Promotional Rescue
Despite the digitization of most customer-facing communication, printed flyers are still an important promotional vehicle for many retailers. By analyzing terabytes of offer-, store- and item-level sales data for products promoted in its weekly flyers, Hudson’s Bay Company (HBC) is determining the true incremental return on printed promotions and optimizing the efficiency and effectiveness of its flyer-based marketing efforts for its Hudson’s Bay stores.
“Everyone knows printed mass communication is not the most efficient method of communicating with the customer,” said Ashley Whicher, VP marketing, HBC, Toronto, which operates 90 Hudson’s Bay department stores. “There is no customization. We didn’t have something to measure the incremental ROI of each offer.”
Getting What You Need
Whicher joined HBC about three-and-a-half years ago, coming from another Canadian retail chain that employed an off-the-shelf automated solution for determining the incremental ROI of offers in printed flyers. He quickly realized that HBC needed something similar. After about six months, he started evaluating potential solution vendors with the IT department and went through an RFP process that lasted about a year before HBC selected a custom-built solution from Saferock Retail.
Running on a virtual Oracle infrastructure, the solution enables Saferock to retrieve data from HBC servers through a multi-encrypted secure virtual link for optimization at SKU level. Data is stored on a Teradata data warehouse running on a separate physical server.
“There was a cost benefit in getting exactly what we needed from a custom-built solution,” explained Whicher. “With an off-the-shelf application there is the expense of development and ongoing maintenance and running of the system.”
Setting the Baseline
Once the hosted Saferock solution was up and running, HBC loaded more than 18 months of historical data about items featured in weekly print flyer offers.
“We determined the sales baseline,” said Whicher. “Promotions never offer a 100% return. They’re incremental.”
HBC launched its measurement of printed promotional effectiveness in the first quarter of this year. Each Friday morning, following the close of its Friday-Thursday marketing week, HBC uploads promotional data and by noon the following Monday, HBC receives data, including performance analysis by offer, incremental sales and incremental sales-driven gross margin.
The retailer uses the gross margin driven by incremental sales as the numerator to determine ROI at the offer level, as well as incremental sales lift and margin at the macro-and item-level. This allows HBC to perform comparisons, such as the incremental return of different promotions on the same item, as well as measure incremental sales driven by specific offers on specific items.
“We may repeat an offer with a lower ROI to help drive traffic,” said Whicher. “If you know in advance, you can build it into your profitability model. Obviously you can’t have every offer be low-ROI.”
Looking ahead, Whicher said HBC may use the Saferock tool to help create flyers segmented for market niches. Internally, the tool has had an important cultural impact, as well.
“We’ve changed the culture of how people look at the business,” he said. “We used to look at gross sales generation of promotions. With the tool, you can determine the baseline you would have gotten just by opening the doors and determine the actual incremental sales and margin, which are the true number.”