Alterian June 2009 Webinar Addressing Retail Trends Through An Integrated Approach By Merkle

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Featuring Naj Uddin, Yoram Greener and Scott Cone, Merkle

Retailers face an increasingly difficult business environment with decreased store traffic and weak sales. An analytically-based approach that links marketing strategy, customer insight, predictive analytics, and leading-edge technology can assist retailers in maximizing the return on their marketing investments. In this webinar, Merkle discussed today's retail challenges and their unique solutions.

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Alterian June 2009 Webinar Addressing Retail Trends Through An Integrated Approach By Merkle

  1. 1. Proprietary – Shared under NDA Addressing Retail Trends Through An Integrated Approach June 18, 2009
  2. 2. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><li>Summary 5 minutes </li></ul>
  3. 3. Merkle’s Focus on Retail <ul><li>Merkle is a leader in the database marketing space servicing large scale clients across complex industries such as financial services, insurance, and travel & entertainment. </li></ul><ul><li>Merkle entered the retail space, recognizing that the industry is underserved and that there was an opportunity to bring industry best practices to the retail vertical. </li></ul><ul><li>We have recruited significant talent from the retail space across all key areas, including Interactive, Database Technology, Analytics, and Strategy </li></ul><ul><li>To date, we have developed our core retail technology solutions, incorporating not only the most advanced technology tools and processes but also specific retail modules embedded in our solution. </li></ul>
  4. 4. Merkle’s Engagement Perspective <ul><li>Our Differentiation </li></ul><ul><li>Merkle’s engagement is to support the existing business to hit key metrics and short term priorities while also laying a foundation for future initiative and long term growth </li></ul>Change the Business Merkle uses a framework driven approach to systematically help clients identify opportunities to optimize FUTURE growth Run the Business Merkle provides analytical and strategic support to maximize our partners’ CURRENT marketing efforts Strategy & Analytics Marketing Strategy Develop a retail strategy roadmap consisting of an array of integrated marketing programs that will maximize business impact Analytics Provide the quantitative support to bring to life the initiatives outlined in the retail strategy roadmap across offline and online activities Marketing Technology Build the right infrastructure and processes that support data integration, campaign, and business intelligence needs going forward Loyalty Loyalty efforts are enabled through a technology platform but designed to drive long term customer value and retention, capturing greater share Interactive Provide thought leadership and vision around advancing interactive and emerging technologies that are relevant to the customer
  5. 5. Database Marketing Agency Structure Strategic Consulting (Boardroom) Database Technology (Power Plant) Data Content (Fuel) Delivery Production & Media (Factory) Creative & Messaging (Studio) Analytics & Insight (Lab)
  6. 6. Implementation Gap – Why does it exist? Implementation Gap Marketing Strategy Marketing Execution Over abundance of data, inability to fully utilize Lack of understanding, business intelligence and infrastructure/process High cost and investment of time to implement Lack of clear ROI metrics Organizational silos Abundance of Ideas Available Capacity Lack of Action Surplus of Data Available Infrastructure Lack of Ability
  7. 7. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><li>Summary 5 minutes </li></ul>
  8. 8. Retail Industry Perspective <ul><li>Retailers have grown their business over the last 10 years by brick and mortar expansion, while traffic to existing stores has steadily declined </li></ul><ul><li>To offset for the decrease in traffic retailers have increased price points over the last three years, but have reached a &quot;boiling point&quot; due to the recent economic crises </li></ul><ul><li>eTailing has been recognized as a growth opportunity, and both budget and talent has been shifted to eCommerce </li></ul>
