customer lifestage
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Customer LifeStage
Marketing Plan
Joe Hage and Rob Befumo
June 20, 2000
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Increasing Purchase Frequency is Rel. Marketing’s #1 Goal
Background: In 2000, we increased purchase frequency among 12-month customers from 2.04 purchases / year to 2.11 / year (+3.4%).
Objective: In 2001, we will increase frequency from 2.11 to 2.20 (+4.3%).
Strategies:
Smarter about who we mail and when.
Email: we will do big campaigns over 16 times to 33MM customers (up over 100%)
– and Welcome all first-time buyers with email addresses (1.3MM)
Direct Mail: we will mail for all 7 Major Occasions (4.6MM)
– and Welcome first-timers without email addresses (1.3MM)
Customer LifeStage work
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Customer LifeStage Definition
Customer LifeStage Definition:
where the customer is in the ordering cycle; and what services the customer opts in for.
Awareness Browsing Buy
Browse
Registration Gift Reminder
Buy Again
• Advertising
• Recipient
• Word of Mouth
• Public Relations
• Permission to Contact
• Bookmark
First-Timers
• Products
• Services
• Welcome
Extra support during Peaks
Pre-Purchase
Same for All
Repeaters
Different by Opt-in Services
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Customer LifeStage Options
The options we give customers are:
1 Remove yourself from our electronic communication (opt-out of mass email)
2 Register for our electronic communication (opt-in for mass email)
3 Enter reminder dates and information (opt-in for personal services)
Many of these programs are best suited for Interactive customers, which is why collecting email addresses is so important!
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Customer LifeStage - One of 4 ways to think about 18FC customers
Customer
Lifetime Value
Customer LifeStage
Contractual Obligations
Responsiveness
• Most Valuable Cust.
• Most Growable Cust.
• Below Zeros
• Responds to our communication
• Doesn’t Respond
• Let MVCs get preferred service.
• Dangle incentives to MGCs.
• Avoid BZs.
• Needs completed Datamart in 7/00.
• CHAID program will predict who will respond.
Note: Note:
• Talk to AOL a certain way
• Airlines
• Sears
• Potential customer
• Accepts email
• Registered (Y/N)
• Gift Reminder User
• We will de-couple “registered” from “opted-in.”
• Gift reminder users opt-in for most relevant messages.
Note:
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Menu of 16 Communication Points
Pre-Purchase:
How to start a dialog?
• Email Opt-In
• Pop-Up at Exit
Post-Purchase:
Repeat purchases?
• Promotional Email
• Newsletter Email
• Gift Reminder Email
• Direct Mail
First Purchase:
Maximize contact?
• Register
• Gift Reminder
• Welcome Email
• Bookmark
• Order Confirmation
• Wrap Up Page
• Delivery Confirm
• Second Sell
• Welcome Booklet
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Menu of Communication Points
Email Opt-In
Pre-Purchase (what Seth Godin calls “Getting to Maybe”)
Pop Upat Exit
Strategy: even if a visitor doesn’t purchase
• gain permission to begin a relationship
• learn something about the visit
Execution:
• Email: Place to collect email addresses of “Browsers”
• Pop up (example): We’re sorry we weren’t able to help you today. Was it because:
(a) You were just browsing
(b) We didn’t have what you were looking for?
(c) Items were more than you wanted to spend?
• Upon reply, pop up: $5 off your next visit. Thank you for shopping with us. Enter your email address if you’d like us to send you a $5 discount for your next visit to our site.
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Menu of Communication Points
Register
Wrap UpPage
OrderConfirmation
DeliveryConfirmation
First Purchase
ShoppingCart
Could include customer survey -- mail -- telephone
Bookmark2nd Sell
anything elsetoday?
Optional
Optional Services (customers’ choice to accept or decline)
General Services (all receive these communications)
WelcomePostcard
and/or Email
(phone equivalent is scripting)
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Menu of Communication Points
Opportunityto Register
Wrap UpPage Banner
OrderConfirmation
DeliveryConfirmation
First Purchase
ShoppingCart
Opt-in box to
register at checkout
No, Didn’t Register
Register now
Register now
Register now
Yes, Did Register
Gift Reminder now and Save on your next gift reminder purchase.
“Gift Reminder” will mean:
• Reminders (not addr bk)
“Registration” will mean:
•Easy Check out
•Address Book
•If we ever do points
•Preview products in short supply
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Menu of Communication Points
Opportunityto Register
Wrap UpPage Banner
OrderConfirmation
DeliveryConfirmation
First Purchase
ShoppingCart
Registered?
No to Reminders
Gift Reminder now
Gift Reminder now
Yes to Reminders
Product Sell
Product Sell
Yes, Did Register
Gift Reminder now and Save on next purchase.
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Menu of Communication Points
Register
Bookmark
First Purchase, Optional Services continued
ShoppingCart
2nd Sellanything else
today?
Bookmark Me! Click here to add us to your Bookmarks.
Additional page (after “Billing,” but before “Review & Payment”)While we have your billing information loaded, is there anything else we can help you with today?• Yes, a friend’s birthday is coming up• Yes, please show me your Father’s Day collection• Yes, remind me about your Rose Month sale next month.
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Menu of Communication Points
Retention Efforts
Promotional& Newsletter
DirectMail
Repeat
Purchases,or End
GiftReminder
Strategy: communicate our products and services until:
• CHAID program predicts customer would be unresponsive
• customer tells us to stop (opts out)
Content: content of communication will depend on:
• customer type (“regular,” airlines, Sears, Small Office/Home Office, B2B)
• customer LifeStage (registered?, remindered?, opted out?)
