Transcript Slide 1

Boom and Bust
CRM as the Primary Tactic in Down
Markets
1
Beware of the Budget Cut!
Everyone is Being Asked to Cut, But is it the Right
Move for CRM?
2
Topics for Today
• Overview of current economic environment
• Why now is the time to increase your marketing and
CRM budget
• Making the case to senior leadership
• Ten things Victoria’s Secret is doing now to optimize
CRM
• The Role of CRM in the Marketing Mix
3
Overview of Current Economic Environment
4
Economic Indicators Show Continued Weakness
• Consumer confidence has reached an all time low of 37.7
• Unemployment stands at 7.2% and is expected to increase
Consumer Confidence (Jan)
Unemployment (Dec)
105
8.0%
VSS R2 17%
7.0%
80
Current
37.7
55
6.0%
Current
7.2%
5.0%
VSS R2 22%
30
Jan- M ar- M ay- Jul07
07
07
07
Sep- Nov- Jan- M ar- M ay- Jul07
07
08
08
08
08
Sep- Nov- Jan08
08
09
12-mo Δ
-52%
4.0%
Dec- Feb- Apr- Jun- Aug- Oct- Dec- Feb- Apr- Jun- Aug- Oct- Dec06
07 07 07
07 07 07
08 08
08 08
08
08
12-mo Δ
+44%
Housing Starts (Dec)
Stock Market (DJIA) (1/30)
1,700
14,000
1,400
12,000
Current
8001
10,000
Current
550
1,100
800
VSS R2 10%
VSS R2 14%
8,000
Jan- M ar- M ay- Jul07
07
07
07
Sep- Nov- Jan- M ar- M ay- Jul- Sep- Nov- Jan07
07
08
08
08
08
08
08
09
12-mo Δ
-37%
500
Dec-
Feb-
Apr-
Jun-
Aug-
Oct -
Dec-
Feb-
Apr-
Jun-
Aug-
Oct -
Dec-
06
07
07
07
07
07
07
08
08
08
08
08
08
12-mo Δ
-45%
5
Our Retail Indicator Index is at it’s Lowest Point on
Record
• Decline driven by rising unemployment, falling housing starts, and
stock market declines
80
60
Increased
Chance of
Positive
LL’s
40
20
0(20)
Data shown is 2006- 2009 only
2009
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2008
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2007
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
2006
(40)
6
Retail Bankruptcy Rates Have More Than Tripled
• 32 retailers went bankrupt in the last recession; in the last 12
months 96 retailers have gone bankrupt
• And many other retailers are seeing negative comps, negative traffic
likes and decreased sales!
7
Why Now is the Time to Increase Your
Marketing and CRM Spend
8
This is When It Gets Interesting……
“Be Fearful when Others are Greedy and
Greedy when Others are Fearful”
--Warren Buffet
9
Multiple Case Studies Indicate that Now is the Time
to Increase Your Marketing Budget
• 2002 McKinsey study- 1,000 industrial companies who spent more
on advertising in a recession (on average, 9% more as a percentage
of sales) often became industry leaders after the recessionary
period
• McGraw-Hill Research analyzed 600 companies from 1980-1985.
Business to business firms that increased or maintained their
advertising averaged significantly higher sales growth both
during the recession and after.
– By 1985, sales of companies that were aggressive recession
advertisers had risen 256% over those that didn’t keep up their
advertising
10
Multiple Case Studies Indicate that Now is the Time
to Increase Your Marketing Budget
• According to the ARS Group, during the last recession (early 2000s)
25% of businesses aggressively increased media advertising
expenditures; these companies increased their market share 2.5
times the average business in the post recession period
• A 2003 Oregon State University and Marketing Science Institute
study found that:
– On average, increases in advertising spending increase a firm’s
long term financial performance
– Increases in advertising during a recession provide a bigger boost
to performance than increases in non-recessionary periods
– Advertising spending has a bigger effect in the consumer and industrial
products industries than in service industries
11
Examples of Brands Who Increased Marketing Spend
During a Recession
•
Kellogg's and Post had equal market shared through the 1920’s. During the
depression Post made major advertising cuts while Kellogg’s maintained. At the end
of the depression, Kellogg’s owned a dominant market share that has been retained
•
Revlon and Phillip Morris increased advertising spend and both reported gaining
market share during the mid 1970’s recession
•
Market Sense compared 101 household name brands during the recessionary period
of 1989-1991. The brands Jell-O, Crisco, Hellmans, Green Giant and Doritos all cut
advertising spending and saw sales drop (26%-64%). Jif Peanut Butter, Kraft salad
dressing, Bud Light, and Coors each increased spend and saw sales increase (15%
to 70%)
12
Examples of Brands Who Increased Marketing Spend
During a Recession
•
Pizza Hut and Taco Bell also increased their marketing budget, effectively gaining
market share from McDonalds during the 1989 recession
•
Coca-Cola added $350M to its worldwide marketing budget in 2001, increasing sales
and net income
•
In 2001, an advertising spend increase of 16% by Heinz increased market share
4ppts
13
Making the Case
• Making the case for increased marketing spend to financial, bottomline focused executives is tough in this environment
• How we positioned the message:
– Cited previous case studies
– Benchmarked competitors
– Increased share of voice
• “When a brand’s share of voice is greater than its share of market it is likely
to grow its market share in the coming year”1
• Less marketing messages in a customers mailbox and inbox means YOUR
