AN ANALYTICAL APPROACH TO WEALTH INTELLIGENCE

Transcription

1 WHITE PAPER AN ANALYTICAL APPROACH TO WEALTH INTELLIGENCE How Luxury Brands Can Grow Market Share Using Predictive Analytics and Modeling

2 ABOUT THIS PAPER The purpose of this paper is to provide a foundational perspective on the value of using analytics when developing an effective marketing and business development strategy. This paper provides an overview of the role that analytics plays within the overall wealth identification process, and discusses how a systematic approach to understanding your customers and prospects allows organizations to benefit by uncovering opportunities to drive repeat or additional purchases and increase share of wallet. In this report we provide highlights of the ratings and scores that are included in WealthEngine s solutions, as well as some of the customized services that WealthEngine offers for predictive analytics. This information is helpful for marketing and business development professionals looking to grow their business. WEALTHENGINE PUBLICATIONS TEAM: Mark Logan Chief Executive Officer Michael Lukich Vice President, Marketing Cori Pearce Demand Generation Director, Marketing Wendy Buck Manager, Marketing Jessica Gilbert Creative Director Moira Boyle Director of Commercial Sales & Strategy 2017 WealthEngine TM, Inc. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. This document is informational in nature and we do not guarantee any of the information either expressed or implied. Readers are encouraged to consult with their appropriate legal, accounting and professional counsel before implementing any suggested actions. WealthEngine has no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof and shall not be held liable for any claims or losses that may rise from the implementation of the best practices in this report. This document includes ideas for enhancing WealthEngine s products. These ideas are subject to change at any time.

3 CONTENTS AN ANALYTICAL APPROACH TO IDENTIFYING WEALTH...3 TODAY S CHALLENGES FOR LUXURY MARKETERS...6 A Static State of Affairs...7 Trend 1: All Wealthy Are Not The Same...9 Trend 2: Online Marketing and Social Media Have Changed the Playing Field...10 Trend 3: Customer Loyalty is Key...11 A NEW FRAMEWORK FOR DATA-DRIVEN MARKETING...13 Using Predictive Analytics to Develop a Segmentation Strategy...16 Use Predictive Analytics To Drive Marketing Strategy...17 Practical Applications for Predictive Analytics...18 NEXT STEPS...19 The Power of Predictive Analytics...20 CASE STUDIES...22 Luxury Retail...23 Travel and Hospitality

4 to Identifying Wealth 3

5 Studies show that despite recent economic turbulence, there are real opportunities for growth in the luxury market where brands show exceptional quality, reputation and value. But with the variety of choices available and the changing dynamics of customer relationships, using analytics-driven insight can help you successfully adapt to changing market conditions and evolving customer needs. The key to understanding customer segments is through data and analytics. Data, once considered a part of the IT responsibility, is now a key to marketing success. In fact, research from CMO.com estimates that data-driven marketing accounts for about 20% of all marketing spend ($1.3 trillion per year in the U.S.). By using data and predictive analytics, luxury marketers have a means to better target and engage their customers. Data and predictive analytics allow you to uncover opportunities to drive repeat or additional purchases so you can create a closer tie to the customer. Analytics allow you to truly understand the customer and their wealth attributes, so you can target the most qualified luxury consumers and offer a compelling and seamless brand experience. Predictive analytics provide the power to turn ordinary data into actionable insight. 4

6 This paper provides a foundational perspective on the value of wealth intelligence and predictive analytics when developing an effective marketing strategy. A custom predictive analytic solution allows you to find people who look like your best customers, and find opportunities to up-sell, crosssell, and drive share of wallet among existing customers. Armed with this insight, you can develop an effective strategy that targets your ideal prospects and customers, at the right time, with the right message and through the right channels. In this paper, we provide highlights of WealthEngine s predictive analytics and modeling solutions, as well as WealthEngine s proprietary wealth ratings and scores. This information is critical to luxury marketing and business development professionals as they leverage customer data and wealth intelligence to drive business development and uncover new sales opportunities. Marketing professionals can apply this insight when targeting customers with a new offer, or when developing focused messages based on insight into an individual s wealth or change in wealth. Wealth intelligence encompasses the systematic understanding of your customers by identifying exactly who they are, where they live, their wealth, disposable income, spending patterns, lifestyle, interests, demographics, business and more. 5

