Predictive analytics drove marketing success for Dermstore

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Dermstore, a dermatologist-backed online store, depends deeply on its relationships with customers. However, keeping track of more than 1 million active customers is no easy task.

Launched in 1999 by a board-certified dermatologist, the retailer has been a wholly owned subsidiary of Target Corporation since 2013. The fast-growing online retailer offers a wide range of professional strength and salon-grade skin care, beauty products and cosmetics through its website as well as its spa/store location in Hermosa Beach, Calif. For the multi-year customer service award winner, knowing its customers as more than just a number is of vital importance.

For this personalization, Dermstore turned to Custora, a company that has built a customer segmentation platform designed for retail. “We wanted to leverage predictive intelligence to drive our marketing strategy,” Beaupain says. “The Custora platform helps us send the right message to the right customer.”

The platform allows for fast access to data, she says. Dermstore uses Custora to reach shoppers at critical points in the customer lifecycle, such as when a loyal customer visits and sales dip. Data science rather than the usual business rules are used to determine when to intervene in a customer relationship, ensuring Dermstore is speaking to its guests at the most relevant time for them.

Improving campaign ROI

Custora’s platform consists of two parts. Its Customer Data Cloud powers the platform by aggregating data from transactional, engagement and web analytic sources and creates a unique profile for each customer.

The newest part of Custora’s platform is Segmentation Studio, a web interface with point-and-click access for insights needed in marketing campaigns. This tool helps marketing teams and retailers improve the return on investment of email, direct mail, Facebook and display ad campaigns.

Segmentation Studio gives Dermstore the ability to build and look at different customer segments, Beaupain says.

“We can go down to category level, for example skincare purchasers. We can look at transactions [or]which promos brought them to our site. The platform helps our team prioritize promotions and understand our customers better.”

Members of the marketing team at Dermstore can access customer data through the platform and easily segment customer data. It is no longer necessary to take a number and wait for help from an overworked IT department: Marketers can run their own data queries.

“Segmentation Studio has helped us bring power back to our marketing team,” Beaupain says. “Our team runs its own queries in our large data pool to come up with strategies that actually work.”

The retailer’s results have been even healthier since using the new platform for customer segmentation. Dermstore has realized an overall revenue lift of about 2 percent on its entire business.

Delving into data

Custora has been in business since 2011 and its software has evolved quite a bit over time, says CEO Corey Pierson. “In the earliest days, the software was predictive analytics. We thought if we could surface insights, marketers would know which ones to use.”

Pierson says the typical retailer has many separate marketing tools — one for email, one for Facebook ads and more. Delivering a consistent and valid message across all these tools to the perfect audience is difficult, if not impossible for many retailers.

“All marketing tools are integrated in our platform,” he says, “making it much easier to determine the right customer for this campaign, this message.”

Some retailers send the “We miss you” email too soon, according to Pierson; Custora’s platform uses algorithms to detect attrition, such as which customers are veering off their purchasing tendencies.

“Our platform uses flag alerts for these tendencies in individual customer purchasing, but not too early and not too late,” he says. The platform determines “Who is at risk right now?”

“Most retailers with forward-thinking brands are becoming more customer-centric,” Pierson says. Marketing teams are becoming empowered with tool sets, allowing them to develop campaigns for increasingly specific customer levels rather than just focusing on those who spent the most or the least. “They are tailoring brand experiences and exploring ideas for new ways to reach customers. For example, what’s unique about the top 5 percent of customers?”

“Learning alongside earning — the two can now go hand in hand with constant iteration learning about customers,” Pierson says. “Retailers are feeding the customer-centric cycle as a key to the growth of their brand.”
Custora’s client base is retail-specific and includes apparel, luxury jewelry and home goods retailers. “We help shine a light on the biggest areas of opportunity in a retailer’s customer data,” Pierson says.

Areas of opportunity

Custora collects data regarding offline orders, online orders, website visits, email and other touchpoints, and then organizes all the data around each unique customer. Customer profiles are augmented with a suite of predictive models to determine preferences in products, price points and discounts as well as lifecycle stage, propensity to return items and more. Diagnostics run to determine areas of opportunity for segmentation to impact the top and bottom line.

The platform is integrated with tools across marketing such as automatic email to seamlessly deploy customer segments into any marketing execution systems. Measurement tools quickly determine the success of targeted marketing campaigns. “Data is leveraged for a better customer experience,” Pierson says.

Since using the new platform for customer segmentation, Dermstore has realized an overall revenue lift of about 2 percent on its entire business.

Implementation of customer segmentation can be creative and add to the bottom line. Marketers know that the top 20 percent of customers often drive the bulk revenue of the brand. Custora uses predictive lifetime value models to identify customers most likely to be in the top segment before they actually spend to this top level. For markdown items, the platform can find customers who like the item in general and love to shop clearance sales.
Many chief marketing officers are now being given revenue growth responsibilities, Pierson says. “They know there’s potential in data. Custora helps them maximize the data in a self-serve way and create demand.”

Beaupain says the next frontier for Dermstore is integrating customer insights into “massive personalization” moving to day-to-day rather than just at key moments. Her marketing team is partnering with Custora on the integration of individual user-level predictions into the content of daily emails.

“Creativity does not work linearly,” she says. “Marketers can now become data scientists as well as idea artists. This platform helps blend both areas.”

Virginia-based D. Gail Fleenor has written hundreds of articles about retail, technology and consumer research following nearly two decades as a supermarket research manager.

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