Techniques to Simplify Personalized Marketing 5Nov15

1. © Copyright Loyalty Builders Inc. 2015 Techniques that Simplify Personalized Marketing and Boost Revenue Irena McCue, Director of Client Management CONFIDENTIAL

2. © Copyright Loyalty Builders Inc. 2015 6to 7number of times more costly it is to acquire a new customer than retain an existing one Improving the Lifetime Value of Existing Customers Source: Flowtown

3. © Copyright Loyalty Builders Inc. 2015 Increasing revenue from existing customers with relevance How many already personalize communications to each customer? How many do not but have it as a goal? What obstacles do companies face? Relevance Gets Customers to Buy More

4. © Copyright Loyalty Builders Inc. 2015 Three Steps to Ultimate Relevance Communications based on customer lifecycle and individualized product offers to each customer Best customers for any product(s) or customer segments Same communication to everyone Lift in Revenue & Profit $ $$ $$$ Static Product- Centric Customer- Centric Content/Offers Focus of this presentation

5. © Copyright Loyalty Builders Inc. 2015 How much lift? Proven Over Hundreds of Campaigns CPG/Ecommerce $490K Lift in 1 Campaign Product Targeting B2B Apparel $342K Lift in 6 Weeks Personalization Consumer Service $1M Lift in 12 Campaigns Personalization B2C Cataloger $3M Lift in 1 Mailing Catalog List B2C Retailer $1.2M Lift in 6 Campaigns Personalization B2C ECommerce +66% Profits in 10 Product Promos Product Targeting CPG/Ecommerce $315K Lift in 3 Month Trial Personalization B2B Supplier 24-67% Lift in 5 Campaigns Product Targeting Print Services $370K Lift in 12 Months Loyalty Targeting B2B Supplier 20x Return in Cross-Selling Personalization Customer Examples:

6. © Copyright Loyalty Builders Inc. 2015 Even a Little Lift Makes a Big Difference This $0.42 lift over previous methods delivered $314,700 of additional revenue At 500K individualized emails per month, this translates to $2.6 million additional revenue per year Testing methodology: A/B split test, 12 campaigns over 6 month periodAverage Over 6 Campaigns – 750K emails/group Control Individualized Lift 29,149 orders 34,357 orders 5,208 orders $3.09/email $3.51/email $0.43/email Business as Usual Individualized

7. © Copyright Loyalty Builders Inc. 2015 Loyalty Builders Customer: Consumer Services Problems: Almost 10K products to analyze Prior Solutions: Static email to all customers LB Experience: Personalized emails with 1:1 product recommendations to each customer LB Results: 6 personalized campaigns (approx. 1M emails, plus 250K control group): Revenue lift from $0.29 to $1.78 per email ($1.19 average) Average revenue lift $204,597 Total lift over 6 campaigns: $1,227,582 7

8. © Copyright Loyalty Builders Inc. 2015 Apparel Maker (B2B side) Problems: Stagnant return on marketing spend; Limited analytic skills and budget Prior Solutions: Regular static emails to all customers LB Experience: 5 campaigns to 3600 customers, individualized offers and messaging by loyalty group LB Results: Consistent revenue lift in every campaign 30-77% lift in buyers per email over control group 12-80% lift in revenue per order Overall revenue lift: $342,314 8 Designs just for you. View this email in your brow ser Sam Just For You! Here is a collection of apparel tailored just for you. Now that you’ve selected a template to work with, drag in content blocks to define the structure of your message. Don’t worry, you can always delete or rearrange blocks as needed. Then click “Design” to define fonts, colors, and styles. Need inspiration for your design? Here’s what other MailChimp users are doing. 1534801 $6.00 BUY NOW! 1031032 $6.00 BUY NOW! 8522290 $6.00 BUY NOW! 1534801 $6.00 BUY NOW! 8035732 $6.00 BUY NOW! 1031032 $6.00 BUY NOW! 4518505 $7.00 BUY NOW! 8522290 $6.00 BUY NOW! 1010004 $8.00 BUY NOW!