7 Today s Challenges for Luxury Marketers 6

8 A STATIC STATE OF AFFAIRS Although the luxury market appears to be a recession-resistant industry that generates over $1 trillion in revenue, shares in global luxury goods makers followed by Bloomberg Intelligence have dropped approximately 13 percent in According to a survey by Boston Consulting Group (BCG), the global market for luxury goods represents over $1 trillion USD, across several categories including fashion, retail, travel, hotels, food & beverage, and spas. This is due to a shift in buying patterns that has been a game-changer for a range of consumer behaviors that impact spending on luxury. For their 2016 Affluent Perspective Global Study, YouGov surveyed 2,515 individuals in the U.S. who earn over $150,000 to analyze affluent spending across nine categories, including apparel, travel, and personal care. The study predicts an increase in luxury spending by eight percent for affluent millennials and ten percent for the 400,000 wealthiest households in the U.S. in the coming year. Estimates for the total discretionary luxury spending across the nine categories for 2016 are at $277 billion, with Baby Boomers and Gen Xers generating the majority of spending ($215B). Each year, the Bureau of Labor Statistics conducts a Consumer Expenditure Survey to examine how Americans spend their money. The Mendelsohn Affluent Survey, published by Ipsos MediaCT, reanalyzes unpublished data from the Consumer Expenditures Survey to detail the buying power of Affluent Americans across more than 140 different product and service categories. Ipsos Mendelsohn defines Affluents as the 58.6 million adults living in households with at least $100,000 in annual household income. Their research shows: Affluents make up 25% of American adults and 21% of American households Affluents account for at least half of consumer spending in 38 categories Affluents account for at least one-third of consumer spending in 112 categories Key trends among the affluent include: Across the 13 discretionary spending categories, 11% of consumers expect to spend more, and 79% anticipate spending the same on luxury goods and services this year. Saving more Making households more fiscally responsible and resourceful Generally low levels of confidence 7

9 Across the 13 discretionary spending categories, 11% of consumers expect to spend more, and 79% anticipate spending the same on luxury goods and services this year. The highest growth is predicted for those categories where the brand is in sync with quality in life experiences, such as weekend getaways and vacations, and experiences that bring them closer to their inner circle of friends and family. Moreover, the search for both value and worth will dominate the luxury agenda in the foreseeable future. This trend is easy to spot in the travel and leisure industry, where regardless of their high and ultra high affluence, luxury travelers want their hard-earned time away to be worth it, with money going towards experiences that add value, are exclusive, and reflect their passions whether it be an active vacation with their extended family in the Colorado mountains, or an exotic destination across the globe. Research also shows that affluent and wealthy families are growing more concerned about the value of success itself. One in five consumers with discretionary incomes of $250,000 or more are worried about being disparaged for being financially successful. As a result, there is a culture that favors savings over investment and covert consumption over conspicuous consumption. Another key trend is the relationship between age and wealth. Never before have such a large number of young people been raised by wealthy parents. In fact, 34% of the wealthy between age 18 and 33 have been wealthy throughout their lifetime, as compared to less than 10% of all other generations. This younger generation wants brands that are pro-social, have a reputation for design, have history and heritage, and make them feel they own something rare. On the whole, the average affluent and wealthy family will spend slightly more than $20,000 per household on luxury items in the next 12 months, essentially unchanged from last year. But of note, nearly two-thirds of all luxury spending will be consumed by the top 12 million families. That makes finding qualified prospects within this top tier all the more essential to growing your business and gaining a competitive edge. Three key trends have emerged that affect how luxury marketers target their audience. First, the disparity among the wealthy has become more evident; in other words, all wealthy are not the same. Second, online marketing and social media have changed the playing field for marketers, and third, the importance of customer loyalty in generating revenue is bigger today than ever before. 8

10 TREND 1: ALL WEALTHY ARE NOT THE SAME In an exclusive interview with WealthEngine, Stephen Kraus, Senior Vice President and Chief Insights Officer at Ipsos MediaCT, summarizes a key trend in luxury: The definition of luxury today is not the same as it was five years ago. Five years ago, we used to think of anyone having more than $100,000 in annual income the top 20-25% of the U.S. as a luxury target. Five years ago, that mass affluent group was considered by luxury marketers to be the aspirational luxury shopper, and was a key target. However, we have since learned that the spending of many individuals was based more on how rich they felt, or how rich they anticipated becoming, not how rich they really were. With changing economics, luxury marketers need to go upstream, redefining their target audience and focusing on Ultra Affluents such as the 2-3% with incomes of $250K+. Affluent Mass Affluent In other research, There is a tendency to think of the wealthy in any country as a group of identical individuals, explains Marc Cohen, one of two founding directors of Ledbury Research, a London-based a research company specializing in the understanding and engaging of High Net Worth Individuals. We think this over-simplification is dangerous for brands, he continues. Knowledge about the wealthy in fast-growing markets is hard to come by, so tends to be based on anecdote or generalization. But anecdote and generalization do not make for a sound business strategy. A case in point: two wealthy individuals from the same city may look similar on paper, an in-depth look at their net worth, assets, income and cash on hand can show a different story. Both are aged 45 and have high total assets (in the range of $10MM-$25MM). However, Person #1 has a net worth score of $10-$25MM while Person #2 has a net worth between $1-$5MM. When scores are separated by two or more ranges (higher total assets and lower net worth, as in this case), it can indicate that they have more debt. As a result, there is strong indication here that Person #2 is a less viable prospect for a large purchase. Conversely, if scores are within the same range, this can indicate less debt, which means they are a viable prospect. Finally, a look at each individual s cash on hand score shows that Person #1 has the cash on hand to make the purchase. Ultra Affluent Not all HNW individuals are the same: Use analytics to identify & understand wealth Person 1 Age 45 Total Assets: $10MM - $25MM Net Worth: $10MM - $25MM Person 2 Age 45 Total Assets: $10MM - $25MM Net Worth: $1MM - $5MM 9