  9. 9. Retail Industry Perspective <ul><li>As a result most retailers offer multi channel of purchases included brick and mortar, call center and eCommerce and have began to adopt new CRM practices to manage their customers. </li></ul><ul><li>Today many retailers have expanded their push media including: </li></ul><ul><ul><li>In-store promotions </li></ul></ul><ul><ul><li>Kiosks </li></ul></ul><ul><ul><li>POS messaging </li></ul></ul><ul><ul><li>Direct mail, catalog </li></ul></ul><ul><ul><li>Email and mobile messaging </li></ul></ul><ul><li>As well as their pull media including: </li></ul><ul><ul><li>SEO </li></ul></ul><ul><ul><li>Affiliate Networks </li></ul></ul><ul><ul><li>Social Networks </li></ul></ul><ul><ul><li>Banner advertising </li></ul></ul><ul><li>The retail industry has faced challenges integrating the CRM practice across these channels of purchases and new media vehicles </li></ul><ul><li>Merkle’s primary objective in the retail space is to help retailers manage these complex multi-channel and media challenges and become more relevant to their current customers and prospects </li></ul>
  10. 10. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><ul><li>Framework for integrated strategy, analytics and database </li></ul></ul><ul><ul><li>Technology approach </li></ul></ul><ul><ul><li>Multi-Channel Retail Analytics </li></ul></ul><ul><ul><li>Allocation Schemes </li></ul></ul><ul><ul><li>Interactive </li></ul></ul><ul><li>Summary 5 minutes </li></ul>
  11. 11. The Objective Connecting Customers & Products Across Channels
  12. 12. Retail Enterprise: Customer-Centric View Promo Calendar Optimization - Event Specific - Seasonal/Product Category Contact Strategy - Media - Channel of Purchase - Offer - Cadence - Seasonality Lifecycle CRM - New To-File - Active customers - Lapsed/Inactive Media Mix Optimization Category Mix Optimization - Store/Regional Levels - Key Items/Category Basket Analysis - Cross/Up Sells - Category Affinity Product Driven Segmentation - Customer Profile/Segment - Category Consumption - Segment Value Pricing Strategy Full Price vs. Outlet - Site Selection/Trade Areas - Expansion vs. Cannibalization Performance Classifications Clienteling Customers Locations Products Marketing Merchandising Store Operations
  13. 13. Multi-Channel Retail Marketing Programs: Purchase <ul><li>Merkle evaluates the marketing calendar and considers adding the following programs utilizing all data, targeting and media platforms to influence shopping behavior </li></ul>Loyalty / Rewards Best Customers Proprietary Card Events In-Store Activity Programs Media <ul><li>Acquire new members </li></ul><ul><li>Migrate Loyalty Tiers </li></ul><ul><li>Point Balances </li></ul><ul><li>Redemption Balances </li></ul><ul><li>Loyalty Extra Points Promotions </li></ul><ul><li>Acquire new cards </li></ul><ul><li>Monthly Balances </li></ul><ul><li>Card Promotions </li></ul><ul><li>Private Sales </li></ul><ul><li>Exclusive Products </li></ul><ul><li>Exclusive benefits </li></ul><ul><li>Special Gifts </li></ul><ul><li>Show new lines </li></ul><ul><li>Meet with.. </li></ul><ul><li>Store Openings </li></ul><ul><li>Store Events </li></ul><ul><li>Private Sale </li></ul><ul><li>New Mover Programs </li></ul><ul><li>Holiday </li></ul><ul><li>Valentines’ Day </li></ul><ul><li>Mothers’ Day </li></ul><ul><li>Back to School </li></ul><ul><li>Graduations </li></ul>
  14. 14. Multi-Channel Retail Marketing Programs: Purchase Gift With Purchase (GWP) Friends & Family New-to-File <ul><li>On-boarding </li></ul><ul><li>Circulate early merch categories to determine product interests </li></ul><ul><li>Different value </li></ul><ul><li>GWP by customer segment </li></ul><ul><li>Referral Programs </li></ul><ul><li>Tie-In offers </li></ul>Gift Cards <ul><li>GC purchases </li></ul><ul><li>GC balances & redemptions </li></ul>Bouncebacks <ul><li>Bounceback offers upon purchases </li></ul><ul><li>Bounceback reminders </li></ul><ul><li>Bounceback redemptions </li></ul><ul><li>Abandoned Carts </li></ul>Programs Media
