Segment Holiday, Sale Shoppers for Long-Term ROI

One of the easiest ways to maximize return on investment is to segment holiday shoppers. Customers purchasing between Black Friday (Nov. 27 this past year) and Dec. 24 yield different long-term value trajectories than customers purchasing during other times of the year. These customers are often motivated by promotions and, as a result, less likely to purchase merchandise at full price in the future.

Carefully monitor the long-term value of customers acquired during prior holiday shopping seasons, analyzing the time periods when these customers purchase again, and whether they purchase with or without promotions.

For many brands, holiday shoppers are infrequent buyers. They represent an opportunity for companies to save considerable marketing expenses by not overspending to reach them.

Similarly, sale shoppers are unique customers. Over the past 15 years, merchants have created a shopping event that begins on Dec. 26 and lasts well into January, even to the end of January for some brands. Customers now know that they can get the best possible deals by shopping in the days after the holiday shopping season.

Segment these customers as well, measuring their long-term values. Many of these buyers aren't going to purchase during full-price time frames, allowing you to save a lot of marketing dollars that would otherwise be wasted.

Some companies code every time frame during the course of the year as a separate variable that's entered into customer value regression models. Black Friday through Dec. 24 is entered as a variable; Dec. 26 to Jan. 31 is entered as a variable; and so on. With somewhere between a dozen and two dozen unique variables, marketers are able to see how long-term customer value is impacted by different marketing events.

If you don’t have the resources to execute complex regression models, simply create segmentation variables, and overlay the segmentation variables against your current RFM-based segmentation strategy. You'll clearly see the impact different promotional periods have on campaign performance.

Traditionally, marketers get very excited by promotional periods. They tend to be less interested in the downstream impact of customers who purchase during promotional periods. By segmenting your customers and analyzing future performance, you can better allocate marketing dollars across campaigns and customers that deliver the best long-term ROI.

Kevin Hillstrom is president of MineThatData, a database marketing consultancy. Kevin can be reached at kevinh@minethatdata.com.