Hunting for Gold in the Great Outdoors

By Christina Zarrello
One retailer has mastered the ability of transposing the beauty of the outdoors into an indoor retail landscape complete with mountains, wildlife and ponds full of swimming fish. Cabela's is an outdoor lover's paradise and has commonly been referred to as Disney World for the outdoorsy. Cabela's goes above and beyond a typical outdoors retailer; it's an experience. And beyond the expansive selection of hunting, fishing and camping gear, the store features a full-service restaurant, meeting facilities, a general store that sells everything from homemade fudge and scented candles to Burt's Bees products as well as a shooting gallery complete with stationary animal targets.

Nearly 50 years ago, the idea behind Cabela's was conceived around a kitchen table by two brothers in Chappell, Nebraska. Founders Jim and Dick Cabela lived the outdoors lifestyle and took their passion for the outdoors to create the largest direct marketer and specialty retailer of hunting, fishing, hiking, camping and outdoor merchandise.

Cabela's rapidly transitioned from a direct marketer into a multi-channel business and today operates 29 retail locations in the United States and Canada and a bustling e-commerce Web site. Visits to Cabelas.com increased a remarkable 32 percent in 2008 solidifying the retailer as the number one most visited e-commerce Web site in the sporting goods industry. As a result, Internet revenue increased 8.2 percent for the year.
Direct mail is still a key component in the retailer's success. Cabela's mails more than 130,000,000 catalogs each year that range in size from 100 to 1,700 pages.

DEFINING  the  Customer
As Cabela's evolved into a multi-channel business, it was challenged to gain a single view of its customers. The retailer wanted to better focus its marketing efforts to increase  sales by leveraging its data across all channels. In a similar fashion, the analytics department shifted from a marketing support role to an enterprise support role to leverage data throughout the company to make better decisions. 

"Over the years, we had gathered a lot of information about our customers and we wanted to leverage that information to help our retail stores and Web site, along with our catalog business," says Corey Bergstrom, director of marketing research and analysis for Cabela's.   

Expansion of advanced analytics was the missing piece of the puzzle and a SAS Teradata integration in 2006 was implemented to more effectively analyze Cabela's sales transactions, market research and demographic data associated with its large database of customers. The system also helps the retailer choose up-sell offerings that in turn increase profits and schedule promotions to drive sales. Using SAS Analytics, Cabela's gains better target marketing efforts across all of its sales channels including catalog, Internet and retail.

"SAS is able to handle millions of pieces of data," says Bergstrom. "We tested several software packages and SAS best met our requirements."

The integration of SAS Analytics with Teradata's Enterprise Data Warehouse allows Cabela's to personalize catalog offerings and estimate its first-year sales. Additionally, the retailer gains the insight it needs to identify optimal site locations. For 2009, Cabela's plans to open next-generation stores in Billings, Montana and has scheduled a 2010 store opening in East Rutherford, New Jersey.

To enhance the customer experience, Cabela's leveraged SAS to create customer value scores to provide customer service reps a clear understanding of the individual customer's value to better personalize their interactions. Cabela's identifies the customer's favorite channel and then sends related marketing materials.

According to Bergstrom, the retailer is now able to answer: "Does the customer like the 100-page catalogs or the 1,700-page catalogs? The customer tells us this through their past interactions so we can send the catalog that matches his or her needs. SAS gives Cabela's the power to conceivably personalize a unique marketing message, flyer or catalog to every customer."

Additionally, the retailer uses prediction scores to maximize marketing spend across channels and within each customer's personal contact strategy.

"We leveraged SAS to create predictive models to find out more about who we should mail catalogs to and what catalogs should be mailed in order to drive revenue and keep our costs down by targeting customers," says Bergstrom. "Predictive modeling is used for every e-mail, catalog, flyer and credit card communication we send out. We create predictive models to optimize customer selection for all customer contacts."

Success in Analytics
The combination of SAS Analytics with Teradata's Enterprise Data Warehouse has dramatically improved the processes that Cabela's uses for managing important data. Using SAS Analytics, Cabela's has been able significantly reduce the time it spends on data processing by bringing its data close to its analytic function. The process now takes seconds versus days or weeks.

"Our statisticians in the past spent 75 percent of their time just trying to manage data," says Bergstrom. "Now they have more time for analyzing the data with SAS and we have become more flexible in the marketplace. That is just priceless." 

According to Bergstrom, there is still room for improvement and Cabela's will continue to reap benefits out of its analytical tools. "We are still making advancements to the process by providing the accessibility and flexibility to more users and by creating a bigger universe of people with the skill set to fully leverage SAS Analytics. "We used to have ten people, mostly statisticians, who leveraged SAS Analytics. Now, we have over 30 employees using the system on an ongoing basis."

Bergstrom continues by pointing out that report generation through detailed analytics is an ongoing process.  "Report generation has really provided us with the ability to not only know what is happening, but why things are happening," says Bergstrom. "Drilling into these reports allows us to create a solution as to why something happens so that we can be better positioned in the marketplace. If a product category is working, we can now find out why it is working and how long it will last. We want to take advantage of the insights that are driven based on the data that is given to us. Leveraging SAS and the power of being able to answer why things are going on allows us to take strategic action."
SAS Analytics has played an integral part in pinpointing hot product categories. In the retailer's latest financial quarter, it strategically focused on firearms and related accessories, which resulted in a 2.2 percent increase in same store sales. In 2008, the retailer leveraged the strength of its other hot product categories and noted that hunting equipment particularly faired well in the challenging year.
 
Bergstrom points out that the process of deploying such a sophisticated system goes beyond that of an implementation and is more of an evolution. "The evolution has been transitioning from purely marketing support to an enterprise support function, leveraging SAS as the main analytical tool," says Bergstrom. It's been about two years since the integration of SAS and Teradata and we've seen incremental benefits since the beginning. We are now able to answer questions in a more timely fashion and the processes that used to take weeks now take days or even hours." 

Additionally, the retailer has been able to cut back on costly mass mailings to every zip code in a 120-mile radius of a store. The retailer uses analytics to focus its marketing efforts within the geographies of customers most likely to generate the greatest possible incremental sales, which has resulted in a 60 percent increase in response rates.

"With SAS predictive models, we've seen significant growth in overall sales per catalog along with performance increases of as much as 60 percent from some of our retail flyers," says Bergstrom. "Integrating marketing efforts with SAS has shown a valuable return. SAS gives us such a significant return, our executives have never asked us to justify its cost."