Data Can Be Sexy

There’s no shortage of puns and wordplays that come to mind when thinking about the marketing strategy of a retailer like Frederick’s of Hollywood.

But the secrets to success for the $150 million per year retailer come down to things far less sexy to the general public: data and execution.

Frederick’s operates in the highly competitive apparel space, which saw a 6% decline in household sales in 2009 and a 4% decline in basket size per transaction across the industry, according to the 2009 Abacus Trend Report.

These negative trends compelled Frederick’s to look at transaction data with an eye toward developing new strategies for approaching different types of customers. The company also sought creative ways to capture new customer information and link its online presence with bricks-and-mortar locations.

A store-level peek at Frederick’s merchandise sales shows significant differences in buying trends. Most often the determining factor for these differences is the store’s location. Purchase analysis reveals some locations have a much higher concentration of bra sales (30% of all revenue) compared with more alluring items such as seduction apparel (12%). Stores in other Zip Codes report inverse results, such as a total of 29% of all merchandise sales from seduction and corsets, and just 17% from bras.

“Our data efforts are often centered around finding out where our customers shop,” says Tracy Rhyan, vice president of multi-channel marketing for Frederick’s. “Or, more importantly, where do the people who look like our customers shop?”

A look at a map generated by Epsilon Targeting’s Abacus data solutions revealed that stores located near destinations such as Las Vegas enjoy higher than usual volume sales of ultra-sexy “Seduction by Frederick’s of Hollywood” gear. Suburban, middle-America locations show the opposite trend.

With this data in hand, Frederick’s has created two distinct store designs, that are based on purchase patterns overlaid with retail locations. In areas with a high concentration of practical undergarment sales, the retailer employs a toned-down “Bra and Panty Boutique” model. More transient area locations that show stronger levels of seduction apparel sales get an “Ultra Sexy Boutique” store design.

Epsilon’s analysis does more than help Frederick’s tailor merchandise lines to reflect local area purchase tendencies. Knowing what a customer is likely to buy before she buys it has helped streamline supply chain management and inventory, ensuring the right amount and type of product to satisfy customer demand. And retail personnel are given information about what their customers are regularly buying so that they are able to present appropriate coordinating or up-sell items at the time of purchase.

Determining when the customer is ready to buy has also proved crucial for Frederick’s. While a simple report can show whether a customer made a purchase within the previous year, a total picture of the customer’s spending patterns across multiple retailers within a merchandise category can reveal propensity to buy again.

“Is it a one-off repeatable purchase that is timed to a recurring event, or can we trigger their next purchase by directing relevant marketing messages to this customer?” Rhyan asks. “This data is at the heart of our CRM and drives our contact strategy, which then is articulated by medium and fuels channel sales.”

To ramp up online and offline interactions, the retailer produces e-mail marketing pieces offering complimentary items such as a free panty. Customers complete a short form and enter their Zip Code in order to receive the coupon, which is redeemable in retail locations.

“Our aim is to engage each consumer on several channels,” continues Rhyan. “We’ve found that the multi-channel customer has three times the value of a regular customer.”

An Enticing Offer

The giveaway e-mails have enticed consumers to click through at much higher rates than average — usually 3 to 15 times the standard click-through rate. Frederick’s has captured opt-in information from more than 178,000 consumers since implementation, and each consumer has agreed to receive further communications. Considering that the buzz was created from a very low margin giveaway like a panty, the return on investment is sky high.

But things don’t always go so well. When the retailer tried to use its data to develop shopping personas, a popular trend in the marketplace, the demographics failed to deliver unique individual shopper identities. “Our personas all looked the same,” says Rhyan. “Instead, we shifted our focus from the individual shopper more to the merchandise trends. You must be able to adapt.”

Jean Yves-Sabot is vice president at Abacus, a division of Epsilon Targeting.