Case Study: Customer Loyalty

Company: $300-million B2B direct manufacturer of industrial supplies

Situation: Lab Safety Supply, a leading direct distributor of safety and MRO products, was beginning to witness an increased number of lapsed buyers - buyers who did not purchase within the last 12 months. In addition, customer migration analysis was showing that fewer new customers were migrating to the top RFM ranks. There was no program to communicate to Lab Safety’s new or loyal customers, other than the standard catalog mailings. While new buyer and loyal buyer programs had been tried long ago, there was never sufficient tracking to analyze the ROI, therefore the CEO was skeptical of such programs.

Solution: After analyzing data from the old program, there was a correlation between an increase in the second order and retention rates and customer relationship programs, however, the programs had not been set up to isolate the programs’ ROI based on a defined control group. This data was used to establish goals and metrics for a new buyer welcome program and loyalty program. The programs would generate a profit by increasing the second order rate 10% and the 12-month retention rate by 7% and would be tracked through a contact sequence test that identified the lift of each communication element in the program. The programs were outlined the following way:

• New Buyer Welcome Program: First, a regression analysis was conducted weekly to segment new buyers based on profitability. New buyers were given a tiered communication and offer strategy based on that profitability. The most profitable new buyers were given an offer, a slimline product catalog, a welcome letter from the CEO and an informational brochure about Lab Safety Supply, followed up by a phone call. The least profitable segments were given a thank you letter only. Multiple hold out groups were established to validate the test.
• Loyal Buyer Program: Similar to the New Buyer Program, a tiered Loyal Buyer Program was developed to increase the retention rate. The most profitable customers were given thank you letters from the CEO, newsletters, offers and personalized calls from our dedicated Customer Service Reps.

Both of the programs achieved their objectives and tracking reports were generated weekly. More importantly, certain elements of the program were identified to generate the greatest lift over the control group (example: Phone Call) and the program was subsequently streamlined to increase ROI.