CALA 2007 OfficeMax’s Journey into Loyalty

Ricardo Martinez Marketing Manager OfficeMax Mexico Mexico City

Ricardo Martinez

Marketing Manager

OfficeMax Mexico

Mexico City

Agenda OfficeMax Mexico Overview Steps to developing a program MaxPuntos Overview What we are learning Where will the program go Incrementa/SHC Direct Questions & Answers

OfficeMax Mexico Overview

Steps to developing a program

MaxPuntos Overview

What we are learning

Where will the program go

Incrementa/SHC Direct

Questions & Answers

OfficeMax Mexico Established 1996 Retail, Online, Catalog Sales 66 stores and growing Presence in all major Mexico cities

Established 1996

Retail, Online, Catalog Sales

66 stores and growing

Presence in all major Mexico cities

Steps to a formal program Understand the market Understand customer perception of our market place Establish Goals Examine ROI Construct a program

Understand the market

Understand customer perception of our market place

Establish Goals

Examine ROI

Construct a program

Mexican Office Products Market Independent Corner Paper and Copy stores (Papelerias) “ Big Box” retailers taking customers from both independents and specialty office products chain No clear customer loyalty to any supplier

Independent Corner Paper and Copy stores (Papelerias)

“ Big Box” retailers taking customers from both independents and specialty office products chain

No clear customer loyalty to any supplier

Mexican Office Products Market from the Customer Perspective Mid Sized Business Administered Programs/Planning Tend to drive minimum and maximum inventories Stock piling Mostly Structured Frequent contact with supplier, but driven remotely or sometimes through 3rd parties Micro & Small Business Newly emerging/Instable Little planning Aware of needs/rapidly changing Mostly Improvised More frequent contact with suppliers, mostly personal or direct Customer behavior with office products and paper

Mid Sized Business

Administered Programs/Planning

Tend to drive minimum and maximum inventories

Stock piling

Mostly Structured

Frequent contact with supplier, but driven remotely or sometimes through 3rd parties

Micro & Small Business

Newly emerging/Instable

Little planning

Aware of needs/rapidly changing

Mostly Improvised

More frequent contact with suppliers, mostly personal or direct

Mexican Office Products Market from the Consumer Perspective In general, tend to establish a convenience and operationally based relationship with suppliers There is little loyalty to any particular suppliers Buying Influencers By Price By Selection By offer or promotion By location By specialty By Infrastructure support By customer service By Advertising By Image By Quality By Strategy & Negotiations Business Market Office Products & Paper Suppliers Cold/Distant Connection – merely functional

In general, tend to establish a convenience and operationally based relationship with suppliers

There is little loyalty to any particular suppliers

Buying Influencers

By Price

By Selection

By offer or promotion

By location

By specialty

By Infrastructure support

By customer service

By Advertising

By Image

By Quality

By Strategy & Negotiations

Goals Established Learn customer purchasing behavior Learn appropriate customer segmentation basis Identify purchasing customer and connect to business entity to establish personal relationship with buyer Establish a communication structure to increase average ticket and frequency Build a defense against competition and establish customer loyalty to OfficeMax Establish an immediately available benefit associated with all channels of customer interaction

Learn customer purchasing behavior

Learn appropriate customer segmentation basis

Identify purchasing customer and connect to business entity to establish personal relationship with buyer

Establish a communication structure to increase average ticket and frequency

Build a defense against competition and establish customer loyalty to OfficeMax

Establish an immediately available benefit associated with all channels of customer interaction

Where to begin? Successful program in U.S. – MaxPerks Focused on small business and teachers Program structure not transferable to Mexican market place Business customer focus equally important in Mexico, micro, small and mid-size What benefits will work to drive business customer loyalty, and how can we establish a communication relationship with these customers Need to identify the best segmentation scheme, and identify other potential customer segments outside of business customers Keep the program basic and learn first

Successful program in U.S. – MaxPerks

Focused on small business and teachers

Program structure not transferable to Mexican market place

Business customer focus equally important in Mexico, micro, small and mid-size

What benefits will work to drive business customer loyalty, and how can we establish a communication relationship with these customers

Need to identify the best segmentation scheme, and identify other potential customer segments outside of business customers

Keep the program basic and learn first

Program Challenges In house database of business contacts aging, and focused only on business name not person making purchases U.S. Program name didn’t translate Program cannot rely principally on direct mail communication as in the U.S. POS system limitations Integrate private label credit card program Integrate all purchasing channels Build a solution easy for the customer and not so easily replicated by competitors Protect redemptions against product returns

In house database of business contacts aging, and focused only on business name not person making purchases

U.S. Program name didn’t translate

Program cannot rely principally on direct mail communication as in the U.S.