MESSAGE stands out
– Cited statistical analysis
• Increased incrementality suggests that customers would not be shopping
without a marketing contact
– Shared stories of successful brands who increased marketing spend
1Source:
Millward Brown
14
Making the Case
• These companies have indicated that they
increased marketing spend in 2008 or will
increase in 2009 (as a % to sales)
15
10 Things Victoria’s Secret is Doing Now to Optimize
CRM and the Business During this Recession
16
#1 Trending the Long Term Control Group
• Trending the 12 month holdout group allows us to
observe natural baseline shopping patterns
• These patterns help inform our contact strategy for a
season
• Lower baseline shopping = more CRM
17
#2 Increasing the Size of the Database
• This is the time to increase your share of voice (SOV)
• Invest in building the customer file to garner more
contacts
– We are adding cell phone matching capabilities to identify more
customers at POS
– We are also investigating media deals that involve sharing of
names
18
#3 Considering Alternative (Less Expensive)
Channels of Delivery
• We are hoping to test:
–
–
–
–
Inserting our direct mail piece on top of newspaper deliveries
Inserting into existing Victoria’s Secret catalogs
Using concierges to deliver our CRM pieces in high tourist areas
Bulk drops
• We are increasing the number of email contacts
• Bounce backs, although less “elevated”, are also a less expensive
delivery mechanism that targets high quantities of existing
customers including those not captured on the database
– Bounce backs utilize stores for distribution
19
#4 Focusing on Current Customers with Minimal
Spend on Lapsed and Prospecting
• Our first priority is to retain existing, high quality customers
– We are mailing higher deciles of our statistical response/spend model
more frequently
– We are focusing on our Angel Credit Card customers with the
introduction of new benefits and double and triple point events
• We are not stopping reactivation and prospecting initiatives but we
are decreasing spend in this area
• This strategy is more productive short-term but may have lasting
effects on the size of the customer file if the use of this strategy is
prolonged
20
#5 Rewarding Loyalty
• For those customers who continue to be loyal and
maintain their spend and trips, it’s important to reward
that behavior
– They will spend even more after the recession
• We sent VS branded gifts ($40 value) to our best
customers this past holiday season
– We did the same thing in Holiday ’07 and saw a significant
increase in 12 month spend
21
#6 Researching the Customer- The Motivators have
Changed
• Previous motivators may have included things such as
style or color, but now quality, life of a product, or “how it
helps my family” is more important
– This knowledge is important in message positioning
• We are undertaking a 3-month study to help better
understand what is in our customers’ and noncustomers’ lingerie drawers and what influences her to
purchase certain products
22
#7 Over-Hauling the Customer Contact Strategy
• Re-build your models- The primary drivers of response and spend
may have changed
– As our average transaction size (ADS) has decreased we’re considering
adjusting our models to weight more heavily towards customers with a
likelihood to increase their ADS
• Monitor customer cycle time (time between trips)
– Intercept those customers whose cycle time is increasing to help
prevent attrition
– Earlier intervention increases the likelihood of retaining the customer
• Add more contacts per customer as you monitor the 12 month
baseline holdout group
23
#8 Getting more Aggressive with Offers
• This doesn’t mean the discounts have to bigger; instead
the offer must have more perceived value
– We are considering adding more beauty samples to some of our
gift with purchases
– Our gift with purchase bags will be larger (but not cost more)
• Study the archives, what didn’t work before may work
now
24
#9 Featuring Value Messaging on the Creative
• Once again, this does not need to focus on discounts
• We are calling out special in-store deals that are
featured at a great price in addition to our champion
offers
– Body Bare Bra at $29.50
– Buy 4 items, get one free
– Beauty set pricing
25
#10 Looking for Creative Sources of Funding
• Look for funding/partnerships in unusual sources
–
–
–
–
Partnerships (hotel chains, banks, entertainment groups)
MC/Visa/Amex
List exchanges
Use excess product for Gifts with Purchase events
26
So How Does this Impact our Marketing Mix?
27
Marketing Dollars Shifting To CRM
• The segmented approach of our CRM programs allows us to speak
in a more relevant voice to the customer than other forms of
marketing
• CRM is also measurable, and contains a strong call to action
• The more productive and efficient nature of CRM moved us to:
– Increase CRM spend 10% in Fall 2008
– Keep CRM spend flat to LY in Spring 2008
• We are shifting dollars from television media to print and CRM
• We are increasing contacts by reducing production costs
• CRM is our primary marketing tactic in Spring 2009!
28
Questions?
Feel free to contact me:
Amy Stevenson
AVP, Customer Marketing
Victoria’s Secret Stores
[email protected]
29