The Total Economic Impact Of Listrak Omnichannel Marketing Solutions

Transcription

1 A Forrester Total Economic Impact Study Commissioned By Listrak Project Directors: Norman Forbush Sarah Musto July 2014 The Total Economic Impact Of Listrak Omnichannel Marketing Solutions Profit Driven By Omnichannel Marketing Solutions

2 Table Of Contents Executive Summary... 1 Disclosures... 2 TEI Framework And Methodology... 3 Analysis... 4 Financial Summary Listrak Omnichannel Marketing Solutions: Overview Appendix A: Assumptions Appendix B: Total Economic Impact Overview Appendix C: Glossary Appendix D: Endnotes ABOUT FORRESTER CONSULTING Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester s Consulting services connect you directly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting. 2014, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester, Technographics, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to

3 1 Executive Summary Listrak commissioned Forrester Consulting to conduct a Total Economic Impact (TEI) study and examine the potential return on investment (ROI) enterprises may realize by deploying its marketing platform and omnichannel digital marketing solutions. The purpose of this study is to provide readers with a framework to evaluate the potential financial impact of the Listrak marketing platform and Listrak omnichannel marketing solutions on their organizations. To better understand the benefits, costs, and risks associated with a Listrak implementation, Forrester interviewed an existing customer ( the organization ) with over a year of experience with Listrak. Listrak offers an integrated digital Listrak s marketing platform and omnichannel digital marketing solutions enhanced the organization s ecommerce revenue by $6.4 million and its brick-and-mortar revenue by $5.6 million in Year 1 of our analysis. In addition to the initial revenue uplift seen after investing in Listrak s platform and solutions, the organization has experienced and expects to continue to experience strong annual growth in -driven revenue of 40% per year. marketing platform that provides omnichannel solutions for retailers. It partners with clients to create a personalized experience for their customers across channels and use shopper data and insights to build customer-centric campaigns that drive incremental revenue and brand loyalty. Prior to partnering with Listrak, the organization had implemented an alternate marketing platform. However, this solution yielded limited success, performing worse than expected and leaving considerable opportunity for revenue growth on the table. With Listrak, the organization has a reliable marketing partner that delivers consistent growth in both ecommerce and brick-and-mortar revenue, engaging a consumer base that has not traditionally responded to marketing efforts. As the VP of ecommerce and digital marketing said, If you treat it as another form of advertising, you re spending money to drive traffic, and there is nothing we buy that has anywhere close to the return that has. Not even in the same ballpark. LISTRAK GENERATES REVENUE OF $12 MILLION IN FIRST YEAR Our interview with an existing customer and subsequent financial analysis found that the interviewed organization experienced the risk-adjusted ROI, net present value (NPV), and benefits shown in Figure 1. 1 The analysis points to an ROI of 151% and a net present value (NPV) of $1,735,426. In its first year, the organization achieved a combined $12 million in revenue, or $848,000 in profit, from ecommerce and brick and mortar sales driven by Listrak and attributed 18% of its online traffic to Listrak solutions. FIGURE 1 Financial Summary Showing Three-Year Risk-Adjusted Results ROI: 151% NPV: $1,735,426 Year 1 revenue: $12,006,000 Online traffic driven by Listrak: 18%

4 2 Benefits. The interviewed organization experienced the following risk-adjusted benefits: Incremental ecommerce profit of approximately $487,000 in Year 1, increasing to $980,000 in Year 3. The organization was able to create a series of regular marketing campaigns, supplemented by specialized campaign and list acquisition solutions, which drove $12.9 million in ecommerce revenue by Year 3. Profit from brick-and-mortar stores attributable to Listrak of approximately $319,000 in Year 1, increasing to $626,000 in Year 3. Through the Welcome Series solution, the organization is able to customers trackable coupons that are redeemable online and in-store. These coupons were used in 160,000 transactions in retail locations in Year 1, increasing to 314,000 transactions by Year 3. Costs. The interviewed organization experienced the following risk-adjusted costs: Software licensing fees of about $18,400 upfront, $309,000 in Year 1, and $483,000 by Year 3. These include upfront and monthly fees paid to Listrak for the implementation and access to its basic solution (a majority of fees based on volume) as well as six add-on solutions. In Year 2, an implementation fee is included for investment in the Post Purchase campaign. Internal resource costs of $63,000 per year. This includes costs for day-to-day management of the Listrak suite. It also includes time spent by the internal graphic design team to design templates for campaigns. Disclosures The reader should be aware of the following: The study is commissioned by Listrak and delivered by Forrester Consulting. It is not meant to be used as a competitive analysis. Forrester makes no assumptions as to the potential ROI that other organizations will receive. Forrester strongly advises that readers use their own estimates within the framework provided in the report to determine the appropriateness of an investment in Listrak s digital marketing platform and omnichannel marketing solutions. Listrak reviewed and provided feedback to Forrester, but Forrester maintains editorial control over the study and its findings and does not accept changes to the study that contradict Forrester s findings or obscure the meaning of the study. Listrak provided the customer name for the interview but did not participate in the interviews.

