What is cross-marketing?

If you run a business with multiple products, services, or brands, then cross-marketing is an essential CRM strategy to keep customers on your platform.

By identifying customers at risk of churn and understanding their propensity to use your products, we can re-engage customers to maximise their profit.

When optimised effectively, cross-marketing is a powerful promotion tool used to increase the lifetime value (LTV) of dormant customers who would otherwise be neglected by traditional retention marketing.

The trade-off problem

Incentivising customers to use your products is easy: give them an attractive offer. The more attractive the offer, the higher the success rate. The more attractive the offer, the higher the cost.

There’s a trade-off between lowering the cost of offers and increasing the success rate of campaigns

But what if you could tailor your offers to each individual and maximise the expected lifetime profit without the spiralling costs?

By better understanding the customer characteristics and behaviour that drive success, Ibex can optimise the type of offer to send to each customer and solve the trade-off problem.

Simple theory, novel approach

At Ibex, we’re experts at using AI for marketing. We use statistical models to understand behaviour and apply that knowledge to predict success rate, cost, and crucially: profit.

Our approach uses a simple concept in probability called Expected Value. If we were to roll a die a large number of times, the expected value represents the mean value we would see.

Expected values are driven by two things: the probability of events occurring, and what would happen if those events occur.

E(Profit)=P(Success)×E(Profit|Success)

For us, that means estimating the probability of cross-marketing success, and the expected profit if we were successful.

This can be broken down into five distinct steps:‍

• Use machine learning models to predict revenue
• Use offer mechanics to predict cost
• Profit =Revenue – Costs
• Use machine learning models to predict probability of success
• Expected profit = Probability x Profit

This ensemble of models provides us with a clear expected profit for each customer and each potential offer, allowing us to choose the optimal combination of customers and offers.

Try it yourself

Artificial intelligence provides a great opportunity for businesses to provide bespoke marketing to their customers. Cross-marketing is just one part of a much larger suite of products Ibex offers to improve customer retention.

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