9. © Copyright Loyalty Builders Inc. 2015 Automotive Services Provider Problems: Converting 1-time buyers, expanding lifetime value, no analytics team Prior Solutions: Static print mailers and coupons LB Experience: Personalized coupons to targeted customers; LB Results: 12 monthly mailings to about 30K customers: $348K one-month revenue lift from 1-time buyers $612K one-month revenue lift from loyalists Additional $3.55M after 12 months (coupon redemption) 9

10. © Copyright Loyalty Builders Inc. 2015 The Right OffersTo Each CustomerAt the RightTime At Campaign Scale… Spring is here! Get ready for the season with 10% off Individualized image Individualized text Individualized discount Individualized product recommendations

11. © Copyright Loyalty Builders Inc. 2015 The Easy Way to Personalized 1:1 Offers 11 Customer Image Discount Text 1 Text 2 Product 1 Product 2 Product 3 Product 4 2246398 aaa 15% off Come back! We miss you! EquiVisor G.U.T. Quiessence Omega Horseshine 1491677 bbb 20% off Thank you! You rock! Tack Sponges EquiVisor Himalayan Salt Licks SmartDigest& reg; Ultra 1650265 ccc 10% off Spring is here! Get ready! Ultra Pellets Kensington Groom Tote Deniro Field Boots Ultimate Blanket Spring is here! Get ready for the season with 10% off Individualized image Individualized text Individualized discount Individualized product recommendations Data file formatted to drive marketing platform

12. © Copyright Loyalty Builders Inc. 2015 What Data Points to Use? Cust ID Item ID Date Amount Customer Profiler Recency Duration Retention Total Spent No. Orders Distinct Items Item 1 Totals Item 2 Totals Revenue Module Orders Module Category Module Time Module Log-LinearSummaryModule Customer Loyalty Rank Re-Sell Module Cross-Sell Module Item 1 Probability Item 2 Probability Item 1 Probability Item 2 Probability Product Metrics Customer Metrics Likelihood to Buy per Period Purchase Delay Risk Score Expected Value Loyalty Segment 1. Establishes buying patterns within entire customer base 2. Aligns each customer with most appropriate pattern

13. © Copyright Loyalty Builders Inc. 2015 Bird’s View Customer Migration (6 month) 13 Loyalists Nurturers Underperformers Faders Win Backs

14. © Copyright Loyalty Builders Inc. 2015 Loyalty Builders’ Predictive Metrics Metric Explanation Loyalty Segment Segments population on Value Rank and Risk (7 segments). Risk Score Probability customer will not purchase before going “inactive.” Likely Buyer Score Probability each customer will purchase within 10 configurable time horizons (7 to 90 days). Expected Value Expected amount of revenue from each customer within 10 configurable time horizons (7 to 90 days). Metric Explanation Re-Sell Probability Probability of customer to purchase each item previously purchased within 10 configurable time horizons (7 to 90 days). Cross-Sell Probability Probability of customer to purchase each item never before purchased within 10 configurable time horizons (7 to 90 days). Cross-Sell Rank Score A ranked score indicating relative interest in purchasing each item never before purchased within 10 time horizons (7 to 90 days). Loyalty Predictions: Product Recommendations: Other Metrics per Customer: Value Rank, Purchase Delay, Category Score, Retention, Recency, Number of Orders, Amount Spent

15. © Copyright Loyalty Builders Inc. 2015 Purchase History is Highly Predictive of Future Purchases Predicted Results vs.Actual Results (Recent Prospect) 15 0% 20% 40% 60% 0-3% 3-5% 5-10% 10-15% 15-20% 20-25% 25-35% 35+% Purchase Probability Back Test Predicted Probability ActualPurchasing 0.0% 0.2% 0.4% 0.6% 0.8% 1.0% 1.2% 1.4% Cross-Sell Back Test % Customers Purchasing in 1 month % Customers Purchasing in 3 months Predicted Score ActualPurchasing 0% 10% 20% 30% 40% Re-sell Back Test ActualPurchasing Predicted Probability Customer Defection Back Test

