In what is believed to be industry first, Petco Animal Supplies is testing to see if including customer-written product reviews in its outbound e-mail campaigns boosts conversion-to-sale rates.
Petco in January sent e-mails containing top-rated products and customer-written reviews to its more than 1 million subscribers. In March, Petco plans to do an A/B split test by sending e-mails with product offers accompanied by customer reviews to half of its subscribers and product offers without reviews to the other half.
Though companies such as Amazon.com have featured customer-written product ratings and reviews for years, Petco is believed to be the first to test them in outbound e-mail campaigns.
“The idea was to leverage customer involvement in the Web site and use it as a marketing tool,” said John Lazarchic, vice president of e-commerce for San Diego-based Petco. “Most recent surveys say that customers are very interested in what other online shoppers have to say. They trust the voice of other customers more than they trust the retailer or the manufacturer.”
Petco toyed with the idea of adding customer reviews to its Web site for several years, but held off because of potential management headaches, such as having to screen all the reviews for inappropriate content, such as obscene material.
The company’s Web site late last year began featuring customer ratings and reviews using a recently launched service by outsourcer Bazaarvoice.
Companies using Bazaarvoice can customize the number of product attributes customers can rate. Petco, for example, asks reviewers to rate products from one to five paws under the categories “overall,” “pet satisfaction,” “appearance,” and “quality.”
Bazaarvoice charges a set-up fee plus a monthly service fee—starting at $2,000 a month for companies selling less than $10 million a year—negotiated on a page-view and order-volume basis, he said.
Petco’s e-mail test is part of an effort to demonstrate that product reviews drive conversion-to-sale rates high enough to justify the cost of the service.
It is also an effort to drive more multi-channel shopping because people who shop multiple channels spend more than those who shop through a single channel.
For example, a 2004 study of J.C. Penney’s customers commissioned by Abacus Direct found that triple-channel shoppers—those who bought online, from the catalog and in retail stores—spent an average of $887 a year and dual-channel shoppers spent an average of from $446 to $608 annually, depending on the combination of channels. In comparison, Internet only shoppers spent $157 annually; retail-only shoppers spent $195, and catalog-only shoppers spent $201.
A significant percentage of Petco’s e-mail addresses are collected through its loyalty card program in its retail stores. As a result, a large number of Petco’s e-mail subscribers are offline-only shoppers.
Lazarchic confirmed that Petco’s multichannel shoppers spend significantly more than its single-channel shoppers. He added that Petco’s e-mail subscribers who only shop retail spend more than those who only shop retail, but aren’t e-mail subscribers.
“We see value in just getting the e-mail into customers hands to keep Petco top of mind,” he said.
Petco’s e-mail program also includes sending its online shoppers alerts to sales on products they have already bought.
“Because we’re in the consumable business, people buy the same pet products over and over,” said Lazarchic. “If you buy a bag of dog food from us, and that dog food goes on sale in our circular, we will e-mail you that it’s on sale. Our circular has 500 or 600 items in it, so I can’t e-mail you that entire thing, so what we try and do is target you with items we know you already buy or items that are on your wish list that are on sale.”
But Petco e-mails with product offers not based on customers’ past purchases don’t generally perform as well, he said.
“Historically, we know that if we just pick top-selling items and e-mail them to people, conversion isn’t that great,” he said. “It’s very hard to target in the pet space. You have to know a lot about that consumer.”
As a result, he said, when Petco isn’t sending e-mails based on customers’ purchase history, the company tends to promote categories of products.
However, including customer-written product reviews in outbound e-mail blasts not only may boost conversion rates, it will expand the customer-review program’s reach.
“People are really emotional about their pets and love to talk about them,” said Lazarchic. “We have a really intensive e-mail marketing program already. We thought it would be great to take some of the comments where they’re having great success with products and get them into the hands of people who don’t come to the Web site on a regular basis.”
Lazarchic declined to say how well the first test of including product reviews performed, but it apparently performed well enough that he isn’t abandoning the effort.
