Business Process Instances Discovery from Email Logs

Mining Business Process Activities from Email Logs Multi-level clustering for extracting process-related information from email logs
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Dr.JohnNesh,United States,Researcher
Published Date:30-11-2017
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Abstract Communicating data-driven and personalized marketing content is today common among large B2C businesses with loyalty programs. Email has become the standard digital channel for this type of communication as it offers high cost-efficiency among digital channels and great possibilities for creating appealing content customized to the customer. This thesis aims to identify what effects personalized communication through email can lead to within loyalty programs and whether businesses should invest in personalized email communication. The methodology consisted of two quantitative case studies in the form of data analysis on eleven personalized newsletters and one activation email for a business in the fuel and convenience industry. A series of qualitative interviews with individuals that work in the field of personalized communication was also conducted. The results show that the loyalty members to a large extent accept the communication and are exposed to the personalized content. The emails in the form of monthly newsletters did not show any consistent positive effects on increased sales, store visits or in upsell. The activation email, which was part of the activation phase in the customer lifecycle, showed greater promise as it increased number of visits and led to a positive overall upsell. Additional effects in the form of switching costs and brand awareness were also identified, as long as the content reaches the customers personalization is deemed relevant. Otherwise it risks alienating them as customers today expects digital marketing to be personalized. In summary, the effects of personalized email justifies investing in it, but one should be aware of what effects to expect. 1 1 Introduction 1.1 Background How businesses reach their customers is changing and becoming more and more data driven and taking place in multiple channels, both traditional and online. Businesses today have the opportunity to target their customers with content based on customer data and where in predefined customer lifecycles they are. This is made possible by today’s marketing tools, access to customer data and the variety of channels available to reach customers. Businesses with loyalty programs utilize this new way of reaching their loyalty program members. A loyalty program is intended to give additional value to loyal customers with the hope of containing them as regular customers for a long time. Studies have shown that loyalty programs give a sense of appreciation among customers who relate rewards to being a preferred or special customer. Those who become members of loyalty programmes likely identify more strongly with the company, which is especially beneficial in industries in which consumers make frequent purchases and distinctions among competitors are low (Lars Meyer-Waarden, 2008). The loyalty program is also essential for recruiting and keeping customers. But besides recruiting and keeping customers, the business behind the reward program has the opportunity to obtain valuable data from the customers participating in the loyalty program. The data could for example consists of information about the customers, the purchases he or she makes and when they occur. Based on the data conclusions can be drawn and responsive actions can be made. For example, if a customer has not made a purchase for some time then the company can reach out to the customer with a special offer to hopefully persuade the customer to return. The customer data across channels, both online and offline, can help the business to form a picture of consumer behavior, buying patterns, and general trends. This means that business has the potential to provide their customers with customized personalized offerings and communication based on the customer data. Most major businesses with loyalty program are adapting their customer communication to its recipients with the hopes that it will increase their market share and increase customer loyalty. But what are the actual concrete effects from personalized communication within a loyalty program and should companies with loyalty program invest in making their communication more personalized and in that case why? 8 1.2 Project Definition 1. 1.2.1 Purpose The purpose of the thesis is to evaluate the effects from personalized email communication within loyalty programs in industries that focus on physical store purchases and not on e-commerce. The thesis intends to clarify if and why businesses with loyalty programs that match the criterias above should invest in personalized email communication and what competitive advantages it may lead to. 1.2.2 Research Questions 1) What are the effects of personalized email communication within loyalty programs for businesses without e-commerce opportunities? 2) Should businesses without e-commerce opportunities with loyalty programs engage in personalized email communication? And if so, why? 1.2.3 Objective The objective of the thesis is to identify effects from personalized email communication and provide insights that can hopefully help businesses with loyalty programs decide whether they should invest in it. The thesis can also hopefully provide recommendations to Kaplan, where the thesis was commissioned on how to improve their personalized communication and what competitive advantages personalized communication can yield. 