A big box retailer turned to Echelon Marketing to help increase the number and quality of its Most Valuable Customers.

An industry-leading big box retailer with a strong marketing focus created a Most Valuable Customer (MVC) program with the goal of building a stronger relationship with its most important customers. The retailer’s customer segmentation system had several shortfalls:

• Marketing Waste: A single large purchase generally qualified a household to be part of the MVC program. But even with ongoing marketing, some of those households did not continue to spend more than the average customer, and thus their inclusion in the MVC program was not justified.
• Poor Differentiation Among Long-Term Customers: Among existing long term customers who were not part of the MVC program, there was no way to determine which households were in fact category junkies – with the majority of their spend going to the retailer’s competitors – and thus should be part of the MVC program.
• Missed Sales Opportunities with New Customers: While the retailer gained hundreds of new customers every day, they couldn’t tell which new customers qualified to receive special offers and treatment via the MVC program until almost twelve months had passed.

The big box retailer turned to Echelon to find and identify households with spending capacity to be included in the MVC program.

“Demoting” Unqualified MVC Households and Finding the Next Most Valuable Customers
The retailer provided Echelon with a customer file broken out by MVC households, non-MVC households that were customers for 12+ months and non-MVC households that were new customers. Echelon scored the retailer’s file with DSI. The results and implications were enlightening:

1. 20% of MVC Households Did Not Qualify: About 20% of the households in the retailer’s MVC program did not have the spending power to justify the retailer’s pursuit – these customers simply did not have the future purchase capacity to warrant being part of the MVC program.
2. 10% of non-MVC Customers Qualified for the MVC Program: Echelon’s analysis showed that about 10% of non-MVC households that were customers for 12+ months could be elevated to the MVC program based on their ability to spend on the retailer’s brand. Many of these customers were likely category junkies who could offer incremental revenue to the retailer.
3. A Fast, Efficient Way to Determine a New Customer’s Spending Trajectory: For new customers, the retailer could use Echelon’s spending power index to immediately determine their spending capacity and implement differential marketing efforts from day one for those households with the highest potential to become MVC customers.

As a result of Echelon’s analysis, the retailer reallocated marketing dollars from unqualified MVC households to newly found qualified households, thus gaining up to 25% marketing efficiency. The retailer expects to increase its revenue in excess of $1 million within one year of implementing its new strategy.