  15. 15. Merkle Loyalty Approach <ul><li>Loyalty Currency </li></ul><ul><li>Loyalty Tiers </li></ul><ul><li>Surprise & Delight Benefits </li></ul><ul><li>Loyalty promotions </li></ul><ul><li>P&L </li></ul><ul><li>Profile customers by tier </li></ul><ul><li>Identify tiers cutoffs </li></ul><ul><li>Assign customers to tiers </li></ul><ul><li>Target customers based on Loyalty parameters </li></ul><ul><li>Measure migration patterns </li></ul><ul><li>Currency Accumulation </li></ul><ul><li>Redemption </li></ul><ul><li>Track other benefit transactions </li></ul><ul><li>Cost </li></ul><ul><li>Data exchange </li></ul><ul><li>Updates </li></ul>Marketing Database Loyalty System of Record Analytics & Research Program Development
  16. 16. Strategic Planning Merkle recommends an initial strategic engagement to define key goals and prioritize resulting initiatives accordingly. The strategic engagement would answer the following:
  17. 17. Strategic Engagement Process Merkle’s Strategic Engagement Process (SEP) is designed to identify the key areas that need focus via the discovery, assessment and gap process. Once determined, detailed recommended roadmaps and project plans are then constructed.
  18. 18. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><ul><li>Framework for integrated strategy, analytics and database </li></ul></ul><ul><ul><li>Technology approach </li></ul></ul><ul><ul><li>Multi-Channel Retail Analytics </li></ul></ul><ul><ul><li>Allocation Schemes </li></ul></ul><ul><ul><li>Interactive </li></ul></ul><ul><li>Summary 5 minutes </li></ul>
  19. 19. Our Approach to Technology Usability How it will be used Functionality What capabilities are needed Technology TCO Business Driven Approach Best Approach
  20. 20. KnowledgeCenter Schematic Offline Channels Content Management Customer SKU Transaction Demographic Email Interactions Data Management : KnowledgeLink  ETL  Data Hygiene  Address Standardization  Matching  Update Process Database Marketing Strategy & Analytics Cross - Sell / Up - sell Acquisition Sequential Survey ( Profiling ) Notifications / Service - oriented Modeling Triggered Messaging Creative Library Deployment Engine Campaign Management : Alterian  Segmentation  Suppressions  List Sizing  List Selection Knowledge Warehouse : MS SQL Sever POS Promotion Web Analytic Online Channels : Dynamic Messenger WEB Loyalty : Merkle’s Solution  Data Management  Reporting  Member Management Reporting :  Standard  Ad Hoc  Dashboards
  21. 21. Customer Data Warehouse Key Customer Data Elements Associative Membership Household & Residence Individual Basic Attributes & ID Links to all other tables Communication Channels Location / District Email Text Communication Preferences Opt Outs & Suppressions Transactional Attributes SKUs Payments Discounts Tender Transactional History Purchases Returns Derived Attributes Model Scores Derived Variables Promotional History Campaigns & Segmentation Criteria
  22. 22. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><ul><li>Framework for integrated strategy, analytics and database </li></ul></ul><ul><ul><li>Technology approach </li></ul></ul><ul><ul><li>Multi-Channel Retail Analytics </li></ul></ul><ul><ul><li>Allocation Schemes </li></ul></ul><ul><ul><li>Interactive </li></ul></ul><ul><li>Summary 5 minutes </li></ul>
  23. 23. Segmentation: Becoming Customer-centric Having a customer-centric view of your customers (across the lifecycle) is critical. Segmentation provides the ability to make customer-centric decisions