1.2.4 Focus and Limitations The thesis does not directly consider the opinions of loyalty members regarding their preferences or perception of the communication they receive from the client, but instead looks at customer data based on their behaviour and the overall purchasing patterns. To identify the effects the communication yields the data is compared with a control group which does not receive any communication. According to J Nielsen, author of Measuring usability — preference vs. performance. Communications of the ACM data​ from for example surveys or focus groups can be misleading as the participating individuals can base their answers on doubtful recollections of memories and give answers that they believe are expected to give. Therefore the loyalty members’ own opinions and personal perception will not taken into consideration. The presented research will focus on personalized email communication from large businesses with loyalty programs without any major possibilities of e-commerce. It will only regard communication that is somehow targeted and personalized based on 9 customer data and only through digital channels. The thesis will focus on the scandinavian market as that is the market where the client is active. 1.3 Kaplan Kaplan is one of the leading customer management firms in Scandinavia and is based in Stockholm. Kaplan helps large businesses manage and loyalize their customers through technological, strategic, analytical and creative solutions by using technologies within CRM, CEM, data analytics and relationship marketing. They also help companies create customer experiences and multi-channel touchpoints. The work differs from client to client as they have different needs and are active in different industries. Kaplan’s client, who this thesis bases its results on, has outsourced some of the processes involving their communication with their loyalty program members to Kaplan, both technical and creative. Kaplan are curious of what effects their customer communication have and what possible improvements can be made. 1.4 The Client Kaplan’s client that this thesis has collected data from is one of the leading industry players in fuel and convenience in Scandinavia and the Baltic region. They have one of Sweden’s largest loyalty clubs and are working closely with Kaplan to make the interplay between them and their customer as data driven and personalized as possible to improve customer experience and promote loyalty. Since the client is in the fuel- and convenience industry they offer no form of e-commerce and will serve as a great example as the basis for the case studies. 1.5 Abbreviations CEM: ​Customer Experience Management CRM: C​ ustomer Relations Management KPI: K​ ey Performance Indicator CLC: C​ ustomer Lifecycle ROI: R​ eturn On Investment B2C: ​Business-to-consumer 10 2 Theory 2.1 Customer Loyalty Converting less frequent customers into loyal customer is vital in most industries. Most companies today have stopped viewing their customers as consumable resource and instead develop strategies to retain their existing customers and making them loyal to the company. This is especially important in industries with low differentiation between competitors, as customers are more likely to be disloyal and switch to a competitor in such industries. Rosenberg and Czepiel (1984) argues as following for why companies should prioritize customer loyalty and invest in strategies that promotes customer loyalty: 1) “A loyal customer has a high repurchase rate and can be up to five times as cheap to retain compared with a new customer.” (​Rosenberg, Czepiel 1984) 2) “With the right marketing efforts it is possible to build a loyal customer base with a high repurchase rate and by that achieving a solid share of the market that consists of loyal customers.”​​ (Rosenberg, Czepiel 1984)​ The start-up cost, the initial cost for a company to make a customer profitable, is in some industries very high, meaning a customer could initially be a financial loss to company. Businesses in those industries also depend on loyal customers. 2.1.1 Loyalty and Loyal Customer Definition The term loyalty is very broad and has numerous different definitions. According to Oliver (1999) it can be described as a strong commitment to either a product or a service which is not affected by external forces or efforts. “A deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand-set purchasing, despite situational influences and marketing efforts having the potential to cause switching behavior.” Oliver (1999)​ A loyal customer is defined by Blomqvist, Dahl & Haeger (1993) as “​a customer who over time engages with a company to satisfy all - or a significant part - of their needs for the services covered by the company's range of services”. In other words, a loyal customer chooses a certain company over competitors to fulfill his or her needs, thus establishing a 11 long term relation with the company in question. The relation is often beneficiary for both parts. 