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Client: A small new manufacturer of natural bath and body products funded by private equity and venture capital investments. |
Challenges: The company was just starting a campaign to gain nationwide recognition and penetrate interesting niche markets like tri-athletes, luxury seekers and fans of natural products. However, fewer customers were making repeat purchases than expected and the LTV ("LifeTime Value") of prospects was lower than the cost of acquiring them. Further, the response to follow-up catalogs sent to information requestors had a very low response rate only 30 to 60 days after the request date. Investors were uneasy with performance and anxious to see improvements.
Solution: Management Analytics Group analyzed the company's customer database and defined segments in terms that were useful and immediately actionable. We discovered that repeated contacts with customers (especially recent customers) would substantially increase LTV. We also discovered that certain customer segments preferred to place significantly larger orders than other segments. Finally, MAG discovered which customer segments were not likely to respond to follow-up catalogs.
With this information, the company shifted it's communication strategy to focus upon recent customers who were likely to respond to follow-up mailings. It also cut back on the number of catalogs sent to low-response segments. The company also created new and larger product bundles to appeal to those customers that preferred to place larger orders.
Result #1: Response rates to catalog mailings has risen to 4.2%
Result #2: LTV of new customers has doubled and prospects now have a positive LTV.
Result #3: Average orders have increased 20% over pre-analysis levels.
Result #4: The number of loyal (3x or more) buyers has doubled.
Result #5: The company achieved a 63% increase in year-to-year overall sales and won front-page coverage in the local newspaper!
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