I'm standing in the back of the main conference room at Gliebers Dresses, with Sarah Wheldon (Chief Marketing Officer). We're here for the quarterly Gliebers Dresses Fashion Show.
Roger Morgan (Chief Operations Officer) is the Master of Ceremonies for this event. He's wearing a tuxedo. A catwalk splits the conference room in two. On each side of the catwalk are seated the hard-working employees of Gliebers Dresses. They cheer as their co-workers prance down the catwalk, donning the dresses that Ms. Thompson believes will be best sellers in the fall.
Speakers pump the rhythmic beats of Michael Jackson's "Billy Jean", paying homage to the deceased performer. Bart Conway (facility services) was even able to light up squares on the catwalk as each model/employee walked, giving props to the famous music video.
Most in the audience clap in unison. They erupt in enthusiastic applause as Pepper Morgan (Chief Creative Officer) strides with attitude in a beautiful one-shoulder gown, price = $99. And when Lois Gladstone, the Chief Financial Officer, strolls through the audience in a turtleneck dress suitable for the workplace (price = $79), the house comes down --- a standing ovation! In a well-choreographed exchange, Sonora (Pepper's daughter) hands Ms. Gladstone a bouquet of flowers, waves to the crowd, then sprints off-stage to text message her friends who are standing on the other side of the conference room.
Roger Morgan (operations) steps up to the microphone.
"Wow, what a show! Let's give a hand to all of the models who made this show a success (audience roars its approval). And a big thanks to the exquisite Pepper Morgan for creating an environment that feels like the runways of Milan (crowd applauds). And how about little Sonora Morgan? It won't be long before we see her in a reality show! (crowd chuckles, then murmurs)"
Mr. Morgan continues.
"Well, it's been a really difficult quarter at Gliebers Dresses. The global economic crisis is impacting our customer. Sales for the quarter totalled $10,850,000, a decrease of 20% compared with last year (the room becomes very quiet). However, the decrease in sales have been well managed, and we eked out a tiny profit of $8,000 in the quarter (a smattering of applause)."
In the back of the room, Sarah Wheldon (Chief Marketing Officer) whispers her comments to me.
Sarah Wheldon (whispering to me): "All of that profit happened because Lois (CFO) managed foreign exchanges rates in a favorable manner. These days, we make money because of the discipline of the finance department, not because of our ability to sell merchandise."
Roger Morgan (to the audience): "This quarter has been a time of reflection. We've had to figure out how to trim expenses. We survived the adjustment to workforce initiative ...
Sarah Wheldon (whispering to me): "A lot of employees call an adjustment to workforce initiative 'being fired'".
Roger Morgan (to the audience): "... and with our new contract with Royal Crown Cola, we believe we can save an additional $8,000 a year in subsidized beverage expense. So we're making the changes necessary to position this company for breakthrough profits once we emerge from this economic downturn."
Sarah Wheldon (whispering to me): "Imagine the howls we're going to hear when Roger switches out Lays potato chips for Old Dutch potato chips later this fall."
Roger Morgan (to the audience): "Our management team has been experiencing a period of quiet reflection and contemplation as well. We hired an industry consultant to come in and analyze our business. We learned some amazing facts about our customers. Let me ask you a question. If 100 customers purchased from our business in 2008, how many of the 100 customers will purchase again during 2009? Anybody have any guesses?"
Woman In the Audience: "94?"
Another woman in the audience: "97".
Male in the audience: "83".
Pepper Morgan: "53".
Roger Morgan (to the audience): "Who said 53? That's the right answer! 53. 53% of last year's customers will purchase again this year. Who thinks that 53% is a good number?"
Audience: "Boooooooooooooooooo!". Some of the men in the audience lift their fists in the air, then point their thumbs down in a sign of disapproval.
Roger Morgan (to the audience): "I agree. 53% is not where we want that metric to be. Not at all! Imagine what would happen if we could increase the retention rate from 53% to maybe 80%. I'm willing to bet that our business would almost double if we could pull that off, wouldn't that be great?!!!!'
Audience quietly applauds.
