Sheplers Whitepaper

A Monetate Whitepaper

SHEPLERS:OVER 100 YEARS OF SMART MARKETING

Sheplers Whitepaper

OVER 100 YEARS OF SMART MARKETINGEXECUTIVE SUMMARY:

As a retailer that has been around for over 100 years, Sheplers has a wealth of marketing and merchandising experience. The company, whose name has become synonymous with western wear and cowboy boots, is now using that experience to craft cutting-edge online retailing practices built around testing, targeting, and personalization of website content and features. This whitepaper describes how Sheplers has been using Monetate to put its ambitious online retailing plans into action to improve online revenue, customer acquisition, and other key metrics.

Sheplers Whitepaper

A. BACKGROUND

From modest beginnings in 1899 as a saddlery in Wichita, Kansas, Sheplers has become a leading retailer of western wear, which the company defines broadly as: "apparel and accessories for the country/western lifestyle, including traditional cowboy wear, fashionable western wear, country-inspired casual wear and authentic work gear."

More than a dozen Sheplers stores can be found in seven states across America. The flagship Sheplers store in Wichita is today a landmark on the city's Western Heritage Tour. The company also has an extensive direct mail catalog offering.

Since 1998, Sheplers has enabled customers to shop whenever it is convenient for them, from just about any place in the world, thanks to the Internet and the company website at www.Sheplers.com. Sheplers also makes extensive use of email for marketing and merchandising. The net effect is a commanding presence in the world of western wear retailing, across America and around the globe (about a quarter of the company's online revenue is from international sales).

Although the company's roots in retailing can be traced back to the nineteenth century, Sheplers was one of the first retailers to adopt a twenty-first century approach to online marketing and merchandising. According to Sheplers' Chief Operating Officer Mark Hampton, the transition to being an Internet business offers both advantages and disadvantages:

"Online you have competitors both vertically and horizontally. Just about everyone wears shoes, but the percentage who wear cowboy boots is relatively small. So I would characterize our market as a vertical, composed of narrow categories like cowboy boots and western shirts. That means an inherently smaller online audience than horizontal competitors like Amazon.com and Zappos, companies that are selling things across broad categories, like books, music, and footwear in general."

As search technology has evolved, the ease with which consumers can find specialty items—for example, snip toe alligator boots—has compensated for the existence of online superstores that attempt to sell anything and everything (for the record, the first three organic results in Google for snip toe alligator boots right now belong to Sheplers). In other words, the company was quick to see the benefits of search engine optimization and pay-per click-advertising. According to Hampton:

"Early on we started building our website for good organic search results. We got into PPC early and in a big way. We paid a lot of attention to conversion and custom landing pages. In fact, we still have over 300 customized landing pages specifically for top search engine keywords."

Snip Toe Alligator Boots

Sheplers Whitepaper

B. TESTING, TESTING, 1-2-3

Sheplers aggressive approach to search engine optimization and pay-per-click advertising has paid off. Today, around 60 percent of traffic coming to sheplers.com is coming there for the first time, in other words: new visitors. That is good news because it means the company is continuing to reach people who potentially can be converted into new customers. So the question then becomes: How do you make sure you convert as much of this new traffic as possible while continuing to provide a satisfying site experience to established customers? For Sheplers the answer was a simple 3-step process:

Although Sheplers has an experienced team of in-house IT experts running the website at sheplers.com, managing this type of testing project through traditional IT channels can take a long time. Sheplers wanted to test aggressively, with instant feedback, so the company turned to Monetate.

When Sheplers installed Monetate's testing and targeting platform it decided the first task should be to make the purchase flow as smooth as possible. Reducing friction in the item selection and checkout process can increase both revenue per session and average order value as well as reduce cart abandonment rates. Before targeting more visitors with promotional messaging that encourages them to buy, you want to make sure it is easy for them to do just that, to follow through on the course of action you are trying to nurture, namely adding items to the cart and checking out.

Test the key elements of conversion, including the landing page experience; product location and selection, the add-to-cart process; and the checkout process.

Implement test winners so that changes identified as beneficial can begin earning incremental revenue as soon as possible.

Monitor the results to make sure that any changes you make continue to pay off.

