Case Study: Walgreens and Behavioral Targeting

It’s pretty tough right now to be a retailer. The economy is limping along. The Walmarts of the world are bringing prices down and changing customer expectations every day.

Smart retailers need to use all of the tools at their disposal to get more customers and sell more stuff. This article about Walgreen’s coupon strategies, brought to us by DM News caught my eye: Walgreens’ in-store BT strategy hits the mark.

Background
Walgreens is using behavioral tar­geting to engage customers in its stores.

The nation’s largest drugstore chain has partnered with Catalina Marketing to print targeted coupons in its 6,000 stores, which are given to customers based on their purchasing behaviors, as they receive their receipts. Catalina runs in-store pro­motions in about 25,000 grocery stores and 14,000 pharmacies nationwide.

Strategy
Walgreens’ overall strategy is to lever­age consumer data more effectively, which Doug Egan, VP of marketing services and research for the company, said has ramped up in the last six months.

“[It's] part of a larger understanding that purchasing behavior can be changed in-store,” he said. “Truly, the trackability of it is great. We can track purchases by store, time of day and even register.”

Walgreens’ marketing spend is still dominated by its circular — 60 million per week — and by direct mail.

Results
Egan said that in-store promotions, cur­rently accounting for 10% of Walgreens’ marketing spend, are growing, thanks to the success of the Catalina promotions.

“What we’ve heard from customers is that they are useful,” he said.

Average Walgreens stores see between 800 and 1,000 customers per day and print Catalina coupons for about 10% to 12% of them. About 6% of those printed are redeemed at a future date, said Egan.

The goal of using Catalina coupons or behavior targeting overall is to expand the consumer’s shopping basket, said Egan.

“The average purchase, not counting pharmacy, is three to four items per store visit, and two store visits a month. We want to add a trip a month,” he said. “It’s great to see data of what a customer is purchasing in real-time. You can then offer related programs. If they purchase two twelve-packs of Pepsi, we can target them with a coupon for a dollar off of three twelve-packs. You can see what customers purchase consistently.”

Interesting case study, no?

Back in June, I blogged about couponning in my Direct Marketing Blog and put forth this challenge to direct marketers: How do you track exactly who is redeeming your coupon, without making this cumbersome to the consumer? In Walgreen’s case, they know what products people are purchasing, but I still can’t see where they have a handle on the make-up of what buyers look like.

It would be so much more powerful if you could flesh out purchase behavior with other things known about the consumer, wouldn’t it?

Then, you could begin true database marketing and really start to delight your customers–with offers tailored specifically to a customers’ specific needs and situation. You’d not only have the knowledge that a specific customer enjoys Pepsi over Coke, but if you knew, for example, that that customer has a large family and likes to go camping, you could customize the Pepsi offer to include a propane tank or other camping gear. Now, we’re talking about a much larger shopping cart (more revenue), and a satisfied customer who leaves the store happy that they’ve gotten a great deal, not only on Pepsi but on gear for an activity they love.

I would love to see retailing move in this direction, wouldn’t you?

Analytics Key for E-Marketers

As a self-proclaimed data geek, I always get a kick about learning about unexploited opportunities to reap the benefits of data-mining. I salivate about the potential to make an impact using tools that haven’t been used before. I truly do get excited when I see an opportunity to generate new sales simply by obtaining a better understanding of customers’ wants and needs.

Take a look at this article from DM News: E-commerce should stress analytics: eTail 2008.

The article provides a recap of a recent presentation at the eTail conference in Washington. It talks about the opportunities for e-commerce firms to start to benefit from the knowledge embedded in the customer data they collect online.

He (speaker Sheldon Gilbert, founder and CEO of Proclivity Systems) said many e-commerce companies only “look at the cash register;” only what a customer is buying. To fully optimize marketing efforts, he added, companies have to dig deeper into predictive modeling, and take into account factors such as seasonal shopping cycles, consumer buying and browsing patterns, and gauging the value of certain “action words” such as the word “organic.”

Actually, some of what the speaker highlighted seemed fairly ‘no-brainer’ to me. Check out this point, where he talks about how to identify cross-sell opportunities:

He also said that companies should mine their databases to learn what customers of one particular product are also buying. For example, if 79% of customers that bought denim products and shoes from a retailer overlap, then the company needs to determine how to send the proper offer to those customers based on that data.

“The data will tell you what to offer,” he said. “Human behavior is fairly predictive.”