5 3 TEI Framework And Methodology INTRODUCTION From the information provided in the interviews, Forrester has constructed a Total Economic Impact (TEI) framework for those organizations considering implementing the Listrak platform and omnichannel marketing solutions. The objective of the framework is to identify the cost, benefit, flexibility, and risk factors that affect the investment decision. APPROACH AND METHODOLOGY Forrester took a multistep approach to evaluate the impact that the Listrak platform and omnichannel marketing solutions can have on an organization (see Figure 2). Specifically, we: Interviewed Listrak marketing, sales, and/or consulting personnel, along with Forrester analysts, to gather data relative to the Listrak platform and omnichannel marketing solutions and the marketplace for digital omnichannel marketing solutions. Interviewed one organization currently using Listrak to obtain data with respect to costs, benefits, and risks. Constructed a financial model representative of the interview using the TEI methodology. The financial model is populated with the cost and benefit data obtained from the interview. Risk-adjusted the financial model based on issues and concerns the interviewed organization highlighted in interviews. Risk adjustment is a key part of the TEI methodology. While the interviewed organization provided cost and benefit estimates, some categories included a broad range of responses or had a number of outside forces that might have affected the results. For that reason, some cost and benefit totals have been risk-adjusted, and are detailed in each relevant section. Forrester employed four fundamental elements of TEI in modeling Listrak s service: benefits, costs, flexibility, and risks. Given the increasing sophistication that enterprises have regarding ROI analyses related to IT investments, Forrester s TEI methodology serves to provide a complete picture of the total economic impact of purchase decisions. Please see Appendix B for additional information on the TEI methodology. FIGURE 2 TEI Approach Perform due diligence Conduct customer interviews Construct financial model using TEI framework Write case study

6 4 Analysis THE INTERVIEWED ORGANIZATION For this study, Forrester conducted one interview with a representative from the following company, which is a Listrak customer based in the US: The organization is a clothing retail chain that has an omnichannel approach to ecommerce and brick and mortar. Based in the US, the organization has 300 stores. In 2013, it achieved $24 million in ecommerce business driven by 25 million s sent per month. It s hard to find people who can actually deliver and do what they say they can do. Listrak could. ~VP of ecommerce and digital marketing The organization recently reassessed its ecommerce strategy. As part of this assessment, the organization moved from its prior marketing platform and solutions to Listrak s platform and solutions. The organization initially invested in Listrak s marketing platform, Welcome Series, Shopping Cart Abandonment, Preference Center, Modal Lightbox, and Advanced Retail Segmentation with Point-Of-Sale (POS) Integration. Within a few months all of these solutions were live, and the benefits the organization has seen from the Listrak suite have contributed to the organization s rapid growth. Last year, the organization attributed 18% of online visits and 14% of ecommerce revenue to its Listrak investment. In its second year with Listrak, the organization invested in Listrak s Post Purchase campaign, and it continues to see strong revenue growth of 40% year over year driven by Listrak s solutions. INTERVIEW HIGHLIGHTS Based on Listrak s performance, the interviewed organization emphasized that the move to Listrak was an important part of its refreshed ecommerce strategy and that partnering with Listrak has enhanced growth online and in stores. Situation Prior to the decision to invest in Listrak s marketing platform and solutions, the organization was having difficulty realizing the full potential of a robust marketing platform. The organization has experienced rapid growth over the past several years. It needed to find a solution that could complement the organization s growing business while also being easy to manage. The organization also needed a way to engage its target customers: younger women, who have not traditionally been as responsive to campaigns. The organization had been using an alternate marketing solution that wasn t performing as well as expected and had nominal revenue attribution. It wanted to partner with an marketing provider that had the expertise on staff to make sure that the solution worked not only on the first day but also on an ongoing basis. I think we have a really strong partnership with Listrak. I m on the phone with them once a week at a minimum. If there is something we see... that can help one of us or both of us grow the business, we talk about it. ~VP of ecommerce and digital marketing

