Oberweis Dairy ups customer retention 35 percent using SAS® Analytics
SAS helps optimize cross-channel promotions to save millions
Using SAS® Analytics to customize cross-channel promotions, Oberweis Dairy has improved retention 35 percent – a lift representing millions of dollars in savings. Oberweis delivers dairy products to tens of thousands of homes in Illinois, Indiana, Missouri, Virginia, and Wisconsin, and aspires to national coverage.
In 2009 Oberweis tapped SAS, a leading provider of business analytic software and services, to determine the effectiveness of its channels and which promotions performed best in each. Despite a healthy response to its targeted campaigns, Oberweis noted a sharp defection rate among customers that signed up through an introductory special that waived the $2.99 delivery fee for the first 6 months. With attrition nearing twenty percent once the offer expired, Oberweis needed to refine its marketing strategy.
Using SAS, Oberweis discovered that customer churn rates were lowest among customers that had received no promotional incentive. Bruce Bedford, PhD., Vice President of Marketing Analytics and Consumer Insight at Oberweis, hypothesized that the drop-off rates amongst those that had received the free delivery promotion was due to a perception of value. Suddenly customers had to pay for a previously free service.
Oberweis tested different offers to formulate one that would attract customers at a similar or better rate than previous promotions, but perform better at the six-month mark. A five-market A/B test conducted through Valpak offered Group A a one year introductory fee of $0.99. Group B's offer waived the delivery charge for six months and included a free delivery box that normally costs $25.
Both groups responded at similar rates. After six months Group A had a much lower attrition rate than Group B. At nine months, Oberweis saw a 35 percent improvement in retention rates among Group A. This translates into millions of dollars of revenue for Oberweis Dairy. "It's all about perception of value," said Bedford. "Group B didn't want to pay for something they were getting free, but Group A didn't feel the incremental increase to the full-delivery fee as sharply."
Use of SAS analytics isn't confined to the Oberweis marketing department. Using analytics to mine customer complaint data, the company quickly identified and corrected manufacturing glitches and created a program to root out bottle return fraud at dairy stores.
Bedford said "I think implementing SAS is a great way for a small company to become a large company. One of the most valuable assets of any company, large or small, is its data. But you have to analyze it. SAS is one of the best tools available to do that.''
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