CRM Gives Retail A Boost
All things considered, the 2001 holiday shopping season was not nearly as bad as many pundits had predicted. Even the venerable National Retail Federation (NRF), which originally predicted sales growth of only 2.2 percent for the fourth quarter, modified its forecast up to 2.5 percent to 3 percent for the November/December period.
However do not be fooled by the numbers; as any retailer will say, the 2001 shopping season was anything but a smooth road. Despite the rise in consumer spending in October, which boomed up to 6.4% over September as consumers attempted to keep the economy healthy following the September 11 attacks, the spending rate quickly fell by 3.7 pecent in November, according to U.S. Department of Commerce data.
Later in the fall, top selling goods related to "hearth and home" items as people, reeling from the terrorist attacks, were looking to their homes as a source of comfort. In mid-December, the NRF reported that sales in general merchandise, apparel, furniture and home furnishings, electronics and appliances, and sporting goods, hobby, book and music stores had risen by nearly 3 percent over the prior year. The NRF predicted that trend would continue throughout the 2001 holiday season.
And while some retailers were reporting lackluster sales in early December, many went on record as saying the shopping season was better than they had expected.
There are many reasons why that may be so: consumer confidence rose, interest rates continued to fall, economists stated en masse that there would be an end to the 2001 economic recession in early 2002, automobile retailers were offering zero percent financing and most other retailers kept prices low and offered sales prices on many popular items throughout December.
For those retailers that also employed customer relationship management (CRM) tools, the results were likely even brighter.
Many retailers are intrigued by the use of CRM tools to help them build a loyal customer base and increase repeat traffic, particularly during the noisy holiday season when consumers are bombarded by offers from a variety of sources. While CRM efforts have proven to be successful in early-adopting industries, such as financial services, retailers often look to CRM as a "nice to have" solution that might be too costly to adopt given the volatile state of today's marketplace.
Yet there are ways in which retailers can implement CRM offerings that are not only on the cutting edge but are also tangible, easily achievable and cost effective, such as real-time customer loyalty programs. Clothing giant Eddie Bauer, for instance, in 2001 looked to real-time marketing promotions to help it generate sales during a time when they felt most consumers might be reluctant to part with their money.
The leading international retail brand apparel merchant would argue that the real test is not whether the technology exists for real-time marketing, but whether these programs can actually provide tangible results. For the Redmond, Washington-based specialty retailer, the proof was clear. The company saw success in testing a relatively new marketing medium -- "point-of-sale receipt incentives," to generate a lift in customer spending and visits. Since 1999, Eddie Bauer has been Ernex's real-time technology to run its Eddie Bauer Rewards program in Canada.
For a four-week period late last spring, Eddie Bauer ran a campaign that encouraged its loyalty members to return to any Eddie Bauer store for double their reward points. The objective was to learn more about the spending behaviors of Eddie Bauer's loyalty program customers and the impact of printing an incentive on a receipt at the point-of-sale and to help the company at other times during the year.
To test the technology, Eddie Bauer divided its entire loyalty database into two segments - a test group, and a control group. If a customer in the test group made an initial purchase during the campaign period, he or she would receive an incentive receipt message for "double points" for any subsequent purchase before the end of June 30, 2001. Customers in the control group who made an initial purchase were flagged, but were not presented with the "double points" incentive.
Once Eddie Bauer had designed the core components of its campaign, they used promotional tools (Custom Messaging & Bonus Points) that were configured to automatically deliver the incentive messages and bonus points to the appropriate customers. Using the real-time database to track promotion response rates, the retailer was able to track all repeat purchases in the campaign period for both the test and control groups. As a testament to Eddie Bauer's already frequent customer business, customers from the control group, who did not receive the incentive message, still attained a 27.4 percent response rate for subsequent purchases.
More importantly, the test group that received the incentive message attained a 28.7 percent response rate - representing an incremental response rate of 4.7 percent.
The campaign's success was most evident in the incremental sales generated by the incentive provided to the test group. Loyalty customers who received the incentive message spent, on average, almost 7% more than the control group during the promotional period. "Besides understanding the effects of point-of-sale messaging, this campaign has also revealed how recency, frequency, and monetary indicators play a part in our customers' spending behavior," says Lisa Benzaoui, senior manager of credit and new customer programs at Eddie Bauer.
Retail today is becoming more and more challenging as marketing executives struggle to get their message across to their customers and build strong relationships with them. As more retailers discover the cost-effectiveness and overall gains to be achieved by marketing to their best customers at the point-of-sale, this medium is poised to emerge as a key marketing vehicle for year-round campaigns.
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