7 5 Solution The organization selected Listrak for its ability to provide a reliable marketing platform and additional retail-specific add-on solutions like Shopping Cart Abandonment and Welcome Series that help capture additional revenue and inform more targeted campaigns. The organization noted the following: Implementation was very quick. With the exception of the Shopping Cart Abandonment solution, all of the solutions (aside from the Post Purchase solution, which the organization added in Year 2) were live within a few weeks. Shopping Cart Abandonment was live by the beginning of Year 1. Listrak provided a full service implementation that required minimal internal resources upfront. On an ongoing basis, the solutions require minimal management. Listrak account management has played an active role in ensuring the implementation s ongoing success. The organization engages regularly with Listrak to discuss current performance and possible future enhancements. Results The interview revealed that: campaigns drive visits, which drive revenue. The most significant benefit experienced was increased revenue driven by campaigns. With basic batch-and blast- campaigns, along with more targeted campaigns through Welcome Series or Shopping Cart Abandonment, the organization was able to engage more often with its target customers and drive increased traffic to its online site and in brick-and-mortar stores. Its first full year using Listrak s marketing platform and solutions, the organization attributed 18% of its online traffic to Listrak. In addition, through retailspecific add-ons like Welcome Series, the organization is able to drive increased traffic to its retail stores through trackable coupons provided to customers in campaigns. In Year 1, these coupons accounted for $5.6 million in brick-andmortar revenue. The organization is also able to collect addresses in-store to incorporate in future campaigns, enhancing the potential revenue uplift from these solutions over the next several years. Add-on solutions provide benefits and opportunities in other channels. While the organization has not quantified the impact of solutions like the Modal Lightbox, Preference Center, and Advanced Retail Segmentation, it believes that these solutions have provided value and enhance the solution set as a whole. The organization has also been using these solutions outside of the channel, finding creative new ways to leverage the data that these solutions collect to drive additional benefit. Listrak is an engaged partner. The organization has benefited from active engagement by Listrak account management. The interviewee connects with Listrak at least once a week to discuss new trends in marketing and what can be done to further the organization s growth. As the interviewee described it, They re really like an extension of my staff. Working with Listrak has allowed the organization to effectively create, maintain, and deliver successful marketing campaigns that drive growth across channels. Our target customers... with most of what you read, shouldn t work for this segment. Yet it s our single largest source of traffic outside of organic and direct. It s 18%. That s a huge number. ~VP of ecommerce and digital marketing