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Monetate really understands the challenges faced by multichannel retailers today. They have developed a unique marketing-oriented

solution that smooths the path to coordinating content and messaging across all channels.“

“

Bob Myers, CEO, Sheplers

Sheplers Whitepaper

CASE STUDY #1: GET THE CART RIGHT

The primary goal of this first series of tests was to improve purchase flow and reduce the cart abandonment rate. A variety of screen elements were tested and changed. The effect of removing certain steps in the checkout process was also tested. For example, what happens when you let customers check out directly from the cart page instead of having to click "Checkout" after reviewing their cart?

During a test period of 10 days, the various changes made by Sheplers resulted in a much lower cart abandonment rate and a 3.33 percent increase in conversion rate. While that might not seem like a large number, the annualized projection of incremental revenue generated by these changes was a seven digit number (ample enough to eliminate any lingering skepticism about the value of testing).

Sheplers is not inclined to say exactly what changes were tested during this friction reduction testing cycle, however, if you look at the sheplers.com checkout page today you can see that it is a model of simplicity which follows many of the best practices in user interface design while maintaining the company's unique style and visual branding.

The approach taken by Sheplers, to test some of the basic elements that influence conversion and purchase flow, is itself a best practice in marketing optimization. After all, you don't want to expend a lot of effort persuading people to put things in the shopping cart if clumsy processing then causes the cart to be abandoned.

Original cart Optimized cart

+3.33%

SHOPPING CART CONVERSION RATE

Sheplers Whitepaper

C. DIGGING DEEPER: BRANDS & CATEGORIES

In developing it's website, Sheplers has wisely leveraged the lessons learned from many decades of brick-and-mortar retailing. The design of a real-world retail store is based on how most shoppers travel through the store to find what they want. Merchandising in the store aims to prompt purchases by presenting tempting offers at appropriate points in that journey.

The brick-and-mortar shopping experience actually offers some advantages over online shopping says Hampton. For example, customers can feel fabrics and try on boots. But an online store can do something that no brick-and-mortar store can do: "rearrange the store to fit customer needs and intent, customizing the shopping experience based on which 'door-to-the-store' they enter through."

Consider someone who enters the Sheplers online store by clicking through from a search for "boots on sale." Now compare that site visitor with someone who searched for "Tony Lama exotics." One can assume, since Tony Lama is a brand of boot, that both people have some interest in buying boots. However, one can infer significant differences between the two visitors with respect to product category, brand, and price range. Boots are a product category. Tony Lama is a brand. And "sale" is a price, or at least an expression of preference for a lower price.

Even before the Internet, smart multichannel retailers like Sheplers were analyzing statistical synergies between brands, price ranges, category purchases, and so on. According to Hampton the company has been working for some time to "leverage these synergies online in terms of what we show to different customers on the website."

Sheplers Whitepaper

CASE STUDY 2: MIX IT UP

Sheplers decided to use Monetate to capture preference and intent inferred from traffic sources such as pay-per-cick advertising and organic search, then use that information to customize website content. For returning visitors Monetate also feeds data about past product views and purchase behavior into the customization mix.

Sheplers tested this strategy by making modifications to the home page for people expressing interest in leather outerwear like leather jackets and coats. The impact of these customized content changes was a 48 percent lift in conversion rate. In other words, visitors who were presented with the customized content chose to make a purchase almost 1.5 times more often than the control group (a subset of people who were not shown the custom content even though they met the criteria).

Even though this test was targeted at a relatively small segment of shoppers—those expressing interest in leather outerwear through PPC clicks and keywords in search—the annualized incremental revenue lift from this strategy was projected to be worth six figures. Needless to say Sheplers continues to test and implement different ways of customizing content based on customer brand and category preferences.

When you are trying to deliver the best possible website experience to each and every customer, with a minimum of pain, Monetate is a huge

asset to have on your side.“

“

Bob Myers, CEO, Sheplers

Home page without targeting Home page targeting user preference

48% Higher conversion rate lift

Sheplers Whitepaper

D. HEAD WEST WITH GEO-TARGETING

Through its operation of brick-and-mortar stores over many decades, in numerous states, Sheplers has learned that tastes vary by region, even in a relatively narrow vertical market like western wear. Cowboy boots with pointed toes might sell better in some states while other states prefer snip toes. Justin boots are big in the Northwest. Wrangler jeans are more popular than Levis in some states. Hampton calls this "brand pocketing."

