A Retail TouchPoints custom white paper for Pluris Marketing

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. 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
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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
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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
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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
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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:
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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
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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%
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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.”
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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
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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.
www.plurismarketing.com
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 www.retailtouchpoints.com.
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