2.1.2 Loyalty programs 2.1.2.1 Loyalty program definition and purpose A customer loyalty programme is defined by Lars Meyer-Waarden (2008) as an “integrated​ system of marketing actions that aims to make customers more loyal by developing personalised relationships with them​.” A customer loyalty program is a reward program for loyal customers and for customers that are becoming loyal to the brand. The main reasons for a company to establish a customer loyalty program is according to ​Uncles, Dowling & Hammond (2003) to;​ “increase revenues from sales and to establish and maintain a strong bond between current customers and the brand​.” A customer loyalty program is intended to give customers additional value with the hope of containing them as regular purchasing customers for a long time, which can lead to competitive advantage, a strong brand e.t.c. “​Most loyalty programs are designed to offer customers benefits and rewarding their loyalty through offerings and perks. In exchange the customer has to conduct some of his or her business with the company in question in order to receive these offers”. (Blomqvist, Dahl & Haeger 1993). The loyalty program is also an crucial method for recruiting customers, which is often done by offering a limited special offer if the customer signs up and enrolls in the loyalty program (Cao, 2014). This is some form of generous short-term incentive that hopefully attracts new customers. 2.1.2.2 Loyalty programs in different industries Loyalty programs are available by a variety of businesses in different industries and the rewards are often discounts or bonus points within the business itself. Airline company offer their bonus points in flight miles, hotels can offer customers an extra night and grocery stores offer their members points for every purchase. (Lars Meyer-Waarden, 2008). Loyalty programs also cooperate among themselves and offer the possibility to transfer bonus points between loyalty programs. 2.1.2.3 Switching costs within loyalty programs According to Lars Meyer-Waarden (2008) the modern loyalty program has the potential to attract both price sensitive customers while retaining non-price sensitive customers; “Overall,​ the loyalty programme provides rewards to those who require some sort of discount or bonus points for purchases and at the same time avoids additional costs for 12 those who would buy even without the discounts”.​ Loyalty programs create switching costs for the loyalty members that have accumulated bonus points over time as they are locked to that specific company and cannot be transferred to a competitor. These switching costs can be both monetary and non-monetary. Companies that succeeds in creating switching costs and manages to reward long and active membership are more likely to strengthen the relationship with their loyalty programs members. If the benefits are strictly monetary and disproportional with the length of the membership then the loyalty program can be viewed as a simple way for customers to collect discounts and offers rather than building a relationship with them (Blomqvist, Dahl, Haeger, 1993). Figure 1. An overview of a successful customer loyalty program where the added value and benefits create switching costs that locks the customer in (Blomqvist, Dahl, Haeger). 2.1.2.4 Effective loyalty program While the aim of loyalty programs is, as stated by ​Uncles, Dowling & Hammond (2003) and mentioned previously, to reward loyal customers in return for their long term purchasing loyalty, not all loyalty program are successful and fails to structure its loyalty program after the model in figure 1. A study conducted by Leenheer et al. (2003) on loyalty programs in the grocery industry showed that some loyalty programs are ineffective and gives away more value to their members than they earn back in terms of additional customer revenues. The research concluded that the effectiveness of loyalty programs depends on the design of the program (Leenheer et al. 2003). Loyalty programs can however have negative effects on retailers (Smith, A.D. 2008). Studies suggests that there are examples where companies without a loyalty program 13 actually gained more in sales than competitors with reward programs. Implementing a loyalty program is associated with high costs and if companies fails to manage it properly, it can generate equally high costs to recover (Schumacher et al. 2007). In a recent study by the consulting firm Acando representatives from 20 different loyalty programs were interviewed in order to investigate the strategies behind successful loyalty programs and what factors are important when creating loyalty. The study showed that only 35% of the respondent considered themselves to have a clear loyalty strategy. The same study shows that special offers is not ideal for recruiting and nurturing inactive members as the probability that the customer will become active long term is low. A lot of loyalty program have in fact a high number of inactive members (Acando, 2017). 2.1.2.5 Customer Motivation and Market Saturations Since loyalty programs are very common in the retail business and some customers are members in quite a few. Some are suggesting that the market has reached some sort of of market saturation. As customers are enrolled in multiple loyalty programs in the same industry the incentives to remain loyal to one particular store decreases. This creates a form of competition amongst loyalty programs where the perceived quality of the program affects where consumers choose to do their business (Wright, Sparks 1999). As customers have multiple choices, the motivation behind choosing one loyalty program has been studied. These studies show that consumer involvement in programs is related to both social- and monetary aspects. Social aspects could for example be social ties to individuals either from the business or other members. 2.1.2.6 Loyalty programs effect on customers Loyalty programs can introduce feelings of intelligence and pride. Those who become members of loyalty programmes are more likely to identify strongly with the company (Oliver, 1999), which is beneficial in businesses in which consumers purchase frequently and distinctions among companies are low (Lars Meyer-Waarden, 2008). Customer loyalty programs allow companies within retail to direct their attention towards their most loyal customers, rather than less frequent customers that only purchase bargains. Through the loyalty programs incentives, a loyal bond can be established that retain good existing customers. These customers visits the retail store in question more often and have a feeling of belonging to the brand (Smith, A.D. 2008). 