Case Study: Walgreens and Behavioral Targeting

It’s pretty tough right now to be a retailer. The economy is limping along. The Walmarts of the world are bringing prices down and changing customer expectations every day.

Smart retailers need to use all of the tools at their disposal to get more customers and sell more stuff. This article about Walgreen’s coupon strategies, brought to us by DM News caught my eye: Walgreens’ in-store BT strategy hits the mark.

Background
Walgreens is using behavioral tar­geting to engage customers in its stores.

The nation’s largest drugstore chain has partnered with Catalina Marketing to print targeted coupons in its 6,000 stores, which are given to customers based on their purchasing behaviors, as they receive their receipts. Catalina runs in-store pro­motions in about 25,000 grocery stores and 14,000 pharmacies nationwide.

Strategy
Walgreens’ overall strategy is to lever­age consumer data more effectively, which Doug Egan, VP of marketing services and research for the company, said has ramped up in the last six months.

“[It’s] part of a larger understanding that purchasing behavior can be changed in-store,” he said. “Truly, the trackability of it is great. We can track purchases by store, time of day and even register.”

Walgreens’ marketing spend is still dominated by its circular — 60 million per week — and by direct mail.

Results
Egan said that in-store promotions, cur­rently accounting for 10% of Walgreens’ marketing spend, are growing, thanks to the success of the Catalina promotions.

“What we’ve heard from customers is that they are useful,” he said.

Average Walgreens stores see between 800 and 1,000 customers per day and print Catalina coupons for about 10% to 12% of them. About 6% of those printed are redeemed at a future date, said Egan.

The goal of using Catalina coupons or behavior targeting overall is to expand the consumer’s shopping basket, said Egan.

“The average purchase, not counting pharmacy, is three to four items per store visit, and two store visits a month. We want to add a trip a month,” he said. “It’s great to see data of what a customer is purchasing in real-time. You can then offer related programs. If they purchase two twelve-packs of Pepsi, we can target them with a coupon for a dollar off of three twelve-packs. You can see what customers purchase consistently.”

Interesting case study, no?

Back in June, I blogged about couponning in my Direct Marketing Blog and put forth this challenge to direct marketers: How do you track exactly who is redeeming your coupon, without making this cumbersome to the consumer? In Walgreen’s case, they know what products people are purchasing, but I still can’t see where they have a handle on the make-up of what buyers look like.

It would be so much more powerful if you could flesh out purchase behavior with other things known about the consumer, wouldn’t it?

Then, you could begin true database marketing and really start to delight your customers–with offers tailored specifically to a customers’ specific needs and situation. You’d not only have the knowledge that a specific customer enjoys Pepsi over Coke, but if you knew, for example, that that customer has a large family and likes to go camping, you could customize the Pepsi offer to include a propane tank or other camping gear. Now, we’re talking about a much larger shopping cart (more revenue), and a satisfied customer who leaves the store happy that they’ve gotten a great deal, not only on Pepsi but on gear for an activity they love.

I would love to see retailing move in this direction, wouldn’t you?

Measuring Online Performance

I found this chart today from Marketing Sherpa. You know, it’s difficult to measure just about any type of campaign or advertising efforts (trust me, as a direct marketing expert, this is something I’ve struggled with throughout my career).  And, online lead gen programs can be among the most challenging, in terms of measurement.  Well, this chart shows you what types of metrics you should be considering for each type of effort, from the very beginning of the sales process (the top of the funnel) to the end (where you’re closing the deal.

Hopefully, you’ll find it helpful, too.

How to Measure Online Efforts

Analytics Key for E-Marketers

As a self-proclaimed data geek, I always get a kick about learning about unexploited opportunities to reap the benefits of data-mining. I salivate about the potential to make an impact using tools that haven’t been used before. I truly do get excited when I see an opportunity to generate new sales simply by obtaining a better understanding of customers’ wants and needs.

Take a look at this article from DM News: E-commerce should stress analytics: eTail 2008.

The article provides a recap of a recent presentation at the eTail conference in Washington. It talks about the opportunities for e-commerce firms to start to benefit from the knowledge embedded in the customer data they collect online.