• time of year / occasion
Gen. Service
(All Receive)
WelcomePostcard
and/or Email
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Communication Matrix / Peak Period / MVC Service
Communication Matrix
Segmentation will run along three variables:
Customer LifeStage (4) (Potential / Purchaser / Registered / Service User)
Lifetime Value (3) (Most Valuable / Most Growable / Below Zero)
Contractual (6) (Regular / AOL / American / Delta / United / Sears)
Peak Period
Repeat Customers will get access during Peak Periods:
Phone (jump to the top of the queue)
Service (jump to the top of TLO’s, etc.)
Merchandise (exploring priority access)
MVC Services (Q3)
Special Service for Most Valuable Customers:
Best Reps, Treatment in Queues, Interactive Prompts
Appendix
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Menu of Communication Points
Retention Effort #1
WelcomeMail & Email
Strategy: communicate our products and services to new customers
Communication Priorities: (1) thank you for your purchase; (2) come back soon; (3) Everyday gifting; (4) our breadth of product and services (experts); (5) online benefits.
Execution:
• Email: all records with email addresses get a welcome email (regular, airlines, Sears, SOHO, B2B)
• Direct Mail: all non-email records will get a booklet, some email records will get a booklet (test)
– Three versions: Regular, American, Sears (differences on return address and Jim letter)
– Other differences would be handled by stickers or laser printing on label.
– The package may be updated with 7.0 improvements, and we may test elements (letter, etc.).
Note: CHAID may predict some buyers are less likely to repeat, and may be omitted.
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Menu of Communication Points
Retention Effort #2
Promotional& Newsletter
Versions:
• Function of Communication Matrix
Strategy: communicate our products and services to all predictably responsive customers (CHAID)
Execution:
• Fiscal 2001 has 18 promotional emails planned, 12 Newsletters, and 3 Gift Guide Newsletters (see 2001 Marketing Calendar).
• Distribution will be determined by CHAID.
• If a customer purchased already for the holiday, alter the message to encourage multiple recipients.
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Menu of Communication Points
Retention Effort #3
Strategy: since gift reminders are the highest level of permission, communicate only what was specifically requested (opted-in for) by the customer.
Execution:
• We will still email reminders for Holiday, Valentine’s, and Mother’s Day, unless customer opted-out.
• We will still deliver promotional and newsletter emails, if the customer opted-in for them.
• We will still deliver Direct Mail, if CHAID predicts it would be efficient.
GiftReminder
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Lifetime Value: Money, and More
The Lifetime Value (LTV) of a customer is the stream of both actual and expected future profits, discounted at an appropriate rate back to current net present value.
The ranking/sorting of customers not only assigns a dollar value to a customer, but incorporates a “score” on select non-monetary attributes.
LTV is not a quantity that can be precisely calculated for a particular customer; rather, it is a forecast based on probabilities. This measure will incorporate historic monetary value as well as non-monetary factors that impact expected future value, discounted back to the present.1
LTV = NPV [(Historic Monetary Value)*(Non-Monetary Considerations)]
1: Need to determine interest rate to be used.
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Strategic Value: Incremental Potential
Beyond non-monetary factors considered in projecting Lifetime Value, Strategic Value (SV) estimates the incremental potential of a customer if the company applies a targeted strategy to increase its share of customer.
“Migrators”MVCs MGCs BZs
Use 1to1 to keep these customers...
Lifetime Value
Strategic Value
Servicing CostsMigrate these(strategic value
unknown)
Spend no resources marketing to these
...and grow these.
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= Lifetime Net Margin
Monetary Value
The team has identified an initial proxya to begin ranking customers in terms of relative profitability.
Total lifetime margin contribution
- Cost of status-check calls: [annual weighted avg call lengthb] x[cost/minute] x [# of status checks]- Cost of “problem” calls: [annual weighted avg call lengthc] x[cost/minute] x [# of problems]- Cost of make goods (product)- Cost of make-good handling (mailings, coupon value, etc.)- Direct marketing costsd
a This proxy deducts partial CSI and direct promotional expenses linked to individual transaction profiles.b, c Paul, Mark, Jake to determine the extent to which variable line time and CSR time factor into this measure.d This factor will be built in, starting with customers who have joined in the past six months.
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Non-Monetary Value
Cost to Serve (Margin) Customer service inquiries (3 measures) Ratio of Internet orders to total orders Promotion sensitivity (2 measures)
Indicators of Potential Volume
Ratio of non-holiday orders to total orders
Trend in order frequency
Number of recipients
Ratio of multiple-purchase orders to total orders
Strength of Relationship
Ratio of non-floral orders to total orders
Ratio of planned orders to total orders
Team has identified nine non-monetary factors that impact a customer’s Lifetime Value :
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Calculating Lifetime Value
The formula for calculating Lifetime Value has been determined. The coefficients and constant will be determined by modeling historic data (greatest weight will be given to most recent data):
LTV = C + (CoMVo) + (C1F1) + (C2F2) + (C3F3) … (C9F9)
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Geodemographic Scores
Homeowner (Y/N)
Length of residence (years)
Age (years)
Estimated household income ($000)
Median home value ($000)
Merchandise buyer category (last transaction )
Marital status
Ethnic markets
Number of children
We will receive, on a quarterly basis, the following nine InSource data elements applied to our customers and recipients:
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