8 6 BENEFITS The organization experienced two quantified benefits in this case study: Benefit No. 1. Incremental -driven ecommerce profit. Benefit No driven brick-and-mortar profit attributable to Listrak. Benefit No. 1. Incremental -Driven ecommerce Profit The organization indicated that a key benefit from the Listrak marketing platform and solutions implementation was an increase in -driven ecommerce revenue and profit. A majority of this incremental revenue comes from the daily batchand-blast campaigns. These regular campaigns helped the organization build relationships with customers and drive increased traffic to its online site. In Year 1, daily blast s delivered $5.3 million in revenue. Prior to using Listrak, the organization was using a different vendor for its marketing program but was having difficulty realizing results. The organization estimates that the $5.3 million in revenue in Year 1 is incremental and attributable to the strength of Listrak s platform and solutions. The organization has also been ramping up its activity, starting with two or three s sent to each customer per week and now up to one per day. The organization plans to keep increasing the frequency of its send as long as the new s drive further revenue gains. The organization was also able to capture the revenue attributable to Shopping Cart Abandonment, Welcome Series, Birthday Series, and Post Purchase. The Shopping Cart Abandonment solution sends reminder s to customers who have placed items in their carts online but have not yet purchased. With this solution, the organization was able to reduce the loss from shopping cart abandonment by $730,000 in Year 1. The Welcome Series targets new customers with promotional offers to encourage them to make additional purchases. The organization realized $367,000 in revenue by new customers purchasing additional items online. The Birthday Series sends special offers to customers on their birthday, resulting in $9,000 in revenue in Year 1. The Post Purchase campaign sends an a chosen number of days after the customer makes a purchase to recommend additional items for that customer and to prolong the customer relationship. The organization began using the Post Purchase campaign in Year 2 and was able to capture $240,000 in additional revenue that year. This revenue is captured as a result of Listrak s targeted solutions and is thus considered entirely incremental. In years 2 and 3, the organization expects revenue from these solutions to grow at an average of 40% per year across the entire solution set. This is a result of increased monthly volume, continuous refinement in the use of existing solutions, investment in new solutions, and continued support from Listrak account management to identify further ways to drive revenue. The estimated incremental profit from -driven ecommerce in Year 1, after an 8% industry average net margin, is $512,480. By Year 3, the incremental profit from -driven ecommerce increases to $1,031,341. Modal Lightbox, Preference Center, and Advanced Retail Segmentation round out the organization s Listrak solution set. While the organization has not tracked the benefits of these solutions separately, it believes that they provide additional value. Modal Lightbox collects addresses from site visitors, which can then be used in campaigns. Preference Center collects data on customer preferences that can then inform the frequency and types of s sent. Advanced Retail Segmentation with POS Integration allows the organization to use data from customers past purchases online and in-store to create more targeted campaigns. The organization was able to implement all of these solutions very quickly and is also expecting strong continued growth over the next several years. Other organizations may see a longer time to benefit if integration is slower, and the interviewed organization may not fully realize the future growth targets included below. To compensate, this benefit was risk-adjusted and reduced by 5%. The risk-adjusted total benefit resulting from incremental ecommerce gross revenue over the three years was $2,166,468. See the section on Risks for more detail.

9 7 TABLE 1 Incremental -Driven ecommerce Profit Ref. Metric Calculation Year 1 Year 2 Year 3 A1 Daily blast revenue $5,300,000 $7,420,000 $10,388,000 A2 Shopping Cart Abandonment revenue $730,000 $1,022,000 $1,430,800 A3 Welcome Series revenue $367,000 $513,800 $719,320 A4 Birthday Series revenue $9,000 $12,600 $17,640 A5 Post Purchase revenue $240,000 $336,000 A6 Annual revenue growth rate 40% A7 Total incremental revenue A1+A2+A3+A4+A5 $6,406,000 $9,208,400 $12,891,760 A8 Average industry net margin on ecommerce sales 8% 8% 8% At -driven ecommerce profit A7*A8 $512,480 $736,672 $1,031,341 Risk adjustment 5% Atr -driven ecommerce profit (riskadjusted) $486,856 $699,838 $979,774 Benefit No Driven Brick-And-Mortar Profit Attributable To Listrak The organization indicated that another key benefit from the Listrak implementation was the integration of the marketing platform with its retail stores. The organization is able to track revenue tied to the Welcome Series solution in its brick-and-mortar stores. The organization s new customers coupons that are redeemable both online and in-store and tracked via a coupon code. The incremental ecommerce revenue from Welcome Series coupons redeemed online is measured in the previous benefit category and represents incremental purchases. The organization also realizes brick-andmortar revenue when customers print these coupons from their inbox and redeem them at their local stores. This revenue is attributable to both preplanned and unplanned purchases at retail locations where Welcome Series coupons were used. In 2013, this resulted in approximately 160,000 in-store transactions using these coupons at an average order value of $35, totaling $5.6 million in revenue. At an average industry net margin of 6%, these coupons are tied to $336,000 in incremental profit in Year 1. The organization is also able to collect addresses in its retail stores at checkout. Once these addresses are validated, they are imported into Listrak and become part of the Welcome Series campaigns, which can drive additional future traffic to the organization s website and stores. The organization estimates that it collects 30,000 to 40,000 addresses each week from its brick-and-mortar stores for future campaigns. The organization expects revenue from instore transactions attributable to Welcome Series coupons to grow 40% per year. This results in revenue of almost $11 million and profit of almost $659,000 by Year 3. The organization was able to integrate the marketing program with its retail stores very quickly and is also expecting strong continued growth over the next several years. Other organizations may see a longer time to benefit if integration is slower, and the interviewed organization may not fully realize the future growth targets included below. To compensate, this benefit was risk-adjusted and reduced by 5%. The risk-adjusted total benefit resulting from incremental brick-and- mortar profit over the three years was $1,391,712. See the section on Risks for more detail.