He (speaker Sheldon Gilbert, founder and CEO of Proclivity Systems) said many e-commerce companies only “look at the cash register;” only what a customer is buying. To fully optimize marketing efforts, he added, companies have to dig deeper into predictive modeling, and take into account factors such as seasonal shopping cycles, consumer buying and browsing patterns, and gauging the value of certain “action words” such as the word “organic.”

Actually, some of what the speaker highlighted seemed fairly ‘no-brainer’ to me. Check out this point, where he talks about how to identify cross-sell opportunities:

He also said that companies should mine their databases to learn what customers of one particular product are also buying. For example, if 79% of customers that bought denim products and shoes from a retailer overlap, then the company needs to determine how to send the proper offer to those customers based on that data.

“The data will tell you what to offer,” he said. “Human behavior is fairly predictive.”

If this article is correct in stating that many e-commerce firms have not yet employed data mining tactics to improve customer strategy, than this is a huge opportunity for direct marketers. E-commerce needs analytical folks who are schooled in data analysis and modeling techniques–people who’ve had practical experience turning customer behavior into programs that make money.

And, guess what? As a direct marketer with a focus on analytics, I’m ready to help!

Watch out for those Gamma Women!

I’m thrilled! There’s another new segment for us direct marketing practitioners to target: The Gamma Women.

“Gamma women share and exchange information, ideas, opinions, contacts and recommendations with their wide-reaching network using multiple media and channels of communication. This is in sharp contrast to the ‘Alpha’ style of communication – a top down model of selectively passing along information. While a Gamma’s sense of self is guided by her internal beliefs, passions, and priorities, an Alpha is driven by external social hierarchies or other indicators of status or popularity.”

This quote from an EarthTimes article about a study recently released by Meredith Corporation, the media and marketing company that targets American women.

I think they’re on to something. Women typically are ‘sharers’. If we (and I know I’m part of this bold group!) find something (a product, a service) we like, we talk about it. We tell our friends, our family–we become the biggest advocates. Of course, the opposite is also true. If we have a bad experience, we’ll spread that news, too.

The traits of this newly defined ‘gamma woman’ lend themselves almost perfectly to social marketing. The study shows that we like to communicate, and we don’t like to be sold to. We look for relevant content and we’re all about building networks to share our info with. Yep, we Gammas are a social marketer’s dream.

Not only are these Gamma Women perfect for the world of social media, they’re a large group (55 million women!). What an opportunity!

“The report forecasts that, as the social and technological environment in which they exist becomes more and more suited to their communication and interaction styles, Gammas’ influence in the marketplace will continue to increase.”

Moral of this story–don’t forget to include specific programs and tactics that will appeal to these Gamma Women as you develop your direct marketing strategies.

Customer Segmentation Information

You know that we’re firm believers in the power of customer segmentation. We’ve even written a game-plan that we’re happy to share with you. If you can target your segment with the absolute right-on message, creative that resonates with them and an irresistible offer, your direct marketing campaign results will reflect this extra work.

Sometimes segments are based on the products a customer purchases from you. Sometimes they are more related to what’s going on in the customers’ life. As a marketer, you rarely have significant insight into your customers’ and prospects’ personal life. Luckily for us, there is a wealth of external data and experts who know how to mine that external data to make the job of really understanding our customer segments a heck of a lot easier.

Check out this article from DM News. Four data experts have each focused on a niche segment that they have experience in. They provide some pretty valuable insight into how to best message to each group. Here are the groups discussed in the article:

• Bob Stein of Trinity Direct talks about nuances in targeting the Catholic market (hint–they are older, highly mail-responsive and like to donate).
• Amy Benicewicz of ListBargains: “Marketers seeking a target audi­ence of luxury lifestyles and frequent travelers fare very well with prospecting to Double Income No Kids (DINK) families.” Caveat–this group is hard to target (based on available data), but if you sell luxury goods, or are in the travel/tourism industry, you need to reach the DINKs.
• Sandy Ostrander of ListSolutions shares her perspective on marketing to military families. It’s a growing group that is under-served and may just represent an untapped opportunity.
• Rob Odri of ALC talks about marketing to gay and lesbian consumers. The key takeaway here is that this is a large group of people (they command $1 billion in spending power) who also tend to be early-adopters AND they share their views with their friends and family. The opportunity: many mainstream marketers tend to ignore this group.

