Acquisition Marketing: What's So Bad About New Customers?

Hansa

What’s so bad about new customers?

Who am I?

Roy Wollen is President, Hansa Marketing Services Roy was Director of Consulting at Experian, the largest

database company in the world Roy has also been on the client side, working for Federated

Department Stores and Hewlett-Packard Roy worked at Ogilvy & Mather, the global advertising agency Roy has a Master of Science degree from Northwestern’s

Medill IMC program Roy has authored a book on database marketing Roy is an adjunct professor of marketing at DePaul University

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HANSA Brand Consulting

HANSA Analytics

HANSA Market

Research

HANSA Marketing

Communication

Who’s Hansa?

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Hansa is a global organization

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Who are we working with?

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Today’s Agenda

What’s so bad about new customers? Customer segmentation

– Customers see brands, not channels – Measuring the bond – Personalizing the message

How to cut costs without reducing effectiveness Case study: The Home Depot 10 things that predict which customers will buy again

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What’s so bad about new customers?

A few will blossom, but most buy once and never again

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Old model

“The sale is the start of the relationship” (Levitt) Continuum of your relationship with a customer

– Ignorance – Awareness – Interest – Trial (acquisition) – Repeat purchasing (retention) – Loyalty – Advocacy

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Notice – Combination of acquisition media both mass and direct – Customers zigzag in and out of media – There is a lot of research and decision making prior to the sale

Attributing response is not only difficult but political

Display ad? E-Mail? TV Ad??

Price Comparison

Search

Community

www.Brand.com

Store visit

Mobile

New model

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From a customer’s perspective – Customers are in control – more “pull” than “push” – Customers see brands not channels – Customers don’t care who gets credit for the sale

Display ad? E-Mail? TV Ad??

Price Comparison

Search

Community

www.Brand.com

Store visit

Mobile

New model

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Measuring the bond

How do you measure the bond between your brand, your product/services, and your customer?

Strategic customer segments

Some marketers name their segments 11

Advocates Repeat buyers Gift givers Too good to be true Trial buyers Dormant Defectors

– About to defect – Baby come back

Cus

tom

ers

Segm

ents

Sandra is a real customer

Sandra has information in a database – Contact information and “preferences” (opt ins, opt outs) – Transactional summaries at the customer level – Order detail

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Meet “Sandra”

Sandra’s purchase history tells a story

Sandra has a broad range of information in a database – Purchase and non-purchase details (clicks, store visit) – Merchandise detail associated with her purchases

Sandra’s purchase history tells a story

When you include long term behaviors, it completes the story

Personalizing the message for the individual Thank you for your purchase

(Sales incentive disguised as a product review)

Attend a store event – clienteling example

What Sandra bought The store closest

to Sandra? Same store as before?

Potential Customer 1 55 year old male Located in Texas Price conscious Shopping for Golf Balls

Dynamic Category/Subcategory Text

Dynamic Gender/Age Range Image

Dynamic Countdown Dynamic Product Image

Texas store locations

Dynamic store locator

Dynamic Content

Source: Dotomi, 2012

Potential Customer 2 35 year old female Located in Washington state Brand conscious Shopping for Golf Clubs

Dynamic Category/Subcategory Text

Dynamic Image Rotates between Product and Brand

Dynamic Countdown

Dynamic Gender/Age Range Image

WA locations

Source: Dotomi, 2012

Personalizing the message

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20s 40s 60s Professionals 50s

Example of messaging at the segment

level

Today’s Agenda




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1

2

3

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Customer Centric

Batch & Blast

Mail1 Email1 Email2 Email3

Mail2

Y

N Y N Y

Two approaches to marketing outreach

How “deep” should I

circulate?

What does Sandra want?

