Retail: Awesome Strategy and Segmentation Based on Customer Data Insight

This is an awesome case which shows how you by using customer data insight to segment and make differenciated strategies based on potential and behavior resulting in a $21.5 million revenue gain for Brazil's Cooperativa de Consumo (Coop).

"It is important to create differentiation," says Celso Furtado, marketing manager in charge of change management projects for Coop. "Being the only retailer in the country to have a registered customer base due to our business model, Coop can generate customer value and [gain] a competitive advantage."

Database analysis of its members revealed that 60 percent of Coop sales were driven by 17 percent of customers, and a large number of customers had low consumption rates. As a result, the company decided to define goals and action plans for different customer segments.

Coop created a customer-centric program to increase customer engagement and spending. The program is supported by a central data warehouse that contains member information and transactional data, including store preference, payment options, purchase frequency, shopping time patterns, buying behavior within product categories, and brand consumption.

Members were grouped according to their buying behavior, and five portfolios were created based on members' gross purchases and margins generated in four-month increments. This level of customer insight allowed the company to develop different treatment strategies based on the attributes of the customer portfolio, household value, and consumption behavior. It also guides overall strategic decision-making in all parts of the business.

The company set goals for each portfolio (i.e., segment). For the best-value (A) and high-consumption segments (B), Coop's goals are to recognize, maintain, and retain them. For the average-consumption segment (C) the goal is to maintain and develop; Coop wants to develop and recover the low-consumption segment and reactivate inactive members. The company customized direct mail and email campaigns based on these objectives. In addition, to provide a consistent and informed experience, store associates and other customer-service employees receive monthly training to update them on the types of campaigns sent to customers.

One way Coop recognizes customers of portfolios A and B to help retain them is through communication that "is exclusive and unique," Furtado says. "We present exclusive products and pricing." For example, high-value customers who hadn't purchased perfumery products in the previous four months recently received a direct mail piece offering a specific soap for R$ 0.01 if they also purchase moisturizer and body wash.

Meanwhile, "for customers of portfolio C, we aim to develop them and lead their migration to portfolios A and B," Furtado says. Marketing communications sent to portfolio C members talk about how Coop values their business and explains the benefits of increasing their purchases at Coop. In one campaign customers were offered a reusable shopping bag for R$ 0.01 if they bought R$60 worth of items. "We add a minimum amount of purchase to develop the member always a little bigger than his average ticket."

Coop's 2010 campaigns earned US$ 21.5 million in incremental revenue, which corresponds to 2.6 percent of Coop's annual revenue. The company generated an ROI of 64 percent, Furtado says.
Furtado emphasizes that customer data is not a static entity. Household data is evaluated every two months, and inactive households, email addresses, and opt-out customers are removed. In addition, the company encourages members to regularly update their profiles and provide more data in return for a more personalized experience every time they shop.

Next, the company will incorporate new data fields into the database to represent more individual interactions, and will combine internal and external data to improve each customer record. In addition, there will be more attention paid to optimizing relationship channels, especially digital and interactive ones such as email marketing, point-of-sale, and mobile. The company also plans to deploy "relationship agents" in each store to monitor the service and relationships there.

The company's numerous efforts all have one central goal, Furtado says. "The end result is the creation of a productive relationship cycle that increasingly helps our customers and helps us attend to their needs."


Source: 1 to 1 and Gartner