Redcats USA Catalog Company

Prepared by SourceLink
October, 2012

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Situation:
Redcats is an international group consisting of 17 distinct bands and over 70 ecommerce sites (10 new e-commerce sites in 2010 alone). The New York marketing
team is primarily focused on eight catalogs with annual circulation of 335 million.
Redcats currently does extensive modeling and testing to drive results. They also
leverage cross brand modeling to build customer value.
Mailings

Mail approx. 335 Million catalogs annually

Cost per catalog 44c-55c
5.5 Million 12 Month Buyers
13 Million unique households - 8 years of customers
45 Million Prospect file
70% new customers from online and 60% catalog
92% of sales come from 50% of file.
NMA (newly made active), 12 Month, 13-24 Month, and 24+ Month
Some direct mail to branded credit card holders.

Customers

Plus size clothing and living.

45-65 Sweet Spot target age demographic.
Limited success with loyalty programs.
Some ethnicity opportunities.
Older target audience. Challenges moving to a younger customer base.

Analytics
Currently leverage various modeling targets and techniques.
Cross-sell / Up-sell Next Product to Purchase and LTV models.
Active with cooperative transactional databases.

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 Goal to reduce circ while maintaining productivity.

Goal to reduce cannibalization between titles.
Currently leverage BI reporting and dashboards (Excel format) but room for
improvements.
Strong banner advertising and SEO efforts.
Interested in multivariate testing, channel and contact optimization, and attribution.

SourceLinks Customer Intelligence Tools:

The success of analytics is predicated on data accuracy, competence in relevant
methodology and adherence to proven process and approach. SourceLink has a
distinguished track record of working with clients to develop superior direct marketing
strategies, programs and campaigns. Our strength is helping clients identify specific
opportunities within high-potential target markets that result in sales growth and
increased profits. We develop customer solutions based on the objectives of our
clients, rather than applying a one-size-fits-all approach. SourceLink offers innovative
strategic approaches and methodologies to all direct marketing channels, particularly
direct mail. We are passionate about the use of customer intelligence that informs
business and marketing decisions to realize Return on Marketing Investment.
Measuring, analyzing and reporting on all relevant program results contribute to the
refinement of subsequent marketing initiatives. SourceLink provides a breadth of
customer database analyses that form the basis of modeling for cross-sell, retention
and acquisition programs.

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SourceLink utilizes CRISP (Cross Industry Standard Process for Data Mining). When
combined with our proprietary techniques, CRISP ensures best in class modeling and
analytic results. The following chart outlines this rigorous methodology.

Phase

Activity details

Business
Understanding

Data
Understanding

Establish business and modeling objectives

Familiarization with client business

Identify key data sources available

Identify in detail data fields that will be available and
can be used for building the model

Clean the data and format the data

Outlier and Missing Values Treatment
Create modeling dataset
Create appropriate target variables based on
demographic, geographic, product or service and
transaction related variables
Single View Foundation for the three models

Data Preparation

Model

Exploratory Analysis, Hypothesis Building

Development

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Univariate analysis
Develop model on development sample
Validate model on hold-out sample

Evaluate models performance in the real world over

time
Calculate business impact of deploying model
Optimize model based on feedback from evaluation
Present output to business users

Evaluation &
Optimization

Successful direct marketing programs start and end with the data. That's why SourceLink
continually invests in building and maintaining our National Consumer Database, giving
our clients unprecedented insight into their highest opportunity customer and prospect
audiences.

SourceLinks National Consumer Database

SourceLinks National Consumer Database is our proprietary, enhanced database,
created by us and not sold or used by the wholesale data resource community. We
have more than 200 million consumer records populated on our database. SourceLink
doesnt take compiled data at face value. We analyze it to determine which elements
are most accurate and have the most coverage. This assists in overcoming flaws in
individual data sources and improves overall performance. SourceLink continuously
provides demographic enhancements by using a variety of data sources to crossvalidate information, fill in missing data and continuously model for the most
comprehensive coverage. By way of substantiating the value of our enhanced
demographics SourceLink has utilized validated client customer information for

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comparison purposes to contrast typical raw data on national files versus SourceLinks
hybrid of multiple sources and models. Key variables such as Home Ownership,
Marital Status and Children in the Home are examples of demographics that
significantly improve modeling and segmentation results when SourceLink enhanced
data variables are used.
Data richness and accuracy are the strength and foundation of our analytics. This
includes our rebuilding and updating of the
following variables nationally:

Home Value

Presence of Children in the Home

Household Income

Marital Status

Home Ownership

Lifestyle/Interest Data

SourceLink S.M.A.R.T. Modeling

SourceLinks Strategic Market Area Retail Targeting (S.M.A.R.T) technology is a
proven statistical modeling system designed to improve ROI in marketing promotions.
S.M.A.R.T. can be used for customer retention, cross sell or prospecting efforts.
Unlike traditional modeling, S.M.A.R.T. includes proprietary technology to model on a
site by site basis. Whether store by store, region by region or MSA or DMA,

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S.M.A.R.T. analyzes each location and can provide a limitless number of custom
models to cover the relevant geography.

