Ace Hardware

Customer segmentation with PRIZM marketing analysis increases customers and sales

The Company

Ace Hardware began as a small chain of stores established by a group of Chicago-area retailers in 1924 and has since evolved into one of the nation's leading retailer-owned hardware cooperatives, with more than 4,700 stores in 50 states and more than 70 countries. Ace's commitment to delivering helpful hardware services to consumers has been their main focus during their eighty-year history.

The Challenge

Ace Hardware had a number of goals to meet, including:

• Establish Ace as the "Most Helpful Hardware Retailer on the Planet"
• Increase loyal customers through the customer loyalty program, known as the Helpful Hardware Club (HHC)
• Increase number of stores
• Drive sales and increase store traffic

The Case

To best meet their primary goals, Ace Hardware turned to a number of Claritas products, including PRIZM marketing analysis, iMARK, iMARK Online, ConsumerPoint and BusinessPoint. With the focus on creating Ace's target customer profile, its strategy was to perform segmentation analyses at the national and local levels.

Ace marketers began by analyzing the company's 10.5 million HHC reward members, looking at the percent of total revenue, potential households in the U.S. per segment and percent composition of the HHC database. At a national level, they could identify their consumers and appropriately target them with direct mail that spoke to their needs and interests.

Ace looked at three areas for their analysis:

• Recruitment
  
  • Targeted top PRIZM segments, with over 1.6 million pieces mailed in 2005
• Customer Retention
  
  • Targeted top Ace segments with offers and discounts
  • Utilized "We miss you" campaigns
• Product Profiling & Consumer Interests
• Examined Paint & Lawn and Garden customers

The Results

With targeted information about their HHC members, Ace Hardware created customized direct mail campaigns that effectively reached their top segments. Further, their national campaigns reached both HHC members and non-HHC members who fit the profile for potential customers. All told, 2,400 Ace retailers (55 percent) have benefited from the use of PRIZM marketing analysis and segmentation, allowing Ace to:

• Increase retail sales (up 5.4 percent from 2004)
  
  
• Grow to 10.5 million loyal customers (recruitment of new customers)
  
  
• Open 132 new stores in 2005 (139 were planned for 2006)
  
  
• Relocate 30 stores to better locations
  
  
• Conduct 65 grand openings
  
  

And, at the local level, Ace could make a number of decisions about store activities, such as site selection, targeted direct mail to both HHC and non-HHC members and grand openings. In 2005, 132 new Ace stores opened- their site location analyses included:

• Identifying the top PRIZM marketing analysis segments in the market, including the distribution of PRIZM segments, household count and competition for a radius around the proposed location
  
  
• Analyzing the current customer base
  
  
  • Custom segmentation reports PRIZM marketing analysis segments, number of customers and percentage of customers within the segment, average transaction and the total revenue per segment
  • Pin studies
    Maps with dots that represent the customers within the radius area and the percentage of ouseholds in each ZIP Code
• Determining the product mix-based on household segmentation with ConsumerPoint
  
  

Further activities included:

• Recruitment of site visitors through direct mail by profiling Internet shoppers with ConsumerPoint and PRIZM marketing analysis (15,000 postcards were mailed)
  
  
• Email campaigns to increase online traffic by targeting top online shoppers using segmentation, resulted in 1-2 percent response rate
  
  
• Product-Specific Studies determined highest revenue segment and average dollars spent per PRIZM segment
  
  
• PRIZM segments that purchased Ace gift cards at their web site were targeted with direct mail and emails