Notcutts Garden Centre - The Marketing Society

MARKETING
EXCELLENCE
Notcutts
Cultivating a
gardener’s delight
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Marketing Excellence | Foreword
Foreword
By Amanda Mackenzie
What is marketing excellence?
Marketing excellence can drive breakthrough business
results for the short and long-term. Marketing
excellence requires great strategic thinking, great
creative thinking and perfect execution.
Amanda Mackenzie,
President of The
Marketing Society
and Chief Marketing
& Communications
Officer at Aviva
But how do we assess marketing excellence? First we
choose brilliant industry judges who are all experienced
and successful practitioners of excellence and we
ask them to pick out the cases which they see as
remarkable. We ask them to look for two key qualities
from our winners: creativity and effectiveness.
But marketing continuously changes and evolves, as
consumers become more sophisticated and demanding
and the media for communicating with them ever more
diverse. So the standards for marketing excellence
change and in turn become more demanding.
We believe that The Marketing Society Awards
for
Excellence in association with Marketing set the
standard of marketing excellence in the UK.
They have established this reputation over a period
of more than 28 years, and they have always been
based on the principle of searching out the best
examples of different marketing techniques in action,
that showcase great strategic thinking, great
creativity and perfect execution.
In order to be a winner of one of the Society’s
Awards, marketers have to demonstrate that what
they have done is outstanding in comparison with
marketing in all industries not just their own
particular sector.
If a marketing story has been good enough to impress
our judges, then all marketers can learn from it –
however senior they have become. The collection
of case histories brought together here is the best of
the best from the past two years of our Awards, and
I am confident that it truly demonstrates marketing
excellence. As you read these case studies I hope you
are inspired by them and impressed at the talent and
expertise in our profession which created them.
Cultivating a gardener’s delight | Notcutts | Customer Relationship Marketing/Finance Director’s Prize | 3
Notcutts
Cultivating a gardener’s delight
Snapshot
The family-owned group of garden centres designed an inspirational
loyalty scheme which has had a far-reaching impact on brand and
financial performance.
Key insights
• Notcutts wanted to reward its most loyal
customers and attract new ones in a competitive and relatively undifferentiated market.
•Its Sage Privilege Club became a model for
how to develop a fee-based loyalty scheme by
careful use of customer segmentation and
targeted communications.
•Membership fees alone brought in an extra
£2.5 million into the business over three years,
with club members accounting for 40% of profits
overall by the end of the first year.
Summary
Family-owned Notcutts Garden Centre Group, with a
history stretching back to the late 19th century,
operates garden centres across England and prides
itself on its value, service, range and expertise. Faced
with competition not only from independent garden
centres but also from groups operated by some of the
biggest retailers, the company was determined to find
a way to engage more closely with its loyal customers
and grow the customer base overall.
The solution was to set up a reward scheme that was
far more than just a discount card. The Sage Privilege
Club would give members a 10% discount on every
purchase they made during the year, with an additional
£85 worth of benefits. However, for this to be costeffective, an annual fee would have to be charged.
4 | Customer Relationship Marketing/Finance Director’s Prize | Notcutts | Cultivating a gardener’s delight
Standing out in a cluttered landscape
The garden centre retail sector is formed
predominantly of one-off independently-owned
garden centres. There are also around half a dozen
garden centre groups of note, with the top three being
Wyevale, now venture capital-owned and called
The Garden Centre Group, Tesco subsidiary Dobbies
and family-owned Notcutts (Figure 1).
This led to a new strategy for the business: to
ring-fence and develop its most valuable gardeners
and to capture a greater share of their wallet. To do
this, the retailer needed the answers to some
searching questions:
•How do we show that we offer our customers
exceptional value, service, range and expertise,
so we make it worth their while shopping only
with Notcutts?
•In particular, what could we do to increase the
average number of visits to a garden centre from
five-six per year, which is the UK national average?
(Source: Horticultural Trades Association)
•How do we share our knowledge and expertise as a
garden centre brand?