POS system limitations

Integrate private label credit card program

Integrate all purchasing channels

Build a solution easy for the customer and not so easily replicated by competitors

Protect redemptions against product returns

Planning and Implementation Engaged with SHC Direct/Inrementa Develop program structure Model costs and ROI projections IT Planning and Implementation Create Program Branding Build Pilot Plan Refine Launch plan Launch program chain wide

Engaged with SHC Direct/Inrementa

Develop program structure

Model costs and ROI projections

IT Planning and Implementation

Create Program Branding

Build Pilot Plan

Refine Launch plan

Launch program chain wide

Program Structure Relate Points to Pesos Points for every purchase (1 point for every 100 pesos) Double points in OfficeMax brand products (2 points for every 100 pesos Triple points for CopyMax purchases (3 points for every 100 pesos Show earnings and balance on receipt Allow members to pay in points in real time

Relate Points to Pesos

Points for every purchase (1 point for every 100 pesos)

Double points in OfficeMax brand products (2 points for every 100 pesos

Triple points for CopyMax purchases (3 points for every 100 pesos

Show earnings and balance on receipt

Allow members to pay in points in real time

Introducing MaxPuntos Points earned with every transaction Enroll to use your points Redeem real time, in store Receive additional benefits for membership Simple and easy communication

Points earned with every transaction

Enroll to use your points

Redeem real time, in store

Receive additional benefits for membership

Simple and easy communication

Poster área de cajas y CopyMax El poster se coloca en el escritorio de cajas y CopyMax

Manteleta CopyMax La manteleta es de uso exclusivo de CopyMax y coloca sobre las mesas de espera o en el escritorio del área.

Poster / Manteleta En CopyMax debemos instalar el poster y la manteleta juntos para tener un impacto mayor

Tensor para áreas de filas y muebles Los 4 tensores que se enviaron a cada tienda se instalan cada uno en fila de cajas, fila de CopyMax, área de muebles y el último movible entre las áreas de electrónica y cómputo.

Stopper para promociones de dobles puntos Los stoppers se utilizan para delimitar el área de productos marcas OfficeMax (OfficeEditions, MaxBrite, OfficeMax) y promover dobles puntos en su compra.

Zona Dobles Puntos El objetivo del stopper es resaltar productos de marca propia utilizando adicionalmente un impreso en el piso que dice “aquí se ganan dobles puntos” (cont.) Stopper dobles puntos “ Aquí se ganan dobles puntos”

Program Introduction Monterrey Pilot August – November 2006 Phased Launch December & January 2007

Monterrey Pilot August – November 2006

Phased Launch December & January 2007

Why pilot the program first? Limited & isolated market area with multiple locations Solve operational bugs before system wide launch Learn associate reaction Learn customer reaction First line analysis to validate model Some operational issues identified, but no structural program changes made

Limited & isolated market area with multiple locations

Solve operational bugs before system wide launch

Learn associate reaction

Learn customer reaction

First line analysis to validate model

Some operational issues identified, but no structural program changes made

What are we learning? All of our goals are being realized Learn customer purchasing behavior We are seeing differences in category purchase across program enrollees Learn appropriate customer segmentation basis Business still important, emerging household segment Identify purchasing customer and connect to business entity to establish personal relationship with buyer We are enrolling the actual buyer connected to the business

All of our goals are being realized

Learn customer purchasing behavior

We are seeing differences in category purchase across program enrollees

Learn appropriate customer segmentation basis

Business still important, emerging household segment

Identify purchasing customer and connect to business entity to establish personal relationship with buyer

We are enrolling the actual buyer connected to the business

What are we learning? All of our goals are being realized Establish a communication structure to increase average ticket and frequency We have a large percentage of the database providing email addresses Build a defense against competition and establish customer loyalty to OfficeMax Building specific targeted strategies using purchase behavior data to deliver relevant offers and cross sell promotions Establish an immediately available benefit associated with all channels of customer interaction Points are communicated with all channels of purchase and service

All of our goals are being realized

Establish a communication structure to increase average ticket and frequency

We have a large percentage of the database providing email addresses

Build a defense against competition and establish customer loyalty to OfficeMax

Building specific targeted strategies using purchase behavior data to deliver relevant offers and cross sell promotions

Establish an immediately available benefit associated with all channels of customer interaction

Points are communicated with all channels of purchase and service

What are we learning? Customer enrollment depends first on the associate promotion of the program Establishing enrollment contests in the stores for our associates Contests are focusing on enrollment quality Valid e-mail address Complete member demographics Training, training, training Sales and transaction penetration are key measures of success for store managers Associate fraud can be quickly identified and prevented

Customer enrollment depends first on the associate promotion of the program

Establishing enrollment contests in the stores for our associates

Contests are focusing on enrollment quality

Valid e-mail address

Complete member demographics

Training, training, training

Sales and transaction penetration are key measures of success for store managers

Associate fraud can be quickly identified and prevented

Where will the program go? Leverage supplier access to customer list for promotions Leverage e-mail, direct mail, telemarketing messaging for upsell, cross sell and activation Develop additional benefits for membership using OfficeMax and other non-competing merchants

Leverage supplier access to customer list for promotions

Leverage e-mail, direct mail, telemarketing messaging for upsell, cross sell and activation

Develop additional benefits for membership using OfficeMax and other non-competing merchants

Thank you Ricardo Martinez [email_address]

Thank you

Ricardo Martinez

[email_address]