Mini Case: Using a CRM System to Assess Marketing Impact The national retailer is interested in finding out if it can improve the value of its loyalty card holding customers. The marketer decided to run an experiment to evaluate two new potential marketing strategies: "Heavy Promotion" & "VIP Status." The company also kept performing standard CRM practice to some customers. The company ran the experiment for six months, and then compared the results to the previous six months of behavior. Your key task is to assess the impact of the experiment. To do this, it is necessary to calculate the effect size of the experimental effect. i Click the icon to view the description of the company and a detailed explanation of each CRM strategy. i Click the icon to view an explanation for how to calculate the experimental effect size. Click the icon to view a description of all metrics reported and the summarizing tables. Calculate the experimental effect size. (Round to the nearest dollar.) Avg. Sale ($) Avg. Total Avg. # Per Purchases Margin ($) Per Purchase Purchase Avg. Promotion Redemption Rate Avg. ($) Redeemed via Promotion Redemption "Heavy Promotion" $1 - 0.5% $ "VIP Status" $2 1.6% $ You are the Cheif Marketing Officer of a large national retailer. For many years, this retailer has had a customer loyalty card program. This program allows shoppers to acquire "Big Store Buxx" that correspond to a % of every purchase the customer makes. Big Store Bux can be redeemed to make in-store purchases. In addition, customer loyalty card members often receive small "VIP Insider" perks. For example, loyalty card members will receive advance notification of deeply discounted products online. Alternatively, "VIP Insiders" sometimes receive public signifiers of their VIP status. For example, when a VIP Insider buys a product they will have it packaged in a special gold-embossed bag that signifies their special status. Description of CRM Strategies: "Heavy Promotion" - The first strategy focuses on providing the loyalty card member with nearly triple the amount of promotional coupons in the mail and promotional e-mails. "VIP Status" - The second strategy focuses on increasing the feeling of "VIP Insider" status. For this group, the retailer sent special hand-written invitations to after hours events at the retail stores, sent members a new "Black Card" version of the loyalty card, and offered free valet parking services whenever the customer visited any high-end mall where the stores are located. Control Group - Finally, the majority of loyalty card customers did not receive any new treatment, they just kept receiving the same loyalty card benefits they always received. This group acted as the "control" group in this experiment. Print Done Key metrics: (1) Avg. # of Purchases - Over a 6-month period, the average number of purchases a customer made with the retailer. (2) Avg. Sale ($) Per Purchase - The total average value of the transaction, not including sales tax, that the customer paid on average per transaction. Any discount due to sales or promotions are incorporated into this calculation. (3) Avg. Total Margin ($) Per Transaction - The total average value of a sales transaction after discounting the cost of goods sold. (4) Avg. Promotion Redemption Rate - The average % of promotions redeemed by a customer. Calculated as (# of targeted promotions redeemed in last 6 months / # of targeted promotions sent to customer in last 6 months) (5) Avg. ($) Redeemed via Promotion Redemption - The average value in savings redeemed by customers. Calculated as (Total value of savings redeemed ($) /# of promotions redeemed) In the first table, which reports the customer metrics 6-months PRIOR to the experiment, notice how each row has the same exact values. This is because this company was careful to ensure that the customers marketed for the control group, "Heavy Promotion", and "VIP Status Upgrade" all demonstrated equivalent behaviors across all of the key metrics. This is common (and recommended!) practice for experiments using CRM system data. Customer Metrics for 6-months PRIOR to Experiment Avg. Avg. Sale ($) Avg. Total Avg. ($) Redeemed Cunarimental Aura 4 Dramatian Experimental Group Customer Metrics for 6-months PRIOR to Experiment Avg. Avg. Sale ($) Avg. Total Avg. ($) Redeemed Avg. # Promotion Per Margin ($) Per via Promotion Purchases Redemption Purchase Purchase Rate Redemption 3 $30 $12 2.8% $15 3 $30 $12 2.8% $15 3 $30 $12 2.8% $15 Control Group "Heavy Promotion" "VIP Status" Experimental Group Customer Metrics for 6-months DURING Experiment Avg. Avg. Sale ($) Avg. Total Avg. ($) Redeemed Avg. # Promotion Per Margin ($) Per via Promotion Purchases Redemption Purchase Purchase Redemption Rate 3 $32 $16 2.8% $14 3 $42 $17 2.3% $22 4 $34 $20 1.2% $9 Control Group "Heavy Promotion" "VIP Status