The Covid-19 pandemic has presented an unprecedented test for businesses. Given the uncertainty about the duration of the crisis and its impact on everything from global supply chains to customer spending habits, companies have been forced to make tough budget decisions in hopes of maintaining the status quo or limiting their losses.
In times like these, marketers can find themselves in the difficult position of searching for efficiencies that won’t adversely impact revenue. Here is the story of how one company found an agile solution to this dilemma in its inactive list by using Audience Management.
Global Industrial is a leading provider of industrial equipment, furniture, and office supplies direct to businesses. Founded in 1949, GlobalIndustrial is a business unit of Systemax Inc., a Fortune 1000 company. Alchemy Worx has been providing email strategy and production for Global Industrial since 2019.
As the scope of the Covid-19 pandemic started to become clear in April 2020, GlobalIndustrial made the decision to reduce its customer acquisition budget. Some may have seen this move as putting the brakes on growth. We saw it as an opportunity to use Audience Management to optimize Global Industrial’s existing audience – including active and inactive segments – not just to avoid losses, but to generate significant amounts of incremental revenue that was previously being left on the table.
Traditional audience segmentation involves compiling lists of customers, but as complexity grows, the focus narrows to the subscribers with the most data, and we end up ignoring the rest. This works fine for targeting the top 20% of customers today, but it does little to identify who among the other 80% will become high value customers tomorrow.
Audience Management methodology addresses this shortcoming by constantly monitoring the entire audience – active and inactive – across a wide range of data points to expand the pool of potential active customers and ensure everyone gets the right messages at the optimal email cadence.
In order to address Global Industrial’s needs, we started by evaluating their entire audience of more than 1.3 million customers including active, inactive, high-value, low-value, and everything in between.
The percentage of inactive customers for most mailing lists is typically between 60% to 70%. At 70.3%, Global Industrial’s inactive segment was at the top end of the range. Under traditional email marketing approaches that follow the Pareto Principle (80% of your results come from 20% of your effort), these inactive customers would rarely be emailed. However, we saw all those inactive customers as fertile ground for growth.
We dug deeper into the segments, using multiple inputs to evaluate activity and determine not just prior engagement, but the likelihood of future engagement.
After calculating the rate and scale of movement between segments, we identified 395,000 “active” customers who had opened an email within 180days and 935,000 “inactive” customers who had not opened an email in 180+days.
Based on our evaluation, we implemented an Audience Management program designed to leverage Global Industrial’s entire audience to get more customers the right message when they were most likely to purchase.
The program included:
Messaging was continuously optimized using a wide range of strategic testing approaches including subject lines, layout, and more.
We looked at how recently and how often Global Industrial’s active and inactive audience made purchases. We also looked at how much those customers spent. This enabled us to apply RFM-CO segmentation (Recency, Frequency, and Monetary Cadence Optimization).
“The result is still 80/20 in that 20% of the list generates 80% of the revenue at any given time, but it makes room for the volatility of the 20% within a significantly narrower timeframe,” said Quist. “Over a 6-month period somewhere between 30% and 60% of the list may get treated as valuable.”Expanding the scope of the active 20% to consider as much as 60% of the inactive list at any given time is key.
Between April and October of 2020, we were able to use Audience Management methodology to engage and retain Global Industrial’s existing active customers while reactivating 20.7% of their inactive customers.
During this period, the inactive segment was reduced from 70.2% to 49.5% of the total audience. That represented a whopping 29% reduction, bringing Global Industrial’s inactive segment well below the email industry average rate of 60-70%.
On the flip side, reactivating so many customers increased the active segment by 69%, taking it from less than a third (29.8%) to more than half (50.5%) of the total audience. That’s a net gain of more than 270,000 active customers.
Better still, Global Industrial saw revenues from previously inactive customers who were re-engaged out-perform the active segment by 200%.
Thanks to Audience Management, Global Industrial was able to reduce its acquisition budget while continuing to engage active customers, reactivate inactive customers, and increase revenue.