10 8 TABLE 2 -Driven Brick-And-Mortar Profit Attributable To Listrak Ref. Metric Calculation Year 1 Year 2 Year 3 B1 Annual transactions with coupons 160, , ,600 B2 Average order size $35 $35 $35 B3 Annual growth rate 40% B4 Welcome Series revenue B1*B2 $5,600,000 $7,840,000 $10,976,000 B5 Average industry net margin on brick-andmortar sales 6% 6% 6% Bt Welcome Series profit, brick and mortar B4*B5 $336,000 $470,400 $658,560 Btr Risk adjustment 5% Welcome Series profit, brick and mortar (riskadjusted) $319,200 $446,880 $625,632 Total Benefits Table 3 shows the total of all benefits across the two areas listed above, as well as present values (PVs) discounted at 10%. Over three years, the organization expects risk-adjusted total benefits to be a PV of about $2.89 million. TABLE 3 Total Benefits (Risk-Adjusted) Ref. Benefit Year 1 Year 2 Year 3 Total Present Value Atr Incremental driven ecommerce $486,856 $699,838 $979,774 $2,166,468 $1,757,094 profit Btr -driven brick-andmortar profit attributable to Listrak $319,200 $446,880 $625,632 $1,391,712 $1,129,551 Total benefits $806,056 $1,146,718 $1,605,406 $3,558,180 $2,886,644

11 9 COSTS The organization experienced a number of costs associated with the Listrak solution: Cost No. 1. Software license and usage fees. Cost No. 2. Internal resource costs. These represent the mix of internal and external costs experienced by the organization for initial planning, implementation, and ongoing maintenance associated with the solution. Cost No. 1. Software License And Usage Fees Software licensing and usage fees for the Listrak platform represent a majority of the investment cost. For basic batch-andblast , the organization paid $276,000 in the first year for 25 million s per month plus license fees. The organization plans to double volume in years 2 and 3 to capture additional revenue, resulting in a 24% increase in the monthly fee in each year. For each of the add-on solutions, the organization paid an upfront setup fee. For Shopping Cart Abandonment, Modal Lightbox, Advanced Retail Segmentation, and Post Purchase, the organization pays a monthly fee for send or usage. Welcome Series, Preference Center, POS Integration, and Birthday Series do not require a monthly fee. Ongoing account management is included as part of the product costs listed below. The total initial cost for setup and implementation in Year 1 was about $17,500. This doesn t include the setup fee for the Post Purchase campaign, which the organization began using in Year 2. The organization paid just under $294,000 in Year 1, increasing to approximately $460,000 in Year 3 for ongoing use of the solution set, driven primarily by the daily blast costs. Software costs are variable from organization to organization, considering different licensing agreements and other discounts. To compensate, this cost was risk-adjusted up by 5%. The risk-adjusted cost of software over the three years was $1,212,604. See the section on Risks for more detail. TABLE 4 Software License And Usage Costs Ref. C1 Metric volume and license fees Initial Implementation Year 1 Year 2 Year 3 $276,000 $342,240 $424,378 C2 Total add-on solutions fees $17,543 $17,940 $40,880 $35,880 Ct Software license and usage fees $17,543 $293,940 $383,120 $460,258 Risk adjustment 5% Ctr Software license and usage fees (risk-adjusted) $18,420 $308,637 $402,276 $483,270 Cost No. 2. Internal Resource Costs The organization uses internal effort and resources to ensure the success of its marketing strategy. The organization relied on Listrak s full-service implementation, keeping internal resources for implementation efforts minimal. On an ongoing