If this article is correct in stating that many e-commerce firms have not yet employed data mining tactics to improve customer strategy, than this is a huge opportunity for direct marketers. E-commerce needs analytical folks who are schooled in data analysis and modeling techniques–people who’ve had practical experience turning customer behavior into programs that make money.

And, guess what? As a direct marketer with a focus on analytics, I’m ready to help!

Watch out for those Gamma Women!

I’m thrilled! There’s another new segment for us direct marketing practitioners to target: The Gamma Women.

“Gamma women share and exchange information, ideas, opinions, contacts and recommendations with their wide-reaching network using multiple media and channels of communication. This is in sharp contrast to the ‘Alpha’ style of communication – a top down model of selectively passing along information. While a Gamma’s sense of self is guided by her internal beliefs, passions, and priorities, an Alpha is driven by external social hierarchies or other indicators of status or popularity.”

This quote from an EarthTimes article about a study recently released by Meredith Corporation, the media and marketing company that targets American women.

I think they’re on to something. Women typically are ’sharers’. If we (and I know I’m part of this bold group!) find something (a product, a service) we like, we talk about it. We tell our friends, our family–we become the biggest advocates. Of course, the opposite is also true. If we have a bad experience, we’ll spread that news, too.

The traits of this newly defined ‘gamma woman’ lend themselves almost perfectly to social marketing. The study shows that we like to communicate, and we don’t like to be sold to. We look for relevant content and we’re all about building networks to share our info with. Yep, we Gammas are a social marketer’s dream.

Not only are these Gamma Women perfect for the world of social media, they’re a large group (55 million women!). What an opportunity!

“The report forecasts that, as the social and technological environment in which they exist becomes more and more suited to their communication and interaction styles, Gammas’ influence in the marketplace will continue to increase.”

Moral of this story–don’t forget to include specific programs and tactics that will appeal to these Gamma Women as you develop your direct marketing strategies.

Customer Segmentation Information

You know that we’re firm believers in the power of customer segmentation. We’ve even written a game-plan that we’re happy to share with you. If you can target your segment with the absolute right-on message, creative that resonates with them and an irresistible offer, your direct marketing campaign results will reflect this extra work.

Sometimes segments are based on the products a customer purchases from you. Sometimes they are more related to what’s going on in the customers’ life. As a marketer, you rarely have significant insight into your customers’ and prospects’ personal life. Luckily for us, there is a wealth of external data and experts who know how to mine that external data to make the job of really understanding our customer segments a heck of a lot easier.

Check out this article from DM News. Four data experts have each focused on a niche segment that they have experience in. They provide some pretty valuable insight into how to best message to each group. Here are the groups discussed in the article:

• Bob Stein of Trinity Direct talks about nuances in targeting the Catholic market (hint–they are older, highly mail-responsive and like to donate).
• Amy Benicewicz of ListBargains: “Marketers seeking a target audi­ence of luxury lifestyles and frequent travelers fare very well with prospecting to Double Income No Kids (DINK) families.” Caveat–this group is hard to target (based on available data), but if you sell luxury goods, or are in the travel/tourism industry, you need to reach the DINKs.
• Sandy Ostrander of ListSolutions shares her perspective on marketing to military families. It’s a growing group that is under-served and may just represent an untapped opportunity.
• Rob Odri of ALC talks about marketing to gay and lesbian consumers. The key takeaway here is that this is a large group of people (they command $1 billion in spending power) who also tend to be early-adopters AND they share their views with their friends and family. The opportunity: many mainstream marketers tend to ignore this group.

Altogether some interesting information on four discreet segments, and some good food for thought. If you’d like more info on Segmentation, and specifically, an overview of the approach that we take, we’d be happy to share our White Paper, called: Advanced Segmentation Game-Plan.

Be Happy You’re an Analytical Expert…

I came across this chart and remembered the fact that sometimes a picture is worth a thousand words.

So, if you have analytical expertise, you’re in good shape to ride out (and even thrive in) this crazy economy.

And, for more encouraging marketing news, check out this post from our Direct Marketing Blog. A little hint–marketing budgets don’t seem to be on the chopping block, even in this economy!

Using an Analytical Approach to Ride Out the Economy: Part Two

As promised in our last post, here are a few more analytical marketing ideas that will help all Marketers be successful — no matter what the economic climate.

Here’s the next idea: Get everybody involved. Lots of times, Marketing is accused of operating in a vacuum, not being in touch with sales or corporate objectives. Hence, budgets get cut and marketing resources have to begin to fight for their jobs.

