Case Study: Major Retailer Reallocates Media Mix for Better Campaign Performance
– Written by Brian Rainey, CEO, Path2Response for the Integrated Media Research Center
A major retail organization (let’s call them The ACME Corporation) was facing declining media performance and stagnating sales, so they decided to take a fresh look at their media and marketing budget. They wanted to reallocate funds away from advertising and media that were underperforming to better optimize distribution strategies for better performance and response. But before they got started, they knew they had to make a fool-proof plan, gather their data, and identify which contact strategies worked the best for each segment of their prospect and customer database.
ACME began by conducting a weekly analyses of their data to make sure they never strayed from the right path. But the organization took it one step further and decided to get a little extra help from an outside data analytics firm to get additional input into specific campaign recommendations. The intent was to better align their direct mail and email campaigns with revenue and average orders. The analyzers would run tests to determine the most efficient media strategy that would have the biggest positive impact on their revenue stream. The head executives all sat down with their data analyzers and discussed their options:
- Prioritize Acquiring New Customers
ACME was seeing a decline in lifetime value of customers at a certain point in the customer lifecycle, so they began asking: “What if we’ve already maxed out our existing customer lifetime value? Should we stop our reactivation efforts?” To test the idea, they reappropriated funds from their reactivation budget to their acquisition budget. Then, they tracked the lifetime value of their newly acquired customers and compared it to the lifetime value of reactivated customers (and added in the cost of acquiring a new customer versus reactivating an old address). It was more cost effective to reallocate budget to acquiring new customers.
- Evaluate Media Channels and Increase Email Frequency
Long-term customers were not forgotten. Instead, the strategy to reach long-term customers changed, and ACME sent only one catalog to a segment of existing loyal customers of at least five years. Additionally, they append email addresses to their old customer files and reached out to high lifetime value customers via email only.
- Leverage Lifetime Value
Most importantly, ACME wanted to ensure that they weren’t wasting time or money. For the final test, they created two panels: one of low lifetime value customers, and one of high lifetime value customers, then stopped sending promotions to the first group, and added the second group to a loyalty program to study the effects on each group.
The tests conducted by the ACME Corporation revealed some startling trends in their marketing efforts that they hadn’t been aware of:
- Reallocation of catalog dollars away from reactivation efforts and towards activation efforts saw an overall increase in lifetime value and profitability
- Including email campaigns in targeting older customer segments proved more successful than catalog alone
- High-value customers saw an increase in profitability with a targeted loyalty program.
ACME continued to run their tests indefinitely using a holistic measurement process to identify and address data outliers, evaluate their methods to collect email at all points of sale, and investigate new ways to leverage marketing opportunities.
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BRIAN RAINEY | Chief Executive Officer
A 30-year veteran and original cooperative pioneer, Brian has spent his entire career building creative solutions to help marketers improve their efforts. By recognizing the challenge that marketers face and understanding which media drives behavior and response by consumers, Brian has been focused on developing solutions to integrate both online and offline media into the cooperative environment. Brian was previously the president of Epsilon Targeting (formerly Abacus), held senior marketing roles at The Sharper Image and Sara Lee Direct.