11 Traditional consumer and mass-market data analytics are not able to find, or properly understand, the top few percent of wealthy consumers. As luxury marketers target those individuals who are of a higher than average wealth level and a more specific demographic and psychographic profile, using good quality research and custom predictive analytics is a far more effective strategy than working with mass data generated on mass-market consumers. As Kraus explains, There is a very personal and even elusive nature to luxury. Five years ago, there was more of a shared sense of what luxury was; today, luxury is much more intimate, idiosyncratic and self-defined. It is harder for consumers to buy luxury across the board now they have to be more picky about their passions and their spending. But at the same time, quality and value are very important. Affluent consumers show few signs of lowering their expectations. Analytics in Action Wealth intelligence offers both quantitative and qualitative insight that can be used to identify distinct customer profiles and target segments, enabling marketers to achieve a better understanding of the most (and least) profitable customers. Using wealth, lifestyle, demographic and other factors as the criteria for segmenting customers allows luxury marketers to be more precise and focused in reaching their audience with the right message and the right promotional offers. TREND 2: ONLINE MARKETING & SOCIAL MEDIA HAVE CHANGED THE PLAYING FIELD Successful marketers have realized that to be competitive in today s market, you must market to the individual, create opportunities to engage with your customers by reaching them with the most relevant message, and ensure that your brand and the message it conveys speaks to their needs and desires. Integrated marketing and digital targeting strategies offer powerful ways to deliver customized messages and engage with customers through your website, e-commerce, social, and mobile platforms and other digital marketing initiatives. They also offer a powerful means to track customer behavior and measure ROI. However, data gathered through online marketing efforts, marketing automation platforms, and CRM applications are limited in that while they can report on what has happened, they don t tell us why it happened. For example, you may have details on a customer s purchase history, their customer relations interactions and experiences, but this data doesn t necessary explain or predict the likelihood that the customer will buy more, buy less, or buy different based on their wealth or change in wealth. 10

12 Predictive analytics address this issue by combining and cross-referencing customer behavior with income, asset, net worth and demographic data such as age and marital status, as well as lifestyle data such as ownership of a boat or private jet, to make informed assumptions about the customers desires, preferences and interests. Turn Likes into sales. With the power of social networks such as Facebook, Twitter, Snapchat, Instagram, or YouTube, coupled with the proliferation of online customer engagement through blogs and new media, the number of touch points customers use to interact with luxury brands has grown significantly. What s more, the consumer s voice and social influence among friends and peers has risen. It s critical to not only engage in healthy dialogue with customers online, but to also assess their overall online behavior. Failure to recognize behavioral patterns could pose risks in alienating your most valuable customers. Analytics in Action It s more important than ever to create authentic customer experiences that are worthy of attention. To do this, marketers need to tailor their message to the individual and time it precisely. Understanding wealth and lifestyle patterns that drive possible customer consumption behavior, such as an increase in net worth or the purchase of a second home, uncovers opportunities to reach the customer with a timely and relevant offering. Having insight into a broad range of data and analytics provides the intelligence to build strategies to target specific audiences and to adjust marketing messages quickly and efficiently for optimal results. TREND 3: CUSTOMER LOYALTY IS KEY In virtually all industries, loyal customers are the backbone of a successful business. While finding new customers is often the first priority for a company, a more strategic approach is focusing on increasing customer retention. Loyal customers mean repeat business and lower costs on having to constantly acquire new customers, which means that building a robust loyalty program is essential. Part of this means using the data that you already have on your loyal customers to your advantage. As data technology advances, marketers must understand how to use the information available to them to create loyal customers who enjoy interacting with their brand time and again. Marketers must first identify these high value customers based on online behavior and interaction. Tools such as WealthEngine s own On Demand Screening make this process easier by integrating purchase processes with a database platform to instantly return customer data as they interact with your website. These insights will allow you to build a loyalty program that provides legitimate value to your customers. $ 11

13 Analytics in Action To build customer loyalty, you need to first understand customer behavior, and this understanding begins with data analysis and predictive modeling. Often this data will include both the company s transactional and demographic history on customers and WealthEngine s public data and wealth scores. Once data is captured and analyzed, you can develop a strategy to focus on the most profitable customers. Loyalty programs and retention strategies to keep these customers highly engaged are an effective strategy for many luxury marketers. These strategies are designed to keep current customers, but have the added benefit of driving more customers to behave like your most profitable customers. Building loyalty programs to retain loyal customers has the added benefit of giving marketers a means to gain data directly from customers. This data, which can include behavioral and transactional data as well as demographic data, coupled with wealth intelligence, gives marketers the ability to customize their campaign strategy and their message to the individual s unique needs. This investment in loyal customers can prove highly profitable; according to a Bain & Co. study, a 5 percent growth in customer retention can boost profitability by 75 percent. However, building an effective loyalty program requires more than just providing customers with high rewards at signup. It requires a brand to nurture the customer through repeated, rewarding interactions. In a recent interview, Pam Danziger, President of Unity Marketing, said, Luxury brands should look to rewarding behavior that encourages loyalty and repeat purchases. Rather than simply giving points for discounts, luxury brands should think about adding service and experience rewards to their programs. This type of elevated service will build customer loyalty and, through recommendations and word of mouth, will bring their like-minded peers into the fold. When a brand or marketer understands the makeup of a potential customer, better decisions about messaging, timing and delivery media can be made. - Daniel Wagstaff Founding Partner at Dallas-based social CRM shop Pocketstop 12