2.1.2.7 Loyalty programs and customer data Besides encouraging and recruiting loyal customers, the businesses in charge of the loyalty program have the opportunity to interconnect each purchase made by their loyalty program members with their respective unique member ID. By collecting and analyzing this data together with other available and relevant data the customer has stated for example when signing up, businesses can improve their loyalty programs and 14 gain competitive advantages, (see figure 2 below) (Smith, A.D 2008). The gathered purchasing data can in addition also be used to create personalized offers to each individual customer. See the conceptual model below for (Smith, A.D 2008). The customer data across channels, both online and offline, can help the business to form a picture of consumer behavior, buying patterns, and general trends so that the business can provide their customers with a tailored service (Cao, 2014) that customers value and improves their customer experience. Having access to customer data means having the opportunity to personalize the communication and the offers to the customer, making more efficient marketing that speaks on a individual level customer and at the same time adds value as it has the potential to make marketing more efficient and relevant. Figure 2 .Conceptual model outlining the major blocks of loyalty cards and CRM principles (Smith, A.D 2008) 2.2 Personalization 2.2.1 Personalization as a part of the customer experience The main idea behind any type of customization within communication is to provide a stronger and more resonating message by basing the communication on what is already known about the receiver. Creating and managing customized messages is possible today at a low-cost thanks to Internet technologies and digital channels (Li, 2013). Peppers and 15 Rogers (1997) define personalization as “the process of using a customer's’ information to deliver a targeted solution to that customer”. They also conclude that customization leads to higher customer loyalty. There are two types of personalization when designing a message. The communication can be customized based on the available unique data regarding each individual, this is called tailored​ customization. Or it can be customized to a segment of individuals based on certain characteristics that are shared among the individuals within that segment, otherwise known as targeted customization​​ (Li, 2013). Multiple studies show that personalization can create benefits and value to the customer. For example improved preference match, service, communication and customer experience which has the potential to lead to customer engagement and loyalty. Vesanen (2007) describes as following when personalization creates value; “when​ the benefits from the personalization exceed the costs, it creates value for customer” (Vesanen, 2007).​ 2.2.2 The Personalization Process in Marketing Campaigns Marketing campaigns today utilizes the data that is available about customers and their purchasing activities and behaviour. This data is used when designing and forming personalized communication and offer in order to create relevant content for each individual customer. The personalized parts of the communication can either be individually personalized, for instance when greeting the customer with his or her name. Or it can be personalized through customer segments. This is done by dividing the customers into groups and base the personalization on these groups. The segmentation can be based on parameters such as age, gender, location, previous purchases (​Mahajan, Shruti, et al 2016). Vesanen and Raulas suggest a model (see figure 3) that shows a cycle of how personalization is created and interplays with the customer. The model shows how the customer data affects the marketing output the individual customer is exposed, which in turn affects the customer's choices and interactions which generates new customer data and so on. 16 Figure 3. How the basic elements of personalization are connected i​ n the loop of the personalization process (Vesanen, Raulas 2006). 2.3 Marketing and customer communication 2.3.1 Marketing Channels The channels which a company chooses to communicate through with its customers dictates the interaction between business and customers. The channels connects customers with the company and can dictates how the communication is received and perceived by the customers. Communicating with customers can be of great benefit as it can increase the customers’ awareness regarding products and services and deliver value to customers (Osterwalder, Pigneur 2010). 