Strategy: Learning From Fiascos
Lesson learned: Knowing CLV can save a company a lot of money and help prioritize marketing efforts.
3. Trying to Cross-Sell Without Individual Analysis
Story: A large retail clothing chain realized many of its customers, including the "better" ones, were buying very narrowly from only a few categories. Marketers launched a cross-sell campaign based on RFM to promote purchasing across a broader spectrum of product categories.
Fiasco: The campaign flopped, with response rates under even the typical cross-sell response rate of 0.5 percent.
Failure: For a cross-sell campaign to work, customers need to be interested in the products. Generic offers won't induce purchase. There is no product information in RFM, so using those scores to determine an offering makes no sense. Demographics won't work here either, because not everyone in the same ZIP code will buy the same products.
Lesson learned: The way to make a cross-sell campaign successful is to offer products based on purchase propensities calculated from transaction data, one customer at a time. What someone is likely to buy is determined more by what he or she has previously purchased than by age or address. Your customer analytics must be done at the individual customer level for this to happen, and done at scale.
4. Testing, Sans Controlling the Variables
Story: A nationwide automobile tire retailer went all-in on individualized marketing, sending digitally printed postcards with individualized offers to targeted customers in two different markets.
Fiasco: The targeted customers who received the postcards did no better than a control group that was not mailed.
Failure: The control group was composed of similarly targeted customers who were not mailed. When a second control group of randomly selected customers was examined, it was clear that the targeting was accurate and the targeted customers purchased at a significantly greater rate than the randomly selected ones. However, poor collateral (a lot of legal caveats qualifying the offer on the postcard) evidently inhibited buyers. The postcard had no effect on the purchase rate of targeted customers. Unable to develop a more effective postcard, the company dropped the program completely.