Analytics bears fruit

Better segmentation and campaign personalization delivers a turnaround for Harry & David

Gifts and gourmet foods are some of the first products to take a beating in a down economy. Harry & David was no exception. Famous for its sweet pears, the company saw sales and profits plunge in the wake of the 2008 economic downturn. In 2011, it filed for bankruptcy.

Since then, profits have risen 20%, the company’s customer file has grown and it is investing in product line expansion. The secret? Harry & David stopped marketing products and started marketing to customers. Using analytics it now knows who its customers are, how and when they like to receive offers and who is most likely to increase their spending with the company. Over the past three years, customer retention has increased by 14% and sales per customer have gone up 7%. 

The effort is helmed by Paul Lazorisak, Vice President of Customer Marketing. Lazorisak joined the company at the height of its struggles. "I didn’t see a company with antiquated products and fleeing customers ... I saw an opportunity to use analytics to help it do what it had always done ... take care of its customers," he says.

But transforming the marketing effort wasn’t an easy sell. "There was an aging infrastructure, a lack of investment in people and technology, and a culture of subject-matter fiefdoms," Lazorisak explains. With lots of disparate systems and disconnected data sets, "analysts spent 80% of their time on operational process and 20% actually analyzing data."

Lazorisak embarked on a multi-year mission to transform his team into data-driven marketers, organized around the customer – not the product or the channel. "The real potential of the company lies in what the customer tells us," he says. "As a direct marketing organization we know who placed the order, what and when they purchased, how much they spend and to whom it shipped." 

A lesson from Santa’s Elves

Lazorisak arrived at a point when the company was in triage mode. With help from a point-and-click solution that analyzes and publishes results, Lazorisak and his team began to more easily access and analyze data historically under the control of a few subject-matter experts. Within mere months, the team had made headway into developing insights based on customer behaviors and preferences. Within a year, the team had made significant progress into more advanced analytics, including segmentation, customer life cycle and subsequent value.    

"Then we began to tailor our communications and promotional offers accordingly. We strive to have a one-on-one conversation with our customers," Lazorisak says. He adds, "While some customers are highly engaged with the brand, others utilize Harry & David only for specific events or occasions. Through this understanding, we can begin to develop a meaningful relationship."

For example, Lazorisak has one customer segment he calls Santa’s Elves. "They love us at Christmas, but only at Christmas. Try to have a conversation with them about Mother’s Day or Easter and you not only waste resources, you risk driving them away. They are already loyal so the best strategy is to communicate more effectively in that short window of opportunity, making sure the messaging and promotions are just right. We need to make Christmas shopping as easy and as enriching for them as possible."

Segmenting also allows Harry & David to identify which customers are going to be most profitable – using modeling and scoring results that come from both transactional and demographic data sources. "When we bring in new customers, our No. 1 job is to figure out which of them are going to be high value and high loyalty, that is where we are going to focus our time and nurturing efforts. SAS helps us to identify these customers and the factors that will move them up the value chain." Within its customer database, the number of most valuable and loyal customers has grown by slightly more than 10% during the last three years. The company executes 50 print and 500 email campaigns a year.

The company has also learned that:

• By bringing in outside data and studying transactional behavior, customers that come to them through social media discounts can be worth cultivating further. Conventional wisdom suggests these customers are "once and done" prospects.
• Due to the highly cyclical business where many customers only order once a year, measuring the marketing team’s success at developing meaningful relationships requires the use of longitudinal insights. 
• Through customer file modeling, management has a reliable basis for predicting sales and purposefully steering the business. Demand planning needs to start at the customer level. Through customer file modeling, management has a reliable basis for how much revenue will be generated by simply having more or less customers. Next, focus is placed on products or programs that will drive incremental value.
  

"The biggest change for the company is that it’s data-driven," Lazorisak says. "There’s been a change in mindset. We aren’t exactly where we need to be, but we are definitely a long way from where we were."