Comparing the two approaches

Batch & Blast is an old model of marketing outreach – Selecting audiences based on our marketing calendar – “Batch and blast” – each campaign seen as a distinct event – Response rates of 1% are acceptable (99% failure rate)

What’s wrong? – Presumes customers are in market on our timetable – Not aware of other media – particularly customer initiated – Slave to “what have you done for me lately” mentality

• Audiences are selected based on Recency – Frequency model for expensive media such as telemarketing and mail

– For less expensive media, one size fits all • Anyone with an email address gets all email campaigns, no targeting

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Campaigns within a promo periodCampaign 1 Campaing 2 Campaign 3 Campaign 4 Campaign 5

What it looks like to a customer (mail edition)

What it looks like to a customer (email edition)

Customers being pummeled by email Everyone gets the same level of attention Clear differences in responsiveness Not everyone has an active email address

RFM and Email analysisRecency Active

Email %Total

EmailsEmails/Buyer Openers

% whoOpened Opens

Opens/Buyer Clickers

% whoClicked Clicks

Clicks/Buyer CTR

0 - 3 Mos 70,960 74.6% 2,124,751 29.9 43,580 61.4% 339,099 4.8 33,304 46.9% 115,778 1.6 5.4%4 - 6 Mos 79,305 83.4% 2,212,122 27.9 42,724 53.9% 342,965 4.3 30,743 38.8% 102,063 1.3 4.6%

7 - 12 Mos 131,193 80.2% 4,161,901 31.7 57,161 43.6% 407,003 3.1 36,133 27.5% 95,216 0.7 2.3%0-12M buyer 281,458 79.5% 8,498,774 30.2 143,465 51.0% 1,089,067 3.9 100,180 35.6% 313,057 1.1 3.7%

13 - 18 Mos 110,122 75.2% 3,550,586 32.2 44,609 40.5% 310,592 2.8 27,159 24.7% 65,970 0.6 1.9%19 - 24 Mos 94,968 71.7% 2,813,285 29.6 33,669 35.5% 221,741 2.3 19,487 20.5% 43,939 0.5 1.6%25 - 36 Mos 160,279 67.4% 4,036,381 25.2 49,156 30.7% 308,036 1.9 27,007 16.8% 57,400 0.4 1.4%37 - 48 Mos 73,727 44.8% 2,173,384 29.5 21,294 28.9% 135,273 1.8 11,350 15.4% 23,129 0.3 1.1%49+ Months 60,842 24.9% 2,035,069 33.4 16,946 27.9% 111,304 1.8 8,953 14.7% 17,889 0.3 0.9%Grand Total 781,396 61.1% 23,107,479 29.6 309,139 39.6% 2,176,013 2.8 194,136 24.8% 521,384 0.7 2.3%

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Contact strategy based on customers

Planning done based on a customer’s potential (value) – How much should we invest in retention marketing? – Where do we draw the line (lower bound)? – Which channels does the customer prefer?

But implementation is reactive to customer actions – Welcome streams – Triggered by activities – Triggered by non-activities (time going by) – In b2b, triggers might come from site level activities

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Contact strategy experiments

Longitudinal planning = planning campaigns for a period of time (e.g., 6 month season) – Experiment with # of touches – Experiment with cadence and rest periods – Experiment with media (phone call followup) – Experiment with offers – Experiment with cycle time (e.g., how long it takes to get a

welcome kit)

Keep in mind: – Control groups at campaign level – Control groups at universal level (6 month hold out group)

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26 Marketing ROI Seminar

Response Summary by Recency - Frequency

6-Month Season % Sales/Recency Frequency Customers Campaigns Visits Revenue Resp. Piece

0 - 3 Months 3x+ 90,802 713,249 37,508 $17,147,029 5.3% $24.040 - 3 Months 2x 29,595 188,862 5,360 $2,115,413 2.8% $11.200 - 3 Months 1x 50,465 313,203 6,533 $2,535,099 2.1% $8.09

Subtotal 0 - 3 Months 170,862 1,215,314 49,401 $21,797,541 4.1% $17.94


Subtotal 4 - 6 Months 128,238 1,034,895 21,715 $8,552,928 2.1% $8.26


Subtotal 7 - 12 Months 202,443 1,436,914 21,004 $8,102,208 1.5% $5.64

13 - 18 Months 3x+ 60,541 375,304 3,695 $1,406,123 1.0% $3.7513 - 18 Months 2x 37,628 192,206 1,465 $531,979 0.8% $2.7713 - 18 Months 1x 80,242 344,511 2,057 $698,731 0.6% $2.03