In times like this, plan some meetings — some real meetings.  Schedule time to get an accurate view from your CEO, from IT, from Sales — get their ideas on how they measure marketing effectiveness. They can give you some great ideas as to what metrics they believe need to be put in place. Better yet, align your measurements so that you are all working towards the same or complimentary goals. One of the reasons that Marketing gets a bad rap is because the goals across divisions are not aligned correctly. Thus, one division’s objectives may be in absolute conflict with Marketings objectives. This is not going to result in happy campers in the different divisions.  What it might result in is missed objectives . . . resulting in cut budgets . . . resulting in fewer resources.  You get the idea.

So, go talk to your corporate Leaders. Get a good understanding of their specific corporate objectives and make sure that marketing’s goals and metrics align as exactly as possible with corporate goals.

Next meet with Sales — here is where the most conflict may come from . . . have you ever heard this? “These leads suck!” Yep, in marketing we all have heard this.  And, this is what Sales hears from Marketing: “Sales can’t close any of our leads to save their lives!” Not an environment conducive to success.  Perhaps its just that Marketing and Sales needs to sit down and discuss each other’s objectives. Then, they need to revise those objectives so that they are very closely aligned.  This way, Marketing can go acquire the data that will facilitate sales success in reaching their objectives.

In addition, Sales can provide Marketing with their bird’s eye view of the customer.  Then, Marketing can share with Sales what their customer profile studies have told them. Armed with more complete information, they can better target their customer base, create better messaging that will more likely resonate with their customers, and find the most responsive, targeted prospects for sales to call on.

Who ever thought it would all come down to being able to communicate?  And whoever thought communication would be called analysis?  Well, it isn’t — but an analytical approach can certainly help to facilitate better communication!

Stay tuned to the next post for our final word on this subject!

Analytics for Mobile Marketing

We’ve done a lot of talking about how to implement an analytical approach into your direct marketing strategy . . . but what about mobile marketing? Yesterday, we posted on our Direct Marketing blog about the increasing importance of Mobile Marketing — and how it will continue to grow over the next few years (to an estimated $19 Billion by 2012).

Well, to build on that theme, in a recent Businesswire article it is reported that mobile marketers have already jumped on the analytical bandwagon.  In fact, the article reports on Bango Analytics, who provides a hosted service that allows mobile marketers everywhere to connect their sites to Bango’s analytical service to receive results — who’s responding, how long are they on the site, where are they clicking, etc — for free and in minutes. Very forward-thinking!

Bango has published some of their results on click through and conversion rates from these mobile advertising campaigns. “Banner and text ads on mobile websites typically have a click through rate of 2-8% with a conversion rate of 2-5% which can be as high as 12% on some networks.” So, very high conversion rates! In addition, Bango’s data “clearly shows that when the offer is closely aligned to the needs of a particular consumer profile, click-through and conversion rates increase, often doubling.” For those of you who have been reading our blog for a while now, you know that we truly believe in the power of the customer profile. Here, again it is proven to increase conversion rates on mobile marketing campaigns. The bottom line here? You’ve got to really understand and define your customer base. With these types of response rates, it is crazy not to go through the customer profile exercise.

The other thing to consider about the use of this free analytical service, is that mobile site owners can easily determine the characteristics of those most receptive to their marketing message. According to the article, “This information is then used to focus marketing campaigns on the countries, networks and handsets which return the highest conversion rates.”

Kudos to Bango for being savvy enough to offer this service to their customers — this is using intelligent marketing at it’s best. Bango benefits by gaining more clients, and by offering this value-added service, their clients benefit by marketing more specifically to those prospects who will be most highly likely to respond and convert. This is a true win-win scenario!

Why Analytics is so Important Today

Like us, you probably read many different direct marketing periodicals. Over time, we’ve all heard every single buzzword out there that was going to be the end-all, be-all in direct marketing strategy.

In our sputtering economy, we need more than the newest acronym to pull us through. This is why we are such huge fans of using an analytical approach. In fact, we’ve built our business on it.

Using analytics can help you realize the full potential of every single marketing dollar spent. Put simply, those who implement an analytical strategy into their business will survive, and those who don’t . . . well, we’re not so sure they will.

Over the last couple of weeks, we’ve posted about everything from how to integrate analytics into your retention, cross-sell/upsell, and acquisition campaigns to how to use analytics with your credit-data-driven campaigns. Are you sensing a theme here? Using analytics within all marketing campaigns can make everything you do more profitable. And, as time goes on, you’ll market smarter and smarter.

