Increasing Profit-Per-Customer with Incentive Optimization for E-Commerce Company

Background

A publicly traded e-commerce company spends tens of millions of dollars per year on discounts and vouchers to drive customer retention and new customer conversion. Beyond Data Consulting was engaged to optimize the way that this budget was being spent.

Key Findings

The analysis identified two inefficiently-targeted customer segments:

1. Non-responsive segment: Customers who only shopped when they had vouchers and discounts (i.e. no further purchases were driven following the initial incentivized purchase).
2. Over-incentivized segment: Customers who were going to make purchases anyway, and didn't need any incentive to do so.

Solution

Beyond Data Consulting targeted customers who were already sufficiently retained (and for whom it was predicted that incentives would provide no uplift in customer purchasing), and withheld from them discounts and vouchers.

Results

• Increased Incentive Efficiency: Improved profit-per-customer by 1.2% on an AB-test. This translated to $1M+ saved in incentive expenditure per year.
• No Negative Impact on Purchase Volume: Incentive expenditure was reduced with no statistically significant reduction in customer purchase volume.