14 Today s Challenges for Luxury Marketers 13

15 As marketers vie for their piece of the $1 trillion luxury market, customer segmentation and targeting is critical. Kraus points out, Marketers have gotten better at segmenting among the wealthy. Five to ten years ago, they thought all rich were rich, and that they acted the same. With the changing economy, we now see completely different behaviors and motivations between the mass affluent and ultra affluent, and across other segments as well. As an industry, the key to success is understanding these segments: their lives and lifestyles, their dreams and desires, their anxieties and their ambitions. To grow your business among affluent individuals, you need to determine which customers and prospects have the greatest potential so you can direct your time, energy and marketing dollars their way. The most effective way to do this is through wealth intelligence. Wealth intelligence provides for a systematic understanding of your customers by identifying exactly who they are, where they live, their net worth, real estate holdings, income, spending patterns, lifestyle, demographics and more. WealthEngine utilizes hundreds of data points to more effectively analyze wealth and develop custom analytic solutions for clients. When examined together, these attributes create a complete picture or profile of an individual s wealth. This information is critical to understand your target audience and their needs, determine which lead generation techniques are best to broaden your sales horizons, and increase sales by developing strategies to sell additional products and/ or services to existing customers. WealthEngine provides key insights such as the individual s net worth, total assets and cash on hand scores that correlate with discretionary income. Wealth is a powerful predictor of spending in virtually every category, particularly luxury. For marketers, targeting and segmenting wealthy consumers has become more important than ever. - Stephen Kraus Senior Vice President and Chief Insights Officer at IpsosMediaCT 14

16 Wealth Ratings & Scores Definition Values Provided Practical Application Net Worth The difference between total assets and total debt for a household Ranges based on dollar value Use when targeting products and services to high net worth customers and prospects Total Assets The total value of all financial and nonfinancial assets held by a household Ranges based on dollar value Use when targeting products and sevices to customers and prospects when liabilities do not factor into decisions Cash on Hand Estimates the amount of available cash for the household. This is based on readily accessible, discretionary funds(e.g., checking, savings, money market accounts, etc.) Ranges based on dollar value Use to identify individuals that have cash on hand to make a large purchase or deposit Propensity to Give (P2G TM ) A score to assess an individual s means to give and the inclination to do so. It is based on exact household matches, overall wealth and financial ability. 1-5 scale Use to segment your list and prioritize efforts by focusing on those with better wealth profiles and more accurate matching A predictive analytic solution goes one step farther. Predictive analytics allow you to uncover trends and crucial insights that will help drive decisions and inform your marketing or business development strategy. They are based on your specific goals and data, rather than industry-based assumptions. Experts in luxury marketing have confirmed this notion. WealthEngine spoke with Greg Furman, Founder and Chairman of The Luxury Marketing Council, a group of 1,600 CEOs and top marketing executives. As the recession continues, luxury brands are experiencing a wake-up call from a market which continues to be soft. For the first time in many years, even brands that have been determined to continue to pursue their strategy of great product, major investments in advertising are rethinking the viability of this old-world approach. This trend, along with the disappearance of the aspirational shopper, points to the importance of luxury brands to take an analytical approach to marketing and use innovative strategies to build loyalty among their current customers and cross-sell and upsell additional products to their current base of ultra-affluent customers, explains Furman. 15

17 USING PREDICTIVE ANALYTICS TO DEVELOP A SEGMENTATION STRATEGY Predictive analytics can play an important role in enabling luxury marketers to make timely, meaningful and relevant decisions that target the most qualified prospects and raise average client spend, all while driving deeper customer loyalty and engagement. For example, the goal of a luxury retailer is typically to gain a greater share of the consumer s wallet by making relevant product recommendations or offers, and time them while the consumer is ready to spend. To accomplish this, luxury retailers can utilize predictive models to identify what product the consumer is most likely to buy, and when he or she is most likely to buy it. This type of analytic solution takes information about the customer and compares it to those with similar characteristics who have purchased in the past. Models can also be used to predict the likelihood of a prospect having the characteristics of a top customer. By identifying characteristics of the most profitable customer groups, you can use this insight to target new customers with similar characteristics, or look-alikes, for future offerings. This concept can also be applied in reverse, by identifying characteristics of non-profitable customers and excluding them from certain offers. The first step in predictive analytics is to determine the business issue that you are looking to solve. Typically, it will be tied to or influenced by revenue or profitability. Once the business need is identified, historical performance data as well as wealth, lifestyle and demographic data can be analyzed to predict future outcomes. Predictive analytics is a form of statistical analysis that is used in predicting behavioral patterns to shape business decisions, forecast trends and ultimately improve performance. Instead of looking backward to analyze what happened, predictive analytics help answer the question, what s next? and what should we do about it? - Cognizant Insights August 2011 Use Predictive Analytics to Maximize Marketing ROI Predict future buying behavior of your current customers Learn how often your customer will buy again or return to your stores Identify qualified prospects who will significantly influence company performance and market share Discover prospective customers with direct connections to your current customers Segment and prioritize your business development efforts based on your highest value prospects»» Execute targeted marketing campaigns and sales promotions 16

