A McKinsey & Company study found that targeted online marketing increases consumer conversion rates, resulting in higher sales and profits. McKinsey's case study involved a leading online retailer who carried a wide-range of products at discount prices. The client was struggling to effectively target its consumers, whom it knew little about, and was experiencing decreasing conversion rates and revenues per customer.
Effective target marketing seeks to "determine what activities can be profitably changed," explains Teradata.
McKinsey first went about investigating the company's analytics to determine how they could change customer habits. The researchers correlated "the number of purchases with the quantity of product categories bought across the industry. We used this segmentation to calculate the likelihood that customers in each product category would "cross the aisle" and buy in other categories—and what it would be worth economically when they did."
Some groups of customers especially likely to "cross the aisle" were those who bought products in the sports, fitness, garden and pharmaceutical departments. McKinsey and the online retailer used this information to develop an effective internet marketing strategy that targeted specific customers. The new approach emphasized cross-selling and category-penetration techniques. One of the approaches focused more on analyzing customer purchase history to determine other products the customer would like, while the other one sought to predict customers' "attitudinal preferences" based on past purchases. These preferences also helped the online retailer make purchasing decisions.
Following up six months later, McKinsey discovered that the "aisle-crossing" habits of the customers they targeted continued. The online retailer also saw an increase in email conversions for these same consumers. It saw a 25 percent increase in email conversions and 60 percent increase in on-site conversions, translating to its overall marketing ROI increasing by 30 percent.
If you are interested in learning more about the benefits of targeted online marketing, consider working with an internet marketing firm such as KeyMedia Solutions.