Kelloggs Special K presentation UCD Smurfit

Increasing Profit

by Improving Predicted

Coupon Redemption

Group 6Aparna Sosale | Melanie Kaiser | Lara Zaccaria | Tove Perlhede | Christer Lundmark

Strategic targeting to narrow down the most valuable

customers.

Increase ROI

WHY PREDICTIVE MODELLING?

• To support business decisions with strong, actionable insights gathered from customer data.

• To highlight future possibilities for better investment opportunities.

1

Optimal number of people to send the

coupons to

BENEFIT OF PREDICTIVE MODELLING

2RANDOM MODELLING HUMAN JUDGEMENT PREDICTIVE MODELLING0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

14%

25%

39%

3

Removing Insignificant

Variables

Examined Ideas

Low P-Value

Significant Variables If formula New

Variables

PROCESS OF MODEL CREATION

FINANCIAL BENEFITS

4

Total No. of Customers to Target 15,000,000

Total No. of Targeted Customers Cost to Target Per Customer

Total Cost to TargetAverage Prediction

Total No. of Redeemed CustomersGross Profit from Redeemed Coupons

Gross Profit from Redeemed CustomersNet Profit

Return-on-Investment

2,250,000€ 0.15

€ 337,50039%

886,500€ 0.90

€ 797,850€ 460,350

36.4%

1,800,000€ 0.15

€ 270,00043%

766,800€ 0.90

€ 690,120€ 420,120

55.6%

3,000,000€ 0.15

€ 450,00035%

1,050,000€ 0.90

€ 945,000€ 495,000

10%

15% 12% 20%

6

12% 13% 14% 14% 15% 17% 20%€ 380,000

€ 400,000

€ 420,000

€ 440,000

€ 460,000

€ 480,000

€ 500,000

€ 520,000

0%

10%

20%

30%

40%

50%

60%

€ 4

20

,12

0

€ 4

39

,33

5

€ 4

43

,47

5

€ 4

59

,90

0

€ 4

60

,35

0

€ 4

89

,60

0

€ 4

95

,00

0

56%50% 46% 46%

36%

28%

10%

Net Profit Return on Investment (ROI)

Cut-OFF

Ne

T P

RO

FIT

RO

I

FINANCIAL BENEFITS

RESULTS OF DIFFERENT CUT-OFFS

5

Maximum ROI

12% 12% (55.6%) 20% (€495,000)

Beyond 15% Net Profit

increases, ROI decreases

Best Cut-Off

Maximum Profits

€

MODEL IMPROVEMENT

Increase ROI

Cut-Off

Most valuable customers

‘Special K Last Time Bought’Day & Time

Redeemed cou-pons of category

cereals.

6

Other Special K Products

• This will lead to the ultimate short-term goal to an increase in profit and Special K cross-sales.

8

Personal Shopper

Sally

Future of Virtual

Assistants

Good Morning Philippe! Would you like to shop

today?

RETAIL OF THE FUTURE

9

THANK YOU!