16. © Copyright Loyalty Builders Inc. 2015 16 Mapping Out Customer Lifecycle Lifecycle Welcome & Nurture Engage Retain Re-Acquire Segment Prospects 1&2x Buyers Nurturers Underperformers Loyalists Faders Win Backs Total Customers 879,022 678,055 567,798 983,222 345,689 45,900 234,945 % of Total Customer 23.5% 18.2% 15.2% 26.3% 9.3% 1.2% 6.3% Total Revenue - $6,915,770 $8,559,536 $916,258 $21,099,472 $307,226 $0 % of Total Revenue - 18.30% 22.65% 2.42% 55.82% 0.81% 0.00% Orders - 39,792 47,286 9,391 65,645 8,351 5,769 Average Order Size - $173.80 $181.02 $97.57 $321.42 $36.79 $0.00 Average Tenure - 31 1057 1763 2313 1161 2033 Average Recency - 57 49 92 50 91 178 Repurchase Rate - 46% 59% 32% 56% 35% 30%

17. © Copyright Loyalty Builders Inc. 2015 Welcome & Nurture Engage Retain Re-Activate Sample Segment Strategy - Loyalists Overview – Best of the best customers • Buy most frequently • Most broadly • Spend the most – Best targets for cross sell – Strong brand loyalty and numerous transactions – Stronger scoring recommendations Segment Goal – Maintain & optimize Considerations – Make a purchase whether they are marketed to or not, so large discounts are not necessary 17 Loyalist Program Themes Offers Calls to Action Messaging Contact Approach  Cross-sell focus: 1 upsell, 3 cross- sell product messaging  Offers be more about qualitative benefits vs. discount approach  Call to actions are focused on exploring different products and re-ordering  Messaging and tone should personalized, targeted and appreciative  Emphasize appreciation  High frequency  Targeted  No more than # communications – 2 per week – 10 month  New Product  Product re-sell  Product Cross- Sell  Flash Sale  Exclusivity  Thank You  Ratchet Offers  Free Sample  Loyalty Club Pricing  Double Points  Free shipping  Low stock on your favorites  Be first to try it and tell your friends  Personalized recommendations  New products  Exclusive promotions  We appreciate you  Reminders Max touches Jan - Mar 10 Max touches: Apr - Sep 16 Max touches: Oct 8 Max touches: Nov 8 Max touches: Dec 6 Inclusion / Exclusion  Did not open previous email Include  Clicked through, did not buy Include  Opted-Out Exclude Value Risk Revenue % of Revenue # of Customers % of Customers Orders Ave Order Size Average Tenure Average Recency Repurchase Rates H L $21,099,472 55.82% 345,689 9.3% 65,645 $321.42 2313 50 56%

18. © Copyright Loyalty Builders Inc. 2015 Other steps 1. Promotion Strategy and Promotion Planning No different than any other campaign or marketing program Add product recommendations and individualized messaging to existing campaigns 2. Variable Content Design Variable content designs are not difficult – Loyalty Builders can help Abandon cart template can be easily repurposed 3. Campaign Execution Most marketing platforms handle variable content We’ve worked with most Loyalty Builders can execute the campaign for you

19. © Copyright Loyalty Builders Inc. 2015 The Right OffersTo Each CustomerAt the RightTime At Campaign Scale… Spring is here! Get ready for the season with 10% off Individualized image Individualized text Individualized discount Individualized product recommendations

20. © Copyright Loyalty Builders Inc. 2015 Special Offer for NEDMA We are confident that our methodology works and guarantee at least a $100,000 lift from qualified campaign If our methodology doesn’t create at least $100,00 lift, our services are free More detail in the flier, along with a 100 Grand bar that represents $100,000 revenue lift that we can help you to achieve!

