I-Impact Case Study: GourmetMarket

Case Study: GourmetMarket

Bringing the Best (Customers) to the Table
GourmetMarket.com Maximizes the Value of its Marketing Expenditures

GourmetMarket spends significantly less on marketing than its competitors, yet achieves comparable results. Here’s how I-Impact’s Web-focused decision support software is helping to make the difference.

When GourmetMarket launched its Web site <www.gourmetmarket.com> in October 1997, the San Francisco-based firm had its sights on the day when it would be one of the leading destinations for gourmet products on the Internet. GourmetMarket has since attained that goal through offering an extensive selection of specialty foods, fine wines, chocolate, cookware, culinary content and community activities—all underpinned by shrewd, knowledge-based marketing.

"Success on the Internet boils down to acquiring more and better customers for less money, and making more money because you are spending less on marketing," says, Michael Yablon, GourmetMarket’s VP Merchandising and Operations. "Web-based businesses have an unprecedented opportunity to use the power of the electronic media to gain market information. The ability to analyze this information and draw conclusions from it will make all the difference between an Internet company that succeeds and one that does not."

"Growth represents return on investment. You need to ascertain who will deliver the customers that will stay with you for a long time, and who will bring you the customers that will have a high lifetime value."

Growth as a return-on-investment
Like any serious Web contender, GourmetMarket needs to pick and choose carefully from a smorgasbord of marketing opportunities. These start with potentially lucrative, but extremely expensive, affiliate marketing deals with leading portals and websites. They also include traditional broadcast and print advertising, as well as a range of special promotions such as couponing. There is literally no end to the ways that a Web business can spend marketing dollars.

Unlike many Web merchants, however, GourmetMarket is not a believer in growth at any cost, or "in selling a $10 bill for $9." Instead, the company is driven by the belief that establishing a profitable long-term business means focusing on acquiring the most valuable customers at a reasonable price and then serving them extremely well.

Says Yablon, "To us, growth represents return-on-investment. When you evaluate today’s wealth of marketing opportunities, you have to determine much more than just who is going to deliver you the customers. You need to ascertain who will deliver the customers that will stay with you for a long time, and who will bring you the customers that will have a high lifetime value to your business."

MarketDrive—putting science in the equation
Determined to "bring science into the business of building a profitable destination Website," GourmetMarket recently turned to a new decision support software product from I-Impact, called MarketDrive. Designed to provide visibility into the economic performance of websites, MarketDrive gathers customer-marketing and sales-related data, analyzes it using state-of-the-art modeling and business intelligence techniques, and uses the subsequent knowledge to predict the impact of future decisions.

GourmetMarket is using MarketDrive to help its marketing personnel quickly and efficiently analyze:

Where they are paying the least for the most profitable customers
How their customers behave in the long term
Which products the "best" customers are buying
How best to influence their buying decisions

"We are able to grasp very quickly which marketing activities and affiliations are profitable and which are not."

MarketDrive works by collecting data from a wide variety of sources. In GourmetMarket’s case, this included its own advertising and merchant databases as well as other input from MarketDrive’s customized data collector. Sources can also include flat files, customer relationship management systems and Website traffic analyzers. GourmetMarket’s personnel can drill down to specifics, perform ad hoc queries, or use the software’s Impact Analyzer to identify causal effects and uncover difficult to discern relationships. The Impact Analyzer also enables forecasting, so analysts can compare the impact of different marketing initiatives and then predict how future campaigns will impact the business.

Understanding the business
According to Yablon, MarketDrive is allowing the company to understand its business, "quickly, easily and visually."

"We are able to grasp very quickly which marketing activities and affiliations are profitable and which are not," says Yablon. For example, after initiating couponing and promotional deals with radio stations around the country, GourmetMarket was able to rapidly evaluate their impact on profitability and to determine which ones to go forward with.

Adds Yablon, "MarketDrive let us understand how much these new customers were buying, if they were coming back repeatedly to the site, and if we were making or losing money on the promotion. It also helps us see whether a promotion is attracting existing or entirely new customers, which is an increasingly important consideration."

In addition, MarketDrive is helping GourmetMarket easily see what parts of the business it should be concentrating on, such as which product categories are growing faster than the norm and which are the most profitable. This in turn helps merchandising and marketing analysts identify emerging trends, synchronize product mixes with customer buying habits, and better target promotions with an eye towards overall profitability.

"Because we direct our shots, we successfully compete with companies that spend as much as 10 times more on marketing."

Acquiring competitive advantage
MarketDrive has turned out to be an easy package for GourmetMarket personnel to learn and use. Developed in Java and using a standard Web browser interface, MarketDrive is accessible from any desktop platform that is authorized. Its graphical user interface (GUI) makes it easy to take advantage of its functionality, such as executing OLAP drill downs on highly detailed data and performing sophisticated analyses on multiple databases. It also enables analysts to create useful reports on the fly from current data or take advantage of predetermined reports.

Equally important, according to Yablon, is that the power of the product "is matched by the service we get from I-Impact and the flexibility of the software."

Concludes Yablon, "I-Impact really understands the business questions we are asking. They haven’t just given us an inflexible off-the-shelf solution. This product is extremely adaptable. We have been able to tailor MarketDrive to really match our needs. As a result, we can use it to help acquire the best possible customers at the lowest possible cost, sell them the products they want, and make maximum profits off those sales. Because we are able to direct our shots, we successfully compete with companies that spend up to 10 times more than we do on marketing. It is capabilities such as MarketDrive’s that make this possible."

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