We created behavioral segments using clustering algorithms for a specialty retailer and developed specific strategies to improve coupon ROI.
A billion-dollar speciality retailer increased their coupon redemption rate by 5% and marketing ROI by 10% using Impact Analytics customized campaign optimization and management solution.
Consumer behavior is ever-changing, and in a competitive marketing landscape, there is no room for ineffective campaigns that hurt the bottom line. Most brands are concerned about campaigns that lead to direct sales but often fail to understand the metrics needed for measuring campaign effectiveness. Marketing campaigns that lead to ‘lasting’ consumer impressions in line with the present-day market demands are considered to be effective, in the long run. Sustaining the marketing momentum is critical for building awareness and driving consumer action.
The client, a specialty retailer, operating across US with 400 stores and about 6 million customer base, was struggling to strike a balance between effective marketing channels and targeting the right customer segments. The client’s marketing budget was about 2% of total revenue and were managing their emails that go out every week along with the much costlier direct mail campaign which run every month. Approximately 4 million emails were sent every week along with 100k Direct Mail Coupons. Issues such as high un-subscription rates, low open and conversion rates prevailed as their strategy was to use a blast process without checking for the relevance of the offer to the customer.
The cost of customer acquisition and retention increased steadily. The lack of a robust campaign management system, undefined goals for customer segments, not using analytical engines or machine learning algorithms, and missing a test and learn approach for identifying the best strategy, had put the client in a very critical position.
Impact Analytics was engaged by the client to manage multiple marketing campaigns. The customer base was divided into two, to target through email and direct mails based on the customer’s propensity to respond to the channels.
Step 1: Increase conversions for each segment
Based on customer behavior (transaction history and product preference), relevant coupons were sent to match the customer’s ability to spend. Deeply discounted coupons were used to win back lapsed customers. Coupons were paced to improve the footfalls and keep the customer engaged.
Step 2: Calculate true incremental lifts in revenue and margin
The lift in sales and margin received due to the coupon redemptions was calculated. Significant spikes were observed over the weekends as a result of higher redemptions.
Step 3: Measure and track goals such as retention and acquisition costs
Goals were set at a store-level splitting their marketing budget between acquisitions and retentions. Factoring in the propensity of the customer and areas to be focused, brought down the costs by approximately 50% and had a higher ROI.
Step 4: Test and learn
Benchmarks were created after execution of every weekend campaign(s). Test and Control analysis in place helped understand how differently test groups were behaving compared to control groups. Tweaks were made to incorporate the seasonality and group’s responses.
The campaign management solution has helped the client add millions to the bottom line by improving the marketing ROI and generating additional revenue via increased coupon redemptions. Impact Analytics set store-level goals for the client which enabled better allocation of marketing budget between retentions and acquisitions.