Barnett’s Segmenting Strategy Goes for the Gold

The September 2000 merger of maintenance, supplies, and operations (MRO) rivals Barnett and Wilmar created based Interline Brands, a $650 million company that mails seven catalog titles, including J.A Sexauer, Trayco, Hardware Express, and Maintenance USA. All told, Interline Brands has more than 160,000 active buyers and a prospect universe of more than 700,000 names. Last year, the Jacksonville, FL-based company mailed 5 million catalogs and flyers.

To manage its multiple brands more profitably, in January the company began testing a mailing strategy with the file of its Barnett title, its largest catalog. “We want to improve our direct marketing efficiency without affecting sale,” says vice president of marketing Pam Maxwell.

Using database software Campaign Manager Suite 2.0 from Milwaukee-based NuEdge Systems, the cataloger segmented the Barnett house file into three types of customers: gold, silver, and bronze. The gold buyers are loyal customers who make a purchase roughly every 30 days.

Conventional wisdom holds that a company would want to contact such buyers more frequently than other segments of its file. But, says Maxwell, “we figured these customers already buy from us monthly, so we didn’t need to offer them the same kinds of promotions as less active buyers.” So Barnett started mailing its gold customers an eight-page flyer each month rather than the 24-page catalog it had been sending them.

The strategy of mailing less to best customers is less of a risk in the business-to-business world, notes Mary Lou Kolodziej, director of consulting and education for NuEdge Systems. B-to-b catalogers typically aren’t as reliant on mailings as consumer catalogers are, because they also contact customers through faxes, field sales representatives, and e-mails.

Silver customers, who buy less frequently than gold customers, make up about 45% of Barnett’s house file. “We mail them a catalog with the biggest page count as well as the best promotions to incent them to become gold customers,” Maxwell says. Bronze buyers, who purchase less frequently than silvers, receive the same offers as silver customers but not as often.

The results? Barnett’s response rate increased 0.3%, to 5%. At the same time, the average order size increased 1.2%-1.6%. And Interline has reduced its monthly direct marketing costs 3.5%.

A more accurate representation

Barnett previously segmented its customer file by standard industrial classification (SIC) codes, targeting product offers by market segment; within each market segment, it then segmented the buyers by sales. But because Barnett was working with small cells, the segmentation was misleading. For instance, Maxwell says, “a contractor could be making large purchases for a one-time renovation project, and we wouldn’t know it.”

Interline now resegments its house file quarterly to measure customer migration between categories, such as how many silver buyers have become gold customers. Though the cataloger is still testing the segmentation program, Maxwell is encouraged by early results: “Nothing at this point makes us want to change the strategy midyear.”

Partner Content

3 Critical Components to Achieving the Perfect Order - NetSuite
Explore the 3 critical components to delivering the perfect order.
Streamlining Unified Commerce Complexity - NetSuite
Explore how consolidating multiple systems through a cloud-based commerce platform provides a seamless experience for both you, and your customer.
Build the Foundation for Great Customer Experiences - NetSuite
Understand how consistent, timely, relevant and personalized experiences are enabled by having the right technology foundation in place.
Strategies for Maximizing Mobile Point-of-Sale Technology - NetSuite
Learn the top five innovative ways to utilize your mobile POS technology to drive customer engagement, increase sales and elevate your brand.