2.3.2 Brand Awareness Brand awareness is an ability that reflects how well a consumer can identify a certain brand in different circumstances (Aaker, 2009) and consists of two parts: brand recognition and brand recall. One of the purposes of marketing is to promote brand awareness. According to brand​ recognition is the ability to recognise a brand based on product category while brand recall is recognising the brand based on a so called brand cue, for example seeing or hearing about the brand itself. Brand awareness has the power to influence consumers when deciding to make a purchase and therefore has the power to affect market shares. Having a positive and strong brand can lead to brand loyalty ​as brand recognition can be the deciding factor for customers when choosing products or services among several brands (Chi et al. 2009)​ 17 2.3.3 Customer Lifecycle A Customer lifecycle is a series of phases a customer can go through. For example when considering joining a loyalty program, joining the program, becoming a loyal customer etc. A business can have multiple customer life cycles mapped out for different common lifecycles. Sterne and Cutler (2000) describes the points in the customer lifecycle as: ● Claim the potential customer’s attention ● Introduce them to the business ● Convert them into paying customers ● Keep them as a customer ● Turn them into a loyal customer. Figure 4.The customer lifecycle Sterne and Cutler (2000)​ If the customer or potential customer abandons the customer lifecycle incentives are put into place to make the customer reconsidering to stay. 2.3.4 Customer journeys Companies are using customer data and analytic tools in order to shape and lead their customers through the different steps as they go through a series of expected steps. For example; the customer is interested in a product or service, the customer considers the product or service and compares it to other similar products or services and finally goes ahead and purchases the product or service. This is referred to as a customer journey. How a customer used to move from exposure to purchase used to look rather similar among customers but today they differ to a much larger extent. The customer journey offers additional value to the customer as it creates a smooth path between the different touch points and adds to the customer experience. The customer journey directs the customers into a loyalty loop which they are then locked in to (Edelman & Singer, 2015. Figure 5 below) 18 Figure 5. Representation of the Customer Journey according to Edelman & Singer, 2015 2.4 Email marketing Email as a form of marketing communication has been around for decades but is still one of the most cost- and time efficient ways for businesses to communicate with their customers (Hartemo, 2016) and is still widely and frequently used today (Bender​ & Weimann 2015). Global email usage continues to grow annually. In 2017, the total number of business and consumer emails sent and received per day is expected to reach 269 billion. It is expected to keep growing over the next four years and reach 319.6 billion in 2021 (The Radicati Group 2017). Studies suggest that keeping regular communication with customers as a business through email help marketers improve customer loyalty and that regular communication with consumers by email has positive effects on brand loyalty (Merisavo, Raulas 2004). Customers exposed to marketing for example through email are also more likely to recommend the brand through word of mouth, visit retail stores, buy the brand’s products, and visit the brand’s site on the Internet via links. Studies show that the more brand loyal consumers are, the more they appreciate regular communication and value the messages they receive (Merisavo, Raulas 2004). 2.4.1 Email being the standard in digital marketing Even though consumer behaviour is slowly shifting, B2C communication is still heavily dominated by email. This is because email still provides the best marketing in terms of ROI. It is 40 times better at acquiring new customers compared to Facebook and Twitter combined (Aufreiter, Boudet and Weng 2014) (see figure 6), suggesting that marketers will not abandon the channel within the next few years either (Hartemo, 2016). The reason that email communication is cost-effective and time-effective is because it only has to be designed once and can spread fast to many users at a low cost, making email an important way to communicate with customers and influence buying decisions (Bender​ & Weimann 2015).​ 19 Figure 6. US customer-acquisition growth by channel, % of customers acquired per year (Aufreiter, Boudet, and Weng 2014). 2.4.2 Personalized emails Personalized emails refers to emails where part of the content contains recognizable personal elements of the recipient. This could for example be the recipient's first name, location, workplace etc. (Dijkstra, 2008). The personalization can also consist of marketing content that has a high probability to be appealing to the recipient, for example marketing content based on age, gender or previous purchase. The purpose of personalization is to create more relevant content and to increase the chance of persuading the customer compared to generic emails where the content is the same regardless of recipient. Studies have shown that personalized emails benefits businesses. For example adding the recipient's name in the email subject line can increase the open-rate and overall sales (​Sahni et al., 2016)​ 2.4.3 Email web technologies Using email as a way of communicating with customers offers possibilities to style and personalize the message using web technologies such as HTML. These technologies enable email to contain images and links (Reichhart et al 2013). Designing a visually appealing email with an interesting subject line and customized landing page can increase conversion rates (meaning the percentage of visitors who take a desired action) by more than 25 percent (Aufreiter, Boudet and Weng 2014)​. Emails can be received across devices with internet connection. As mobile devices have developed and smartphones have become the standard, emails are increasingly being read from the mobile phone (Hartemo, 2016). Nearly 45 percent of all marketing emails today are opened on a mobile device (Aufreiter, Boudet and Weng 2014).