Background and Challenge
Traditional direct marketers continue to spend significant sums on paper catalogs despite diminishing returns. Pure e-commerce players are stealing their customers’ attention as shoppers increasingly interact with brands through digital channels. How can traditional merchants become more cost-efficient without putting significant business at risk?
L.E.K. Consulting hypothesized there was an opportunity for a retail client to significantly reduce its catalog budget and reinvest those funds more productively elsewhere in the business. Simultaneously, there was an opportunity for the client to create a more effective and engaging digital shopping experience for all its customers. To optimize the company’s catalog marketing approach, L.E.K. realized that a comprehensive digital makeover was necessary.
Approach and Recommendations
L.E.K. conducted an in-depth analysis of the client’s customer data to determine how to improve the catalog marketing approach. We were able to determine that 9%-13% of customers already had sufficient digital interaction with the retailer to curtail catalog mailings without causing a material impact on purchase cadence. L.E.K. then charted a course to expand those savings to additional segments of the customer base through a careful test-and-learn optimization program.
In addition, L.E.K. developed a comprehensive digital marketing approach for the brand. Working closely with the client’s management team, we built a holistic plan and identified the resources required to overhaul both the back- and front-end digital experiences at the company. From enabling Big Data analytics, to streamlining the web site shopping experience, to improving the client’s social media presence, high-return improvements were detailed.
The client was able to both realize immediate savings and fund a series of high-return digital investments over the coming year. Specifically, L.E.K. delivered:
- 10%-15% immediate cost savings in the catalog budget, with a roadmap to greater savings
- A major projected increase in new digital traffic and digital conversion rates
- Significant EBITDA uplift
In addition to financial returns, L.E.K. also provided the client with a coherent perspective on how to leapfrog competitors’ digital strategies and operate at the forefront of digital marketing.
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