CRM Loyalty

Impact Analytics developed a customized segmentation and campaign management solution for a specialty retailer with over 400 stores and helped the client reduce churn by 20% and increase average basket size by 15%

Big Picture

The first thought that comes into mind when discussing customer retention strategies is the high cost of retention. The cost of acquiring a new customer is approximately seven times the cost of retaining a customer. Customer Relationship Management (CRM) in retail has become an essential platform that can support multiple business strategies such as omnichannel communication, customer experience management, social media engagement, rewarding loyalty programs, and effective customer retention programs.

Increasing use of social media to connect and communicate has changed the way consumers engage with each other and with brands. Smart retailers are responding by adopting CRM and social CRM strategies along with new-age technologies to engage consumers and build stronger customer relationships.

Challenge

The client is a specialty retailer with over 400 stores generating more than a billion dollars in revenue in FY 2017. The client has a strong customer base of around 5 million unique customers. However, they were struggling to streamline their marketing program. In some cases, the customers would receive more than 40 emails/coupons per week with an offer not relevant to their requirements. As a result, the customers did not feel engaged, and the ROI on their marketing campaigns was low.

Solution

The client had a clear objective in mind: to improve ROI of the marketing campaigns and increase customer engagement (coupon redemptions and frequency of visits). Impact Analytics built an advanced customer segmentation solution that utilizes ML algorithms and a customized ROI effectiveness solution that addressed the client’s concerns.

Impact Analytics’ customer segmentation models revealed three primary customer segments:

1.Regular
2.High Risk of Churn
3.Low Engagement

Each of the above segments had three sub-segments. This segmentation helped in creating customized marketing strategies for their weekend sales campaigns. Using Test & Learn approach, multiple strategies were evaluated for each segment which accounted for seasonality and customer preferences among other factors. Finally, the best strategy was implemented for each customer segment.

Outcome

  1. Customer churn rate: Decreased by 15% across all segments (customers moving from higher to lower segments were also considered as churn)
  2. Increased coupon redemption due to customized offers: Email coupon redemption up by 18%, Direct Mail coupon redemption.
  3. Average visits per quarter: Up by 30% across all segments.
  4. Average basket size of Regular and Low Engagement customer segments: Increased by 20%
  5. ROI of Direct Mail campaigns: $2 million in savings from optimizing campaign and $3 million additional revenue generated from coupon redemption

Conclusion

The automated customer segmentation and churn risk models had resulted in $3.5 million bottom-line savings for the client. Coupons are sent to consumers on the priority order of churn risk and lifetime value, and on consultation with the retailer. Impact Analytics helped the global retailer improve upon their marketing spend and coupon redemption rate, which in turn strengthened their churn assessment and improve brand communication strategies. .