​ 2.4.4 Email measurements and key metrics 2.4.4.1 Email tracking Tracking user behavior from emails is an important aspect of online marketing as it provides valuable data. The data obtained can be used to measure and further improve the communication (Fabian et al. 2016). Email tracking enables the possibility to observe if an email is opened, the type of device in which the user opens it and can also identify 20 what links user clicks. This information can be used to measure how successful the email was and what customer behaviour came as a result of the email. 2.4.4.2 Key metrics There are several key metrics that can be identified and analyzed with the purpose of measuring the performance of an email marketing campaign (Hartemo, 2016). The key metrics from a campaign can be used in order to prove that the message is finding its way to its recipients, how it is received and to improve future campaigns. Below are descriptions of several key metrics often used by campaign managers and marketers to asses an email campaign. Bounce rate The bounce rate is a percentage that describes how many of the total emails sent that failed to be delivered and therefore “bounced back”. The metric is most often used to discover any problems that may rise. The problem can either be that the recipients inbox is full or that the email address does not exist. Unsubscribe rate Indicates how many choose to unsubscribe from all future communication by clicking the link often found at the end of an email. This should not be a figure of how many are completely uninterested in the communication since many simply do not bother to unsubscribe to the communication even though they ignore the emails. Delivery rate The delivery rate is a percentage that describes how many of the total emails sent successfully reached their destination and landed in the recipient's’ inbox. If a campaign has a very poor delivery rate it may be because it was flagged for spam by an email client. Click-rate The click-through rate describes how many of the total recipients clicked on one or more links or images in the email. The​ metric can give a sort of indication if the message was perceived as engaging to the audience, though it depends on the content and purpose of the email. It is therefore important to take into account what type of email is being analyzed since the type affects what click-through rate one can expect. Response rate The response rate describes how many of the recipients responded as a result of the email campaign. This can mean different things depending on the the type of email and what kind of reaction it hopes to bring to the recipients. In this thesis the response rate is discloses how many of the recipients of the email made at least one purchase during the campaign period. 21 Conversion rate The conversion rate describes the number of recipients who were activated by the communication and does the desired action. For example a specific purchase. Upsell A measurement that describes the total monetary gains as a result from the email communication. Often used by comparing the overall sales from the recipients of the communication and a control group that does not receive the communication. Open-rate Describes how many of the recipients opened the email. However, this metric can be somewhat unreliable since the tracking technology counts an email as opened if the embedded images in the email are received. Some email clients block the embedded images, meaning a recipient may open and read the email but the email will be classified as unopened. 2.5 Digital and Mobile Marketing Studies suggest that strictly mobile media such as text-messages are perceived to be more personal and can lead to feelings of invasion of privacy. Marketing communication in mobile media is challenging because of the personal nature of the mobile medium and because consumers are not able to notice that the communication is of commercial nature until it is opened (Heinonen, Strandvik 2007). This questions its effectiveness as a marketing channel compared to other media, for example email. Jayawardhena et al. (2009) presents a study that shows that trust and customer loyalty can be increased by offering control options for the customer. If a customer has power over the communication and can freely choose when to cancel the subscription and when to re-activate it, the overall customer loyalty towards the business increases. 22 3 Method This chapter describes the research methodology applied to approach and answer the formulated research questions to the fullest extent possible. The choice of method and the type of data the methods produce are described and justified. 3.1 Overview of ​ M​ ethodology The thesis’ methodology consisted of three parts. The first two parts were case studies based on collected email data from one of Kaplan’s current clients. The first part consisted of data collection and compiling from personalized email newsletters sent on a monthly basis. The second part consisted of data collection and compiling from a single personalized activation email that was part of the client predefined customer lifecycle. These two parts will look at different approaches to personalized email communication. The third part consists of qualitative interviews with individuals who work with campaign management within loyalty programs . The case studies on Kaplan’s client will serve as good examples for the thesis in order to approach the research questions. Summary of each of the three methodologies: 1) A case study on eleven personalized email newsletter campaigns that were sent out on a monthly basis between February 2016 and January 2017. The personalized newsletters were sent to the client’s most valuable customer segments eligible to receive the emails. The purpose of the newsletters was to communicate marketing content, inform the recipients of current offers they have as members and their current standing in the loyalty program. 