  24. 24. The Enterprise Segmentation “Funnel” <ul><li>The Funnel has become the primary framework for marketing efforts </li></ul><ul><li>The two permanent segments are the Enterprise Segments (across the funnel) and Lifecycle (down the funnel) </li></ul><ul><li>The Funnel data can be selected based on recency and geography via ‘drop down boxes’ </li></ul><ul><li>Many different metrics can be displayed within the boxes (population % and indices shown to the left) </li></ul>Segment A Segment B Segment C Segment D Segment E Marketable Universe Active Customers Conversion Rates Conversion Onboarding Lost Customers Retention Rates Development Retention Awareness Consideration Acquisition Rates Inquirers Segment F 12% 55 16% 11% 13% 27% 20% 75 83 99 104 133 137 126 100 97 66 133 111 119 108 67 KEY: % of Lifecycle Bucket Index to Total Market 65 15% 124 79
  25. 25. Using the Database for Insight <ul><li>Overall Profile </li></ul><ul><li>“ I Am” </li></ul><ul><li>Personal Information </li></ul><ul><ul><li>Name: Kristen Smith </li></ul></ul><ul><ul><li>E-Mail: [email_address] </li></ul></ul><ul><ul><li>123 Main Street, Manhattan Beach, CA 99989 </li></ul></ul><ul><li>“ I Wear” </li></ul><ul><li>Product Information </li></ul><ul><ul><li>Shoe Size: 7 </li></ul></ul><ul><ul><li>Apparel Sizes: Tops – S, Bottoms – M </li></ul></ul><ul><ul><li>Favorite Colors: Black and Pink </li></ul></ul><ul><li>“ I am Looking For” </li></ul><ul><li>Online Shopping Interests </li></ul><ul><ul><li>Black raincoat - Beige handbag </li></ul></ul><ul><li>“ I Buy” </li></ul><ul><li>Purchase History last 12 months </li></ul><ul><ul><li>3 pairs of shoes - 6 Tops - 2 Suites </li></ul></ul><ul><li>“ I Like to Shop In” </li></ul><ul><li>Channel Preference History </li></ul><ul><ul><li>2x in your store in Laguna CA </li></ul></ul><ul><ul><li>1x in your store in the Las Vegas Mall </li></ul></ul><ul><ul><li>1x over the phone </li></ul></ul><ul><li>Promotion History Profile </li></ul><ul><li>“ I Like To Receive Emails” </li></ul><ul><li>EM Promotion History </li></ul><ul><ul><li>To receive emails from time to time but not too many </li></ul></ul><ul><ul><li>Opt-in </li></ul></ul><ul><ul><li>Low number of clicks </li></ul></ul><ul><li>“ I Also Like to Receive Catalogs” </li></ul><ul><ul><li>Catalog Requests </li></ul></ul><ul><ul><li>Three phone calls to the call center over the last six months </li></ul></ul><ul><li>“ I rarely shop online” </li></ul><ul><ul><li>No online registrations </li></ul></ul><ul><ul><li>Rare website visits </li></ul></ul>“ Kristen Consumer”
  26. 26. Sample: Strategy Map We use strategy maps to directly link themes and initiatives to desired outcomes. This assures that we work on the right things. Strategic Themes Initiatives Outcomes Develop Merchandise Mix Optimization Customize Retail Specialty and Outlet Targeting by Promotion Optimize Merchandise Mix Cross-Sell Offer Targeting by Segment and Merchandise Mix Targeting and Test Schemes Color and Size Optimization Seasonal Discount Strategy Increase Multi-Channel By 20% New-to-File Strategy Support Store Openings & Closings Trigger Program Engine Custom Retail Trade Areas Store and Regional Level Category Model Optimize Circulation Per Promotion 10% Increase Y-O-Y Same Store Sales Cross Channel Models
  27. 27. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><ul><li>Framework for integrated strategy, analytics and database </li></ul></ul><ul><ul><li>Technology approach </li></ul></ul><ul><ul><li>Multi-Channel Retail Analytics </li></ul></ul><ul><ul><li>Allocation Schemes </li></ul></ul><ul><ul><li>Interactive </li></ul></ul><ul><li>Summary 5 minutes </li></ul>
  28. 28. Match Back / Fractional Allocation Customer Insights: Closed Loop Measurement <ul><li>Lead and sales attribution feeds a closed loop campaign process enabling analytically-driven activities. This feedback loop ultimately influences marketing decisions. </li></ul>There are a number of ways to attribute leads and sales back to marketing activity supporting both precision marketing (addressable activities like DM or email) and mass and interactive media Best practices to support various levels of attribution across media are outlined in the following slides and incorporate the analytic and technical components of the process. All methods can be leveraged to assess historical data.
