Reaching Mothers-to-Be in Software

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Reaching Mothers-to-Be
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Kmart ran into some nancial troubles in 2002, but that does not mean that we cannot learn a great deal from some of Kmart s excellent marketing programs. One of these programs focused on prospective mothers. There is a lot of money to be made from selling to this group. Mothers-to-be spend $18 billion annually, and 80 percent of that amount is spent before the baby is born. For a 2-year period families spend thousands of dollars in a category in which they have not recently been spending and in which they are unlikely to spend again until the next child arrives. Kmart and other retailers have understood the power of this segment for some time and have made major efforts to capitalize on it. Kmart developed a comprehensive strategy for targeting this segment. Using its database, it was able to reach one-third of all U.S. moms-tobe before the baby was born. The basic strategy was this:
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Use the database to identify moms-to-be through their purchase of maternity apparel and other prebirth items. Be the rst to market before the baby is born, through databasetargeted direct-mail communications. Integrate with other departments as a cross-functional team to change merchandise assortments and the arrangement of merchandise in the stores so that the items purchased by mothersto-be are within easy reach. Actual shopping behavior plus multiple regressions were used to determine which customers really were mothers-to-be (as opposed to grandmothers or friends shopping for a baby shower). The data explored the cross shopping of each individual, her market basket, her known age, and her previous shopping history. Armed with this information about the moms-to-be, Kmart developed test groups that got the special promotions and control groups that did not. Comparison of the purchasing behavior of the two groups clearly showed the advantage of the special targeting.
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The program increased store sales by over 15 percent while reducing mailing costs by 35 percent. In Hispanic markets, store sales of baby products increased by over 25 percent, while sales in adjacent highly cross-shopped departments increased by 35 percent over the prior year. On a customer level, over 21 percent of the top-decile moms-to-be shopped at Kmart during the mail event, increasing their spending more than 40 percent over the prior year. Targeted customers outperformed the control groups by 4 to 1 and spent over 20 percent more per visit during the promotional event. As a result of this experiment, the use of the database to drive promotions was expanded into many other departments at Kmart. According to Tom Lemke, vice president of database marketing at Kmart, Our mission is to Mail Less and Sell More. To accomplish this, we use the intelligence of customer data to create improved response rates and lowered mail volumes.
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Everyone who tries to create customer segments runs into the problem of numbers. By using recency, frequency, monetary (RFM) analysis, it is possible to come up with hundreds of different RFM cells. By using SIC codes, you can create hundreds of types of customers that you can market to. By using pro tability, you can subdivide your customers into deciles, for example, from the most pro table to the least pro table. How many segments make up the right number To get the answer, you need to consider the imagination and creative genius available in your marketing organization. Every new marketing idea requires time and resources for its execution. Few organizations can develop and support as many as ve or six simultaneous marketing efforts. Therefore, the sector marketing strategy must end up creating and marketing to just a few sectors.
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OK. You have divided your customer base into ve segments, and you have developed a marketing program for each of the ve. Let s say you divided your customers by level of total spending (rather than by age, income, product categories, etc.). Were your segments the most profitable that you could have devised How can you know One good way to nd out is to create a universal control promotion that you use with your segment control groups. This is a good promotion that has worked in the past and resulted in a lot of sales. It is used to test the marketing promotions designed for each segment. Table 8-2 shows a possible result of a mailing to your segments based on total spending. Here s how we did the math for the lift in sales. We subtracted the sales rate for the control group from the sales rate from the test. In the Gold segment, for example, we subtracted 7.94 from 8.10 and got 0.16 percent. Then we multiplied that 0.16 percent by the number of people in the test segment in this case 100,000 to get the lift in sales. What this tells us is that the creative material we used with the Gold
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