18 USE PREDICTIVE ANALYTICS TO DRIVE MARKETING STRATEGY A custom predictive analysis can help luxury markets address such questions as: Who among my customers are likely to churn? Statistically identify characteristics of those customers who left and find customers that share those similar characteristics. Who among my customers are likely to become less active/more active with their repurchase behaviors? Conduct geospatial evaluation of economic/wealth trends as they react to economic shocks (technology & price shocks, for example) and apply these insights to customer base that is likely to be affected. Who are my best customers? What are their attributes across key wealth and demographic criteria, including age, income, marital status, children, home ownership, education, and location? Who are my best prospects? Are the attributes of my best prospects similar to those of my current customers? When a brand or marketer understands the makeup of a potential customer, better decisions about messaging, timing and delivery media can be made. - Daniel Wagstaff Founding Partner at Dallas-based social CRM shop Pocketstop 17

19 PRACTICAL APPLICATIONS FOR PREDICTIVE ANALYTICS Some useful applications of wealth intelligence and predictive analytics for luxury marketers include: Identify or confirm customer attributes and demographics Create, test and optimize lead generation campaigns, events and promotions Adjust marketing offers quickly and efficiently, for optimal results Benchmark and analyze customer wealth against repurchase activity Acquire new customers by learning from existing customers Build loyalty among current customers Identify new customers with business or personal relationships with your current customers Predictive analytics can help you gain greater share of wallet by making relevant product recommendations and sales offers, and time them for when the consumer is ready to spend. 18

20 Next Steps 19

21 THE POWER OF PREDICTIVE ANALYTICS As you look to grow your business among affluent customers, expand your reach in selected geographic markets or reach new target segments, you need a thoughtful and well-executed strategy. Data analytics play an important role in the strategy and decision-making process, enabling you to establish a customer-centric approach that delivers the right messages and opportunities to the right customers, at the right time. But when setting organizational priorities or determining your marketing strategy, it s important to consider your experience and judgment. Many successful organizations feel that the most effective approach for them is to couple their experiences with research and rely on analytics to evaluate and validate their decisions. Quite often, analytics will show that a decision based largely on past experience was in fact not a good decision. This creates a foundation for changing the course, bringing in fresh ideas, trying new approaches and launching new creative tactics. The best way to determine the right path for your particular offering is to test various combinations of messages and communications channels until you ve determined which is most effective. While this may take time, it s a sound strategy and an ongoing process that ideally should continue as the market changes, as your product offerings change, or as you add new sales outlets. By measuring the lift or lack of lift in sales that results from different marketing strategies, and adjusting your strategy accordingly, you are better able to identify the right mix for each specific customer group. Analytic-driven marketing strategies are focused on the customer and their needs, and enable you to maximize return on investment by directing the right message and the right product offering to the right people at the right time. Jennifer Wiese, Analytic Consultant at Aspen Marketing Services, a division of Epsilon, explains this concept to Luxury Daily, For all brand categories including luxury, it is very important for marketers to target the right audiences at the right time with a personalized and relevant message. A good way to do this is with triggered messages and the use of dynamic content. The channel performance is even greater when marketers send messages that are triggered based on behavior or milestones. 20

22 WealthEngine works with a broad range of luxury clients to establish predictive analytic solutions to drive their marketing strategies. With a systematic approach to understanding their customers and prospects, these organizations are able to uncover new sales opportunities, increase customer retention and gain a competitive edge while deploying marketing resources more effectively. For example, the luxury hotel group described in the following case study was able to use predictive analytics to target specific audiences and adjust their marketing program with targeted lead generation campaigns that use different promotional offers for each prospect type. This approach allowed them to optimize their campaign, quickly and efficiently. By better understanding its prospects and customers, the company can accurately interpret client needs and what drives them to select one experiential travel destination over another. This approach enables the hotel group to position offerings that are most likely to resonate with the individual prospect, thus reducing marketing costs, saving time and giving their audience a highly personalized sales experience. Finally, the use of the analytic results should be monitored to identify if there are issues with your current marketing or business development efforts. They can also be used to identify if the predictive model needs to be refreshed over time to strengthen subsequent campaign performance. The lessons learned during the process can trigger new and often more focused business questions. Data mining is not over once a solution is deployed, but is a continual process that is quickly becoming a standard marketing practice for successful luxury organizations. Data analytics play an important role in the strategy and decision-making process, enabling you to establish a customer-centric approach that delivers the right messages and opportunities to the right customers, at the right time. 21