Subtotal 13 - 18 Months 178,411 912,021 7,217 $2,636,832 0.8% $2.89

19+ Months 3x+ 129,024 398,968 2,687 $949,888 0.7% $2.3819+ Months 2x 127,003 313,473 1,816 $598,560 0.6% $1.9119+ Months 1x 380,147 820,132 3,487 $1,096,891 0.4% $1.34

Subtotal 19+ Months 636,174 1,532,573 7,989 $2,645,339 0.5% $1.73

Total 1,316,128 6,131,717 107,327 $43,734,864 1.8% $1.78

Best

Longitudinal analysis of campaigns

Contact strategy can be extended to touchpoints

Clienteling at point of sale (POS) – Data driven POS experiences – Contacts then continue from store associates

Intelligent call center routing based on value and customer segments

Dynamic creative on the web – Landing page optimization – Personalized display ads

Dynamic creative on outbound email – Early morning test then change creative to everyone based

on results – Keep track (a history of what interested customers) 27

Cost cutter ideas

Plan campaigns longitudinally Envision media holistically, experiment

– Example: Email prior to direct mail

Direct mail reserved for best customers – Use statistical models to select audiences based on probability

of sales or attrition

Make online communications relevant – First class postcards with a special offer to drive recipients to

your website – Specific search terms lead to relevant landing pages – Data driven display ads, not generic “banners” people ignore – Display ads on email 28

Today’s Agenda




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Case study for customer centricity

Analytical challenge – Home Depot wanted to know which online affiliates attracted

New- versus Repeat customers? • When customers buy again, do they buy directly from The Home

Depot, or via the same affiliate channel (who’s the customer loyal to?) • Which categories of publishers are best (not just biggest) for driving

loyal customers?

Solution – Analyzing customer transactions and determined Lifetime

Value (LTV) to establish the base for measuring success – Home Depot gained more control of its affiliate program at the

same time it increased repeat purchasing and LTV

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Today’s Agenda




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10 things to help you predict which customers buy again

1. Dollars spent on first purchase 2. Breadth of first purchase (# of departments) 3. Usage of a sales incentive or coupon 4. Payment method, especially house credit program 5. Degree to which customers tell you their

communication preferences 6. Sample or ancillary service on first purchase 7. Replenishment nature of product 8. What happened prior to the first purchase 9. (b2b) role and employee size 10. (b2b) activity of the site 32

How do I know this is true?

Repurchase rates by first dollar amount

This template can be used for any dimension

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First Dollar New Customers Bought in 1st 3 Months Bought in 1st 6 Months Bought in 1st 12 Months$501+ 5,284 1,793 2,345 2,850

$401-500 3,942 1,207 1,617 2,041$301-400 12,223 3,557 4,898 6,130$201-300 38,609 10,493 14,698 18,690$101-200 151,955 35,659 52,210 67,978$ 76-100 104,687 21,437 32,243 42,464$ 51-75 105,149 19,925 31,015 41,667$ 26-50 170,551 28,009 44,350 60,112

$ 25 or less 54,049 8,922 14,174 19,236646,451 131,001 197,550 261,168


Repurchase rates by first dollar amount

This template can be used for any dimension Go on a treasure hunt for the most important attributes

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First Dollar New Customers Bought in 1st 3 Months Bought in 1st 6 Months Bought in 1st 12 Months$501+ 100% 34% 44% 54%

$401-500 100% 31% 41% 52%$301-400 100% 29% 40% 50%$201-300 100% 27% 38% 48%$101-200 100% 23% 34% 45%$ 76-100 100% 20% 31% 41%$ 51-75 100% 19% 29% 40%$ 26-50 100% 16% 26% 35%

$ 25 or less 100% 17% 26% 36%100% 20% 31% 40%

Retention Rate


Repurchase rates by presence of sales incentive

Conclusion: Bribery has a short term benefit but downstream drawback

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Retention Rate

Premium New Customers Bought in 1st 3 Months Bought in 1st 6 Months Bought in 1st 12 MonthsYes 13,848 1,819 2,928 4,205No 631,516 131,582 197,776 260,459

