Oberweis Dairy: The Power of Analytics Unveiled

Have you ever wondered about the magic behind analytics? Well, buckle up because I’m about to share a fascinating story that will remind you of its incredible value. This tale takes us to Aurora, Illinois, where Oberweis Dairy works its analytic wonders. Join me as Bruce Bedford, the Vice President of Marketing Analytics and Consumer Insights, reveals how analytics brought about a remarkable 30% increase in customer retention.

Curious to know more about Bruce’s background?

Me, Bruce Bedford: You know, my journey into the world of marketing is kind of different. I actually started off as an engineer. Yeah, I have a PhD in Chemical Engineering. At the beginning, I was working as an engineer, doing all sorts of fancy design projects for big companies. But then, after a couple of years, I found my way into the business and marketing field.

You: Hey, could you give me some info about Oberweis Dairy?

Me, Bruce Bedford: Absolutely! Oberweis Dairy is a cool business. We have a bunch of retail dairy stores where we sell fresh and yummy ice cream treats like cones, milkshakes, banana splits, and sundaes. But that’s not all, we also sell fresh bottled milk and lots of other products! And get this, we have a total of 47 stores spread across the Midwest. Pretty amazing, right?

So here’s the deal. We’ve got two main things going on. First, we’re all about convenience. We can bring all the groceries we sell in our stores right to your door. Yep, you heard that right – no need to leave your house. We usually do this every week, so you can count on us to keep you stocked up.

Then, there’s our dairy products. We make ’em ourselves, and we get them out to you by working with a bunch of different grocery stores across the country. You might find our stuff at places like Costco or Target.

Now, let’s talk about what went down in our stores. Boy, oh boy, we had a lot of people showing up to buy their stuff. The lines were insane – they were stretching out of the stores! So, how did we handle this crazy challenge?

Hey there, it’s me, Bruce Bedford! You know what happens when the weather gets all warm and sunny? The ice cream frenzy begins! You won’t believe how long people are willing to wait in line for a scoop of their favorite frozen delight. But here’s the thing: sometimes, they get stuck behind someone who’s taking forever to decide what they want from our menu boards.

So, as I sat down and thought about it, I realized that we were actually making the wait time even longer. Our menu board layout wasn’t as efficient as it could be. Oops!

I started studying that problem to see if we could find a better way to arrange things and make the waiting time shorter. Right away, I realized that changing the order of the menu could help. But then I worried that this might actually change the types of items people buy and end up making less money per transaction. We call this the value for transaction.

We tried out different designs for the menu boards in a test program. After analyzing the results, we found one design that solved two problems. We saw that the waiting time decreased, and people started choosing items that made more money per ticket.

So, here’s what happened. We figured something out and used that knowledge to make the menu boards at all our locations in the Midwest way better. And guess what? It worked! Customers were happier, and we made more money per order. Plus, people didn’t have to wait as long. Oh, and get this: one item that wasn’t selling well before actually jumped up by a whopping 80%!

USamerica.US: So, you wanted to make things better for customers by making the lines shorter, but you ended up making more money too?

Bruce Bedford: You got it. That just goes to show how powerful analyzing things can be.

USamerica.US: And you also used your analytical skills to figure out how to keep customers coming back for your home delivery service?

Bruce Bedford: I run a vintage-style home delivery service. We bring fresh milk straight to the doorsteps of thousands of homes in the Midwest.

Even though we’re not as big as some of the national companies, we take great pride in our mission to deliver our products every week. This is super important for us because once we get a customer, we want to keep them for a long time. You see, it’s quite expensive to find new customers, so we gotta make sure we give our current ones the best service possible!

One of our most popular deals with our sales team was offering free delivery. No matter if you come to our dairy stores or we bring the products to your home, the product price remains the same. To cover the extra cost of delivery, we ask our customers for a small fee of $2.99 per delivery.

During the promotion, we used to waive that fee for six months, which meant around 26 deliveries. However, when we looked deeper into the data using survival analysis, we made an interesting discovery. It turns out that the customers who took advantage of the free delivery offer didn’t stick around for long. In fact, we noticed a significant drop in retention rates at the six-month mark. So we wondered, why is that happening at the six-month mark?

So, here’s what we figured out: if we compare the 26th and 27th deliveries for our customers on a certain promotion, they don’t really see any difference in value. The only thing they notice is that we started charging them an extra $2.99. That got us thinking, What if we offer a promotion that doesn’t create such a big contrast after six months?

To test this idea, we decided to use the Valpak Blue Envelope Service. We sent out a couple of competing coupons and did a randomized AB test. Some customers received a coupon that offered six months of free delivery. Now, that’s worth about $100.00 in value because we also include a free Porch Box with that promotion, which adds an additional $25 of value.

So, we tried something new to attract customers. We came up with a different promotion that lasted for a whole year. The idea was to offer delivery for only $0.99 instead of the usual price, which was $2.00 higher. And guess what? We still promoted it as a ‘$100 savings’.

Now, here’s what happened. We sent this offer to two random groups of people. Surprisingly, the response rates were pretty much the same for both groups. People were equally receptive to the offers.

But here’s the interesting part. We tracked these customers for an entire year. And what we discovered was that the group that received the $0.99 delivery offer had a significantly higher retention rate. In fact, it was about 30% higher than the group that received the free delivery for six months. Quite impressive, isn’t it?

USamerica.US: Wow, it might not seem like a big difference, just 99 cents compared to getting something for free. But I have to ask, did you notice that once people realized the free offer was gone, they stopped being interested?

Bruce Bedford: We had a theory that there’s some kind of psychological effect going on here. Most people really dislike the idea of giving up something they already have. What we found out was that if we kept some value available for customers to claim, they would keep wanting that value.

The value of the program is still the same in both cases, a savings of $100. In the first example, you get all of that value upfront with the free six-month delivery. But in the second example, it takes you at least a year to claim that same value.

So here’s what I found: when people know they can save money on top of what they already have, they’re more likely to stick around for a long time. And you know what? A 30% increase in how many people stay means we’re talking about millions of extra dollars. It’s kind of amazing how powerful analytics can be.

Hey Bruce, where can I learn more about this stuff? you might be asking. Well, you can check out Oberweis or hop over to our Facebook page. We’ve got all the info you need right there.

By the way, this interview is part of the One on One series, where we chat with some really interesting entrepreneurs, authors, and experts. But don’t worry, I’ve edited this conversation to make it easy to read. And if you want to hear the whole thing, just click on that player up there.

Oh, and one more thing. This is part of our One-on-One Interview series with thought leaders. I’ve made some edits to the transcript so that you can read it here, but if it’s an audio or video interview, you can find the player embedded above. And if you’re into podcasts, you can subscribe on iTunes or Stitcher to listen to our interviews there.