Building The Perfect Offer


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A Retail TouchPoints custom white paper for Pluris Marketing

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Building The Perfect Offer

  1. 1. Building The Perfect Offer Multi-channel retailing requires sharp analysis of the most important link between the product and the customer—the offer. Here's a look at how industry leaders recommend optimizing for better results. The early days of a downtown department store hanging a sign in the window with the latest discount price on a popular item have disappeared. While many retailers and even customers might grow nostalgic for the simplicity of those days, modern complexities have made retailing faster and sleeker. Sales opportunities and complexities have grown with each new channel, new customer, new technology, and new ability to offer products. Now, instead of focusing on one channel to extend offers, most retailers have to communicate and manage offers across the web, email, mobile, social, live agents and in-store via point of sale. The effectiveness of these offers will get a retailer a positive hearing in the court of public opinion of social media, which so far has a huge but hard to measure upside. Extending and evaluating the results of an offer is the most underrated thing a retailer does in the world of multi-channel commerce, and the most important. That offer represents the mechanism through which customers will ultimately make the decision on whether or not to pull the trigger on a purchase. Unfortunately, for many retailers, this all important lever continues to be sent without testing, process evaluation or overall analysis. Sponsored by
  2. 2. This new retail offer optimization process consists of three basic building blocks: Offer management: When a retailer creates an outbound offer it must consider the entire catalog and how it will address various multi-channel touchpoints. The direct mail offer will be different than an offer communicated via First, however, let’s define what an mobile phones. Likewise an offer offer is. An offer is often confused that will attract response to a with a promotional offer, consisting web site or contact center will of the retailer giving away something need to have different elements. to attempt to incite a purchase. If we Offer management demands that go back to classical marketing, and retailers plan for the touchpoint, look at the 4Ps of product, price, the budget necessary to manage placement, and promotion, an offer the offer. actually consists of a combination of Offer optimization: This is where all these elements. It is a promotion the offer is married to the customer (e.g. buy one get one free, free segment or individual customer. shipping, etc), for a product incited The offer that goes to a frequent by price and placement. Some customer will be different than an modern marketing theorists argue offer that attracts new customers. that there may be as many as 12Ps The offer that goes to the “moms now (think push/pull/persuasion/ with young kids” segments will be persona etc). But a true offer then different than the “retired” segment. consists of at least all four of these An offer that goes to someone elements, and may or may not offer that does not require promotions a price discount. In fact, a strong to purchase is different than an offer optimization program would offer that goes to a customer that help a retailer enhance margin, not does. A different offer or message diminish it. would go to someone who has just This white paper will present a responded to a previous offer or roadmap for offer optimization, strategy and made a purchase. including the rewards of using Offer delivery: Here retailers push automation to increase customer the offer to the proper channel. It engagement and best practices is the third building block and can for achieving this more profitable only be effective if retailers have process of interactions. first managed the touch points and 2  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  3. 3. “Customercollecting data about the start with behavior-based promotions Connecting Offers To Engagement customer, including demographics, The need for retail offer automation purchase history, and offer redemption, is underscored by several general among other criteria. ” market trends and independent research. The first is in email. It —Sahir Anand, Aberdeen is still an effective offer delivery mechanism. However, the sheer volume of emails that retailers send budget, and then synched with the to their customers is staggering. customers and segments. Delivery According the “Retail Email Blog,” is a complete equation: touch point 2009 saw record email volumes + customer + delivery mechanism. from retailers. Top online retailers Aberdeen senior analyst Sahir sent an average of 132 promotional Anand said strategies for offer emails to each of their subscribers, optimization and optimization start a 12% increase over 2008 — and with data. “Customer behavior- 39% increase over 2007. That based promotions start with means top online retailers sent more collecting data about the customer, than twice the amount of offers to including demographics, purchase customers over the past two years. history, and offer redemption, But they didn’t necessarily learn among other criteria,” he wrote in anything from the results of those Offer Optimization In Retail. “The offers. In fact, a recent post from next step is to use the customer Return Path noted that many large data in a BI application to conduct retailers are sending on average 10 deeper segmentation of buying emails per month to past customers affinity, customer preferences and who haven’t opened an email from customer wallet share.” them in over a year. As Anand pointed out, business According The Aberdeen Group, intelligence and customer the email deluge is one of the intelligence is a critical challenge for factors that make offer optimization retailers. For as many opportunities essential. Retailers need to ensure as the multi-channel retailing world that promotions are effectively provides, the retailer that ventures targeted towards the ideal customer into it without the proper analytics segment whether that segment is capabilities and sufficient customer defined by demographics, location, knowledge will find that it is or specific needs. In fact, Aberdeen continually sending irrelevant found that the two main drivers for offers multiplied by their increased business intelligence at multichannel usage. retail were the need to accurately 3  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  4. 