Premium New Customers Bought in 1st 3 Months Bought in 1st 6 Months Bought in 1st 12 MonthsYes 100% 13% 21% 30%No 100% 21% 31% 41%

What customers did prior to their first purchase

36 Source: Joe Stanhope, Forrester 2010

Key takeaways

Not all first-time customers are created equal Most won’t buy a second time

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Other takeaways

Take a long term view of customers, which will provide feedback on acquisition marketing decisions

Envision communication as streams, conversations Plan contacts based on customer value and

longitudinally, not batch and blast Then embed triggers to react to customer activities Make your messages relevant Set aside control groups Measure what’s working

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Above all: measure what’s working

From campaign analytics … – Basic response analysis with ROI – Responses across channels (response attribution) – Experiments in market for offers, audiences, selections

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Channel Buyers Trans Sales Sales/Piece Margin GM% AOVRespRate

RespRate 2

Retail 200,000 250,000 10,000,000$ $2.50 5,000,000$ 50.0% 45.00$ 4.0% 4.5%Direct 100,000 130,000 5,000,000$ $1.50 2,500,000$ 50.0% 35.00$ 3.0% 3.2%Total 300,000 380,000 15,000,000$ $3.00 7,500,000$ 50.0% 40.00$ 3.8% 4.0%

List Priority Circ AOV Resp Rate Sales/Piece1. List x 1,000,000 $55.00 3.2% $2.002. List y 2,000,000 $45.00 4.9% $3.003. List z 2,000,000 $35.00 4.6% $4.00

5,000,000 $40.00 3.8% $3.00

Market Circ AOV Resp Rate Sales/PieceKey market 1 1,000,000 $50.00 6.0% $4.00Key market 2 4,000,000 $35.00 2.0% $2.00Grand Total 5,000,000 $40.00 3.8% $3.00

Discount Circ AOV Resp Rate Sales/Piece$25 off 1,000,000 $55.00 5.0% $4.00$35 off 2,000,000 $65.00 6.0% $1.75Gift w Purchase 1,900,000 $25.00 2.0% $2.00Control group 100,000 $40.00 3.0% $2.00

Grand Total 5,000,000 $40.00 3.8% $3.00

Distance to Store Circ Buyers Trans Sales Sales/Piece Margin AOVRespRate

Resp Rate 2

Within 1 mile 300,000 90,000 110,000 4,000,000$ $13.33 2,000,000$ 55.00$ 7.0% 7.2%2 miles 200,000 50,000 75,000 3,000,000$ $15.00 1,500,000$ 45.00$ 6.0% 6.5%3 miles 500,000 40,000 55,000 3,000,000$ $6.00 1,500,000$ 50.00$ 6.0% 6.4%4 miles 500,000 40,000 50,000 2,000,000$ $4.00 1,000,000$ 45.00$ 5.0% 5.5%5 miles 500,000 35,000 40,000 1,000,000$ $2.00 500,000$ 25.00$ 4.0% 4.0%

6 to 10 miles 1,000,000 20,000 22,000 900,000$ $0.90 450,000$ 40.00$ 2.0% 2.2%11 to 15 miles 1,000,000 15,000 16,500 650,000$ $0.65 325,000$ 35.00$ 1.5% 1.7%16 to 20 miles 1,000,000 10,000 11,500 450,000$ $0.45 225,000$ 35.00$ 1.0% 1.2%

TOTALS 5,000,000 300,000 380,000 15,000,000$ $3.00 7,500,000$ 40.00$ 3.8% 4.0%

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Above all, measure what’s working

…to customer analytics – Value of a lead, then optimizes investment in both

acquisition and retention programs – Hidden influencers, specifiers and site level and buying cycle

dynamics (by role, industry, employee size) – Finally dashboards drive action not just recite KPIs

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Roy Wollen President, Hansa Marketing Services Inc. (847) 491-6682 [email protected] www.Hansa-Marketing.com Blog.Hansa-Marketing.com http://www.linkedin.com/company/404316?trk=tyah

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Business

Acquisition Marketing: What's So Bad About New Customers?