SNUG - 27TH FEBRUARY 2014 RETAIL MARKETING ANALYTICS OVERVIEW

SNUG - 27TH FEBRUARY 2014 RETAIL MARKETING ANALYTICS OVERVIEW

WHO IS THIS GUY? Tim Manns a) Principal Analytics Consultant b) Since 1998 (employment history: Clementine/Modeler, SPSS, Optus, SAS) c) All industries, all analytics.

PROOF OF CONCEPT - PROJECT OBJECTIVES Proof Of Concept (POC) project. Project duration: 25 days effort. - using SAS software, analyse point-of-sale data with a focus on member activity. The project deliverables fell into three principal phases: 1. Member Insights & Profiling Census demographics surrounding stores Member segmentation 2. Predictive Analysis Forecast future member spend Predict member churn Recommend next best product 3. Market Basket Analysis Product associations Price sensitivity

HIGHLIGHTS FOR SNUG 1. Project Overview 2. Demographics & Summary 3. Predictive Analysis 4. Basket Analysis 5. Customer Insights

ANALYTICS OVERVIEW Basic demographic analysis was conducted using publicly available data from the 2011 National Census, and Australian Taxation Office postcode summary tax returns Data includes age, gender, income, rent & mortgage amounts etc s are compared in relation to the demographic profile of the households in surrounding postcodes

DEMOGRAPHICS SURROUNDING STORES For some stores there are significant differences in the demographic profiles of surrounding postcodes. For example the average % of individuals aged 0-4 in surrounding postcodes of the Redbank store can be compared to the average store nationally. In this case there is a 49% greater proportion of 0-4 year olds. Difference From 60% 40% 20% 0% 20% 40% 60% Redbank Age 0 4 Age 5 14 Age 15 19 Age 20 24 Age 25 34 Age 35 44 Age 45 54 Age 55 64 Age 65+ Distribution Of Age Groups In Nearest Postcodes Above Below

DEMOGRAPHICS SURROUNDING STORES Difference From Difference From 140% 120% 100% 80% 60% 40% 20% 20% 0% 40% 60% 140% 120% 100% 80% 60% 40% 20% 0% 20% 40% 60% Brisbane Age 0 4 Age 5 14 Age 15 19 Age 20 24 Age 25 34 Age 35 44 Age 45 54 Age 55 64 Age 65+ Distribution Of Age Groups In Nearest Postcodes Redbank Age 0 4 Age 5 14 Age 15 19 Age 20 24 Age 25 34 Age 35 44 Age 45 54 Age 55 64 Age 65+ Distribution Of Age Groups In Nearest Postcodes Above Below Above Below

STORE DEMOGRAPHICS VS SALES BY CATEGORY Brisbane 103% more (over double) Age 20-24 in surrounding postcodes than average store. Difference From 120% 90% 60% 30% 0% 30% 60% Age 0 4 Age 5 14 Age 15 19 Age 20 24 Age 25 34 Age 35 44 Age 45 54 Age 55 64 Age 65+ Distribution Of Age Groups In Nearest Postcodes Above Below 65% greater proportion of Sundry purchases than average store. 37% greater proportion of Intimate Apparel purchases. % Of Sales By Category 80% 60% 40% 20% 0% 20% 40% 60% SUNDRY SECTION INTIMATE APPAREL LADIESWEAR GENERAL MERCHANDISE FOOTWEAR & ACCESSORIES MENSWEAR ENTERTAINMENT HOMEWARES TOYS BABY & BASICS CHILDRENSWEAR Above Below

STORE DEMOGRAPHICS VS SALES BY CATEGORY Redbank 49% more Age 0-4 in surrounding postcodes than the average store. 43% more skew to Baby & Basics in store (as percentage of overall store sales) than average store. Difference From % Of Sales By Category 60% 40% 20% 0% 20% 40% 60% 50% 40% 30% 20% 10% 0% 10% 20% Age 0 4 Age 5 14 Age 15 19 Age 20 24 Age 25 34 Age 35 44 Age 45 54 Age 55 64 Age 65+ Above Below Above Below

PREDICTIVE ANALYSIS

MEMBER PREDICTIVE ANALYTICS Deliverable 2: Predictive Analysis. Predict customer value using time series forecasting. In order to accurately forecast future member spend we utilise multiple inputs including: The number of prior visits/baskets (recency & frequency) The cumulative prior spend (monetary) The number of items/products purchased in prior visits Customer segment (applied basket & product affinities)

MEMBER SPEND FORECAST Prediction of future $ spend for every member Churn risk is the difference between average forecast and recent forecasted spend Members with greatest decreasing spend can be targeted in campaigns. Optimises $ Member $ Spend Per Quarter 300 250 200 150 100 50 0 20104 20111 20112 Forecast is below average. Therefore lost revenue. High churn score 20113 20114 20121 20122 20123 20124 Year Quarter Actual $ Sales Forecast $ Spend Forecast $ Spend Per Quarter 300 250 200 150 100 Churn Score 50 is $ Lost Spend 0 20104 Forecast above average. Higher spend than historically. Low churn score. 20111 20112 20113 20114 20121 20122 20123 20124 Year Quarter Actual $ Sales Forecast $ Spend Forecast

