Zeroing in on right Customer Decision to optimize

Please click on above to see a much larger image of customer decisioning framework

Very often it is easy to get seduced by the statistical techniques and various algorithms and start off analytics in an area which is in the comfort zone of the practitioner. The classic "Hammer looking for a nail in the wall" problem. For example it is common for analysts who have done multiple churn scoring models to assume that scoring customers for churn is the best place to start deriving value in an analytical engagement. But taking a structured approach revealed in this case that trying to build a customer propensity model for cross selling complimentary products provided more value than the churn score model. How does one not fall into such traps ? Here are some key questions to ask before applying analytics to a business processes are

Which are the possible Customer facing ecisions which I can optimize for my operations ?

What is the current yield of these customer decisions which are taken ?

Which of these are strategic customer decisions ? Which of them are operational customer decisions ?
Which of the customer decisions , if optimized bring additional revenue to my organisation ?
Which of the customer decisions , if optimized reduce cost for my organisation ?

This is possibly best explained with an example. Lets take the example of a retail store and apply the above questions framework to retail industry

STEP-1.1 : What are the 13 core decisions taken in a retail industry ?

- Cross sell decisions
- Migrating Valuable customers to 'High touch channels'
- Promotion decisions ( Temporary price reductions, Gift offs, Coupon promos )
- Decision on where to open/close new Stores ( location decisions )
- Decisions on Pricing for newly launched products
- Which slow moving products to move off the shelf using campaigns
- Mix of product Categories to stock
- Value added retail Services to bundle
- Decisions regarding which customers to waive Loyalty fees for
- Decisions regarding which interventions to win back loyal customers are at risk
of churning
- Decisions regarding migrating low value customers to email and web channel instead of call center channel ( Channel migration decisions )
- Decisions regarding store layout
- Decisions required to heighten in store experience
STEP-1.2 : Which of these are strategic in nature ? ( window of 4-6 months )

- Decision on where to open/close new Stores ( location decisions )

- Decisions on Pricing for newly launched products

- Decisions regarding store layout

- Decisions required to heighten in store experience

STEP-1.3 : Which of these are OPERATIONAL in nature ? ( every day, every week decisions taken by front line folks )
- Cross sell decisions

- Migrating Valuable customers to 'High touch channels'

- Promotion decisions ( Temporary price reductions, Gift offs, Coupon promos )

- Which slow moving products to move off the shelf using campaigns

- Mix of product Categories to stock

- Decisions regarding which customers to waive Loyalty fees for

- Decisions regarding which interventions to win back loyal customers are at risk of churning

- Decisions regarding migrating low value customers to email and web channel instead of call center channel ( Channel migration decisions )