4. “Consideringdefinemarketersin a single struggle to that success often Considering that marketers often struggle to define success in a channel, it’s not surprising that 43% single channel, it’s not surprising of marketers surveyed find measuring that 43% of marketers surveyed find results across multiple channels measuring results across multiple ” channels challenging. challenging. —Jeff Zabin, Gleanster Offer Optimization In Action The difference between a retailer predict customer demand (33%) that has enough analytics and and the need to improve promotion data capability to execute offer effectiveness (39%). Managing automation and one that doesn’t promotion effectiveness can also can be the difference between help the retailer improve margins. keeping and losing a customer. That’s why the connection between Suppose a sporting goods chain offer automation and customer wants to follow up a recent back engagement deserves so much to school program with a POS and attention. Email marketers have email initiative that offers customers done a great job of convincing discounts for winter sports retailers that irrelevant messaging equipment. Those discounts and will lead to alienation and a break those offers need to be based on in learning dialogues. But the same past behavior in order to be relevant principle holds true for all channels and effective. of communication. Deliver irrelevant If the new offers are relevant and web content, send unrequested compelling customers will want to direct mail, or ask a customer spend more time, want to return for information you’ve already for more purchases and will send requested and their relationship with them more information. Customer you will weaken. If a retailer keeps engagement becomes stronger. sending the same offer, or worse, a But that sporting goods chain less relevant offer, it risks customers also needs to know the specifics disengaging completely. behind failed offers. Maybe an offer Again analytics are the key. Offer failed to email customers because automation requires a sophisticated prices were too high. Maybe in- level of analytics. According to store coupons should have been a Jeff Zabin, CEO of Gleanster, redeemable online. Maybe “forward multi-channel campaigns produce to a friend” discounts just didn’t different types of data at different hit the mark. But unless the offers, frequencies and levels of granularity. and all the elements of an offer, are 4  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  5. 5. follow up offers depending on the customer, the customer behavior and the potential for conversion. Suppose the second part of the back-to-school offer centers on in-store POS. In this case, the POS system in place can recognize loyalty cards, or even couponing patterns for different purchases. Even something as simple as a new pair of soccer cleats can be analyzed, a retailer will never know met with an offer on the receipt how to optimize. A cycle of broken that has analyzed the current customer engagements begins. purchase, tying the offer to the next logical purchase, and even To illustrate the multichannel driving the customer toward digital connection, suppose that a retailer content. That offer process will also has already defined the customer need to involve customer service behavior through its various reps. As a key point in coordinating channels and has developed the multichannel retailing, live agents ability to analyze customer behavior need to have the intelligence in each channel. Let’s look at the to act on the offers marketing major components. departments put into the field. The first is email. After defining its So the offer is critical and the most potentially effective target manner in which it’s communicated list, technology now exists for us needs to cut across all channels. to cut through more simple metrics But retailers need to hone in on the like delivery rate, open rate, and effectiveness of that offer. While response rate. Now we can tell the average modeling company within days or hours whether or not considers a .10% lift in response a the offer was researched, moved win, companies that employ offer to a wish list, recommended optimization regularly achieve ROI to a friend or used to research up to 1,600% for their efforts. another product. And of course the retailer can know whether it led to Offer Optimization conversions. Go one step further Best Practices and the technology can extend a new offer to email customers that Retailers need to embrace the analytics have determined to be following six best practices in order potentially more relevant. Beyond to automate offers and maximize that, the offer optimization systems customer engagement: can actually extend several different 5  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  6. 6. If a fashion retailer encourages feedback to a call center, point-of- sales personnel, and an in store rep, that feedback needs to reside in the same database. That database can then yield the proper differentiated offer strategies, further honing the effective potential of that offer. Then the offer itself can be analyzed for effectiveness and potential optimization to a broader audience. 