12 10 basis, the organization has one senior executive spending an average of 4 hours per week engaging with Listrak account management and maintaining the solutions. The organization also has a graphic design team that devotes part of its time, approximately 40 hours per week for the team, to designing templates for campaigns. While the organization plans to expand volume over the next several years to capture additional revenue, one benefit of an automated solution like Listrak is that building templates becomes easier. Therefore, the organization will be able to send a higher volume of without spending significantly more time on graphic design. Ongoing management and graphic design work total to $60,000 in resource costs for time spent internally on marketing activities per year. Resource costs are more variable from organization to organization considering some organizations may be newly starting an marketing program while others may have previous experience and capabilities in-house to manage these solutions. To compensate, this cost was risk-adjusted up by 5%. The risk-adjusted cost for internal efforts over the three years was $189,000. See the section on Risks for more detail. TABLE 5 Internal Resource Costs Ref. Metric Calculation Year 1 Year 2 Year 3 D1 Ongoing management hours spent per week D2 Fully loaded annual salary management $150,000 $150,000 $150,000 D3 Graphic design hours per week D4 Fully loaded annual salary graphic design $45,000 $45,000 $45,000 D5 Weeks per year D6 Ongoing management annual cost ((D1*D5)/2,080)*D2 $15,000 $15,000 $15,000 D7 Graphic design annual cost ((D3*D5)/2,080)*D4 $45,000 $45,000 $45,000 Dt Internal resource costs D6+D7 $60,000 $60,000 $60,000 Risk adjustment 5% Dtr Internal resource costs (risk-adjusted) $63,000 $63,000 $63,000 Total Costs Table 6 shows the total of all costs as well as associated present values, discounted at 10%. Over three years, the organization expects costs to total a present value of about $1.15 million.

13 11 TABLE 6 Total Costs (Risk-Adjusted) Ref. Cost Initial Year 1 Year 2 Year 3 Total Present Value Ctr Software license costs and usage fees $18,420 $308,637 $402,276 $483,270 $1,212,604 $994,547 Dtr Internal resource costs $0 $63,000 $63,000 $63,000 $189,000 $156,672 Total costs $18,420 $371,637 $465,276 $546,270 $1,401,604 $1,151,219 FLEXIBILITY Flexibility, as defined by TEI, represents an investment in additional capacity or capability that could be turned into business benefit for some future additional investment. This provides an organization with the right or the ability to engage in future initiatives but not the obligation to do so. There are multiple scenarios in which a customer might choose to implement the Listrak platform and omnichannel marketing solutions and later realize additional uses and business opportunities. Flexibility would also be quantified when evaluated as part of a specific project (described in more detail in Appendix B). The organization has started to experiment with the use of Listrak solutions in social advertising. With Advanced Retail Segmentation, the organization can build sets of addresses that can be used on social networking sites for new customer acquisition. With the addresses for a specific customer demographic, the organization can leverage the social networking data associated with these addresses to identify similar new audiences on social sites to target with focused advertisements. The result is additional traffic to its online site and to its retail stores. The organization is also contemplating further investments in Listrak solutions, including the personalization engine Recommender. The Recommender solution will allow the organization to track and share relevant content for customers across , mobile, and web channels. By presenting customers with recommended products based on their past preferences and shopping history, the organization intends to use the Recommender solution to drive additional revenue through additional customer purchases. RISKS Forrester defines two types of risk associated with this analysis: implementation risk and impact risk. Implementation risk is the risk that a proposed investment in the Listrak platform and omnichannel marketing solutions may deviate from the original or expected requirements, resulting in higher costs than anticipated. Impact risk refers to the risk that the business or technology needs of the organization may not be met by the investment in Listrak, resulting in lower overall total benefits. The greater the uncertainty, the wider the potential range of outcomes for cost and benefit estimates.

