Kicking off with Dan Heath, co-author of the best-selling book Made To Stick as the keynoter, last month’s Retail Advertising Conference (RAC), in Chicago, was centered around the theme Make Your Mark and Make It Stick.
While marketing strategies were the main topic of conversation, a key underpinning of the conference was around gaining better insights into customers in order to make sure that marketing campaigns and messaging resonate. Executives from PetSmart and Banana Republic delivered presentations on customer segmentation and leveraging customer information across the organization.
“I really feel the key is in the word understanding. It’s about investing the time to know and understand who your target is – what motivates them, what’s important to them,” said Tamra Krefman, Consumer Strategist with Banana Republic. While Krefman’s team is technically part of the marketing department, she said a key to its role and the company’s success is the focus on integrating customer feedback into all areas of the business.
“Our energy is solely put into understanding the Banana Republic customer, and working closely with the brand teams to integrate the findings,” she said. “We also work peripherally with finance when it comes to assessing marketing effectiveness, and with our corporate consumer insights and advanced analytics teams, who support all Gap Inc. brands. Depending on the project, we may rely on them more or less heavily for support.”
Krefman explained that Banana Republic has established a “Consumer Insight Toolkit” to capture customer feedback on as many fronts as possible. While focus groups, shopalongs and syndicated shopping data are all parts of that Toolkit, Krefman pointed to the brand’s Insiders Consumer Panel as one of the most effective insight drivers.
Advertisement
“This is perhaps one of our more unique tools that has brought us great flexibility and innovation in research,” Krefman said. Launched in January 2006, the panel is made up of loyal shoppers in who fall into the company’s target demographic of 25-44 year old consumers. The Insiders are contacted every 3 weeks with a survey link or an activity invitation and the group is offered incentives ranging from appreciate cards to merchandise. “This continues to be a key vehicle for us to understand customer issues in greater depth than a traditional tracking study or qualitative group can provide. Incentives vary from appreciation cards to merchandise.
On an ongoing basis, Banana Republic measures and reports on the health of its consumer franchise and divides the findings into the following three key areas:
Acquire: Is the company building brand visibility, awareness, and brand interest to drive new traffic into the store?
Deliver: How well is the company converting those visitors into customers? What are customer brand perceptions? Is the company meeting expectations?
Build Loyalty: Is the company building advocates and brand loyalists who will keep help spread the word about Banana Republic being a great place to shop?
The company’s monthly scorecard reports on metrics relevant to each of these areas and provides a score (up, down, mid arrow) for each bucket and a net directional score for the month.
PERSONA PAYOFFS
Another retailer that is digging deeper into customer insights to drive its overall strategy is PetSmart. Joice Kempton, Director of CRM at PetSmart, delivered a presentation titled, “From Personas to the Payoff Best Practices & Business Drivers: Putting Customer Segmentation To Work.” Kempton explained that customer intimacy is at the core of the company’s shift from a Mart’ to ‘Smart’ – “leveraging analytics and research to grow customer value by delivering TLC to pets and their parents.”
Since research found that many pet owners treat their pet as a family member, purchasing birthday and holiday presents for them, PetSmart.moved forward in their marketing efforts to address the importance of pets to their customers.
As part of this shift, PetSmart spent time identifying the profile of its typical customer, but realizing not all of its customers looked or shopped alike, the retailer went deeper into
customer segmentation. Kempton said some of the benefits of customer segmentation have included:
· Aiding organizational alignment;
· Helping with Demand Management, by “getting diverse customer base into sizable, actionable chunks”:
· Understanding Preferences, including unmet customer needs and improving the effectiveness of advertising/marketing;
Kempton said PetSmart has employed various approaches of segmenting its customers bases, and she added that the four most impactful tactics have been:
1. Attitudinal/or Lifestyle: segments customers based on their activities, interest preference, and opinions.
2. Transaction-based: segments customers by behavior characteristics, including relationship, product/channel usage, and profitability.
3. Geographic/Demographic/Socio-Economic: segments customer based on geographic boundaries, age, income, gender, and other measurable/identifiable characteristics.
4. Combined Approach: segments customers based on survey research, transactional data, and demographic data. Then, cluster on all data, model for current customers, and model to segment/predict non-surveyed customer segment.
For transaction-based segmentation, PetSmart looks at such behavioral data as:
Ø Gross spend of over last eighteen months
Ø Avg. transaction size
Ø Number of visits
Ø Use of coupons
Ø Whether they purchases online and offline
Ø Number of items purchased per visit
Ø Categories they purchase in
Kempton suggested the establishing RFM (Recency, Frequency and Monetary spend) goals, is a “great place to start” for customer segmentation, before “connecting the dots,” on more advanced approaches that combine other tactics.
