Beauty care retailer achieves four times more business agility and 20% lift

One of the world’s leading botanical beauty care retailers is well-known in its markets for its chain of 1,500 stores where customers can shop surrounded by beautiful products and helpful staff. As a mid-to-high end marketer, the company looks to its stores to provide customers with an enjoyable shopping experience aided by well-trained employees who advise customers on the differences between products and how to use them for best results.

Inflexible loyalty program stalls sales
To further differentiate itself in its markets and strengthen its bond with customers, the company offers a loyalty program that rewards frequent buyers with discounts and promotions. However, in order to get their points, customers had to get a paper card stamped by an employee at the point of sale. The employee would then have to calculate the applicable discounts, along with promotional discounts and any coupons the customer was carrying.

The system was confusing and time-consuming, and took employees off the floor and away from advising customers, forcing them to be human calculators at the point of sale. Delays during checkouts undermined customer satisfaction with both the company and its loyalty program.

Promotional campaigns were implemented every two weeks and managed by the company’s point-of-sale software solution, but the software was not designed for that purpose, and the process was costly and labor intensive.

High rates of error and training costs
In addition, there was little flexibility to engage in rapid, targeted promotions—such as putting self-tanning products on sale during prolonged rainy spells in a certain area, or offering discounts on sunscreen products during a heat wave. In many cases, it took four weeks to make a change in the bimonthly update schedule, and the promotion system could not target a subset of stores at all. Promotions for a targeted market had to be executed manually by training employees with price lists and rules on paper, incurring high rates of error and extra costs.

The company believed that its loyalty program was critical to increasing customer satisfaction and that opportunities were being lost due to lack of business agility. It began reviewing a more rules-driven approach based on IBM® WebSphere® ILOG® JRules business rules management system to manage decision making and increase the flexibility of its loyalty and promotions programs.

20 percent lift in one year
The IBM solution blends three types of decision at the point of sale and is activated when the employee inserts the customer’s new magnetic loyalty card into the system. The employee then scans the items. Using thousands of business rules in a common repository, the decision management system automatically calculates the price of the purchased item and the total basket given all applicable promotions and coupons so that the customer always comes out with the best possible price. The system also calculates the number of loyalty points the customer has accrued according to the rules of the loyalty program—certain customers may be getting double points depending on what products they purchase.

Finally, the system makes a recommendation on what products the customer might want to consider buying next, and prints out coupons for the products. When the card is returned to the customer, the back of the card shows the total price and discount rate, the current balance of loyalty points and the product recommended as the next purchase. The printing on the card is erased the next time the customer uses it, and the card is reprinted with new messages.

The automatic calculations deliver a totally personalized experience for the customer while relieving the sales person from the chore of deciding which promotional price or coupon is applicable and calculating points. Customers are happy with the new system. At last count, 85 percent of customers are signed up for the loyalty program. In certain areas in which the solution has been implemented, the company has experienced a 20 percent lift in sales revenue in one year. The company is so pleased with results that it doubled the pace of implementation to all the stores.

Four-fold increase in business agility
The WebSphere ILOG JRules solution delivers more than a POS solution that blends multiple types of decision making. The solution enables business users to manage promotions and mount targeted promotions in less than a quarter of the time it took previously. The company maintains 300 active promotions at any one time, and 50 to 200 new promotions are launched every two weeks. There are 1,000 rules that govern the treatment of any given customer, which are reused from a common repository. Amazingly, business users with no special IT training maintain the biweekly schedule and launch new promotions in under a week using the WebSphere ILOG Rule Team Server—as opposed to four weeks in the previous environment.

Business users can define and edit rules using a natural language and customizable business vocabulary. Rules can also be expressed in graphical formats, such as decision tables and decision trees. Business users can develop promotions for a small group of stores or targeted stores within an area.

The WebSphere ILOG solution is also integrated with the company’s business intelligence data warehouse to predict product promotions following the analysis of results. The integration of predictive intelligence with the ability to implement changes quickly facilitates the incremental improvement of promotional campaigns.

Reduced cost of promotion management
The company is now able to deal with more information at a higher level of personalization and business agility. And all these benefits come at a lower cost for IT support, since non-technical employees are managing the system. The cost of training has gone down as well, because store employees no longer have to be trained on specific promotions that formerly were managed using price lists and rules on paper.

The same rules can also be applied for online purchases and for personalized promotions in print catalogs, helping the company maintain a consistent multi-channel presence.

As a mid-to-high-end retailer, the company has to be careful about how it positions itself in the market through pricing. All of the company’s promotions are now visible to management to ensure that the various geographical regions and stores are in compliance with the company’s policies.

Perhaps most importantly, the store employees are back with their customers in an advisory role, and can easily explain promotions to their customers. This provides the indispensable human glue that holds this beauty products empire together. They can also easily explain the promotions to their customers.

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