How Supercheap Auto used big data to model customer loyalty
- 29 November, 2013 16:56
Big data is increasingly seen as a tool to fine-tune the marketing mix, but one Australian retailer has used data analytics to create a new and successful take on the customer loyalty program.
ASX-listed Super Retail Group owns a range of retail brands including Supercheap Auto, Rebel Sport, Ray’s Outdoors, and Boating, Camping, Fishing. While many have a customer loyalty program, the company was facing difficulties around what approach to take with its Supercheap Auto stores.
General manager of group marketing and communications, Kevin McAulay, said a key challenge was that the retailer held a lot of anonymous transactional data, yet didn’t know enough about its customers. The brand’s high-low pricing model was another hurdle.
“We also had a fear of loyalty clubs… the concern was we could give away too much margin,” he told delegates at the first Data Strategy Symposium in November. In addition, staff KPIs were based more around meeting margin targets than improving customer loyalty.
The company turned to big data to find the answer. “Most companies are using big data to try and turn marketing around. We wanted to develop our club,” McAulay said.
“We needed to move to fact-based decisions. Marketing has a share of voice, but when it comes to giving away money and promotions, that’s where people start to fret as you’re talking about margins, staff bonuses and so on.”
The Super Retail Group team worked with analytics agency, Beyond Analysis, to compile a list of variables to model the club structure on. These included customer in-store visitations, quantity of product sold both on and off promotions, length of promotions, breakage, average basket size including incremental spend over any credit offers, price sensitivities, and EBIT impact.
McAulay said key market insights were critical to how it formulated the program. One was the fact that customers expected regular sales and promotions. His team also believed a point-based program wouldn’t work given Supercheap Auto customers only averaged five visits per year and a $35 average basket size. Another factor was that men, the majority of the brand’s customer base, head straight to the product they wanted to purchase, rather than browse.
Supercheap Auto also recognised it was burning customer goodwill. A returns spike would occur every time there was a catalogue special, because customers would return goods purchased a week or two previously in order to secure the lower price point.
The result was the ‘Club Plus’ program, based on ‘promising the difference’. Registered customers are offered credit on their membership card to use in-store if products they purchased subsequently go on sale. This credit has a life expectancy of four weeks.
For example, a club member that purchases a $399 compressor which goes on special the following week for $299, will immediately be credited $100 on their club card and alerted via email. Other membership benefits include discounts and ongoing offers.Members also don’t need to keep receipts for warranty as purchase information is linked to their profile.
In order to manage the new club as well as customer data related to its other retail brands, McAulay told CMO the company invested in a new SAP CRM system. It also purchased ExactTarget’s email marketing suite to replace its Vision 6 platform, to better handle the new customer loyalty communication requirements.
Super Retail Group also maintains SAP NetWeaver’s Business Warehouse suite, which does all the work around matching and processing customer data. This is used to identify when customers are due credit for example, and then notifies the core system that an email message should be sent.
McAulay said it took six months from commencement date to rollout the club and new technology. A year on, the program has proved a hit. Customers are more likely to spend more than the credited amount, adding incremental sales, he said. In addition, the program has allowed Supercheap Auto to build up a permission-based marketing database.
To date, Supercheap Auto has signed up 10 per cent of its total customer base, and seen average club member basket spend become 31 per cent higher than non-club members. In the first 12 months it has also seen a 320 per cent return in revenue off the back of credited offered.
“The majority of the credits are between $10 and $50, and of those, we’ve seen about 60 per cent come in and collect rewards,” McAulay continued. “Even if they don’t use their credit, we’re seen as the good guys as we’ve sent these out.”
The wealth of customer data is now allowing Super Retail Group to gain a range of further insights into behaviour and preferences. “This is not just changing our CRM system, but our core advertising platform and the way we do business across the retail group,” McAulay said.
For example, instead of just doing one catalogue, the retailer is producing tailored catalogues and TV ads around four newly defined customer groups: Grease monkeys; mod my car; toolies; and weekend warriors. Thanks to data analytics, the group has also identified ‘toolies’, a group that represents 26 per cent of customers, as the largest source of spend (38 per cent of total revenue).
McAulay revealed emailed customers are worth more per year, and that the value of every dollar spent by marketing (return on marketing investment) on more tailored emails to the Supercheap Auto customer base is $490, against $270 for generic emails.
“This is all because we used the data to drive the club, not the other way around,” he added.
- CMO was the media partner for the inaugural Data Strategy Symposium, organised by Ashton Media, in the Hunter Valley on 25-27 November.