  29. 29. The goal of the attribution processes is to understand the impact of different marketing interventions at a point in time or over time. These measurements can be relative to one another, absolute, and may take into account other factors including brand and retail presence Match Back / Fractional Allocation Metrics And Attribution
  30. 30. <ul><li>There is no single, ‘correct’ method of attributing responses. </li></ul><ul><ul><li>Different methodologies can produce different conclusions. </li></ul></ul><ul><ul><li>Different approaches fulfill different needs. </li></ul></ul><ul><li>Sophisticated marketers use a combination of attribution approaches, leveraging the strengths of each approach to assess appropriate aspects of program performance. </li></ul><ul><li>Merkle’s strategic experience and technology supports the following attribution approaches. </li></ul><ul><ul><li>Direct Attribution </li></ul></ul><ul><ul><li>Indirect Attribution </li></ul></ul><ul><ul><li>Fractional Attribution </li></ul></ul><ul><ul><li>Probabilistic Attribution </li></ul></ul>Match Back / Fractional Allocation Merkle Solution
  31. 31. Our attribution approach is to shift away from linking a purchase to one single marketing activity and instead assess how various factors can influence it Attribution is not limited to response and new business <ul><li>Campaign Specific </li></ul><ul><li>(800) number </li></ul><ul><li>Unique URL </li></ul><ul><li>Key code </li></ul><ul><li>Utilizes Media mix models to assess performance by medium and over time </li></ul><ul><li>Campaign or medium specific </li></ul><ul><li>Compares match-back rates of target vs. hold out groups </li></ul><ul><li>Utilizes business rules and logic to assess allocate a portion of “credit” to various factors </li></ul>Match Back / Fractional Allocation Attribution Point Of View
  32. 32. <ul><li>Top-Down, Quantitative </li></ul><ul><li>Media mix modeling </li></ul><ul><li>Clear goals and consistent metrics </li></ul><ul><li>Considering all options at same time </li></ul><ul><li>Bottom-up, Qualitative </li></ul><ul><li>Channel/Media specific silos </li></ul><ul><li>Specific goals may be unclear </li></ul><ul><li>Different metrics </li></ul><ul><li>Different planning process/systems </li></ul><ul><li>The Marketing Plan </li></ul><ul><li>Plans from each media brought together as last step </li></ul><ul><li>Little cross-media coordination </li></ul>Typical Approaches to Marketing Measurement Spot TV budget Corporate Goals and Marketing Budget DM budget Radio budget Online and search budget Regional Focus Channel and daypart mix Weekly buys and flighting Cost/purchase target Audience selection Offer/creative arbitration GRP or cost/M targets Contact strategy Creative targeting/mix Combined marketing plan
  33. 33. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><ul><li>Framework for integrated strategy, analytics and database </li></ul></ul><ul><ul><li>Technology approach </li></ul></ul><ul><ul><li>Multi-Channel Retail Analytics </li></ul></ul><ul><ul><li>Allocation Schemes </li></ul></ul><ul><ul><li>Interactive </li></ul></ul><ul><li>Summary 5 minutes </li></ul>
  34. 34. Marketing dollars are shifting
  35. 35. Most companies have not addressed the marketing data implications Email Site Social Mobile Search Display UGC