So, what to do when you run into someone who simply won’t listen? Let’s take a look at an example of a company that we work with who shies away from using an analytical approach. This company specializes in selling land that they purchase from landowners nationwide. They are very successful and like many of our clients, are lean in terms of resources and do a lot of marketing by the seat of their pants. It’s tough to get an audience with them because they have little time to spend planning or strategizing. They’re too busy executing.

As you can imagine, this is a very frustrating experience for us, the consultants who work with them. We love these guys, they’re a blast to work with but we can’t get them to implement the ideas that we know will make their business more successful — and save them money. It just drives us crazy!

We’ve done a ton of analysis on their customer base. We know precisely what those people who buy from them look like — demographically, ethnically, and financially — the whole enchilada. Today, we are helping them purchase the right data to target better than they were when they were just buying prospect lists willy-nilly. So, from that perspective, we’ve been successful and saved them money, increased response rates, yadda yadda.

However, now that we’ve gone down this path, we know how much more we can really assist them in targeting better, smarter — getting better response rates and more purchases which equals greater profit. It is so hard to not take the next step — but its tough to make the case because this is new, uncharted territory for these folks. They’ve drank the kool-aid around the customer profiling exercise, and they got some “aha’s” out of the read-out, but getting their bandwidth to build a full response model is proving hard to accomplish. Don’t get me wrong, we’ll continue to try to convince them because we believe in it so much, and we believe that one day we will win them over to our way of thinking.

Why do we try so hard? It’s a matter of profitability. When we look at what they’re doing, we know that they could be doing it so much better. And, we know that the investment that they’d make with us would be a fraction compared to the financial gains that they’d receive from that investment.

If you find yourself in the same position in your company or with the client that you serve, don’t give up. Sooner or later someone will come along who will listen to you — or the someones that you are working with today will finally come to understand that they need to listen to you. Analytics prove themselves — and in this economy you need proof on a daily basis that what you are doing is the best thing for the business right now.

We’d love to hear your experiences in this arena. How did you convince your powers-that-be to move forward with an analytical strategy?

Finding that Next Best Product for your Customers

We’ve seen that more than ever, companies are trying to gain more wallet share with the customers that they have today.  And, that’s a very smart strategy — those who are loyal to you are more likely to be open to other products or services that you offer.

Here’s an idea . . . model for what the best next product is to offer to your valuable clients.  This is a good way to determine how to move those customers who are transacting with you multiple times to — potentially — higher market items.  Or, simply have them become larger customers with you because they purchase more products from you.  Either way, you are building on the profitability of each one of your customers.  And, you keep the dollars with your company as opposed to with one of your competitors.

A good way to start the process rolling is to analyze your customer groups by the product that they currently purchase from you.  Really dig into every group’s profile and outline them. This way, you can figure out which products are held by each customer segment.

From here, you can start to configure the sequence that your customers purchase products from you.  Imagine if while your sales reps were on the phone with a customer, that they knew exactly what the customer would most likely purchase next from you.  They could offer it to the customer right there and then — and, more than likely make the sale.

There’s a lot to be said for this approach — and we wanted to get you thinking about it.  If you’ve done this in your business and can share how you fared with our readers, we’d love to hear all about it.  Toss us a comment and share your success!

Get a Handle on Channel Preference

Here’s the final tip from our analytical workbook!

Use analysis to develop an understanding of how your customers/prospects prefer to deal with you. Look at how they have interacted with you in the past to understand how they would like to be communicated with in the future. For example, do they send you e-mail to initiate customer service, or is it a phone call? Did they respond to your direct mail offer by clicking through and ordering on your website? Have you ever been able to reach them via outbound telemarketing? A simple channel analysis that addresses these types of questions, on a customer-by-customer basis, will give you a deep understanding of your customers’ preferences.

The benefits of this type of channel preference study are clear. First of all (albeit hard to quantify), you’ll boost customer satisfaction if you use the right channel to speak to them. Second, if you know channel preferences, you can then begin to use the least expensive vehicle for communication. Here’s an example—there are people who refuse to take a phone call but would be pleased to hear from you via e-mail. Well, why waste your time and marketing dollars with an expensive outbound cross-sell telemarketing call? Save the money and send this customer/prospect an e-mail. It’s much less expensive, and for this individual, you’ll have better success in getting their attention, just by communicating via their preferred channel.

If you can articulate the above two benefits, and assign some real cost savings to them, your Senior Management should be receptive to the thought of implementing Channel Preference Analysis.

We hope you’ve enjoyed our thoughts on how to create an analytical approach in your own businesses.  We’d love to hear your success stories on how you’ve accomplished this — so please share!