The Loyalty Factor

SGM Distribution grows customer lifetime value with SAS® Analytics

When SGM Distribution, an Italian consumer electronics distributor, launched its loyalty card program, 2.2 million customers signed up - bringing with them a wealth of data on their purchasing habits. With data growing on a daily basis, the distributor is using SAS Analytics to gather insights about customer behavior and propensity to buy, and to identify optimal customer segments for efficient and effective micromarketing campaigns.

SGM Distribution, which also operates nearly 70 Marco Polo and Marco Polo Expert retail outlets, has about 70 percent of its business driven through its loyalty card program. The company uses SAS to drive its marketing segmentation and grow the lifetime value of loyal customers, as well as optimize its direct marketing programs, which have generated response rates of up to 10 percent.

"Reconstructing buyer behavior at points of sale, or looking at the frequency of repurchases at a particular store, is a prerequisite for directing the right product offers to the most receptive clusters," explains Giancarlo Nicosanti Monterastelli, CEO of SGM Distribution. "As an example, if we identify a cluster of customers that has a particular interest in video games, we can establish a co-marketing plan with select vendors. Now that we are profiling and clustering our customer base, we can execute microtargeted campaigns to groups with the highest propensity to buy a product or technology."

"Profiling and clustering our customer database led to a number of promotional campaigns that targeted customers with specific buying behaviors," explains Marco Titi, Marketing Communications Manager at SGM Distribution. "The campaigns were multichannel, comprising online and offline activities. The very first mailing we sent to residential customers generated a 10 percent redemption rate."

Reengineered marketing
Before using SAS, SGM's marketing campaigns were sent indiscriminately to opt-in customers. With the help of SAS' retail consulting partner Value Lab, the distributor's marketing segmentation processes were reengineered to collect transactional data from various contact points, which is analyzed to create customer segments; identify homogenous clusters; build detailed behavior models; evaluate interest indicators; and optimize marketing initiatives.

Loyalty equals profit
"Targeted campaigns also translate into immediate savings on things like mailing costs," Titi continues. "Our current objective is to improve the value of the card by offering customers a wide range of personalized promotions to strengthen relationships. It's important to maximize a product's price, but it's even more important to aim for profitability related to the entire life cycle of a customer."

The results illustrated in this article are specific to the particular situations, business models, data input, and computing environments described herein. Each SAS customer’s experience is unique based on business and technical variables and all statements must be considered non-typical. Actual savings, results, and performance characteristics will vary depending on individual customer configurations and conditions. SAS does not guarantee or represent that every customer will achieve similar results. The only warranties for SAS products and services are those that are set forth in the express warranty statements in the written agreement for such products and services. Nothing herein should be construed as constituting an additional warranty. Customers have shared their successes with SAS as part of an agreed-upon contractual exchange or project success summarization following a successful implementation of SAS software. Brand and product names are trademarks of their respective companies.

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