  36. 36. Interactive data touch-points provide deep, new insights Customer Value Customer Path Low High Traditional: Online: Acquire Retain Maximize Direct Mail Contact Purchase Website Visit Email Response Online Search Social Participation Call Center Contact <ul><li>Identify customer behavior cues between buying cycles </li></ul><ul><ul><li>Click content in an email or website visit could lead to cross-sell / up-sell opportunities </li></ul></ul><ul><li>Develop insights within and across media to drive better informed marketing decisions </li></ul><ul><ul><li>Leverage high-performing search keywords by customer segment in email subject lines and content </li></ul></ul><ul><li>Enable move from reactive to proactive marketing </li></ul><ul><ul><li>Identify dissatisfaction/churn indicators from negative reviews, troubleshooting page visits, unsubscribes, etc </li></ul></ul>P D D P P W O S O O O O W W W W W W W O O S S S S E E E E E E E E E E E E D P E S W O C C D C P E S W O
  37. 37. The Mobile Opportunity <ul><li>Over 86% of US population has at least one mobile device </li></ul><ul><li>More than half ( 52% ) of mobile subscribers use text messaging regularly </li></ul><ul><li>20% of mobile subscribers use web on their phone regularly </li></ul>Sources: US Census 2008 Estimate Nielsen Mobile Media- December 2008
  38. 38. Email Services Dynamic Messenger Solution Dynamic Messenger APIs Core Deployment Engine Dynamic Messenger User Interface Email Lists Creative Assets Integration of multiple technology and process components to enable design, construction, delivery and analysis of email messages Advanced Analytics & Reporting Content Management Data Management Delivery Optimization Custom Apps & Web Solutions Web Analytics Dynamic Content (DyCE) Subscriber Management
  39. 39. Incorporating Interactive Elements into Consumer Database A phased approach to integrating data Customer Database Social Commerce Web Activity Preference Center Phase 3 Ecommerce Email activity Opt-in Data Offline data Demographics Phase I Program Activity 1 Program Activity 2 Wish lists Online Surveys Events Phase 2
  40. 40. Agenda <ul><li>Corporate Overview 5 minutes </li></ul><ul><li>Trends in Retail Industry 5 minutes </li></ul><ul><li>Key Aspects of Merkle’s Retail Solution 20 minutes </li></ul><ul><ul><li>Framework for integrated strategy, analytics and database </li></ul></ul><ul><ul><li>Technology approach </li></ul></ul><ul><ul><li>Enterprise Segmentation </li></ul></ul><ul><ul><li>Allocation Schemes </li></ul></ul><ul><ul><li>Interactive </li></ul></ul><ul><li>Summary 5 minutes </li></ul>
  41. 41. Why retailers should do this? <ul><li>Its all about maximizing relevance </li></ul><ul><li>Retailers need to decipher today’s shoppers’ preferences, including: </li></ul><ul><ul><li>Channels of purchase: Store, call center or web </li></ul></ul><ul><ul><li>Push Media of communications: </li></ul></ul><ul><ul><ul><li>Offline: catalog/ direct mail </li></ul></ul></ul><ul><ul><ul><li>Online: email, txt </li></ul></ul></ul><ul><ul><ul><li>Outbound calling </li></ul></ul></ul><ul><ul><li>Pull Media of communications: </li></ul></ul><ul><ul><ul><li>SEO </li></ul></ul></ul><ul><ul><ul><li>Shopping websites </li></ul></ul></ul><ul><ul><ul><li>Social Networks </li></ul></ul></ul><ul><ul><li>Product mix: primary product categories, size and color </li></ul></ul><ul><ul><li>Seasonality of purchase: Holiday, Back-to-School or Spring </li></ul></ul><ul><li>Marketers need to use advanced technology and analytical methods to achieve better marketing results and show accountability </li></ul>
  42. 42. Contact Information <ul><li>Scott Cone </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>Yoram Greener </li></ul><ul><ul><li>[email_address] </li></ul></ul><ul><li>Najeeb Uddin </li></ul><ul><ul><li>[email_address] </li></ul></ul>

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