Coherent Path Auto-Optimizes Promotions for Long Term Value

One of the grand challenges facing marketing technology today is having a computer find the best messages to send each customer over time, instead of making marketers schedule the messages in advance.  One roadblock has been that automated design requires predicting the long-term impact of each message: just selecting the message with the highest immediate value can reduce future income. This clearly requires optimizing against a metric like lifetime value. But that's really hard to predict.

Coherent Path offers what may be a solution. Using advanced math that I won’t pretend to understand*, they identify offers that lead customers towards higher long-term values. In concrete terms, this often means cross-selling into product categories the customer hasn’t yet purchased.  While this isn’t a new tactic, Coherent Path improves it by identifying intermediary products (on the "path" to the target) that the customer is most likely to buy now.  It can also optimize other variables such as the time between messages, price discounts, and the balance between long- and short-term results

Coherent Path clients usually start by optimizing their email programs, which offer a good mix of high volume and easy measurability. The approach is to define a promotion calendar, pick product themes for each promotion, and then select the best offers within each theme for each customer. “Themes” are important because they’re what Coherent Path calculates different customers might be interested in. The system relies on marketers to tell it what themes are associated with each product and message (that is, the system has no semantic analytics to do that automatically). But because Coherent Path can predict which customers might buy in which themes, it can suggest themes to include in future promotions.

Lest this seem like the blackest of magic, rest assured that Coherent Path bases its decisions on data.  It starts with about two years’ of interactions for most clients, so it can see good sample of customers who have already completed a journey to high value status. Clients need at least several hundred products and preferably thousands. These products need to be grouped into categories so the system can find common patterns among the customer paths. Coherent Path automatically runs tests within promotions to further refine its ability to predict customer behaviors. Most clients also set aside a control group to compare Coherent Path results against customers managed outside the system. Coherent Path reports results such as 22% increase in email revenue and 10:1 return on investment – although of course your mileage may vary.

The system can manage other channels than email. Coherent Path says most of its clients move on to display ads, which are also relatively easy to target and measure. Web site offers usually come next.

Coherent Path was founded in 2012 and has been offering its current product for more than two years. Clients are mostly mid-size and large retailers, including Neiman Marcus, L.L. Bean, and Staples. Pricing starts around $10,000 per month.

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* Download their marketing explanation here or read an academic discussion here.