33. Publishers Clearing House “One-Timer” Segmentation

34. Publishers Clearing House “One-Timer” Segmentation Challenge Speed is a key factor in successfully re-promoting new mail buyers Response declines rapidly with time elapsed before first customer mailing Was not viable to re-mail new buyers until first payment received (6-12 weeks after order) Internal payment model anemic due to lack of predictive data for new buyers

35. Publishers Clearing House “One-Timer” Segmentation Solution Reapply Alliant profitability scores already appended to all responders New internal model uses Alliant scores to create a new One-Timer Behavioral Profitability Score One-Timer score allows for payment segmentation Huge improvement vs. previous internal model using only transactional data and demographics

36. Publishers Clearing House “One-Timer” Segmentation RESULTS:“One-Timer” Behavioral Profitability Score Enables mailing the highest scoring half of new One-Timers without waiting for payment Reduced interval between first order and first customer package from 6-12 weeks to 3 weeks Significant increase in overall order response and conversion to Repeat Buyers Lift in order response and future value more than compensates for decrease in overall payment rate

37. Publishers Clearing House Online Prospect Scoring

38. Publishers Clearing House Online Prospect Scoring Challenges Payment rates for online orders abysmal Publishers unhappy with paid subscription rates Can’t offer merchandise and make a profit Insufficient internal data to identify who is appropriate for Bill-Me offers Order screening improved pay rates, but it’s not good marketing to solicit orders and then reject them!

39. Publishers Clearing House Online Prospect Scoring Solution Apply scores from same Alliant profitability model in Real Time at sweeps registration Combine profitability scores with internal Real Time model to create “Ensemble Model” Use Ensemble Model score to segment offers “Prime” names get merchandise offers “Restricted” names get magazine offers “Lows” receive partner offers only

40. Publishers Clearing House Online Prospect Scoring RESULTS:“Ensemble” Behavioral Profitability Score Targeted offers in online path and email deliver: Much improved profitability for merchandise sales Much improved pay rates for subscription sales Minimal rejection of orders on back end “Lows” routed immediately to partner email programs, improving partner revenue Quality of new acquisition sources can quickly be evaluated via average profitability score

41. Publishers Clearing House Profitability Scores + House Data =Increased ROI Mail Prospect Order Screening ‘One-Timer’ Segmentation Online Prospect Scoring

42. Lifecycle Modeling to Increase Response, Payment and Retention Questions & Answers Mary-Jo Checco Jennifer Schulties Keith Bergendorff

43. Lifecycle Modeling to Increase Response, Payment and Retention Thank You! Mary-Jo Checco Jennifer Schulties Keith Bergendorff