3. Drive Web Sourced Leads: Offers served up via online ads, 1. Integrate Relevant Email responded to via web visits or Metrics: Retailers have been even gleaned from onsite customer aggressive about using email. They behavior can be analyzed and then have built lists effectively, and optimized. However, retailers too become more adept at measuring often focus simply on driving traffic open rates and influence on future to their web sites instead of driving purchases. However, retailers traffic to an actual offer. Traffic need to go much deeper into the analysis and optimization is different elements of each email in order to and significantly less profitable than truly make this strategy work across offer analysis and optimization. channels. Instead of tracking simple open rates and the size of the list 4. Improve Offer ROI: Retailers that received the email, retailers have made progress with their need to track the more complex content strategy and contact nuances of email. There are at least strategy right down to the return on 20 separate elements to each email investment they expect from each. campaign and offer response is But the offer goes largely without perhaps the most important. expectation. Part of the problem that needs to be addressed here 2. Increase Customer Initiated is the campaign-based mentality Contact: Customers drive of email programs. If retailers can interactions with their channel look at offer communication beyond choices. They not only have more a simple email dialogue, they can touch points, but they drive the understand that the offers they timing of the interactions with extend to customer groups is a them as well. Retailers need to multi-channel process than can encourage the quality and quantity be optimized continually until the of that contact first, and analyze targeted ROI is achieved. the contact second. Example: 6  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  7. 7. 5. Avoid Black Box Solutions: planning it makes sense that the Many marketing optimization offer extended from the retailer solutions are self-contained and would change or be optimized automated. This means that based on the channel and the marketers cannot dive deeply into customer’s history interacting what is working, and alternatively with and buying from that channel. what is not, and quickly look at That planning depends on gaps in offer strategies. customer analytics. 6. Test: This is one of the more Too many retailers send the same difficult areas of multi-channel offer offer to all channels because they optimization. In order to get to the either lack the analytics or lack level of testing the offer, companies the sophistication to act on the need to first test response rates to knowledge gleaned from them. see if potential customers will bet Suppose the sporting goods chain to the offer and then respond to knows that 30% of its revenue is it. In order to master this process, generated online. It should know retailers need to understand the that 56% of its customers shop channel they are testing within and exclusively online, and 37% of all how it fits into the integrated whole. customers will opt-in to further communications via email. It should Offer Optimization: The know that its Facebook page has Multichannel Connection attracted 13,576 fans, but no actual purchases so far. At that level, the As retailers move toward offer retailer will know the revenue split management and optimization, it’s it should aim for with its marketing important to understand how it and the offers it carries. It will connects to multichannel retailing. know more about the ways in As mentioned earlier, retailing is which customers interact with more complex by the month. For their business. It will have at least example, if the aforementioned defined its multi-channel landscape. sporting goods retailer started planning a holiday 2010 promotion On a positive note, the vehicles next week, it could extend offers that carry offers to customers are for different products through continuing to attract the most brick-and-mortar locations, a social budget increases. A newly released media fan site, web pages, direct Datran Media survey of executives response TV, microsites connected at Fortune 500 companies, to digital ads, email, direct mail publishing companies, media catalogs, and mobile and social agencies and ad agencies found apps. As part of the campaign e-mail and search regarded as 7  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  8. 8. While the average modeling display (7%), direct mail (6%), social company considers a .10% lift in media (5%) and mobile (1%). response a win, companies that The case for reaching customers employ offer optimization regularly in the multichannel world is strong. achieve ROI up to 1,600% for To be competitive though, this knowledge of multichannel retailing their efforts. is not enough. Most retailers can improve or optimize their message delivery methods. They can cut the digital channels that worked back on search, change their best to communicate offers last email messaging, and re-allocate year. Conducted in December offline dollars almost in real-time. in conjunction with the Direct Retailers for the most part are Marketing Association E-mail locked into a campaign mindset, Experience Council “and other ingrained by years of seasonal media partners,” the survey asked planning that dates all the way respondents to identify the digital back to the early days when offers channels that “performed the were communicated by signs on strongest for your company in 2009.” the window. The next step for Email got the most mentions (cited competitive retailers is analyzing by 39%), followed by search (24%), and then optimizing the offer offline (9%), affiliate marketing (9%), carried within the delivery channels. Digital Channels That Performed Email the Strongest in 2009. 