Not surprisingly this phenomenon of brand pocketing is also found in online retailing where some brands, products, and categories are more popular and convert better, according to geography. The geo-targeting technology built into Monetate has enabled Sheplers to leverage these geographical preferences.

Geo-targeting means changing the content of your website based on the location of the person looking at it. This is possible because, whenever you visit a website from your desktop, notebook, net book, or other device, the web server detects the IP address of the device. That can be used to determine your general location. The usefulness of this information can be illustrated with a simple yet profitable example that leverages the fairly universal shopper preference for saving money.

Justin Boots in the Northeast

Pointed toes in the South

Snip toes in the Northwest

Sheplers Whitepaper

CASE STUDY 3: TAXES IN TEXAS?

Geo-targeting can be used to increase conversion by saving customers money, namely the sales tax they might avoid paying on their purchase from your website based on their location. These days, shopping by price is almost synonymous with shopping online and Shepler's customers are no exception. Sheplers knows that many shoppers carefully weigh all the factors that affect the final cost of their purchase, including sales tax. Since the sales tax payable on web purchases can be up to 10 percent and varies by shopper location, Shepler's has adopted what can only be described as an online retailing best practice: Let visitors know up front if their purchases are likely to be "tax free."

This is not only helpful in closing the deal, but if you point out the potential savings as soon as shoppers land on your site, rather than waiting until they get to the checkout page, it can reduce bounce rates. Above you can see a simple creative that Sheplers displays on the home page whenever Monetate's geo-targeting capabilities indicate a site visitor is located in a state where the company does not collect sales tax.

Actually, the creative above is not as simple as it looks. The name of the state is automatically inserted into the graphic by Monetate at the time it is rendered, thus avoiding the need to make separate creatives for all the states to which the messaging applies (dynamic rendering of text based on targeting variables is just another way in which Monetate improves productivity and helps you save on internal resources).

As for the value of this strategy, tests showed that revenue per session rose 6.48 percent when these tax free creatives were rolled out (as measured against a control group). For Sheplers that translates into a projected annual revenue increase well into six figures, achieved without discounts, or free shipping, or anything else that would erode margins.

6.48%Revenue Per Session Increase

Sheplers Whitepaper

CASE STUDY 4: LET'S GET LOCAL

Shepler's is now experimenting with changes to the home page content based on visitor location and what the company knows about buying preferences in that location. For example, if you are shopping at Sheplers from a state with a marked preference for Wrangler you might see Wrangler products above the fold when you land on the home page. While the company is not prepared to detail the results of these tests, partly because they are ongoing, it is clear that the strategy pays off when you get it right.

For example, changing the sheplers.com home page for visitors from Japan produced a conversion rate improvement of 116 percent. If you are inclined to think that a doubling of conversion rate is an exaggeration we should point out that many other Monetate clients have seen comparable results from country-specific targeting. The World Wide Web truly is worldwide and it turns out that a lot of people outside America like to buy from America (remember that 25 percent of Sheplers' revenue is international).

Would it be worth customizing content for visitors from different countries or regions or states if you had to implement the necessary site changes piecemeal through your IT department? Possibly not, but rolling out this kind of targeting with Monetate is literally a few minutes of effort, and that is Marketing department effort, on Marketing's schedule, not an IT project that has to be placed in the IT queue.

Sheplers Whitepaper

CASE STUDY 5: GEO-TARGETING CONVENIENCE AND COMPLIANCE

A third benefit that Sheplers has found in geo-targeting is improving the site experience by hiding items that a shopper cannot buy. For example, various laws are in effect that limit the distribution of certain "exotic boots" to some locations, like California. It is also illegal to ship some exotic boots from America to other countries. Hiding items that cannot be shipped to a customer's location reduces shopper frustration and calls to customer service.

Sheplers has even used Monetate to help out the IT department. There are times when a website has to be taken down for maintenance purposes. Those times are different in different locations. For example, if you are taking the site down at 1:00 am Central time that is 11:00 pm Pacific time. Sheplers has used Monetate to display a banner that warns shoppers about downtime in their time zone, dynamically generated from the "local time" targeting variable.

Sheplers Whitepaper

E. CONVERSION THROUGH CURATION

All of these targeting capabilities and merchandising strategies come together when you look at how Sheplers is using two complimentary technologies that are on the cutting edge of digital marketing: badging and curation. In this context curation means identifying items that are deemed worthy of greater attention and badging means visually highlighting those items.