Altogether some interesting information on four discreet segments, and some good food for thought. If you’d like more info on Segmentation, and specifically, an overview of the approach that we take, we’d be happy to share our White Paper, called: Advanced Segmentation Game-Plan.

Targeted Social Media

This article’s title really intrigued me: Trust-Based Targeting.

Hmmm. Now, as a direct marketing and analytical specialist, I’m an expert in targeting. I’m aware of the wide array of data that is available to target both customers and prospects, B2B and B2C. So, what the heck does Trust-Based Targeting refer to? Clearly, I had to read more!

It’s an intriguing concept, and one that might actually help with the eventual measurement and better targeting of social media. The article outlines mEgo’s approach that allows consumers to choose the kinds of messaging and targeting behaviors that fit their own needs and interests, all in the area of social marketing.

The premise behind mEgo’s offering is that their users self-create some pretty elaborate and detailed profiles. Then, users decide which parts of their profiles can be shared to advertisers. Finally, users are paid (I believe through donations to their chosen charity) when advertisers use their data for targeting.

“Going back to how mEgo intends to roll out our advertising strategy: We will provide a transparent description of how users’ data is used and, most importantly, allow users to filter which information is publicly available and used for targeting. MEgo members will have complete control of what portions of their profile they’ll permit us to use to target ads. For example, a mEgo user interested in music may choose to view only ads for indie bands generated from a list of their favorite musicians. As an extra step in transparency, we also literally show users the keywords our platform generates for serving the ads they see.”

The article contained an excellent case study for an Adidas social media campaign. It illustrated the viral nature of m’Ego’s offering and is probably the best illustration of this new targeting concept.

I can’t wait to see how (if) other marketers adopt this model. I salivate over the rich data that I may be analyzing in the near future!

But I think that the key things to remember here are trust and transparency–two essentials to this new offering.

“The lesson learned: It is essential that brands earn and keep consumer’s trust in order to be able to effectively market to them. Without trust, the greatest marketing system in the world can’t work. Set the expectation of complete transparency between marketer and consumer, and you convert your consumer from being fearful into being an advocate.”

Analysis versus Good, Old-Fashioned Creative Gut Feeling

I really enjoyed a recent post I found on the Precision Marketing online magazine.  Jenny Hoffbrand  discusses Ian Ayres new book called Super Crunchers and a quote from the book that really summarizes the value of using analytics in the business, as opposed to relying on your “intuition” or gut-feeling: “Intuition and experiential expertise is losing out time and time again to number crunching. Businesses and governments are relying more and more on databases to guide their decisions.”

The post goes on to talk about Ayres recent keynote speech at the recent SPSS Directions Conference in Athens, Greece.  “Ayres used his platform at the conference to endorse the advancements being made in the field of predictive analytics and encouraged brand owners to use their data to determine the most suitable strategies for their marketing campaigns.”

Oftentimes, we see really savvy direct marketers get so tied up in the day-to-day that they forget the value of predictive analytics.  And, they go immediately to their gut feelings on what population to use in the upcoming direct mail campaign or what a certain segment consists of when they create their messaging.

And, time and time again, we see this “intuitive approach” fail.  Let’s face it — the smartest direct marketer in the world is probably not psychic.  We’ve seen very few direct marketers (actually none) who possess the ability to wave their hand over the server that houses their marketing database and pull out an “Ah — 45-65 years old, incomes of $100K+, with 1.3 children per household.”

I’m not bashing the customer intelligence that direct marketers obviously accrue over time, I’m simply emphasizing Ayres argument — that is when you dig into the data and analyze it scientifically you end up with a really robust — and highly accurate — idea of who your customers are, what segments may exist, who may be most responsive to your offerings, etc.

On the other hand, analytics isn’t all about number crunching either.  It’s about using the statistics to better mine the data, then using your business intelligence to look at the output and come to meaningful conclusions and recommendations on how to better conduct your direct marketing efforts.

That’s why there will always be a need for the creative process in direct marketing.  As Philip Keevill, creative director at Kitcatt Nohr Alexander Shaw, states: “If you get rid of intuition, you get rid of emotion. You can’t predict emotion with a machine.”