•And, finally, how do we tap into our customers’ love
of gardening and build our ability to have one-to-one
relationships with them?
Garden centre customers are typically keen
gardeners. They are educated, knowledgeable and
more likely to be female than male. Many customers,
particularly the older ones, also have time on their
hands and a repertoire of garden centres that they
frequently visit. That said, Notcutts knew it had a
core of very loyal customers that it wanted to reward,
protect and engage with, within the framework of a
bigger base of loyal customers for the long term.
Notcutts knew the answer lay in gaining as much
knowledge about its customers as possible and that
email and direct marketing represented the best and
most cost-effective way of talking to customers – if only
it could get enough data. Reward schemes in 2009 were
not unusual. The company’s key competitors already
had clubs and point schemes and it was well aware of
how powerful they could be for a business. It decided
that it wanted to build one that was market-leading.
Figure 1.
The team was a collaboration of the in-house
marketing team, agency specialists and data
analysts. The goal was to turn fickle but valuable
gardeners into brand converts who would shop at
Notcutts regularly and as a first choice, thus
increasing frequency of visit and increasing average
transaction value (ATV). The aim was to bring in
incremental revenues of approximately £1 million in
year one, make marketing communications cost
The pilot scheme run to test out this concept proved to
be a winner, with 7,000 people signing up. For the full
roll-out, Notcutts’ target of 75,000 members in the first
year was reached in six months. By the end of 2012,
the company had signed up one in five of its customers
for the club, which generated £2.5 million in
membership fees alone. Significantly, Sage members
were accounting for 40% of Notcutts’ profits by the
end of the first year.
Cultivating a gardener’s delight | Notcutts | Customer Relationship Marketing/Finance Director’s Prize | 5
Figures 2 & 3. Sage Privilege Club
effective with a positive return on investment (ROI)
and gain actionable insights through testing. And, on
top of all that, to build a scheme that could improve
management information and aid planning across the
entire business.
The scheme also had to be capable of selling itself
as the company had limited launch funds, relying on
marketing through point-of-sale (POS) in the garden
centre, and additional staff support. Therefore it was
agreed that to achieve real prominence, a brand
would be created in its own right while still clearly
belonging to and sharing Notcutts’ values.
Welcome to the club
It was decided that the scheme should be very much a
‘privilege club’ as opposed to just a discount, moneyoff card – a scheme customers felt had greater value
than just the savings they would make as a member. It
also needed to be a scheme that had real depth. The
result was a club called the Sage Privilege Club, which
offered every member 10% off every purchase every
day for their full year’s membership (Figures 2 & 3).
Figure 4. Profits
The value this offered was significant. On top of this
there were more than £85 worth of other benefits to
be given to members throughout the year. Financial
modelling told Notcutts that to offer these marketleading benefits an annual fee would have to be
charged. But – and this was the hard bit – could the
company get its customers to pay to be a member
when some of the biggest schemes in the sector
were free to join – like Wyevale’s, for example?
A pilot was run at the end of 2009 in three of the
garden centres. After four weeks it was clear the club
was working, with all six-week target key performance
indicators (KPIs) already being exceeded by a large
margin. There were 7,000 sign ups, which, over the
four- week period, brought in an incremental £100,000.
For roll-out the company planned on having 75,000
members by the end of the first year (approximately
one in 10 customers). This was achieved in six
months. By the end of the first year, Sage customers
had contributed 40% of the profit for the whole
Notcutts business (Figure 4).
6 | Customer Relationship Marketing/Finance Director’s Prize | Notcutts | Cultivating a gardener’s delight
Realising the rewards
The long-term results were compelling in
a number of critical areas.
1. Customer lifetime value
Sage’s success was dependent on increasing
frequency and value. The data shows that the
three-year value of a Sage member is £670
compared to £200 from non-Sage members.
2. Segmentation
The company wanted to understand who its loyal
(frequent and valuable) members were, and so
created a recency/frequency value (RFV) model.
Among other things, it revealed that over 30% of
all sales from Sage members were coming from
just 11% of members. This ‘very high’ segment
was categorised by a spend over £150 in a 12-month
period, with more than six visits to the garden centre
in the same time frame.
