Wednesday, 27 November 2013 10:23

How Telstra analyses customer behaviour


Telstra is employing ever more sophisticated analysis techniques to retain and acquire customers. It outlined some of the techniques at a Sydney seminar.

One of the oldest truisms in marketing is that “half my marketing budget is wasted – I just don’t know which half.” It goes back to the 19th century and John Wanamaker, a US salesman regarded as the father of modern advertising.

Modern market analysis techniques are intended to eliminate, or at least reduce, that uncertainty. The increasing amount of data now available about customer behaviour, and new techniques for analysing that data, are revolutionising the half art and half science world of marketing.

Telstra has one of Australia’s largest marketing budgets, and operates in an environment where products change quickly and the effectiveness of marketing campaigns can be measured with some degree of accuracy. It also has data on millions of customers, is in probably the best position of any Australian organisation to put into practice the latest techniques in market analysis.

Rowan Drummond, general manager of Telstra’s Product Marketing Analytics group, gave an insight into some of the company’s efforts in the area at a SAS Institute seminar at Sydney’s Macquarie Graduate Schools of Management last week. He explained in some detail Telstra’s used of the Net Promoter Score (NPS) technique, which has become one of the most popular marketing tools of recent times, not just for Telstra but for many organisations.

NPS is a comparatively simple measure, but it can be employed in sophisticated ways. It is based on two questions, which can be asked at any customer contact: Were you happy with this experience (sales, service, information, etc.); and why?

The first question is quantitative, on a scale of 1 to 10. The second is qualitative, as it is free form text.

Respondents who answer a high 9 or 10 out of 10 for the first question are regarded as ‘advocates’, those who answer 7 or 8 are regarded as ‘passives’ and anyone below that is a ‘detractor’. The raw NPS score is formed by subtracting detractors from advocates.

“We are able to mine the information from the advocates to enable us to direct out marketing investment to best meet customer needs,” said Drummond. “And by knowing why they think as they do, we can tell a lot about customer sentiment.”

Telstra has been using NPS for two years now (you are part of it of you have stayed on the line to stay on the line and answer ‘two short questions’ when you call Telstra or another company that uses NPS).

Drummond explained how traditional market analysis measures like campaign tracking are still relevant, but how new technologies and techniques are causing a ‘seismic shift’ in the discipline. “Consumers today are more empowered than ever, and there has been an explosion of data. As a telco we have always had a lot of data, but now we have much more and we need to know how to best harness it and what analytics to run.

“One big change is the improvement in our predictive capabilities. That enables us to forecast the effectiveness of marketing campaigns and the right media mix to employ.”

One example he gave was of a churn matrix, which divided customers into four quadrants, based on whether they would churn (move to another supplier) if they were contacted or not. (See illustration above).

Some (the ‘lost causes’) would churn in any case. Some (the ‘sure things’) would never do so. But the other two groups are more important ‘Sleeping dogs’ would only churn if a contact alerted them to the fact that they could, and 'persuadables’ could be talked into staying by being contacted. Properly identifying and each group, for each product type, could enable very granular and incremental marketing techniques.

Drummond spoke of a range of other techniques, including the use of mathematical techniques like ‘state space multivariate analysis’, a way of comparing a range of variables such as seasonality, macroeconomic changes, competitors’ launches and strategies and the like, to help quantify the many factors that may affect the effectiveness of a campaign.

He said Telstra’s marketing has become much more effective since the 2011 reorganisation of the company’s marketing into one large group, instead of separate marketing organisations in each part of Telstra. That enables a more coordinated effort, and the comparison and analysis of data across the whole organisation.

The bottom line is ‘return on marketing investment’ (RoMI), a term he used often to indicate the efforts being put into quantifying all of Telstra’s marketing efforts and to banish Wanamaker’s conundrum.

Listening to his presentation, I couldn’t help thinking that it is still all a bit of a black art, and that at the end of the day it’s hard to tell how people think and what makes them buy.

But full marks (or maybe 9 out of 10) for trying.

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Graeme Philipson

Graeme Philipson sadly passed away in Jan 2021 and a much valued senior associate editor at iTWire. He was one of Australia’s longest serving and most experienced IT journalists. He is the author of the only definitive history of the Australian IT industry, ‘A Vision Splendid: The History of Australian Computing.’He was in the high tech industry for more than 30 years, most of that time as a market researcher, analyst and journalist. He was founding editor of MIS magazine, and is a former editor of Computerworld Australia. He was a research director for Gartner Asia Pacific and research manager for the Yankee Group Australia. He was a long time weekly IT columnist in The Age and The Sydney Morning Herald, and is a recipient of the Kester Award for lifetime achievement in IT journalism. Graeme will be sadly missed by the iTWire Family, Readers, Customers and PR firms.

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