2) A case study on a personalized activation email sent out to loyalty members who recently enrolled in the client's loyalty program but immediately became inactive with zero registered purchases. The activation email was a part in the client’s CLC and its purpose was to activate the inactive customers by presenting them a generous offer as an incentive to make a store visit. 3) Four qualitative interviews with individuals with job titles such as campaign managers or similar. The individuals worked at the time of the interview with personalized email communication within loyalty programs and had experience in designing and assessing personalized communication. The purpose of the interviews was to serve as a complement to the case studies and literature research and give a qualitative approach to the research questions and yield material in order to answer the “why” questions. 23 3.2 Case Study 1: Personalized Newsletters The purpose of the first case study was to study the effects of eleven personalized newsletters where the data was provided by Kaplan. This was done by collecting, compiling and studying quantitative campaign reports from each of the eleven individual newsletter campaigns. The campaign reports consisted of data in three areas: delivery, response and financial. 3.2.1 Data Collection Method The newsletter case study studied eleven of the client’s monthly newsletters that were sent out by Kaplan between the dates 2016-02-22 and 2017-02-15.​ Each​ newsletter were sent out to between 129 000-170 000 loyalty members. See table 1 below for exact quantities for each individual campaign as well as campaign lengths and exact dates. T​ able 1. Specifics regarding each of the eleven personalized email newsletters Each campaign report consisted of quantitative data on how the client’s personalized communication performed in the following three areas: delivery​ data​, response​ data ​and financial data​. Delivery data: The delivery data disclosed how the communication was received and the overall engagement by the loyalty members who received the communication. The KPI’s in this area that were researched were: open-rate, click-rate and un-subscriptions. Response data: ​The response data disclosed how the loyalty members reacted and responded to the personalized marketing email they received. The data was compared with a control group 24 that did not receive any of the communication in order to determine whether the communication has any effects and if so, what those effects were. The KPI’s in this area were: response rate, average sales value and number of store visits. Financial data: The financial data discloses the overall financial results of the email newsletter campaigns by comparing the recipients with the control group to see whether the communication led to positive ROI. 3.2.2.The Emails and its Recipients The personalized email marketing campaigns consisted of newsletters with the latest offers and information from the client to its loyalty members. They contained offers based on customer data to make the communication relevant to the individual loyalty member. All the newsletters had similar graphical outline with the top block with a personal salutation, current benefits and greeting from the loyalty member’s favorite gas station. The lower blocks contained personalized offers based on purchase history. The personalized emails were sent out to the clients three most valuable customer segments: ​Valued Friends​, Best Friends and​ Frequent Friends. The segments are based on a predefined model (see figure 8 below). Those who belong to neither of the mentioned groups received a generic email. The segmentation is based on a number of store visits and sales. Below are the definitions of each group. The three segments that received the personalized content consists of the three most profitable segments which means that the recipients are not unfamiliar with the client. The actual personalization in the emails consisted of several different elements: a personal greeting to the loyalty member by name signed the members favorite station, current benefits (for example, every sixth car wash is given for free) and several offers based on previous purchases. 25 Figure 8. Chart of the client’s customer segmentation. Valued friends, best friends and frequent friends receive the personalized communication as well as active new friends and acquaintances with a certain number of recent purchases (Kaplan). In order to examine whether personalized emails actually affect sales in a positive way each personalized email campaign has a control group that belongs to the same client segments which does not receive any of the communication at all. The control group consists of around 3-4% of the target group and are randomly selected. By comparing and analysing the control groups customer sales data with the customer data of the target group it is possible to see if they differ in any way. Another group that consists of around 10% of target group that belongs to the same client segments receives an generic email instead of a personalized which makes it possible to compare the two communication types. Figure 9 . Chart of the delivery flow of the newsletter​ s. The customization of the offers to the individual loyalty member is based on different categories. There are a total of ten categories for different special offers, five within fuel and five within convenience goods. Each customer eligible for personalized communication receives offers based on the two most popular categories for that 26

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