23 Case Studies 22

24 LUXURY RETAIL Build Customer Loyalty and Increase Share-of-Wallet with Customer Segmentation BACKGROUND The primary goal for most luxury retailers each year is to maximize sales in order to exceed revenue goals. As the luxury marketplace becomes more competitive due to factors including global expansion, increased traditional and online retail points of sale and a shrinking domestic customer base, one tactic luxury brands have implemented is to focus on growing market share or a customer s share of wallet, which in turn leads to greater revenue. Increasing share of wallet can be done by increasing the number of sales to the customer in a given period, increasing the dollar value per sale, or a combination of the two. Both tactics are based on the concept of first building customer loyalty. In this example, a luxury provider of men s and women s ready-to-wear and accessories is looking to maximize share of wallet and improve customer loyalty through targeted product offers both online and in-store and through high-touch specialty events that illustrate the core values of the luxury brand. With the added challenge of today s slow-growth economy, this luxury retailer needs to focus more attention on reaching its clientele through exclusive events and brand initiatives that drive traffic and sales to both their flagship stores nationally and to their e-commerce site. Developing a platform and communicating to the right consumers at every turn in print, in-store, online and through mobile is a proven strategy that drives sales. But determining which clients to target with these special invitations and offers is a challenge. The challenge however, lies in determining which customers to target. Goals Understand which customers have the highest propensity to buy Segment & rank order the customer base Find new prospects with similar characteristics as top customers CASE STUDY To accomplish this, the luxury retailer utilizes predictive analytics to understand which of their customers have the highest propensity to buy their products. Predictive analytics uncover insights that allow the retailer to segment and rank their customer base and identify distinct customer profiles. Once the retailer understands the wealth, demographics, lifestyle, habits and preferences of their best clients, they can find other new prospective clients that look just like these top loyal customers. Simply put, they need to take the guesswork out of marketing business decisionmaking and use an analytical approach. Occasional Support Loyal Customer Engaged Buyer 23

25 DEVELOPING A PREDICTIVE MODEL: CUSTOMER SEGMENTATION AND CLUSTERING To generate sales, the luxury retailer launched initiatives intended to increase the share of wallet for their brand, offering customers exceptionally designed products and an unforgettable experience that keeps them coming back for more. The process began by setting out to understand the attributes of top customers, as measured by transaction data over a given period of time, ranging from six months to three years. Using the retailer s customer records and transaction data we matched each record against WealthEngine s unique database of over 300 million individuals. WealthEngine s analysts were able to uncover key metrics about each customer, including: Median net worth: $14MM Median total assets: $10MM Median cash on hand: $1MM Average real estate value: $1.6MM Average number of properties: 1.8 Average political giving: $16K Average insider holdings: $7.7MM Average spend (purchase): $8,150 WealthEngine used this insight as the basis for a more detailed clustering analysis, a statistical technique that identifies distinct customer profiles and segments customers together based on their shared characteristics. With WealthEngine, this is accomplished at the household level across 1500 potential wealth, lifestyle, demographic, or interest variables found within WealthEngine s database. Customers were segmented into groups based on their similar characteristics which ultimately drive their needs, motivations, likes, dislikes, and behaviors. Useful characteristics for this luxury retailer to understand about their customers include: Interest in fashion, design, travel and/or the environment Purchasing preference includes shopping offline and/or online For this retailer, WealthEngine analyzed every household against wealth, demographic, and affinity criteria, including: age, income category, income range, marital status, children, home ownership, education, select interests, and buying activities. Some interesting and important discoveries were made in the process, such as learning that 66% of their top clients frequently travel internationally and are multi-lingual, and 75% of their top customers own a luxury automobile. And, particularly insightful is the fact that 38% of their top customers donate to nonprofits within the advocacy and environmental industries. CASE STUDY 24