We agree with Hoffbrand . . . the two should be used together to create the best direct marketing strategy.

The Right Time for Marketing Analytics

You know that we’re firm believers in using analytics for more effective direct marketing.  More folks are becoming believers along with us these days.  Why?  Because you’ve got to be able to measure the effectiveness of your direct marketing efforts.  Part of this is due to the increased scrutiny of marketing budgets but, I think, it’s more due to our evolution as marketers.  Let’s face it, if we can’t prove that what we’re doing works, sooner or later a change will come — and it may not be positive.

I’ve been reading a lot of articles on this topic, and today I found one that really resonated with me.  It’s by Neil Mason of ClickZ Network.  In his article, “Why the Planets are Aligned for Analytics,” Neil gives us his post-analysis of the recent eMetrics Marketing Optimization Summit in San Francisco:

The stage was set on the first day with a keynote presentation from author Tom Davenport on Competing with Analytics. “The planets are aligned for analytics,” he said, meaning that all the necessary components for organizations to adopt and deploy analytical capabilities are being put in place. Those components are: data, enterprise, leadership, targets, and analysts.

“Using analysis is good, competing on analysis is better,” summed up the need to be able to move from insight to action. There’s no point knowing stuff if you don’t do anything about it. He described the five stages of an organization’s analytics capability from being “analytical impaired” at the low end of the scale to being “analytical competitors” at the other end. Organizations, such as Harrah’s and Marriott in the U.S. and Tesco in the U.K., deploy analytics as a source of competitive advantage.

Every time we’ve worked with an organization who embraces our analytical approach, we’ve had astounding success.  On the other hand, when working with harried direct marketers who don’t take the time to close the loop with analytics, we’ve seen something very different occur . . . folks running around like chickens with their heads cut off being very reactive as opposed to proactive.

We preach the gospel according to analytics to each and every one of our valued clients.  And, we continue to be relentless on this topic because we have seen so much success from utilizing an analytical approach.  We’ll make them all converts yet!

Have a great week!

Information on Data Costs

As analytical experts who often rely on external data to fuel our studies, and our clients’ marketing programs, we thought we’d share some results on data costs.

From Direct Magazine, check out this report on the price of data and leads. The article cites a Worldata study called “Winter 2008 List Price Index”, and it reports on changes in data costs year-over-year.

Very interesting stuff, especially if you need help in budgeting costs. Here are some highlights of the study:

• The cost for e-mail lists is decreasing slightly (by $2 per thousand, while consumer e-mail lists dropped by $3 per thousand).
• But e-mail lists still remain fairly pricey, at an average cost of $287 per thousand for permission-based B2B marketing and $135 per thousand for B2C permission e-mail.
• The average cost for Donor lists is $85 per thousand.
• Business Merchandise Buyer lists go for $118 per thousand while Consumer Merchandise Buyers average $103 per thousand.
• Consumer Magazine Subscriber list costs average $108 per thousand.

And, this quote from the Direct Magazine article should help you understand what to expect when you are buying lead data.

“Cost-per-lead data, which the Boca Raton, FL-based firm began tracking last quarter, had a slight increase in its pricing, due to jumps in B-to-B leads. Cost-per-lead consumer programs averaged $1.30 per lead, a slight decrease over last quarter, while cost-per-lead B-to-B Programs averaged $4.90 per lead, an increase of 7% over last quarter.”

Unfortunately, the study does not include average data costs for compiled data (such as consumer lists from Acxiom or Experian, or business lists from InfoUSA or D&B). Compiled data is definitely a less expensive option. And, Occupant lists (you know the direct mail that is not even addressed to a name, simply to “Occupant” or “Resident”) are even cheaper.

Still, this study gives great insight into what’s going on in the list/data industry and provides you with an educated guess as to data costs if you are budgeting a direct mail or e-mail campaign.

Be Happy You’re an Analytical Expert…

I came across this chart and remembered the fact that sometimes a picture is worth a thousand words.

So, if you have analytical expertise, you’re in good shape to ride out (and even thrive in) this crazy economy.

And, for more encouraging marketing news, check out this post from our Direct Marketing Blog. A little hint–marketing budgets don’t seem to be on the chopping block, even in this economy!