OfferMaxima




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Dell Computers Case Study


Background

Dell Corporation decided to implement OfferMaxima's proprietary ad optimization methodology because Dell's Retail Marketing VP - Tim Mattox, an MIT engineer - was familiar with multivariate testing.

Dell selected the Employee Purchase Program (EPP) e-mail campaigns as the initial implementation of OfferMaxima's optimization methodology with the aim of expanding the project later to other audiences (Home, Corporate and Small Businesses). EPP mail advertising campaigns are targeted to 450,000 individuals: 250,000 corporate employees, 150,000 government employees, and 50,000 professors at schools or universities, all of them users of Dell computers at work. The aim of Dell's EPP mail campaigns is to sell computers, software and peripherals to these individuals for their personal use leveraging the fact that they are already familiar with the brand. As an enticing benefit, Dell's EPP members enjoy discounts of up to 12% and special promotions like free shipping, product bundles, and others.

The response rate of the traditional e-mail marketing is typically well below the one percent mark. Dell had good lists of potential customers who already new the brand and its products and had experience working with Dell computers. Even then the Click Thru Rate on the control mail was only 3%.


The Results

Below is an extract from Dell's Landing Strip spreadsheet comparing the response rate and sales of a control and the optimized mail:

Campaign Message Audience Size Total Clicks Click Thru Total Sales $Sales/Email
EPP Email Control 268,610 8,058 3.00% $90,678 $0.34
EPP Email Optimized 142,633 22,379 15.69% $345,095 $2.42

 

Summary

• Click Through Rate increase: 5.2 times
• 7.1 times more sales per mail
• Annual sales before optimization: $8,900,000
• Annual sales after optimization: $63,100,000


The Process

This is an example of a Dell EPP mail before the optimization:





A multivariate testing array was selected to analyze 7 factors with 2 options and 4 factors with 3 options in only 18 test e-mails. This allowed analysis of 10,368 campaigns with only 18 tests - a small fraction of all possibilities (1:576 in this case) or a 99.8% compression rate.

The following factors and options were tested simultaneously:

Factor Option 1 Option 2 Option 3
Promotion Single Several -
Teaser Yes No -
Financing Yes No -
Price High-End Low-End -
S & P* Promotion Yes No -
Discount 5% 10% -
Image Product People -
Subject Line Creative Promotion Dated
Headline Creative Promotion Seasonal
Configurations Two One None
2004 EPP Both Notebook Desktop

* Software & Peripherals


Two test campaigns of 18 test e-mails were sent to 2 different populations, the first to collect open rate and sales data and the second to verify the data of the first campaign. The results are in the table below.


  Response Data
  Open Rate Sales
Test 1 Campaign 1 Campaign 2 Campaign 3 Campaign 4
1 4.8% 5.7% - -
2 5.2% 6.1% - -
3 7.2% 8.4% $1,638 $1,530
4 10.5% 11.6% $1,913 $2,215
5 6.0% 7.3% $1,234 $1,755
6 5.0% 5.8% - -
7 12.7% 13.8% $4,919 $4,522
8 7.9% 8.8% $2,890 $2,933
9 7.2% 8.8% $1,296 $1,104
10 5.5% 6.4% - -
11 4.9% 5.8% - -
12 4.2% 5.0% - -
13 5.5% 6.4% - -
14 5.7% 6.1% - -
15 5.2% 5.8% - -
16 7.4% 8.3% $1,212 $896
17 6.3% 7.0% $1,076 $1,555
18 9.9% 10.9% $2,448 $1,998



Below is a table showing the influential factors with the optimum option and the percentage of influence. Influential factors were ranked by importance. In this case six factors were considered to be significant (statistically different than "noise").


Factor Optimum Option Influence
Teaser Yes 34%
Product Mix Desktop 17%
Promotion Primary 16%
Headline Seasonal 13%
Configurations None 13%
Subject Line Dated 7%
Financing Yes or No 0%
Price High-End or Low-End 0%
S & P* Promotion Yes or No 0%
Discount 5% or 10% 0%
Photo Product or Lifetstyle 0%

* Software & Peripherals

Below are several examples of Dell EPP Email campaigns after the optimization:














Conclusion

The application of OfferMaxima's optimization methodology increased Dell's e- mail campaign open rate more than 5 times and sales more than 7 times in only 4 months. In addition to these impressive results, Dell was able to better understand which influential factors did play a role and at what level for each factor the outcome, as measured by the Click Through Rate response, was optimized.

Although Dell engineers and marketers considered providing all the technical specifications important, it did not lure customers to buy. As can be noted in the ad samples above, the extensive product specifications of the original ads were replaced by friendlier, more appealing, and cleaner ads. The optimized email messages were still being used in January of 2006, 18 months after the original optimization.

Through the application of multivariate testing to their email campaigns, Dell did gain insight (Marketing Intelligence), which was used not only in the EPP program but in other marketing and advertising campaigns as well (Home, Corporate, Small Business, etc.).

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