Case Study: RFM Analysis Strengthens Eastwood's E-Mail Marketing Program

Problem: Eastwood, a catalog/multichannel retailer of tools and supplies for customizing and restoring motor vehicles, sought to drive greater revenue and profits via e-mail marketing while reducing costs.

Solution: It partnered with an e-mail service provider for its RFM predictive analytics software.

Results: Revenue via e-mail marketing has increased 20 percent, profits from e-mail are up 21 percent, e-mails viewed are up 65 percent and opt-out requests are down 14 percent — all while e-mail costs have been reduced by 25 percent.

When Peter Kosciewicz joined the Pottstown, Pa.-based Eastwood in 2003 as chief marketing officer, he quickly targeted e-mail for potential revenue growth.

Eastwood’s e-mail service provider at the time was too small to support Kosciewicz’s vision. And deliverability problems plagued the company. So he led Eastwood on a search for a new vendor, settling on iPost later that year.

In January 2008, Eastwood began using iPost’s Autotarget, a tool designed to provide segmented RFM analysis on a daily basis. Prior to Autotarget, Eastwood’s e-mail strategy consisted of generic batch-and-blast e-mails to its entire housefile of 200,000 names. This led to a poor sender reputation score. Autotarget enables Eastwood to identify customers who are most engaged with its brand and, therefore, most likely to respond.

“As reputation scores became more important, the relevancy of our e-mails, the frequency with which they were clicked through, the number of opt-outs and spam complaints became more important,” says Kosciewicz (who left Eastwood last October for a similar position at Witmer Public Safety Group, but was authorized to discuss the program with Catalog Success).

Less = More
Autotarget’s RFM segmentation significantly reduced the number of Eastwood’s customers receiving e-mails. With revenue goals for each campaign, Kosciewicz didn’t believe a “skinnied-down” list would suffice. But the first test e-mail sent in January 2008 quelled those concerns. (See “Results.”)

The test consisted of a single product offer at a discount. “Typically, we would’ve sent that deal to our entire list,” Kosciewicz says. “Autotarget narrowed the list to under 70,000. Sure enough, the results were really good. We hit our revenue target on a much smaller list by identifying customers who were engaged and most likely to respond.”

The RFM analysis revealed that 34 percent of Eastwood’s response came from the 4 percent of its customers with the highest RFM rankings. Furthermore, 57 percent came from the next 33 percent of highest-ranked RFM customers — leaving 63 percent of the customers generating only 9 percent of the response.

The findings prompted Eastwood to send daily e-mails to its best customers. And with a better reputation score, it sent re-engagement campaigns to lapsed customers without having to worry if it would be blacklisted.

“Even if less than 1 percent of your list re-engage, that pays for the whole effort because of how inexpensive e-mail is,” notes iPost’s Vice President of Sales Stephen Webster.

Multichannel Crossover
Autotarget’s RFM analysis encompasses all channels Eastwood markets in, including catalog. For example, it accounts for customers who were reminded they had a catalog when they got an e-mail, flipped to the catalog and called to place their orders.

As Craig Kerr, iPost’s vice president of marketing explains, Autotarget helps e-mail marketers when they’re using RFM analysis because offline teams use it anyway. “They can demonstrate the halo effect from using e-mail — what it does for purchases in other channels.”