Opening the Blinds

Alliston Ackerman and Lori Castle

5/1/2007

The brand name Levolor has practically become synonymous with the word blinds. Offering a range of stock and custom window blinds, the company is known for setting the standard for window fashions, design innovation, product quality and customer satisfaction. Now a division of consumer products giant Newell Rubbermaid, Levolor has expanded its offerings to include decorative drapery hardware to complement its traditional products.

Recently, the company faced an important decision around the merchandising of its blinds in two home improvement stores. The retailers were planning to reduce the number of floor employees in some stores -- a move which would mean the end of 24-hour staffing in the department dedicated to window treatments.

Fearing the lack of live customer service might impact sales -- especially for its custom blinds, which require a more complex transaction --Levolor began exploring the idea of placing its own full-time employees in select stores.

However, before embarking on this significant investment, Levolor decided to conduct an in-depth cost-benefit analysis of the proposed program.

Executives believed that having a full-time customer service person available would boost revenue, but a number of key questions had to be answered. These included: In how many stores should Levolor put a representative? Which stores should those be? Were there some stores that would benefit more than others? Would total revenue increases sufficiently outweigh the overall cost of the program?

Lacking sufficient data and resources to obtain accurate answers, Levolor needed a solutions partner to enable the company to make the right decisions. Dan Ahmad, consumer research manager at Levolor, recalls, "We needed to understand, based on solid data, where it would make the most sense to put people in stores so we could get a return on our investment relatively quickly. But we don't have a lot of analysts in our organization, and that was a problem -- especially when you have an enormous amount of data connected to each individual store. It was so much information that no one at Levolor could have done the analysis and still managed to fulfill their other job responsibilities."

Levolor chose Acxiom as its provider, who structured a project based on three distinct but related sets of analysis:

To understand whether a particular store merited a sales specialist, Levolor had to know whether that store was in a good market for custom-blind sales -- did a particular store's geography have a consumer base that was apt to buy custom blinds, and if so, how might did this propensity to buy translate into actual sales.

Acxiom started the project with essential data Levolor had in house -- sales of all Levolor products by store. Due to the nature of the custom- blind business, Levolor also was fortunate to have even richer data. Each custom-blind buyer had to supply basic contact information, so every sale could be tied directly to an individual customer.

Analyzing the sales transaction data, Acxiom was able to make an initial determination of how well each store performed historically. In most CG companies and in retail, such data would be used to subsequently predict a store's or market's potential. Yet, while sales history can give some directional guidance on future performance, it's wholly insufficient for predicting potential because it fails to indicate how many consumers in a market did not purchase the product in question but could or would under the right conditions.

Acxiom's proprietary data resource contains more than 2,500 data dimensions on every marketable household in the country. By matching each custom- blind customer's data in Levolor's database to its corresponding record in Acxiom's database, the company was able to create a comprehensive portrait of the typical custom-blind customer that included age, marital status, income, home value, hobbies, size of household and other valuable information.

This customer portrait was crucial to determining the true revenue potential for custom blinds in each store's trading area. Acxiom mapped the custom- blind buyer portrait against all households in the database to identify consumers across the countrywho had not purchased Levolor custom blinds but shared traits and characteristics similar to those who had.

For example, one cluster was nicknamed "Big Money," which included wealthy households, while another was dubbed "Green Acres" because its members generally lived in rural locales. Each store in the chain accordingly was placed in the appropriate cluster, giving Levolor a more manageable way of understanding, at a high level, the personality of each store.

The results of these analysis led to the creation of a set of informative indices for various dimensions of each store's operations -- including sales performance in custom blinds, concentration of "look alike" consumers in its trade area -- and overall could be categorized into one of four groups:

Low performance/low potential: Stores that Levolor should deemphasize because they are not in strong markets for custom blinds.
High performance/low potential: Stores that Levolor should monitor for signs that they are in an emerging market for custom blinds and make investments as the need arises.
High performance/high potential: Stores that historically have done well in strong markets for custom blinds but still have room to grow.
Low performance/high potential: Stores that to date have not been strong performers in custom blinds but have a very high concentration of "look alike" consumers in their trade area and, thus, represent the biggest potential for improvement in customblinds revenue.

At this point, the improvement opportunity was stated merely in directional terms and lacked the hard financial numbers needed to actually make the go/no go decision.

For this, Levolor provided an annual cost of a sales specialist, based on typical compensation packages given to similar employees in the organization. To determine potential revenue increases, Levolor and Acxiom estimated both the amount of revenue that would be lost in a store without a specialist and the amount that could be generated with a specialist in place.

BENEFITS
The analysis determined that an investment of a custom-blind sales specialist in every store would be a big net money loser. And more important, the tool enabled the company to easily adjust assumptions about the proposed specialist program and model many different scenarios.

Levolor ultimately decided not to proceed with the sales specialist program in the near term. Instead, it is using an Excel-based analytical tool Acxiom developed as part of the project to help make a variety of other merchandising decisions.

For example, the product manager for the wood-blinds line uses the tool to determine which stores have the greatest potential; then works with existing sales representatives to formulate action plans to capture some of that potential.

Such plans will include conducting additional product training for reps, improving the condition of the product samples in high-potential stores, and having the sales force call on high-potential stores more frequently than others.

Eventually, Levolor plans to use the tool to support more targeted marketing programs to consumers in certain regions or store trade areas; it's already being used to inform more targeted online advertising and to help make decisions about where to invest in more robust (and expensive) sample displays of shades and blinds.

Previously, Levolor would have randomly picked a city or state for the new displays based largely on sales volume. Its new analytical tool will enable the company to make decisions based on potential.

Furthermore, Ahmad sees the tool playing a valuable role in new-product rollouts -- particularly in the market- testing phase.

Before this, Levolor would run a new-product test in one state, for example, Florida, and monitor the results. If the product did well in Florida, the company assumed it would do well in other southeastern states. Now, Levolor would be more likely to run a test in stores in the same cluster that have a higher potential for custom blinds and shades sales.

At a higher level, the Acxiom tool is helping Levolor's interaction with its retail partners. According to Ahmad, both of the home improvement stores were extremely interested in such detailed store- and consumerlevel data, and were very willing to work with the company on a more strategic allocation of merchandising. Ahmad says, "As we start to have more successes, we're going to look at using this with some of our new retail partners to gain competitive advantage."

The analytical tool has given Levolor the ability to make the kind of fact-based decisions it previously could not. Overall, Levolor has far greater knowledge about customers, retail partners and consumers.

"We're factoring in data we've never even had access to before," says Ahmad. "That gives us a more realworld, accurate picture of where there's a lot of potential for custom blinds and shade sales, and much deeper insights into our markets. We think what we have gotten from Acxiom will help us more accurately predict the success of our programs and maximize our return on those investments." //

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