SourceLink Ultra Match Technology (SUM)

SourceLinks Customer Intelligence group has extensive experience helping clients
measure marketing success. Marketers continuously face challenges regarding the
accuracy of matching campaign files to subsequent transactions and customer
responses. Success is greatly impacted by the quality of the available data and is
influenced by data anomalies, inaccuracies and inconsistencies. Additionally, the
outcome can vary significantly based on the matching algorithms utilized. This also
applies to the ability to identify duplicates for suppression purposes. In order to
enhance client ability to capture conversions and accurately measure marketing ROI
as well as enhance suppression capabilities, CI committed to the following challenge:

Build a system that prevents data anomalies from diluting results

Create algorithms that work with the vagaries inherent in collected data
Utilize technology to automate a flexible process that can be adjusted to client

demands
Acquire outside substantiation of the validity of results
Demonstrate improvement over existing methodology

The result was SUM, a custom 18-step protocol for post-campaign measurement and
suppression that processes data through a hierarchical structure of matching logic
algorithms and significantly improves post-campaign analysis and suppression results.
SourceLink took the extraordinary step of hiring an outside expert who has conducted
sophisticated statistical analysis of name matching algorithms for the government. His
analysis of our 18-step SUM process provided impressive confidence factors for each
step at the individual and household level. Comparisons to traditional methodologies

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improved match rates by 20-88%. This translates into more accurate performance
measurement and better marketing results.

SourceLink Campaign Optimizer sm (Multivariate Testing)

SourceLinks Campaign Optimizer sm uses advanced testing techniques to
simultaneously test multiple variables of your marketing efforts at once while using the
same sample size as a standard split A/B test. We can test up to 8 variables
simultaneously for up to 32 test cells. Campaign Optimizer can be used to test mail
piece design, models, offers, and more. Not only will Campaign Optimizer provide
actionable insights on each variable tested, but it will also test for interactions between
the test elements, providing more detail than standard split A/B testing techniques. It is
a very cost effective way to produce significant response lift with a single mailing,
analysis, and deployment based on results.

SourceLinks Approach for Redcats

Based on our conversation on October 10th, we would recommend the following
analytic engagements.
Profiling and Segmentation
In-Depth Profile of Demographics by Core Titles and Recency Segments
1) Basic Profile high level overview designed to gain some basic insight into
customer demographics compared to the national consumer file.
2) In Depth Profiles analyzing key differences by title, age range, channel,
and brand affinity.
3) Custom Built Cluster Segmentation to identify and target statistically valid
clusters for unique offers.

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Modeling
SourceLink will utilize the name and address of customers and append
hundreds of variables including demographics, lifestyle characteristics,
socioeconomic variables and aggregate credit information. While SourceLink
modeling incorporates hundreds of variables into the model, Redcats
investment is limited to modeled names mailed, offering significant savings over
appending 100% of the house file and building models in house. We can also
test applying the model to various vertical lists. Again, Redcats investment is
based on net names mailed.
Customer Models
4) Re-activation Model targeting LTV in 24+ Month Buyers.
5) Next Product Model for cross-sell leveraging Redcats transactional data to
identify purchasing patterns.
6) Customer Lifetime Value Model to identify existing customers with high
profit potential.
Acquisition Models
7) Prospect Response Model leveraging SourceLink National Consumer File
(financial, demographics, and lifestyle) and SourceLink proprietary
S.M.A.R.T. Modeling Process. We also have access to Abacus summarized
variables for inclusion in the models. Test models built on known subsegments, for example one for older and one for younger prospects.
8) Prospect Lifetime Value Model for acquisition prospecting.
Campaign Strategies
9) Campaign Optimizer Multivariate Testing testing models, creative offer,
price points, etc.
10) New Customer Onboarding Strategy leveraging Next Product to
Purchase and LTV models to migrate customers from one time buyers to
active buyers.
11) Reporting & Analysis / SourceLink SUM Methodology for accurate
reporting and analysis.

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Investment:
1)
2)
3)
4)
5)
6)
5)
6)
9)
10)
11)
12)

Basic Customer Profile

In Depth Customer Profile
Custom Cluster Segmentation
Reactivation Model

$2,500
$5,000
$20,000
<250,000 $12,500 build / $40M Scoring

Next Product Model

>250,000 $0 build / $40M Scoring

<250,000 $12,500 build / $40M Scoring

Customer Lifetime Value Model

>250,000 $0 build / $40M Scoring

<250,000 $12,500 build / $40M Scoring

Prospect Response Model

>250,000 $0 build / $40M Scoring

<250,000 $12,500 build / $60M Scoring

Prospect Lifetime Value Model

>250,000 $0 build / $60M Scoring

<250,000 $12,500 build / $60M Scoring

Campaign Optimizer Multivariate Testing

>250,000 $0 build / $60M Scoring

$5.000 - $15,000 depending on # of

New Customer Onboarding Strategy

Reporting & Analysis / SUM Methodology
Data Append

elements tested
$11,000
$1,500 per campaign
Pricing available upon request

Timing:
Models ~ 3 weeks from receipt of data.
Customer Segmentation ~ 5 weeks from receipt of data to collaborative review.
Multivariate Test Matrix ~ Varies by complexity.

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