39% Search 24% A liate O ine Marketing Display Direct Mail Social 9% 9% Media 7% 6% Mobile 5% 1% 8  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  9. 9. Case In Point: Offer Optimization In Action Although still new to retail and consumer products industries, offer optimization has already proven successful in other industries. For example, Suddenlink Communications has successfully deployed cross-channel offer optimization. Suddenlink is the seventh largest cable operator in the United States, serving approximately 1.3 million residential customers and thousands of commercial customers in Arkansas, Louisiana, North Carolina, Oklahoma, Texas, West Virginia and elsewhere. Extending offers and analyzing responses to these offers has proven to Upon roll-out, order be competitive differentiators for the cable provider. Its challenge was to rates for CSRs using create a more predictable sales process thereby improving the quality and the Offer Optimization consistency of Customer Service Reps’ (CSRs) ability to sell to customers solution increased placing inbound service calls. Suddenlink needed to provide CSRs with more intelligence to support each customer contact, including more reliable more than 34% over caller information and the offer and messaging that is most likely to close a control group; a sale. In addition, once proven successful, offer optimization would be and Suddenlink and extended to all channels, including the web, door to door sales and retail. Pluris Marketing During a 60-day deployment, Pluris Marketing, in conjunction with then extended the Suddenlink, developed a modeling platform to help predict likelihood of solution across other response across all Suddenlink offers. Several hundred offer variations were entered into Pluris’ offer optimization solution, including specific messages channels. for each customer segment along with channel-specific messaging. Optimization algorithms were developed to normalize expected outcomes and align the various offers and offer mix attributes for each customer. A simple integration method was used to feed data to the CSRs’ desktop with minimal impact on Suddenlink IT resources. Upon roll-out, order rates for CSR’s using the Offer Optimization solution increased more than 34% over a control group and Suddenlink and Pluris Marketing then extended the solution across other channels. “Suddenlink requires a cross-channel solution to improve top-line sales because their marketplace is getting more competitive every day,” said Bob Fetter, Pluris SVP of Marketing “Pluris’ approach allows their reps to improve the sales process so that it is more relevant to the customer, making it a win- win for everyone.” 9  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  10. 10. must work from the customer and offer first, not the product first, or the campaign first. Also, if retailers apply offer optimization tools and processes, their analytics will be more specific and actionable. For example, the ability to know which customers are more likely to respond to a free shipping offer to spend incremental dollars, versus which customers will not respond to free shipping at all, will ultimately support top and bottom line Conclusion strategies. Free shipping, without Not three years ago a retailer would the incremental dollars generated to be considered ahead of the curve pay for it, is a classic example of an if they tracked email metrics like offer extended without the proper open rates, and responses and analysis. did some A/B testing of subject While retailing has become infinitely lines. But now retailers need to more complicated since the days respond to a world that integrates of simple discounting, current multimedia and encourages multi- market conditions call for a return channel purchases. This makes to simplicity in one key area: the understanding the customer in all offer. It is the most important thing its various segments and behaviors a retailer does and possibly the an essential capability. Analyzing the least sophisticated in light of today’s effectiveness of each communicated retail technology advances. Most retail offer is the next frontier of retailers have made progress in marketing metrics for retailers, and employing customer data, but they the automated systems necessary have not embraced the next phase to do it are now in place. of customer information analytics, Offer optimization demands that which is analyzing the offer. If they retailers return to the simplicity of can do that, retailers can increase promotions used by the corner revenue, increase customer store, yet integrate robust analytics engagement metrics, and position to understand the motivations themselves to be more competitive of their customers. If retailers in the multi-channel world. embrace offer optimization they 10  A RETAIL TOUCHPOINTS WHITE PAPER 2010
  11. 11. About Pluris At Pluris, we enable marketers to optimize the value of each consumer engagement – anywhere and as it happens - resulting in higher conversion on sales, marketing, and service interactions. We help marketers to better understand consumers, generate key insights from their behavior, and engage them in the most effective way across traditional and interactive messaging channels. About Retail TouchPoints Retail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. Tapping into the power of the Web 2.0 environment, the Retail TouchPoints network is made up of a weekly e-newsletter, category-specific blogs, twice-monthly Special Reports, Web seminars, benchmark research, virtual events, and a content-rich Web site at 11  A RETAIL TOUCHPOINTS WHITE PAPER 2010