Figure 5. Targeted communications
When it came to renewal, Notcutts knew that those
who had spent more were more likely to renew.
So it brought in a communications programme that
would target selected members mid-year to
encourage their spend levels (Figures 5 and 6).
•It targeted those who at week 38 of their annual
membership and were at a level of spend that
implied (from historical data) that their renewal rates
would be at best 35%.
•It also targeted those who had spent more than this
threshold at week 38, but who had not made a
garden centre visit for over six weeks.
Figure 6. Targeted communications
Cultivating a gardener’s delight | Notcutts | Customer Relationship Marketing/Finance Director’s Prize | 7
Figures 7 & 8.
Figure 9.
The promotional element to this trigger programme
was a spend-and-save voucher, using the knowledge
of the average transaction value of the targeted
members. The initial sign of success came with the
voucher redemption rate across a six-week validity
period of 45%. The number of transactions was 20%
higher in the contacted groups, compared to a
representative control, with average transaction
value coming in £5.50 higher even after allowing for
the voucher. Even more importantly, 5% more
customers renewed at the end of their membership
year than in the control.
3. Improved value for customers
The average member’s annual saving is now running
at £14.28 net of the annual membership fee of £10.
This is calculated by taking the fixed 10% discount,
the redemption of restaurant offers and use of other
Privilege Club benefits across the 12-month period.
In addition, members receive several free gifts across
the year.
Sage members have really appreciated the Club’s
benefits and consequently they have helped shift
buying behaviour (Figures 7, 8, 9):
•The free tea and coffee offered to members each
month has resulted in 700,000 redemptions across
the customer base per annum. This represents over
60% redemption for all active members.
•Over a year, 50,000 members attend the ‘20% off
everything’ shopping events run bi-annually.
•These now represent two of the company’s highest
income weekends of the year.
•The average number of buy-one-get-one-free (BOGOF)
redemptions in the restaurants (given to members
three times per year) totals 60,000 per annum.
These deals are planned to drive traffic at quiet times
of the year and structured so that Notcutts is still
profit-positive, despite the promotion offered.
8 | Customer Relationship Marketing/Finance Director’s Prize | Notcutts | Cultivating a gardener’s delight
All high-value price-pointing in the garden centres
carries the Sage Privilege Club price, so members can
easily see how much they are saving (which also
encourages more members into the scheme).
4. Increasing revenues
The club has so far proved very profitable for
the business:
•Membership fees alone brought in an extra
£2.5 million into the business in three years, which
after costs represented £2 million for the company.
•In addition, having customers as Sage members is
better for Notcutts than having them as just regular
customers. They are more active and on average are
bigger spenders so the retention programme is
critical. Members are targeted six weeks before their
renewal date with a series of tried and tested
communications. There is also a reactivation process
that targets any lapsed high spenders.
•What has become a fee-based club without direct
debit (yet) has constantly exceeded targets, with
renewals running at an impressive 60%. By the
second year renewal rates were actually exceeding
70% while approximately 5% rejoined the club
during the activation campaign.
Far-reaching effects
As of the end of December 2012 the Sage Privilege
Club had 122,327 paying current active members.
This represented one in five of all Notcutts
customers nationally.
•Moreover, the whole business has benefited from
the Sage Privilege Club . It has not only helped the
buying and merchandising team with their planning
during category reviews, but Notcutts is now able
to introduce certain lines into some of its garden
centres based on a clearer understanding of the
customer profile.
•It has helped ring-fence and develop the most
valuable gardening customers over the past three
years. Against the market average of five garden
centre visits per year, the visiting frequency of
Sage members has increased by a multiple of over
1.5 per year on average. And as the club matures,
this figure is rising.
•Finally, customers engage with the company more,
as Notcutts is front of mind when they are making
a decision on which garden centre to visit. They will
also be given new products to test, with their reviews
shared with the rest of the membership.
All images appearing in this case study are reproduced by permission of Notcutts.
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