26 Group 1: The Mature Classic Older, Affluent and Willing to Spend on the Perfect Piece Average spend: $7,736 Number of products: 1 Average net worth: $10.5MM Average income: $290K Average real estate: $1MM Insider holdings: $4.7MM D&B company value: $18.1MM Average age: 72 Children at home: 0 Primary interest: Travel/design Purchase preference: Offline Group 2: The Suburban Elite Working Professionals, Family-Oriented, Loyal to the Brand Average spend: $9,888 Number of products: 7 Average net worth: $4.9MM Average income: $310K Average real estate: $800K Insider holdings: $600K D&B company value: $30MM Average age: 40 Children at home: 2 Primary interest: Fashion/environment Purchase preference: Both online & offline Group 3: The Sophisticated Spender Want a Quality Brand and a Quality Experience Average spend: $27,995 Number of products: 2 Average net worth: $10.2MM Average income: $540K Average real estate: $1.5MM Insider holdings: $4.7MM D&B company value: $10MM Average age: 53 Children at home: 1 Primary interest: Travel/Design/Fashion Purchase preference: Both online & offline Group 4: The Urban Trendsetter Young Professionals with Families, Looking for a Unique Buy Average spend: $14,674 Number of products: 1 Average net worth: $6.5MM Average income: $300K Average real estate: $900K Insider holdings: $1.5MM D&B company value: $16.5MM Average age: 35 Children at home: 0 Primary interest: Travel/fashion Purchase preference: Online RESULTS In addition to appending this wealth and lifestyle insight onto each of the retailer s customer records, the resulting series of distinct customer profiles and target segments provided the luxury retailer with in-depth insight on the shared characteristics, or attributes, of their customers. This insight gave the luxury retailer the ability to: CASE STUDY Understand significantly more about each individual customer when necessary Segment and rank customers based on their shared characteristics Identify target segments likely to exhibit specific behaviors Target the right customer base for the right activation, generating increased efficiency and effectiveness of each effort 25

27 A closer look at the luxury retailer s customer base against these customer profiles, or target segments, yielded important insights that they can use to determine who the right fit was for their various marketing initiatives. For example, Group 1: Mature Classic customers are older, retired, highly educated, experienced, and focused in metropolitan areas, and therefore the ideal target to cultivate the brand/customer relationship on a personal level. Invitations to meet the designer or when a new collection launches are special touches that go a long way. Smaller intimate events, engaging direct mail and branding campaigns and superior quality in all facets of the brand are necessary to generate additional sales and grow the relationship further. Group 2: Suburban Elite customers tend to be centered in suburban areas. Coupled with the fact that they are working professionals with young kids means they should be targeted through all channels if possible, although they will likely respond to an online offer or weekend in-store incentive. These are also the best customers to reach when the designer launches a children s line. Group 3: Sophisticated Spenders are more sophisticated customers who likely have more personal time and money than the other segments. They are great candidates for in-store events or online promotions that are on-brand and culturally relevant. Branding campaigns and direct mail is an effective strategy to keep the luxury retailer top-of-mind for this customer while incentivizing them with exciting programming or exclusivity. This approach allows the retailer to develop the customer relationship further and drive sales, creating loyal customers. Group 4: Urban Trendsetter customers are young, single, mobile, connected, and located in urban areas, and therefore great targets for a chic fashion or trend-driven event that offers exclusive opportunities. Additionally, this group is a great audience to incentivize via online promotions using social media, video, games and other new technologies that offer customer engagement in a way that ultimately drives sales. CASE STUDY 26

28 BUSINESS OUTCOMES Predictive analytics played an important role in this luxury retailer s ability to plan their marketing activities and create timely, meaningful, and relevant opportunities that targeted their most qualified prospects and raised average client spend, all while generating a stronger customer relationship. With the consumer insights and intelligence gathered through this segmentation exercise, the luxury retailer created a map that helped them define the various touch points they had with their customers that influence the customer s experience with their brand. By implementing strategies that foster stronger and deeper customer experience, the retailer was able to build customer loyalty and increase share of wallet. BUILDING CUSTOMER LOYALTY AND SHARE OF WALLET In this example, the luxury retailer increased share of wallet by segmenting their customers into groups and reaching them through targeted marketing initiatives that spoke to their needs while maximizing return. The luxury retailer experienced a 5% increase in conversion rates, from 4% to 9%. They also increased the average dollars per transaction, and the average number of products per transaction. Customer Insight Share of Wallet & ROI Customer Touchpoints Customer Experience CASE STUDY 27

29 TRAVEL & HOSPITALITY Discover a Generation of Customers with Customer Profiling BACKGROUND Everything changes when your customer changes. That s the key lesson that this award-winning provider of luxury first class hotels and resorts in global locations has learned in recent years. Leading consultants to the hospitality industry note that over the last two years consumer habits and attitudes have changed, and the hospitality sector has worked hard to adapt. Customers are better informed, more independent in their thinking and, most notably, are eager for experiential travel experiences. They are eager to travel to destinations that exemplify luxury while offering unique experiences and opportunities for long-lasting memories. In addition, the attributes of a typical luxury and experiential traveler are evolving. It is expected that Baby Boomers will drive growth in experiential travel. In fact, by 2015, Baby Boomers are forecasted to account for 60% of wealth and 40% of spending in the United States. Research shows that nearly 60% of tour operator customers are Baby Boomers. In essence, the same generation that once backpacked through Europe in droves on a shoestring budget in the 60 s and 70 s, are now looking to retire, and with their forever young attitude, are turning towards experiential travel. And they want to do it with a certain amount of luxury and style. Goals Better understand their top customers Identify prospects with similar attributes Develop targeted marketing campaigns and relevant promotional offers In this example, this leading luxury hotel group is looking to better understand who their top customers are, so they can find and market to prospects with similar attributes. Their global resorts in South America, Africa, East Asia and India offer prime destinations for the luxury experiential traveler. In essence, they need to find and reach those individuals who not only have an appreciation for their distinctive offering, but also have the wealth to take advantage of it. CASE STUDY 28