Why are curation and badging important to online retailing? Consider the fact that Sheplers stocks 10 categories of Work Boots. In the "Pull-on" sub-category alone there are 60 different styles. When a shopper gets to a web page with 60 choices, it helps to know which items are new, which are best sellers, top-rated, and so on. Fortunately, Monetate technology makes that easy, whether you're selling boots or jeans or western shirts.

Of course, if you had to create new product shots every time the curation changed then badging would be prohibitively expensive. That's why Monetate developed technology that can automatically display small images, the badges, on top of your original product images.

The Monetate marketing platform will do this on your website according to whatever business rules you lay down. For example, if a product SKU is in a list called "new" or "on-sale" then Monetate will float the appropriate badge over the image of any product whose SKU is on the list. You can tell Monetate to do this whenever such a product is displayed, or only on certain pages, such as a search results page.

Sheplers Whitepaper

CASE STUDY 6: RESPECT THE BADGE

Badges are a digital reincarnation of the age-old merchandising strategy of calling attention to specific products within a range of goods, such as items that you are particularly keen to sell. And badges are effective: adding bestseller badges on category pages at Sheplers produced a conversion rate lift of more than 3 percent. The deployment of "Savings" badges on category pages increased average order value by 2 percent. Using a "New" badge on product detail pages produced a 1.63 percent increase in the "add to cart" rate. Individually, these might not seem like big percentage increases, but taken together the annualized revenue increase from these badging campaigns is a seven figure success story.

It should be noted that the bestseller badge is a little smarter than the others. While the "New" badging is triggered by a list of SKUs that Sheplers uploads through its Monetate dashboard, Monetate curates the best selling products automatically because Monetate knows what is being sold and when.

A simple business rule triggers display of the bestseller badge when an item crosses the predefined threshold for bestseller (for example, the 10 most frequently purchased items in the last 30 days). In other words, Sheplers can just set this merchandising campaign and forget it. As customer buying habits change, so does the bestseller badging, without consuming any additional resources.

Sheplers knows that badging pays so it is using Monetate to get even smarter, combining geo-targeting with its accumulated understanding of brand synergies to present different bestsellers to visitors from different states, based on what is selling best in the visitor’s state.

1.63%Increase in add to cart rate

Sheplers Whitepaper

F. THE SHIPPING NEWS

When we asked Sheplers' COO, Mark Hampton, where he saw Monetate making the most difference to the company, he pointed to shipping. Obviously, shipping is a key factor in the online retailing equation, an equation that is different for each retailer.

Take the case of Zappos, an online retailer that is more horizontal than vertical, selling every type of footwear. Free shipping and free return shipping are a big part of the company's business model and marketing strategy. Clearly there are costs associated with that strategy, beyond the shipping costs themselves. Return rates at Zappos are reported to be high, partly because some people intentionally order multiple styles in multiple sizes and return most of them.

Any online retailer who is considering offering free shipping needs to proceed carefully, paying close attention to the effect on both the top line and the bottom line, overall revenue and net profit. One strategy is to offer free shipping selectively. According to Hampton:

"We have determined, with Monetate tests, the importance of free shipping offers to leverage the top line and the incremental contribution."

A key variable in the shipping equation for Sheplers turned out to be location. Detailed analysis of sales figures revealed a group of states converting at lower than average rates. The company suspected the presence of primary retail competitors in those states was the culprit, with Texas being one example. It made sense for Sheplers to target those states with free shipping offers and see if that produced a significant lift in conversion and top line revenue while tracking net contribution to the bottom line.

Free shipping can increase the top line but will also raise costs.

That’s okay if the bottom line keeps growing.

Sheplers Whitepaper

CASE STUDY 7: FREE SHIPPING SOMEWHERE

With its geo-targeting capabilities, Monetate enables online retailers to test and execute a wide range of shipping promotions. These include reducing or dropping the shipping charges based on distance from warehouse, distance from competitors' stores, or location within a particular region, metro area, county, ZIP code, or state. Shipping can be reduced or waived for all purchases for a limited time, all orders over a certain amount, all orders of a particular brand or category, and so on.

Getting Monetate to tell shoppers from Texas that they get free shipping while showing different messages to shoppers from other states is very easy. The big question for Sheplers was the net effect on revenue. Would the increase in sales pay for the cost of the free shipping?

