Optimisation of promotion activities for a leading retail chain

Client Profile
A leading retail chain in Western Europe.

Situation
The company runs a highly successful loyalty scheme with approximately 2.5 million cards issued, which account for more than 75 percent of total spending. The retailer is also well underway in the development of its CRM IT infrastructure and CRM capabilities including its customer communication activities, but was looking for ways to create a deeper and more actionable understanding of its customers and to apply this insight directly to improve sales performance.

Solution
Instead of the simple ABC customer segmentation, which had been used so far, emnos applied a multidimensional segmentation approach taking into account customer value, potential and need. For customer value, the RFM (recency, frequency, monetary value) model was used. The results were then related to an analysis of promotion activities. The aim was to uncover ineffective promotions and develop a strategy to rebalance promotional activity over all customer segments.

Results
emnos’ analysis showed which promotions were ineffective and reduced the total number of lines being promoted from 800 to 600 with no impact on volume. This led to cost reductions of approximately 10 million Euros. Half of these savings were ploughed back into more efficient promotion activities generating additional sales of more than 30 million Euros. This corresponded to a one percent increase in sales.