Sarah Wheldon (whispering to me): "Roger fails to count new customers in his assertion that business would almost double. Misinformation, we thrive on it."
Roger Morgan (to the audience): "Well, we're on a mission to double the size of our business. And our executive team is unified in the belief that our business will double if we make it easy for our customers to become more loyal ..."
Sarah Wheldon (whispering to me): "We're unified?"
Roger Morgan (to the audience): "... this most recent report from Neptune Research says it costs eight times as much to acquire a new customer as it costs to retain an existing customer. So our strategy is to get as many loyal customers as possible. And we're going to do that with a new program, a program that I am announcing today, publicly for the first time.
Sarah Wheldon (whispering to me): "Glieber and Roger and Lois think they can fund this loyalty program with a reduction in my paid search budget or via an across-the-board page count reduction."
Roger Morgan (to the audience): "The new program is this. Beginning on July 1 of each year, we will keep track of the number of dresses each customer purchases. Once a customer purchases four or more dresses in that year, the customer will receive free shipping and handling for the rest of the year."
The audience applauds politely.
Roger Morgan (to the audience): "We will also keep track of the annual retention rate. When you enter the global headquarters of Gliebers Dresses, starting tomorrow, you will see a large digital display with key customer metrics. We will closely track annual retention rate, orders per retained buyer, average order value, reactivated buyers, and new-to-file buyers on the new digital display. You will get to see, first hand, how well our new loyalty program is performing. Ok, folks, that's a lot of information to give to you today, do you have any questions? Yes, Elsie, what's your question?"
Elsie (an employee): "If a customer buys four dresses, then buys a dress and gets free shipping and handling, and then two months later returns two dresses, is she still part of the new loyalty program?"
Roger Morgan (to the audience): "That's a great question, Elsie. We're currently evaluating loyalty program best practices to identify appropriate solutions for customers who experience dynamic changes in behavior due to customer service issues."
Spike (an employee): "Because that ain't righteous, dude. Dude, if a customer gets a defective dress, you know, and then returns the dress, you know, and then we remove her from the loyalty program because the dress was of poor quality, right? That would tick me off if it were me ... not that I ever buy dresses, but you know what I'm talkin' about, right dude?"
Sarah Wheldon (whispering to me): "Look at Meredith ... she's just seething over there! There couldn't possibly be an issue with HER merchandise."
Beth (an employee): "But what about those rascals that buy dresses, wear them for events, and then return them? That's not a loyal customer, that's a criminal. She doesn't deserve to be part of our loyalty program."
Greg (an employee): "If the loyalty program works, can we get Coke products in the vending machines once again?"
Louis (an employee): "Do we resell the dresses that customers return? Because it is really disgusting if we do that."
Betty (an employee): "I wish we had Pepsi products in the vending machines."
Henrietta (an employee): "Are employees eligible for the loyalty program? Even though we only pay $5 for shipping and get 30% off the price of each item, I'd buy more dresses if I had free shipping."
Roger Morgan (to the employees): "People, PEOPLE! Let's focus for a moment. Obviously there's a lot of excitement about this new loyalty program. I'm sure Sarah Wheldon, our Chief Marketing Officer, will distribute a 'talking points memo' for all of us to review by the end of the day, with answers to your frequently asked questions."
Sarah Wheldon (whispering to me): "Oh sure, he loses control of a company-wide meeting and I have to issue a talking points memo."
Roger Morgan (to the employees): "Ok folks, that's all the time I have. Thank you so much for your continued support of Gliebers Dresses, as we dig out of this global economic crisis, and reclaim our rightful seat atop the leaderboard of great apparel companies of all time."
The audience politely applauds, then a hundred folding chairs make abrasive sounds on the hardwood floor as employees quietly banter about the merits of Coke vs. Pepsi vs. Royal Crown Cola.
RFM is great for targeting one catalog to one customer. However, RFM is tough to manage in a multichannel environment. This becomes clear ...
If you don't like geeky math, please skip this post, because I am about to show you how the sausage is made! I have eight variables in...
Remember our e-commerce customer from yesterday ... 50% organic, 50% catalog driven? We mail a catalog, and the $3.00 matchback outcome is ...