30 More than Seeing, It s Experiencing. The experience of traveling and the memories created are what makes travel unique. Experiential travel is simply about the life experience. It is more than the amenities or creature comforts, more than the tourist attractions, restaurants or nightlife, it is about the real-life experience. That experience can be for the purposes of entertainment, to be immersed in an activity, to learn more about a topic of interest, or to simply escape and enjoy a favorite activity, interest or hobby. It can also be about connecting with people from the local cultures in ways that enrich their lives and create lasting memories. DEVELOPING A PREDICTIVE MODEL: CUSTOMER PROFILE AND IDENTIFYING LOOK-ALIKES The luxury hotel group captured a broad range of data on their customers, including their basic demographics and purchase (and travel) history. This information allowed them to see who their top customers are based on their spending history. But this information is simply not enough to determine who they are. Nor does it glean enough insight to use to find new prospects that are just like them. That s where WealthEngine s custom model suite came in. Models were built to predict the likelihood of a prospect having the characteristics of a top customer and identifies look-alikes, or prospects with similar characteristics as their top customers. In conducting this analysis, WealthEngine screened the hotel group s data on their top 1,000 customers against the WE platform to assess the wealth potential for all individuals. WealthEngine uncovered detailed insight on their demographics, lifestyle, and interests. Key attributes such as their age, marital status, family, where they live, their profession, and philanthropic and charitable interests were revealed, along with wealth scores for net worth, total assets, and cash on hand. Use Customer Profiling to Identify New Prospects with Similar Characteristics as Top Customers CASE STUDY 29

31 Using this screened list, WealthEngine was able to profile the attributes of the hotel group s top customers, which were comprised primarily of affluent and ultra-affluent Baby Boomers. In doing so, WealthEngine s analytics team created a custom analytic solution that determined the optimal set of predictors among various lifestyle, wealth, geographic and demographic variables. Wealth Profile: Demographics and Lifestyle: Median net worth: $8MM Marital status: Married Median total assets: $10MM Home ownership: Owner Median cash on hand: $1MM Children: No children at home Average real estate value: $1.2MM Education: College Average number of properties: 1.3 Population density: City & surrounds Average charitable giving: $22K Income category: High affluent Average insider holdings: $5MM Lifestyle: Outdoor enthusiasts, adventure sports Average age: 62 The hotel group was also able to refine their prospecting lists further by applying data appends from WealthEngine that include key lifestyle attributes such as an interest in skiing, golf, cigars, food & wine, tennis, boating, horses, and philanthropic causes. Data Appends Allow For In-depth Profiling of Prospects by Examining Key Lifestyle Attribute Golf Food & Wine Outdoor Adventure Sailing WealthEngine then used this insight to identify look-alikes, or prospects with similar characteristics as their top customers, using WE Prospect, WealthEngine s powerful prospecting platform. The WE Prospect solution leverages WealthEngine s proprietary database of over 300 million individuals, segmented by geography, interests,and wealth. The hotel group determined that they wanted to generate approximately 10,000 records for their marketing and prospecting efforts. CASE STUDY Philanthropy 30

32 RESULTS The customer profiling model and custom prospect list gave the hotel group a strong foundation for building targeted marketing campaigns and relevant promotional offers. The custom prospect list data and insights were incorporated into the luxury hotel group s CRM system for use in developing compelling data-driven marketing campaigns. BUSINESS OUTCOMES The insight generated through the customer profiling model and WealthEngine s custom prospect list services is used by the hotel group to develop targeted lead generation campaigns within their marketing automation platform. It also allows them to determine the right offers for experiential travel to present to each prospect type. This allows them to create unique and compelling messages and rich creative that resonate with the specific desires of their audience as they look to embark on a luxury experiential journey. The results have been encouraging. Three campaigns in 2016 have resulted in a 15% increase in response rate and 5% increase in ROI. Based on this, the hotel group has decided to refocus their campaigns and offer promotions that are more targeted based on the profiling solution, and design promotions around the various preferred lifestyle activities. With this approach, the hotel group has been able to build a sound strategy and approach to target and acquire those prospects that have not only the wealth, but also the demographic and lifestyle attributes of a top customer. CASE STUDY 31

33 ABOUT WEALTHENGINE, INC. WealthEngine, Inc. TM is a leading provider of sophisticated wealth identification and prospect research services to providers of luxury organizations including luxury goods, retail, jewelry, private aviation, automobile, travel, real estate, hotels & resort and art and antiques. WealthEngine clients also include many financial services firms and philanthropic organizations that target high net worth individuals. More than 3,700 clients use WealthEngine for comprehensive research and analytics on individuals, companies and foundations. Headquartered in Bethesda, MD, WealthEngine serves both the United States and the United Kingdom. For more information, visit 32

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