BASKET ANALYSIS

BASKET ANALYSIS CHILDREN S UNDERWEAR Product affinities across the second highest product category grouping skuplus5 show that the strongest product pairings occur amongst similar products. For example product affinity for Children s Underwear is strongest to Children s Hosiery (although this is part of Intimate Apparel, not Children s Wear ). Skuplus6 Key Children s Wear Intimate Apparel Baby & Basics NURSERY CHILDRENS HOSIERY CHILDRENS UNDERWEAR CHILDRENS NIGHTWEAR BABYWEAR Examining product affinities (at skuplus5 category level) - within and across different product skuplus6 categories.

BASKET ANALYSIS FOR CHILDREN S WEAR Ideal input for activities to promote Next Best Product or increase basket diversity Skuplus5 Code Skuplus5 Description Skuplus6 Description Affinity Order TG16642507 CHILDRENS UNDERWEAR CHILDRENSWEAR 1 TG16642506 CHILDRENS HOSIERY INTIMATE Best APPAREL next product 2 TG16642501 BABYWEAR CHILDRENSWEAR Second next product 3 TG16642503 CHILDRENS NIGHTWEAR CHILDRENSWEAR Third next product 4 TG16642502 NURSERY BABY & BASICS 5 TG16642504 LICENCE CLOTHING CHILDRENSWEAR

PRICE ELASTICITY AND SENSITIVITY Price Elasticity Consumer demand of products varies depending upon price. The relationship between price and demand of goods if often referred to as Price Elasticity. Price Sensitive Members A member who typically purchases a product at its lower end price range can be considered Price Sensitive.

PRICE ELASTICITY & BASKET ANALYSIS One specific product (Children s Wear -> Girls 7-10 -> Pleated Dress -> TG16150211791). Product price varies from $6.01 to $22.40 (mean) price of $15.40 Unit Price $25 $20 $15 $10 $5 Price Range 3 (15%) Some members buy when priced at 19.60 Price SKU Price And Range Demand 2 (70% unit sales) Price Range 1 (15%) Some members buy when priced at 10.83 $0 0% 9% 17% 26% 34% 43% 51% 60% 68% 77% 85% 94% % Of Units Sold

CUSTOMER

MEMBER SEGMENTATION Why Segment? -> differentiate members by product preferences and behaviours. Members can be allocated into segments based upon their basket purchases, and other metrics such as visit frequency, spend, and price sensitivity. 3.4 million members (all members that made transactions during 2010-2012 and were tracked over time) were allocated to an behavioural segment. Members placed into one of 25 segments. Each segment is unique in some way.

MEMBER SEGMENTATION CHILDREN S WEAR $150 $125 Big Basket For Mum And Kids Monthly Kids Monthly Spend $100 $75 $50 $25 Churned One More Time Single Lady With Discount Undies Inactive Discounted Baby Monthly Family Every Two Weeks $0 Inactive Menswear Churned Bargain Hunter $25 5% 6% 7% 8% 9% 10% 11% 12% 13% 14% 15% 16% 17% 18% 19% 20% Basket % Children's Wear

EXECUTIVE SUMMARY

NEW MEMBERS HONEYMOON OFFER During 2011 856,250 Members 1 st visit or >3 months since previous visit $64.61 (4.3 items) Currently no tailored communication vs Honeymoon Offer is presented 435,207 Members (50%) 2 nd visit within 3 months $63.29 513,750 Members (60%) 2 nd visit within 3 months $63.29 Total $27.5m revenue from 2 nd visit Total $32.5m revenue from 2 nd visit Additional $5m revenue for 2 nd visit alone member visit frequency is monthly >$60m additional revenue over 12 months

NEW MEMBERS HONEYMOON OFFER During 2011 856,250 Members 1 st visit or >3 months since previous visit $64.61 (4.3 items) For example: Member 435,207 30002248 Members Currently no First visit: 23 rd Sept (50%) 20112 tailored nd visit Total $27.5m within 3 months revenue communication Purchased: Ladies Briefs; Free Fusion; Ladies Denim. $63.29 from 2 nd visit Spend: $68.20 (3 items) Next vs Best Offers: Bras; Hot Options Knits; Hot Options Woven; Ladies Casual Bottoms Honeymoon Offer 513,750 Members (60%) 2 nd visit Total $32.5m revenue is Second presentedvisit: 23 rd within Dec 2011. 3 months from 2 Purchased: Bras; Hot Options Woven; Ladies Fashion nd visit $63.29 Accessories (x2) Spend: $75.90 (4 items) Next Best Offers: Ladies Briefs; Hot Options Knits; Women s Shoes

THANK YOU