1. Overview

        Pharma and Kao, a manufacturer of a household product in Japan, had a joint campaign for sales promotion "Lavenus Direct Mail" from July 7th to 31st, 1997. "Lavenus" was a very new brand of Kao, which products had only appeared in the market for a year at that time. Lavenus' original product line was shampoo. After their first success on it, Lavenus had a brand extension to conditioner and hair dye etc. In order to spread those new products of Lavenus in the market, Kao and Pharma had this joint campaign to let people know their product line extension of Lavenus,   The comparing was about sending Direct Mail (DM) by Pharma to those customers who would be likely to prefer using "Lavenus". The methodology of selecting and classifying customers will be described in the latter section.   Each DM contained a gift certificate which customers could exchange one free sample product of Lavenus, which was shampoo. Each customer who received the certificate can exchange the free sample only in the Pharma's store to where the customer belong. The free sample was packaged in specific small size.
        This campaign was not only a sales promotion but an experimental trial to know how sales promotion of DM will be. So, Pharma selected about 5,000 customers from just 6 stores, which all located in Osaka. Pharma could compare the results from these six different stores with the results from other stores. In the latter section we will show some figures of the comparison briefly.
        The objectives of this case research is to discover the interesting trends, patterns as well as different decision rules from the large data sets of these six different stores. From that, we can analyze and draw conclusions to help Koa and Pharma to define and generate effective and efficient way for their future DM campaigns or other types of campaigns.

2. What is "Lavenus"?

        In last decade, Japan has faced to extreme depression. So it is very difficult to create or sustain a powerful brand. Many companies have tried to do it. It is not only the story in the household industry but in other industries. In this economic background Kao decided to create new brand of "Lavenus".
        The brand of Lavenus has quite unique features as following. Lavenus brand contains products which belong to different categories. As shown in the figure, Lavenus products belong to various categories in witch there are three basic categories, shampoo & conditioner, hair care products and hair dye. It was almost first trial in this industry. Kao intended to use one brand for multiple categories because it is very costly to maintain one brand on one category. We can observe a similar example from another industry. "Chanel" is a very famous brand for high-grade items of perfume, bag, clothes, etc. Some people like to arrange those different items on just one "Chanel" brand because of the high-class brand image. It is usual in this industry, but not in a hair care industry. Likewise Kao decided to make Lavenus image high-grade, high quality, and high functionality in order to make this new brand strategy successful.
        In the first one year after the first release, Lavenus could not be recognized very much. As the result Lavenus did not make so much profit as Kao had expected. So Kao started to explore the more effective way of sales promotion. Then Kao decided to have a joint sales promotion with Pharma.
Brand Code of Lavenus : 7200106

3.About Kao

Kao is one of the famous manufacturer on household products. There are many similar product lines as P&G. It is said that Kao is one of the best manufacturers in Japan which has the most competitive household industry in the world. Also Kao's products are the best selling product among all other products. In order to know what is Kao on the number, you can refer the table which was processed by using just six stores' data. Also Kao's home page will be helpful to get better understanding their strategy.
Manufacturer Code of Kao : 7200

4. Objectives of the campaign

Pharma and Kao had two objectives on this campaign as following.
1) To let people know the name of "Lavenus"
Lavenus was very new brand (about 1 year old) at that time. Therefore the brand name of "Lavenus" was not recognized by customers very much. So Kao wanted to spread the name of "Lavenus" to customers and also make people to switch their preference into Lavenus brand. In order to do it they decided to make a sales promotion by using DM. This was one of the objectives of this campaign.
2) Increase the ratio of the response to DM
Suppose that they don't have any sales data about each customer. They will not have good way to select potential users of Lavenus. Then they have only way to sent a DM to all customers at random. But it will result very costly. Generally speaking response ratio over the all customers who get DM is around 1%. This was a big problem in this world. To get better way to improve the efficiency of the DM was the second objective of this campaign.

5. Specification

5-1. Select conditions

There were three conditions that customers must satisfied in order for them to get the DM.
1. Customers who never buy Lavenus products.
2. Customers who had the visiting rate of Pharma stores more than once per month in average.
3. Customers who bought three or more "Correlated Brands" with Lavenus
"Correlated Brands" were defined by the following steps:
a) To calculate the number of customers who had bought certain brand.
b) To calculate the ratio of the number of customers who had bought Lavenus brand over the number gotten on a).
c) To calculate the average ratio of b) on all of the brands(16080).
d) To select brands which number of b) are greater than twice of the result of c).
Finally 4922 customers who meet above conditions were selected.

5-2. Result of the campaign

        The diagram above shows the result of the DM promotion. Y axis indicates the sales of all Lavenus products. X axis indicates the time sequence from June 18, 1997 to December 27, 1997.
        The red line indicates the cumulative sales of all Lavenus products for which purchased by customers in "six stores", who met the three conditions and got the DM certificates.
        The yellow line indicates the cumulative sales of all Lavenus products for which purchased by customers in all locations, who met the three conditions but without getting the DM certificate.
        The green line indicates the cumulative sales of all Lavenus products for which purchased by customers in all locations, who meet only the first two conditions.

5-3. Description of certificate

Each certificate had an unique bar code, which was used to record the fact that customer had exchanged the sample product.
Pharma product code of the certificate : 1396722
JAN code of the certificate : 4990647026098
Effect#2Code : 29
Effect#4Code : 2999
Effect#6Code :299994

5-4. Description of stores

Even though, all six stores are located in same areas, Osaka, they are all different in terms of accessabilities. eg. store A may only takes three walk from subway, but store B may take more than ten to walk from subway.
Store Code of them : 10240, 10359, 10428, 10469, 10477, 10559

5-5. Period of the campaign

The campaign "Lavenus Direct Mail" had last for a month. July 1st, 1997 was the day that Pharma sent out certificates to the selected customers; it took mostly two days for customers to receive the mailing certificates. July 7th, 1997 to July 31th, 1997 were the period that selected customers could exchange the free sample products.

5-6. Noises

There were certain percentage of selected customer that could not be reached. eg, selected customer had moved and without updated the new address; employees who miss type the address that customer actually living in. There was no way that Pharma could estimate the percentage of these unreached customers

6. Questions

a) The way of the selecting the customers which Pharma did would not be the best way. There would be other ways to select customers which can be more efficient and more effective. What are those?

b) Some customers who exchanged the certificate did not purchase any products of Lavenus brand after the campaign. We can say those customers are in negative group. And some customers completely switched to Lavenus brand in some product categories. We can say those are in positive group. Then how can you describe the features or patterns on each customer group?