Forensic Data Analysis Resulted in $30 Million New Sales

Challenge: Lost Engagement Due to Two Communications Breakdowns

Results: One Million Recovered Customers, 30-Fold Sales Increase

Our client is a mass retailer with a storied brand history and a long-standing base of loyalty
program members, the average of whom are middle-aged women of moderate income.
However, despite a high number of members, the retailer knew it was losing touch with many
of these customers in two critical ways:

1. Uncaptured e-mail enrollments: The retailer was suspicious of a leak somewhere in its data
capture, as the number of transactions occurring among sign-ups at the point-of-sale was substantially higher than the number of names and email addresses eventually compiled in its customer database.

2. Misfired targeting: The retailer lacked a single, centralized approach to its marketing and servicing communications and therefore struggled to capture the interest of its members. Notably, it relied largely on daily email deployments. As a result, it missed opportunities to capture customers in the moment, resulting in fewer visits and, consequently, fewer purchases.

Solution: First-Person Data Pipeline Forensics

Incendio suspected that resolving the communications issues would require a human touch.
So we used our own. Our two-pronged approach:

1. Travel the data pipeline. Regarding the lost email data, Incendio recognized inconsistencies in reports by the retailer’s technology provider, so we performed a real-time audit. Each member of the geographically dispersed Incendio staff signed up for the retailer’s email list at point-of-sale. With real people tagged and followed throughout the various data hygiene processes,
we were able to see names were indeed falling through the cracks and why. It boiled down
to a few critical instances of poor data piping, which was fixed within weeks.

2. Harmonize the messaging. Correcting the communications misfires required input from 19 teams, including marketing, merchandising, operations and e-commerce. First, we aligned all stakeholders on the definition of one-to-one personalization. Next, we developed a data-driven strategy to radically improve personalization, tailoring offers to reflect recent purchases (“this dress would look great with the shoes you purchased”). We then tracked responses.

Incendio’s team audit of the e-mail capture
process uncovered more than 1 million “lost” customers. Once we re-entered them into the pipeline and engaged them with our client’s new one-to-one communications approach, the
benefits followed quickly:

  • $30 million in additional topline sales within
    100 days of members receiving the one-to-one marketing.
  • $5 million in gross profit savings in the first
    three months after the plan was put into play.
  • 8% increase in net new names monthly, due to the fix in the data pipeline.

Further, the work behind both solutions enabled the retailer to build out its technology capabilities, ensuring all data-capture opportunities were optimized at every customer touchpoint. 

Retail Loyalty Program Sees 50% Membership Lift
Through Two-Tier Redesign

Challenge: Six Slow Sales Days and No Insights

Results: Millions of New Members and Transactions

From homeopathic consumers to body builders, our client – a specialty retailer in the wellness category ­– tried to serve five distinct market segments through one paid loyalty program. Under this model, it struggled with two key issues:

  • The benefits of the paid program kicked in only on a certain day of the week.
  • The program did not include a mechanism to capture first-party member data.

Over time, all five of the retailer’s member market segments grew conditioned to shopping on the benefit day, resulting in low sales on non-benefit days and hard-to-predict operating costs. The retailer had become dependent on the revenue stream, however, and therefore was reluctant to change the model and risk confusing members.

Solution: A Two-Tier, Revenue-Protecting Program

Incendio immediately recognized that the program had merely “trained” members to take advantage of sales; it was not set up to delight them. In 2016, we restructured the program into two tiers, each of which engaged and rewarded all five market segments based on their levels
of activity.

The first tier, which is free, was devised to collect first-party data for the first time in the program’s history.

The second tier, which is fee-based, generated a reliable revenue stream while identifying
the program’s most engaged members, so the retailer could recognize them with more memorable rewards. Perks for paid-tier members included twice yearly goodie boxes packed with samples and exclusive merchandise, paid-member-only discounts, special shopping days and free shipping.

As of 2020, the two-tier framework of the new program contributed to a nearly 50% increase in membership numbers, to 21.5 million. It also generates two sources of wealth: Fee income, through the paid-tier memberships, and first-party data that helps the retailer more effectively sell its products. Other results include:

  • 80% of all transactions are now made by
    loyalty members.
  • 32.5 million transactions, per month, by
    loyalty members.
  • 2x activity by paid tier members, who make up an
    estimated 15% of total members and purchase twice
      as much as non-members.
  • 38% margin improvement by enticing members to shop all days of the week (optimizing store expenses).

In implementing a premium option for higher-spending customers, Incendio created a rewards strategy that specifically recognizes the retailer’s best-engaged, and therefore most receptive, customers. At the same time, the data-collecting mechanism installed in the new program enables the retailer to better understand and engage non-paying members, so they spend more and are more likely to consider a paid membership.

Renewing an Old Program: How Fresh Data and Rewards Plans Led to 90% Enrollment

Challenge: A “Mature” Program Needed a Makeover

Results: Millions of New Members and Transactions

Our client was a specialty retailer in the beauty category with a highly targeted market of
professionals, which typically should mean more loyalty. However, the merchant’s fee-based reward program ($5 annually) had not changed in years and lacked the surprise-and-delight pizzazz of rivals. Three issues stood out:

  • The structure limited marketing opportunities: The rewards plan relied on extending everyday discounts, eliminating other promotional options. Plus the reward certificates were limited to specific products.
  • It didn’t keep pace with new shoppers. The retailer’s customer base was rapidly expanding to include a younger audience. The rewards program, however, maintained its old format, which did not resonate with newer shoppers.
  • It lacked the capabilities to personalize. While the retailer’s rewards program tracked what its members purchased, the level of detail was broad. (It knew if a member bought hair color, but not the shade.) Thus, efforts to personalize were limited.

Solution: Remake the Program, and Make It Up to Members

Incendio was hired to revive the loyalty program in 2017, and quickly recognized it needed to be pulled from the roots. We fast-tracked a plan to phase out the old program and transition to a fresh initiative, with distinct approaches to maintain existing members while winning new ones:

Pamper loyal members. Each member of the old program was automatically enrolled in the new program and given a $5 reward to offset the annual fee payment. Bonus: These members were surprised with “starter” points based on their past activity.

Tempt new members. Those who enrolled in the new program received an automatic $5 welcome gift certificate to encourage immediate activity. Now members earn $5 certificates for every $50 they spend, as well as double points on their birthday months.

The new program also collects deeper levels of first-party purchase data so the retailer can personalize the member experience with well-timed bonuses and exclusive perks. And, notably, the program’s reward certificates were assigned cash value, so members could redeem them for whatever they liked.

The transformation took years off the program’s image. With more detailed member data, the retailer is able to send spot-on promotions that encourage additional purchases. These offers include up-sell and cross-sell opportunities that are relatively inexpensive to deploy. As a result, the retailer’s product margin rose by 85 basis points. Among other results, which were nearly immediate:

  • 90% of customers enrolled once the
    $5 membership fee was removed
  • 15% increase in transaction value, as members used their reward certificates
    like cash
  • 2.3% increase in sales

Perhaps most indicative of the new program’s success: The reward redemption rates rose to 20% from 10%, proving members were paying attention to their benefits and are likely to continue using them.