Cover Story : Paradise by the Dashboard Light
The beauty of Red Door Spas' dashboard is how it provides insight into marketing strategy performance
June 2009 By Heather Fletcher
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But more than that, dashboards can keep marketing strategies finely tuned and working at peak condition, believes Todd Walter, chief executive officer of Stamford, Conn.-based Red Door Spa Holdings. The privately held business composed of Elizabeth Arden Red Door Spas and Mario Tricoci Hair Salons & Day Spas saw significant improvement in its direct marketing campaign results after implementing the tool in February 2008. But perhaps more importantly, Red Door learned spa by spa and customer by customer which consumers drove the most profit, what services kept them coming back and which campaigns worked best—or merely exploded in failure.
According to recent research by Boston-based research firm Aberdeen Group, Red Door is in good company. The Recessionary Marketing: How Best-in-Class Companies are Weathering the Storm report Aberdeen released in January says 37 percent of best-in-class firms have marketing dashboards, and 35 percent of businesses plan on getting them soon.
“The thing that I love so much about [the dashboard] is that it is very quantifiable, and so it does a number of different things for us,” says Walter. “And in addition to helping identify what marketing initiatives and programs we want to follow through on, it also gives us great insight into the underlying health of our business.”
Dash What? What’s Its ROI?
For some direct marketers, the concept of delayed gratification can drive them mad. So the idea that dashboards can lap the competition by helping companies save time and money—by eliminating waste, allowing marketers to reallocate resources in a way that will increase profits or simply by providing an organizational structure that streamlines the marketing process—is just too nebulous a goal to visualize at the beginning of the time- and effort-intensive process.
But Walter says he understood the destination at the end of Red Door’s road to a dashboard had to be better than the database debacle he left behind in spring 2007. For years, Red Door had been gathering every strand of information from its spa guests and had 2.7 million names; household and e-mail addresses; and records of haircuts and colors, manicures and pedicures, waxes and facials, home regimen product purchases and massages.
“All of that information is collected in our point-of-sale system,” Walter says. “But we were never able to get at that data to use it to better serve the guest and to better serve the company.”
Segmenting data for just one marketing program made Red Door executives want to pull their hair out.
“If you wanted to get access to specific data, you had to bring in a programmer. And that person would program a report to answer the specific questions that we were asking,” Walter says. “So it was hugely inefficient. … Every time you wanted to do something, it required separate programming, which took up people resources, dollar resources and time.”
Red Door Opens Up
A couple years ago, the beauty business took a hard look in the mirror. Red Door decided what information was most important to gather, in terms of building the company and meeting the needs of the guests, Walter says. Then Red Door opened up to its Stamford neighbor, database and analytics services firm Data Square.
Devyani Sadh, chief executive officer, founder and head of client relations of Data Square, says the entire process took a year, and of that, 60 to 90 days involved actual dashboard implementation. In February 2008, Red Door could begin observing graphs of its key performance indicators.
To that end, Sadh states the Data Square team designed the dashboard to include the following functionality:
1. A historical trend reporting module, with year-over-year comparison benchmarks and deltas vs. point-in-time reporting, as seen in typical dashboards. In addition, Data Square tightly integrated marketing campaign objectives with development of the KPIs to better enable trend reporting.
2. A forecasting module, fired by back-end predictive analytics that enable customer-level targeting for appropriate marketing action.
3. A campaign evaluation module, which enables rigorous control group-based comparisons between campaigns. This can occur both at the detail level and through drill downs by marketing objective, channel, offer, timing and list.
4. Multilevel functionality for relevant KPIs. That includes overall business health and its drivers, by targeting segment (driven by advanced analytics) and by spa.
Dashboard-driven Results
By Mother’s Day 2008, Walter says, the dashboard really started paying off. Dashboard insights began influencing marketing program creation.
Sadh notes the dashboard’s technical capabilities: “The dashboard allows us to evaluate the impact of different dimensions to easily identify the winning combination of offer, audience, channel, etc., that deliver[s] the highest incremental response rate (measured against a control group).”
Put another way, Walter says the highest incremental lift Red Door saw during a campaign “predashboard” was around 4 percent. Additionally, he questioned whether employing e-mail-only direct marketing campaigns was a better investment than e-mail supplemented by direct mail, as direct mail was more costly. Dashboard tracking showed Walter that a Red Door e-mail and postcard campaign experienced a nearly 300 percent greater lift than that of an e-mail-only campaign.
