Thinking about measuring consumer response

Recently I got an interesting promotion in the mail. Home Depot sent the wife and I a gift card that was loaded with a “mystery amount” between $1 and $10,000. To find out how much the card is worth, you have to go to a Home Depot and redeem it. Our card turned out to be worth $1. How much did we wind up spending? $75. As we were walking out of the store I started thinking about this promotion and it hit me how genius it was.

Think about it: They are giving away money in exchange for people shopping at their stores. But, they aren’t going to loose money, and if anything they will gain huge insights into the consumer base in an area!

For example, lets say they mail out 10,000 of the cards. And lets say there are only two values for the cards, $1, and $10,000. The smart thing would be to send out as few of the $10k cards also possible, so in this exercise we’ll assume 1 was sent out. That means that the other 9,999 cards were all worth $1 which means the total value of the “prize” is $19,999. That is, assuming that all of the cards are used (which in real life probably wouldn’t happen for a variety of reasons), and ignoring other things like the cost of the mailings, the time of the staff to prepare things, etc.

A lot of people who get these cards are probably like me, they have a bunch of small projects around the house, but they just don’t have any motivation to do any work on them (because they need parts, they need time, etc., etc., etc.) This card comes along and they decide “Hey, I could win $10k, why not go down there and get some of the supplies I need anyway, and then I can find out what this is worth!”.

So lets assume that 50% of the people who get the cards decide to use them. My wife and I wound up spending $75, but I’m sure that other people will spend more, and other will spend less. For this little exercise, lets figure on the average amount spend is $50 per person. That works out to $250,000 spent at the store! Even if one of the cards happened to be the winning $10k card, Home Depot will still have brought in over $200k of business. If the average spent per customer was higher and/or more people used the cards, the amount would be even higher.

So, for a $20k investment, the business got back $250k in sales. For a company so big, that’s probably a drop in the bucket, but the effect is something that can’t be ignored. And that’s not even the good part!

For those of you who’ve never seen one of these gift cards, they are basically a plastic card with a bar code on the back. The bar code is scanned at the register which queries the main database to find out the value of the card. Pretty standard stuff. But then it occurred to me that I thought the card was addressed by name to me and my wife. I could be wrong, it might have said resident, but at any rate the ZIP code was on the address.

What this means is that there is now (potentially) a connection between how much was spent at the store and what ZIP code the customer lives in. This is a gold mine of data, it tells you so much about your customer base. Off the top of my head I could think of the following:

Continuing with the example above, imagine if the results of this campaign showed that there was a higher turn out from certain part of town those parts could be investigated to find out what kind of homes are there. It could be that the homes in that area are older and thus more likely to be getting “fixed up”. Likewise, if the turnout was low in another area, research could turn up that the houses are newer and less likely to have a need for large amount of work (i.e. the owners are less likely to spend higher amounts of money).

There’s a ton more that could be derived, but the important thing is that the lessons learned can be applied to the next marketing campaign. There’s all kinds of targets that can be aimed for: a higher turn out, a larger purchase per customer, moving a certain type of product (like paint, etc.), the list is endless.

If nothing else, the whole thing has shown that I’m willing to put a lot of thought into something if it will keep me from having to do home repairs.