21. © Copyright Loyalty Builders Inc. 2015 Thank You – Questions? “More Revenue from Existing Customers” irenam@loyaltybuilders.com

22. © Copyright Loyalty Builders Inc. 2015 Loyalty Builders: The Simplest Way to Revenue Uplift from the promotions you are already running Requirements for Fast, Easy Uplift Typical Approach Loyalty Builders No data modeling or scoring rules ✔ No data integration projects ✔ For marketers (no IT, data science skills needed) ✔ Immediate access to actionable campaign lists ✔ Scores every customer on every product ✔ No personally identifiable information ✔ Immediate, easily measurable ROI ✔

23. © Copyright Loyalty Builders Inc. 2015 You Get: AccurateAnalytics Packaged to Execute More Relevant Marketing Email lists with individualized content formatted for your email system Control files formatted to drive variable print campaigns Data files for real-time e-commerce and mobile recommendations Sales leads and recommendations for CRM systems Data files powering personalized digital banners, ads Catalog mailing lists that optimize revenue and margins

24. © Copyright Loyalty Builders Inc. 2015 Loyalty Builders PredictiveAnalytics Sharpened Over 15Years of Research &Experience 24 Customer Loyalty Scores Product Interests of Each Customer Who are the best customers for each (any!) product? What are the best products to recommend to each customer (ranked!)? When will each customer make a purchase? Who is worth your marketing $$, and who is a waste of time? Immediate Answers to Questions Like:

25. © Copyright Loyalty Builders Inc. 2015 Loyalty Builders: By Far the SimplestApproach PredictiveAnalytics-as-a-Service Upload Purchase Data (Cust ID, date, item, amount) to Cloud Service Personalized Product Recommendation Service Download Campaign Lists Email List Direct Mail Catalog Depth Online NBO Sales Leads

26. © Copyright Loyalty Builders Inc. 2015 How Does Loyalty Builders Work? LB Data Delivery Service Metrics DB Predictions by Customer Customer Purchase Data from Subscriber Longbow (Self-service SaaS tool) Campaign & Program Execution Lists Campaign Execution Lists Summary Reports Predicted Metrics for Each Customer E-Commerce CRM Data Import Campaign Platform Analytics Platform Loyalty Builders Cloud Service Deliverables Subscriber-Side Cust ID TX Date $ Amount Product ID

27. © Copyright Loyalty Builders Inc. 2015 How Do We Make It So Simple? 1. Focused objective: “predict buying behavior” 2. Best predictor data (not any/all possible data) 3. Model individuals against population patterns Customer Profiler Recency Duration Retention Total Spent No. Orders Distinct Items Item 1 Totals Item 2 Totals Revenue Module Orders Module Category Module Time Module CustomerValueScoringModule Customer Loyalty Rank Re-Sell Module Cross-Sell Module Item 1 Probability Item 2 Probability Item 1 Probability Item 2 Probability Product Metrics Likelihood to Buy per Period Purchase Delay Risk Score Expected Value Loyalty Segment Customer Metrics Cust ID Item ID Date Amount Actionable Campaign Data Files Loyalty Builders Automation

28. © Copyright Loyalty Builders Inc. 2015 How is Loyalty Builders Different? Big Data Customer Profiling: Simple Data Alternative: Analytics Analytics Customer ID Item Purchased Amount Spent Purchase Date A New Insight Purchases Address Gender Age Website Visits Call Center Cases Sales Calls Income Family Social Posts Likes Tweets Clicks GPS Location Mobile Apps E-Commerce Page Looks Third Party Data Jobs Social Connections For Each Customer: Likelihood to Buy Risk of Defection Expected Value Re-Sell Probabilities Cross-Sell Probabilities Loyalty Segment Product Affinities We Get More from the Less Data

29. © Copyright Loyalty Builders Inc. 2015 Why is this Important? The TypicalApproach… Marketing Campaigns Data/Insight Interpretation Customer Targeting Product Selection Discount/Offer Selection Channel Selection Content Campaign Lists Translate scores and “insights” into marketing actions Data Modeling Data Mining Data Sampling Algorithm Selection Scoring Functions Rules Testing Find “predictor” attributes and score customers Multiple Sources Data Extracts Cleansing Enrichment Schema Modeling Transformation Integration Storage Governance Data Preparation Integrate as much data about your customers as possible Translate scores and “insights” into marketing actions Data/Insight Interpretation Customer Targeting Product Selection Discount/Offer Selection Channel Selection Content Campaign Lists vs. Loyalty Builders

30. © Copyright Loyalty Builders Inc. 2015 Three Easy Ways Give Us a Try ① Free Opportunity Analysis (how much could you make?) ② Low-Cost Pilot Program (multiple campaigns) ③ $100 Grand Trial Campaign: Substitute one of our lists for yours in your next campaign We’ll get a revenue uplift at least $100,000 over our $5,000 cost in a test campaign, or your money back It’s easy! We’ll show you.