In a situation like this you need your testing platform to be nimble. You also want it to report results in real time. In other words, you want to be able to see the effects of the targeting immediately and quickly turn it off should those results prove negative. Monetate lets you do that, but fortunately Sheplers did not have to turn the test off early. After four days the Monetate dashboard showed a 57 percent increase to the top line.

Sheplers was also seeing a 20 percent increase in net contribution even though it was paying for shipping. The test proved the value of offering free shipping to shoppers in states where the company faced strong competition. As a bonus, in addition to the very positive financial numbers, this test showed that the strategy produced a 48 percent increase in new customer acquisition. Annualized contribution to the bottom line? Sheplers prefers not to say, but it is reasonable to assume that this strategy was a Texas-sized success.

20%Increase net contribution

48%Increase new customer acquisition

Sheplers Whitepaper

G. THE ROUNDUP

From the case studies described here you can see the breadth of Sheplers’ implementation of Monetate and get some idea of it's impact on Sheplers’ business processes and performance. In addition to the various strategies described above, Sheplers uses Monetate on a regular basis for traditional A/B split testing to decide on the best creatives and other variables. For example, the company recently decided to try a different design for its "Percentage Off" badges. The winner produced a 4 percent revenue improvement over the loser and an annualized revenue improvement projected to be well into seven digits.

When we asked Mark Hampton to summarize the benefits of deploying Monetate he summed it up in two words: information and partnership. Then he elaborated.

Hampton points to the availability of real-time data on multiple parameters when testing and targeting in Monetate, parameters like bounce rate, new customer generation, average order value, revenue per session, and cart abandonment.

"Monetate is not only telling me if what I am doing is profitable but it is also indicating why it's profitable. You can tell if a test is reducing the abandon rate or speaking more effectively to a new customer than it is to a returning customer. Data like that points you in the direction of how you can do even better."

Information: "The accuracy and detail of the information that Monetate provides to the business is not only more informational than that available from standard analytics packages, it is directional. In other words, it is helping the company decide the direction to take in order to take its marketing to the next level."

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Sheplers Whitepaper

"These guys help us stay focused on moving forward, not just making changes and measuring them, but deriving learnings and implementing them."

Hampton cites the early testing on the shopping cart as an example. Those tests indicated a need to make changes, and Sheplers implemented them. But in some other areas, like badging bestsellers, Hampton says the Monetate team acted as "the forward scout" and encouraged experimentation to prove the value of changes that can go on to become a permanent part of the site design.

In summary says Hampton, "Before Monetate, we were forced to do our own tests or just guess. Faster testing and more tests has freed up development time to do other things. Monetate lets you prioritize. For us, further personalization is the next big thing, based on what people have viewed or are looking at. And with Monetate we are ready to take it on."

After more than 100 years of retailing, Sheplers is a great example of an established enterprise that is looking to the future, pushing the envelope of digital marketing and merchandising, and reaping rich rewards where others have yet to tread.

Partnership: Although Monetate's software is very easy to install and use, Hampton says Sheplers is deriving a lot of benefit from the working relationship the company has developed with the Monetate Strategic Service Team.

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Monetate gives us the ability to test everything in real time, against a control group, under the exact same conditions as the target group;

and that gives us a lot more speed and confidence when making marketing decisions.“

“Bob Myers, CEO, Sheplers

The longer we work with Monetate, the more we learn about our customers and how to apply that knowledge to further improving our

return on marketing spend.“

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Nick Bomersbach, VP, Digital Commerce, Sheplers

Sheplers Whitepaper

As the leading independent provider of testing, targeting, and personalization for websites, Monetate helps major consumer brands deliver personalized content and offers to different traffic segments. And we do this while eliminating IT from the marketing process.

Everything that Monetate does is enabled by a single tag that you cut-and-paste onto your site, no IT resources required. With that one simple action Marketing can bypass IT and access Monetate’s unique marketing optimization features from A/B testing to product badging and geo-targeting of promotions and messaging.

Learn about the successes our clients have had with Monetate, from conversion rate lift to increased average

order values, revenue growth, improved customer acquisition, and commercial websites that simply work better.

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If you are ready for a personal demonstration to see how Monetate can improve your website call us at 877-

monetate or fill out the form on our website.

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and targeting works when you’re using Monetate.

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