14 12 TABLE 7 Benefit And Cost Risk Adjustments Benefits Adjustment Incremental -driven ecommerce profit 5% -driven brick-and-mortar profit attributable to Listrak 5% Costs Adjustment Software license and usage fees 5% Internal resource costs 5% Quantitatively capturing implementation risk and impact risk by directly adjusting the financial estimates results provides more meaningful and accurate estimates and a more accurate projection of the ROI. In general, risks affect costs by raising the original estimates, and they affect benefits by reducing the original estimates. The risk-adjusted numbers should be taken as realistic expectations since they represent the expected values considering risk. The following impact risks that affect benefits are identified as part of the analysis: Slower or more difficult integration/implementation may delay time to benefit for some of the functionality in the solution set. The organization is planning for continued growth in its use of marketing. There is a slight risk that volume and pertinent metrics (e.g., conversion rate) may not achieve the assumed growth targets. The following implementation risks that affect costs are identified as part of this analysis: Software license and usage fees can vary from organization to organization based on differing agreements or discounts. Internal resource costs can vary based on prior experience with similar solutions and whether the resources needed are available in-house or through a third party/outsourced. Table 7 shows the values used to adjust for risk and uncertainty in the cost and benefit estimates. Readers are urged to apply their own risk ranges based on their own degree of confidence in the cost and benefit estimates.

15 13 Financial Summary The financial results calculated in the Benefits and Costs sections can be used to determine the ROI and NPV for the organization s investment in Listrak s platform and omnichannel marketing solutions. Table 8 below shows the risk-adjusted ROI and NPV. These values are determined by applying the risk-adjustment values from Table 7 in the Risks section to the unadjusted results in each relevant cost and benefit section. FIGURE 3 Cash Flow Chart (Risk-Adjusted) $2,500,000 $2,000,000 Financial Analysis (risk-adjusted) $1,500,000 Cash Flows $1,000,000 $500,000 $0 -$500,000 -$1,000,000 Initial Year 1 Year 2 Year 3 Total Costs Total Benefits Cumulative Total TABLE 8 Cash Flow (Risk-Adjusted) Initial Year 1 Year 2 Year 3 Total Present Value Costs ($18,420) ($371,637) ($465,276) ($546,270) ($1,401,604) ($1,151,219) Benefits $0 $806,056 $1,146,718 $1,605,406 $3,558,180 $2,886,644 Net benefits ($18,420) $434,419 $681,442 $1,059,135 $2,156,577 $1,735,426 ROI 151%

16 14 Listrak Omnichannel Marketing Solutions: Overview The following information is provided by Listrak. Forrester has not validated any claims and does not endorse Listrak or its offerings. Listrak offers a single, integrated and personalization platform that provides relevant, timely marketing, retargeting, and recommendations from a single login. Listrak s enterprise-grade platform can create automated campaigns that are based on 360-degree insights and engage customers across multiple channels, including , mobile, web, social, and store. Listrak s omnichannel personalization engine allows retailers to create automated campaigns featuring personalized products in s and on-site. With Listrak s integrated digital marketing platform, Listrak s suite of retail-specific solutions is ready to use. ecommerce solutions include: Advanced Retail Segmentation allows clients to use data from customers past in-store and online purchases to create targeted, relevant campaigns. Product Recommender personalized product recommendations in and on-site. Shopping Cart Abandonment remarketing campaigns to recapture lost revenue from cart abandoners. Browse and Abandon behaviorally based remarketing to nurture clients back to a website to take action. Back in Stock Alerts remarketing to capture lost revenue from out-of-stock items. Automated Recurring Messages used with Product Recommender, turns daily or weekly marketing s into automated messages with personalized product recommendations. Post Purchase campaigns based on Listrak s proprietary Lifecycle Marketing Grid. Transactional campaigns in response to customer-initiated actions. Modal Lightbox on-site acquisition tactic. Welcome Series campaigns to engage new subscribers, validate addresses, and prompt first sales following signup. Preference Center integrated center to gather data that can be used to target and segment shoppers. Buyertrak automated campaigns based on predictive behavioral analytics and business intelligence to proactively prompt product repurchases.