31. © Copyright Loyalty Builders Inc. 2015 Proven Product: Keurig’s customized offers $490,000 revenue uplift • Over 800,000 emails sent • 250,000 emails in control group • Customized emails produced 3x to 4x more revenue • Over 65% lift in number of buyers for Dark and Decaf Open Rate Click-Thru Rev/Email Revenue Lift/Email Tea 34% 19% $0.73 $0.16 Dark 54% 27% $2.19 $1.62 Decaf 49% 29% $1.90 $1.33 Flavored 43% 22% $1.27 $0.70 Light/Med 42% 22% $1.34 $0.77 Control 30% 16% $0.57 $0.00 This campaign was nominated for most innovative marketing campaign award by MITX.

32. © Copyright Loyalty Builders Inc. 2015 Cross-sell Campaign Sample Criteria Goal – broaden variety of products and drive incremental sales from the best customers Loyalty Segments – Loyalists and Nurturers Optimal product combination: 1-2upsell products and 2-3 cross-sell products (4 products total) Upsell products criteria – upsell product with highest scores for each customer Cross-sell product criteria – cross-sell products with highest scores for each customer (preferably with scores 7 or higher) Level of discount – no discount to low discount, preferably on products never purchased before Frequency – 1-2 times a month as a part of individualized & triggered communication strategy (rotate products from the top recommendations to avoid emailing same product recommendations more than once)

33. © Copyright Loyalty Builders Inc. 2015 Retention campaign sample criteria Goal – reengage customers that have deteriorating behavior Loyalty Segments – Underperformers, Faders, Winbacks Optimal product combination: 3-4 upsell products and 0-1 cross-sell products (4 products total) Upsell products criteria – upsell product with highest scores for each customer Cross-sell product criteria – cross-sell products with highest scores for each customer (preferably with scores 7 or higher) Level of discount – medium to high discount, based on the customer segment (medium discount to Underperformer and Faders, high to Winbacks) Frequency – 1 times a month, when customer moves down to the lower loyalty segment and remains there (as a part of individualized & triggered communication strategy)

34. © Copyright Loyalty Builders Inc. 2015 New customer campaign sample criteria Goal – convert 1&2xBuyers into loyal customer Loyalty Segments – 1&2xBuyers Optimal product combination: 1-3 upsell products and 1-3 cross-sell products (4 products total, use as many upsell as available ) Upsell products criteria – upsell product with highest scores for each customer Cross-sell product criteria – cross-sell products with highest scores for each customer (preferably with scores 7 or higher) Level of discount – discount based on recency from the last purchase, introduce discount and increase it with increase in recency (test optimal level and time for increases) Frequency – 1 – 2 times a month, as a part of individualized & triggered communication strategy (rotate products from the top recommendations to avoid emailing same product recommendations more than once)

35. © Copyright Loyalty Builders Inc. 2015 Back-of-Napkin ROI Calculator Number Customer Contacts Per Month 100,000 Normal Buy Rate per Month 1.0% Loyalty Builders Buy Rate per Month 1.5% Average Order Value (Normal) $200.00 Average Order (Loyalty Builders) $200.00 Loyalty Builders Cost Per Month $5,000.00 Additional Costs Per Month $500.00 Average Product Margin 40% Additional Responders 500 Revenue Uplift per Month $100,000.00 Product Margin Uplift per Month $40,000.00 Uplift Cost per Month $5,500.00 Immediate Return per Month 727.27% Campaign Revenue per Year (No LB) $2,400,000.00 Campaign Revenue per Year (with LB) $3,600,000.00 Revenue Uplift per Year $1,200,000.00 Subscription Cost per Year $60,000.00 Revenue Multiple on Subscription Cost 20.00 The Drop-Dead Simplest Way to Boost Revenue with Predictive Customer Analytics for Personalized Marketing Campaigns for: Retailers E-tailers CPG companies B2B suppliers Service providers Catalogers

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