Data-driven Deals

Many retailers believe they have a good handle on who their customers are. But do they know whether a percentage discount or certain dollars off is more motivational for each one? Do they know whether those customers have certain lifestyle attributes that make them more or less likely to be elite or “best” shoppers?

“It’s not unusual for retailers to have a lot of data,” says Ed Higdon, executive vice president, business intelligence and consumer insights for data-driven marketing group Integrative Logic. “But the most common conversation I have with prospects is something like this: “Ed, I’m sitting on a mountain of data and I don’t know what to do with it.’”

Consider the case of Stein Mart. The off-price retailer had long been collecting information on its shoppers: What it didn’t have, however, was a highly developed way of relating to them. Regular mailings, which followed an events calendar, were primarily delineated according to spend.

“If we felt we needed more impact, it was basically just increasing quantity,” says Donna Mills, Stein Mart’s director of CRM. “I think that’s the kind of mailing a lot of retailers do. It’s not particularly granular to the data or particularly targeted, but it does go to your highest-spending customers.”

Enter Integrative Logic, whose client roster includes Saks, Kohl’s, Fashion Bug, Mikasa and Lane Bryant. Suddenly, it became about understanding customers from both behavioral and lifestyle perspectives; cultivating an “elite” customer list as well as alluring a 30,000-member “near-elite” roster; and being able to identify which customers would be “lifted” by direct mail campaigns through predictive modeling. It was also about the surprising discovery that the best Stein Mart shopper isn’t exactly who the company thought she is.

Focused on the data
Last October, Stein Mart offered a special mailing it probably wouldn’t have considered in the past: A coupon for 20 percent off an entire purchase, aimed specifically at its tens of thousands of “near-elites.” The idea, says senior vice president of marketing and advertising Glori Katz, was to encourage those shoppers to step up to the next level of buying as soon as possible. Not only would it bolster brand loyalty and increase sales for the store, it would ensure the customer that she’d have access to the best offers available for her holiday shopping.

The elite program was launched in spring 2009 as a direct result of an initial segmentation study by Atlanta-based Integrative Logic. That in-depth look at Stein Mart’s mountain of data — with a special focus on lifestyle attributes — showed that the average Stein Mart customer is more affluent than originally thought.

It also showed that Stein Mart’s best customers regularly shop in more than three of the company’s stores, “but there was no way for the leadership in any one store to know this customer and her true value to the company,” Mills says. “By identifying her with a special card, our stores are able to give her the kind of attention [afforded] a very loyal customer.”

That’s of great value to corporate, she says, “but this is also of great value to the folks in the stores, to be able to identify these customers and how they affect the chain as a whole.”

The plan appears to be working: Despite the economy, Stein Mart has seen a slowing of the attrition rate among its best shoppers.

“I think it’s huge, especially in today’s economy, to have a program in place that differentiates you and makes the customer think of your brand first,” Higdon says. It’s of great value to the customer when she feels that what she’s being offered is relevant to her personal needs.

Higdon tells the story of an online retailer through which he often shopped in the past. The retailer was terrific at giving him relevant suggestions for books on marketing and analytics, and he felt he was clearly understood and appreciated as a customer. Last Christmas, however, his wife shopped with this retailer through his account, and the marketing now arriving in his inbox is no longer pertinent to him.

“All of a sudden I had an e-mail for a snow globe,” he says. “I understand why they did it, but I went from opening every single e-mail they sent because they were relevant to not even looking at them anymore. They’ve lost me. It’s a case of diminishing brand value.”

Alerts to changing patterns
Stein Mart tracks customer behavior over time, and even signals the company when something outside that person’s normal buying pattern occurs. If a customer typically buys every 30 days, and 45 days pass without a purchase, that shopper can receive a targeted special offer to get her back into the store.

On a larger scale, having a better understanding of who the customer is and how and when she shops can affect merchandise purchasing and even real estate: Decisions about new store placement — as well as potential store closings or consolidations — can be based on more concrete information.

It’s not enough, however, for Stein Mart just to have a handle on its current customers. It’s also important to use the new-found understanding to reach and retain new ones.

“We have to be efficient with direct mail and announcing sale events, but also in reacting to customer behavior,” Katz says. “The more information we have about how customers respond, the better we know how to balance our mix and balance our margins. Across the board, there are some customers you need to discount more deeply in order to get them to act. Others don’t need a discount; they just want information about what’s new in the store or what the fashion trends are. Knowing that, we can manage the markdown scenario more closely.

“In this economy, there’s a lot of discounting beyond everyday discounting, and we’re now better able to manage that,” she says.