Hammacher-Schlemmer Revamps Contact Strategy Based on New Customer Database
The company sells through a catalog, its flagship store in New York, www.hammacher.com and retail partner SkyMall. Products include apparel, electronics, home items and gifts. It drops 18 catalogs annually to customers pulled from its database of 500,000 people.
In late 2003 the Chicago-based company built a new customer marketing database that permits studying behavior and building relationships. It selected BeNOW, a CRM technology and strategy services company in Wakefield, MA, to develop it.
Hammacher Schlemmer previously used "mainframe-based data that was highly summarized and difficult to get at," said Fred Berns, vice president of marketing.
The company also used outside vendors for its modeling.
"We had to rely on a cumbersome and complicated modeling environment, and analysis would take days or weeks to get back," he said.
Marketing events were treated as individual events, Berns said, so the company didn't know how each catalog interacted with other marketing events around it.
"Our multichannel contact strategy was built on assumptions and judgment," he said.
The new database, updated weekly, lets Hammacher Schlemmer maintain and easily access a complete contact history on every customer, including which ones have received either a print catalog or an e-mail. The company can link purchase behavior to the marketing activity that generated it much more accurately.
"Not having visibility to how individual customers were treated and how they responded over an entire year, we were concerned that we were over-contacting our top customers," Berns said. "With the new database, we can now see that that isn't true. Our best customers can actually support even more marketing investment."
Analyzing its 2003 holiday season, the company found that the ROI of its top customers exceeded 300 percent. This drove the company to redesign its holiday contact strategy. For holiday 2004, Hammacher Schlemmer devised a longitudinal contact strategy that let customers be seen for their total seasonal value, and an appropriate contact stream was established for them.
The strategy planned how many contacts, such as a catalog, each customer group would get -- from zero to six.
"We ensured that our best customers received everything in the arsenal, and that our marginal customers received at least one, two or three books based on their seasonal performance," Berns said. "In addition, we built test panels to evaluate if customers were placed in their proper tier."
The company found that the top customers identified to receive six contacts could support the 13 percent increase in contacts, Berns said. The second tier, which was to get five books, also showed much promise in the planning stages, "and our testing proved us right. The application of a contact stream to this group increased their demand by 28 percent -- a nice profit improvement."
The real opportunity for Hammacher Schlemmer was "in this middle to upper tier," he said. "We could differentiate those customers and determine the appropriate marketing investment for them and set a contact strategy for them.
"We used to be a catalog company that happened to have a Web site. Now we have to market to our customers in a more holistic sense versus thinking of it as phone versus Web. The database, which gives us a more holistic view of how customers interact with us, will help facilitate that evolution to thinking about the total customer relationship rather than one channel at a time."
And with direct access to its customer behavior, Hammacher Schlemmer is saving time and money.
"We've been able to design a circulation selection environment that is tuned for our business and is significantly less complicated," he said. "By eliminating the involvement of two other vendors in the process, our annual circulation-related expenses were reduced by over $250,000."
Melissa Campanelli covers postal news, CRM and database marketing for DM News and DMNews.com. To keep up with the latest developments in these areas, subscribe to our daily and weekly e-mail newsletters by visiting www.dmnews.com/newsletters