Musicland Group, Inc. the corporate parent for four retail chains, has learned that marketing works best when promotions are highly personalized and targeted to create customized mailings for each individual customer.
The turnaround of a customer-loyalty program for Sam Goody stores that only two years ago was beset with problems has been so successful that Minnetonka, MN-based Musicland recently began expanding the program into 1,200 stores nationwide.
– The “Replay” program had to be overhauled because customers were deserting it in droves.
– Teleservices phone agents were swamped with complaints from frustrated customers in a timely fashion.
– Impersonal and unappealing printed materials were mailed to customers late.
– Record keeping was shoddy for customers eligible to receive 10% rebates on purchases of $150 or more.
– Membership was dropping and store managers became reluctant to promote the program.
The successful turnaround that followed has led to the recent expansion. Three out of four of Musicland’s audio and video retail chains now participate in the revamped program, which is managed by a database marketing agency, Group 3 Marketing, based in Wayzata, MN.
“Once we got Sam Goody up and running we brought the On Cue stores on board in April, and Sun Coast stores in August,” says Archie Benike, vice president of marketing for the corporate parent Musicland.
A fourth chain of retail stores called Media Play is expected to join the Replay marketing club program sometime next year.
Positioned as a club to consumers, the Replay program generates mostly retail store traffic and some online traffic. Members pay $7.99 annually to receive product discounts, as well as promotional postcards and newsletter mailings with information about new product releases, reviews and related infotainment.
Newsletters designed to generate retail and online traffic pull response rates averaging 16% to 18%, while less-targeted and less-personalized postcard mailers typically generate response rates averaging 5% to 7%.
The circulation and scope of mailings varies depending on how much of an advertising and promotion budget is available from the product manufacturer. Message content depends largely on what specific customer demographic information is captured and stored in the database.
Data for relationship management is gathered when magnetic-strip cards are swiped at cash registers to capture purchasing records. Consumers are encouraged to use the membership cards to accumulate points and receive $5 gift certificates.
Musicland has developed a database detailing the purchasing and advertising response history of 700,000 customers for the Replay program. The company’s goal is to increase the Replay club database to 1 million names by Christmas.
Group 3 manages the database and coordinates mailings for Musicland. Newsletters are mailed bimonthly to all members and, on average, four or five special postcard mailings are sent out per month, according to Benike.
Both the newsletters and postcards are personalized and targeted using information from the Replay program database. The printed materials target members based on music and film preferences, recent purchases, birthdays and proximity to retail stores.
The circulation for postcard promotions is typically about 6,000 pieces, but it various from 1,000 to 30,000 pieces, says Benike. Postcards generally are used to announce new product releases.
Customized messages are placed in a box on the back cover of newsletters adjacent to street address information. A different cover page is used for each of the three store chains participating in the Replay program.
“Page three is almost entirely devoted to personalized copy,” says Bart Foreman, president of Group 3 Marketing.
The third page notes accumulated point balances, gift certificate rewards status, and new product releases matching the customer’s entertainment tastes as reflected by past purchases. Other customized offers and information are printed on a freestanding insert.
The remaining pages of the newsletter are fairly generic product offers, segmented down to the store where the customer enrolled at their point of purchase. The club is promoted by store signs and Musicland’s primary Web site, www.samgoody.com.
Each of Musicland’s stores receives reports on the purchasing activity of their 50 top-spending customers. The information is coded to pop up on electronic cash register screens so cashiers can greet these customers by name.
Group 3 conducts small outbound teleservices campaigns offering free gift tickets to concerts and other events to Musicland’s biggest customers. “If they say yes we mail them out,” Foreman said.
Musicland soon plans to start transmitting data captured by electronic cash registers daily to Group 3. As of late September, the data was still being transmitted weekly.
Musicland also has bigger plans to expand the program online. The retail holding company is looking for more marketing partners after recently signing a co-promotion deal with Web marketer Netflix.com, based in Los Gatos, CA.
Musicland is preparing to adapt the program to start e-mail promotions next year. However, before it starts using e-mail, says Benike, it will publish notices in newsletter mailings directing interested customers to sign up online to receive an electronic version of the newsletter.
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