17 15 Appendix A: Assumptions FRAMEWORK ASSUMPTIONS Table 9 provides the model assumptions that Forrester used in this analysis. The discount rate used in the PV and NPV calculations is 10%, and the time horizon used for the financial modeling is three years. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult with their respective company s finance department to determine the most appropriate discount rate to use within their own organizations. TABLE 9 Model Assumptions Ref. Metric Calculation Value R1 Hours per week 40 R2 Weeks per year 52 R3 Hours per year (M-F, 9-5) 2,080 R4 Hours per year (24x7) 8,736 R5 Management salary $150,000 R6 Graphic design salary $45,000

18 16 Appendix B: Total Economic Impact Overview Total Economic Impact is a methodology developed by Forrester Research that enhances a company s technology decisionmaking processes and assists vendors in communicating the value proposition of their products and services to clients. The TEI methodology helps companies demonstrate, justify, and realize the tangible value of IT initiatives to both senior management and other key business stakeholders. The TEI methodology consists of four components to evaluate investment value: benefits, costs, flexibility, and risks. BENEFITS Benefits represent the value delivered to the user organization IT and/or business units by the proposed product or project. Often, product or project justification exercises focus just on IT cost and cost reduction, leaving little room to analyze the effect of the technology on the entire organization. The TEI methodology and the resulting financial model place equal weight on the measure of benefits and the measure of costs, allowing for a full examination of the effect of the technology on the entire organization. Calculation of benefit estimates involves a clear dialogue with the user organization to understand the specific value that is created. In addition, Forrester also requires that there be a clear line of accountability established between the measurement and justification of benefit estimates after the project has been completed. This ensures that benefit estimates tie back directly to the bottom line. COSTS Costs represent the investment necessary to capture the value, or benefits, of the proposed project. IT or the business units may incur costs in the form of fully burdened labor, subcontractors, or materials. Costs consider all the investments and expenses necessary to deliver the proposed value. In addition, the cost category within TEI captures any incremental costs over the existing environment for ongoing costs associated with the solution. All costs must be tied to the benefits that are created. FLEXIBILITY Within the TEI methodology, direct benefits represent one part of the investment value. While direct benefits can typically be the primary way to justify a project, Forrester believes that organizations should be able to measure the strategic value of an investment. Flexibility represents the value that can be obtained for some future additional investment building on top of the initial investment already made. For instance, an investment in an enterprisewide upgrade of an office productivity suite can potentially increase standardization (to increase efficiency) and reduce licensing costs. However, an embedded collaboration feature may translate to greater worker productivity if activated. The collaboration can only be used with additional investment in training at some future point. However, having the ability to capture that benefit has a PV that can be estimated. The flexibility component of TEI captures that value. RISKS Risks measure the uncertainty of benefit and cost estimates contained within the investment. Uncertainty is measured in two ways: 1) the likelihood that the cost and benefit estimates will meet the original projections and 2) the likelihood that the estimates will be measured and tracked over time. TEI applies a probability density function known as triangular distribution to the values entered. At a minimum, three values are calculated to estimate the underlying range around each cost and benefit.

19 17 Appendix C: Glossary Discount rate: The interest rate used in cash flow analysis to take into account the time value of money. Companies set their own discount rate based on their business and investment environment. Forrester assumes a yearly discount rate of 10% for this analysis. Organizations typically use discount rates between 8% and 16% based on their current environment. Readers are urged to consult their respective organizations to determine the most appropriate discount rate to use in their own environment. Net present value (NPV): The present or current value of (discounted) future net cash flows given an interest rate (the discount rate). A positive project NPV normally indicates that the investment should be made, unless other projects have higher NPVs. Present value (PV): The present or current value of (discounted) cost and benefit estimates given at an interest rate (the discount rate). The PV of costs and benefits feed into the total NPV of cash flows. Payback period: The breakeven point for an investment. This is the point in time at which net benefits (benefits minus costs) equal initial investment or cost. Return on investment (ROI): A measure of a project s expected return in percentage terms. ROI is calculated by dividing net benefits (benefits minus costs) by costs. A NOTE ON CASH FLOW TABLES The following is a note on the cash flow tables used in this study (see the example table below). The initial investment column contains costs incurred at time 0 or at the beginning of Year 1. Those costs are not discounted. All other cash flows in years 1 through 3 are discounted using the discount rate (shown in the Framework Assumptions section) at the end of the year. PV calculations are calculated for each total cost and benefit estimate. NPV calculations are not calculated until the summary tables are the sum of the initial investment and the discounted cash flows in each year. TABLE [EXAMPLE] Example Table Ref. Metric Calculation Year 1 Year 2 Year 3 Appendix D: Endnotes 1 Forrester risk-adjusts the summary financial metrics to take into account the potential uncertainty of the cost and benefit estimates. For more information, see the section on Risks.