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Boom and Bust. CRM as the Primary Tactic in Down Markets. Beware of the Budget Cut!. Everyone is Being Asked to Cut, But is it the Right Move for CRM?. Topics for Today. Overview of current economic environment Why now is the time to increase your marketing and CRM budget

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boom and bust

Boom and Bust

CRM as the Primary Tactic in Down Markets

beware of the budget cut
Beware of the Budget Cut!

Everyone is Being Asked to Cut, But is it the Right Move for CRM?

topics for today
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
economic indicators show continued weakness

Consumer Confidence(Jan)

Unemployment(Dec)

VSS R2 17%

Current37.712-mo Δ-52%

Current7.2%12-mo Δ+44%

VSS R2 22%

Stock Market (DJIA) (1/30)

Housing Starts (Dec)

Current55012-mo Δ-45%

Current800112-mo Δ-37%

VSS R2 10%

VSS R2 14%

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
our retail indicator index is at it s lowest point on record
Our Retail Indicator Index is at it’s Lowest Point on Record
  • Decline driven by rising unemployment, falling housing starts, and stock market declines

Increased Chance of Positive LL’s

0

Data shown is 2006- 2009 only

retail bankruptcy rates have more than tripled
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!
this is when it gets interesting
This is When It Gets Interesting……

“Be Fearful when Others are Greedy and Greedy when Others are Fearful”

--Warren Buffet

multiple case studies indicate that now is the time to increase your marketing budget
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
multiple case studies indicate that now is the time to increase your marketing budget11
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
examples of brands who increased marketing spend during a recession
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%)
examples of brands who increased marketing spend during a recession13
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
making the case
Making the Case
  • Making the case for increased marketing spend to financial, bottom- line 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

making the case15
Making the Case
  • These companies have indicated that they increased marketing spend in 2008 or will increase in 2009 (as a % to sales)
10 things victoria s secret is doing now to optimize crm and the business during this recession
10 Things Victoria’s Secret is Doing Now to Optimize CRM and the Business During this Recession
1 trending the long term control group
#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
2 increasing the size of the database
#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
3 considering alternative less expensive channels of delivery
#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
4 focusing on current customers with minimal spend on lapsed and prospecting
#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
5 rewarding loyalty
#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
6 researching the customer the motivators have changed
#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 non-customers’ lingerie drawers and what influences her to purchase certain products
7 over hauling the customer contact strategy
#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
8 getting more aggressive with offers
#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
9 featuring value messaging on the creative
#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
10 looking for creative sources of funding
#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
marketing dollars shifting to crm
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!
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Questions?Feel free to contact me:Amy StevensonAVP, Customer MarketingVictoria’s Secret Storesastevenson@victoria.com