Since installing the dashboard, Red Door has been able to track the results of more than 100 campaigns. That includes one of its most successful—the December 2008 e-mail and direct mail gift certificate campaign. The guests, as Walter refers to them, each received offers of $25 gift cards if they purchased two gift certificates valued at $100 or more, or $20 off of retail prices for buying at least $100 in gift cards or certificates at a spa. A control group, always composed of at least 1,000 customers, received nothing.
Targeted consumers, identified through predictive analytics and segmented out on the dashboard as “core recent” guests, responded well to the holiday campaign, Walter says. Red Door saw a purchase rate of 12.5 percent, with only 3.2 percent of the control group buying gift cards and certificates. That adds up to a 9.3 percent incremental lift.
“Because it is so measurable and because we can communicate the relative success of a particular program or campaign as compared to a control group where we did nothing, it becomes obvious to everyone what we should do or what we should repeat,” Walter says. “So when you get a marketing program that yields a 300 percent lift over not doing that program, no one will disagree with you that you should do that again. It makes everyone successful, and so there is no resistance to it. It clearly only benefits the entire organization, and by being able to demonstrate that to people through these graphs and through the dashboard that we have, there are no barriers or there is no resistance to it. The benefits of it become obvious.”
In other words, it was rather easy for the staff to get on board.
“You don’t need to be an expert to understand that an upward sloping graph is better than a downward sloping graph,” Walter says. “And you can literally, just by looking at a picture and a graph, get an immediate sense as to how the business is doing, just by virtue of whether the graphs are moving up and to the right or down and to the right.”
Facing Facts
Still, not all gift certificate purchases, or guests, are created equal. Five percent of Red Door’s customers, dubbed “core guests” for dashboard purposes, bring in more than half of the profits.
Walter emphasizes that, for example, the Red Door dashboard drives home the point that it’s better to sell two gift certificates for $50 each than one for $100.
“We were sitting around a table, and we were getting ready for our holiday gift certificate campaign,” Walter says, setting the scene for the 2008 campaign. “And, as we were analyzing the data and trying to figure out what insights we could get from it, one of the things that became very clear to us was as people come in to redeem gift certificates, the vast majority of the time they spend far in excess of the value of the gift certificate. And the takeaway from that was it’s not so much just about the absolute dollar value of the gift certificates that we’re selling. But as important, if not more important, was the conclusion that it’s the absolute number of gift certificates that are sold. And the reason for that is if every guest who comes through our door has an expected lifetime value to us, if we can create a situation where more guests are coming through the door, then we’re increasing the opportunity to convert those guests into lifelong, recurring guests.”
And that’s not the end of the story. Walter says he wanted the dashboard to answer other questions, too. So the dashboard now provides data that helps the company protect its core guests, cross-sell its services by creating trials across departments, increase customer visit frequency, reactivate guests who haven’t stepped through a Red Door in 12 months, convert first-timers into repeat customers and enable visitors to refer friends.
“We were able to drill down and better understand what makes a guest more profitable than another,” Walter says. “And what we found through that analysis was that our hair and our waxing guests had the highest lifetime value relative to other guests who shopped in the other categories. And the reason for that is the recurring nature of those services.”
Knowing facts like that helps his company reach its destination—of ultimately securing each customer’s top to bottom “total beauty buy”—from hairstyles to pedicures.
“Our primary objective is getting that total beauty buy of all of our guests,” he says. “Now that’s not necessarily a realistic objective, but … said another way, we’re looking to maximize the profit per guest. What this dashboard does is it gives us data, which then leads to insights about what’s going on within our business and specific customer guest segments, which then leads to action.
“It allows us to drive the total profitability of our business and to meet the needs of our guest,” Walter continues. “This is not a one-way street. It’s not just about making profit; certainly that’s important to us. But we believe, philosophically, the way that we will maximize our profit is by best meeting the comprehensive needs of our guests and giving them a ‘wow’ experience. And if we’re successful in doing that, then they’ll come back. They’ll buy multiple services from us, and they’ll refer friends to us. And so if we can accomplish that, then ultimately the profits will follow.”
Those thoughts show the marketing process doesn’t have to specifically follow a straight line. As an illustration, the dashboard’s impact on marketing then has a significant impact on operations, Walter says. So the dashboard is even steering hiring decisions.
Red Door found that spa guests were more likely to return if they were treated well while checking in and out. So it became clear the guest service representative was such an important position that human resources needed to go back and develop interview questions designed to find employees with the competencies that bring guests back. “This is not just a marketing tool, if you will; it is a philosophy or approach that has really permeated every department within the Red Door organization.”
Not to split hairs, but what Walter is driving at is that the dashboard is helping increase direct marketing efficiency and is guiding profits through the Red Door.
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