Reliable CRM Always in Stock at The Vermont Country Store

When the proprietors of The Vermont Country Store mailed their very first catalog in 1945, their customer relations strategy was simple: The mailing list included every name on the family's Christmas card list. More than half a century later, the descendants of founders Vrest and Ellen Orton mail 50 million catalogs a year. But with help from SAS, these purveyors of the "practical, functional and hard-to-find" still know how to manage intimate relationships with their customers.

Early in the growth process, the family learned of the delicate balance between healthy growth and overselling. "We learned how to control the pace at which we grew with a simple equation," explains Lyman Orton, the company's current proprietor. "Expand our capacity in the stockroom and shipping department, and then send out enough extra catalogs to increase the orders, but not so many that we could not ship today's orders tomorrow."

But with growth comes complexity, and determining just how many catalogs to send – and to whom – is no longer a matter of simple equations. To help control their mailings and to more accurately predict customer needs and behavior, The Vermont Country Store relies on Enterprise Miner from SAS.

"Enterprise Miner is a big part of why we've been able to consistently find better ways to mail to our customers," says Larry Shaw, The Vermont Country Store's vice president of marketing and creative. "When you mail 50 million catalogs a year, if you can improve results by 1 to 3 percent, that's a big increase." In fact, when they first tested Enterprise Miner in 1998, analysts from the Vermont Country Store realized that an increase of 2.83 percent in catalog efficiency could provide a 1,000 percent return on investment.

Offering Products Customers Need, When They Need Them
Before turning to SAS, the store's mailings were based solely on customers' buying histories: how recently and how frequently they purchased and how much money they spent. The recency-frequency-monetary (RFM) equation is common in the catalog industry, says Shaw. But while RFM is a fairly reliable method, models are limited only to those three variables.

"RFM targets always tell you to send catalogs to the people who have made recent purchases and who have spent the most money," explains Shaw. But that's not always the best strategy. Shaw and his team wanted to include other variables, to make sure they were targeting the right customers with the right products and not over-saturating the market by sending too many catalogs to the same customers.

Since they began using Enterprise Miner in 1998, market researchers at The Vermont Country Store have expanded their modeling methods to incorporate hundreds of new variables, including the number of catalogs a customer receives, the buying patterns for each season and the types of products that are popular for each customer segment.

"With Enterprise Miner, we can actually take raw data and create new variables, which tell us the biggest drivers for our customers. We can look beyond what month someone made purchases or how much money they spent, and start looking at which customer is more likely to spend their money in one quarter over another." With this information, marketers can determine the ideal times to send new catalogs to each customer.

SAS also allows the company to bring in outside data – including credit data, demographic data and lifestyle codes – to aid in predictive modeling.

Reactivating Customers
The Vermont Country Store maintains a huge customer database with more than 4 million customer names and addresses. About 20 percent are active customers who have recently bought items from the store's catalogs. The remaining 3 million customers may have gone five to 10 years without making a purchase. "In the past, we likely wouldn't mail catalogs to these customers at all," explains Shaw. "But with our SAS models, we've been able to reactivate customers who haven't ordered from us in five or six years." His team uses Enterprise Miner to better understand inactive customers and to help regain their business. "One of our biggest opportunities with SAS is to help identify which of these inactive customers we should be mailing," says Shaw.

One way they've been able to reactivate dormant customers is by mailing smaller versions of their catalogs to consumers who have not bought from them recently. "The SAS models allow us to rank our customers in terms of productivity, so that we're able to mail the larger catalogs to our better customers and the smaller versions to our other prospects. This makes a big difference in terms of getting more sales and keeping our costs effective," says Shaw.

Happy Customers and Increased Productivity
Today the balance between healthy growth and overselling at The Vermont Country Store is understood through circulation efficiency. "Circulation efficiency is probably the biggest driver of profitability for a catalog company. We're always asking ourselves, how can we mail more without compromising the productivity of what we mail?" says Shaw. It's a question they've answered with SAS.

And according to Shaw, SAS has contributed to a successful year for The Vermont Country Store. "This year we've been able to mail more catalogs without lowering our productivity. In fact, our productivity has increased. SAS allows us to keep our circulation and productivity high, which ultimately drives financial results and directly impacts the bottom line."

SAS helps Shaw's team build relationships with customers, both old and new. "Enterprise Miner has allowed us to find new customers that we normally wouldn't have mailed to, and it helps us make sure we're not over-mailing our existing customers. Anyone who's in the mailbox at the same time with us is considered competition, and that can be up to 20 catalogs a day. So that's why it's even more important to understand our customers, which we do with SAS."

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