Reference no: EM132870808

Selling experiential gifts online?

RedBalloon is a leading Australian m-commerce company selling experiential gifts. The company connects customers with over 1500 suppliers across Australia and New Zealand. Its portfolio of offerings includes over 7000 unique experiences. Some of those experiences include action-packed outdoor activities, exciting water sports, gourmet experiences, luxury getaways, scenic flights, spa treatments, thrilling driving experiences and so much more. Consumers can search RedBalloon's website (www.redballoon.com.au) via a mobile device and select an experience for family, friends or significant other with just a few taps on the screen. Confirmation is instant in the form of a printable and redeemable email. Alternatively, consumers can purchase an experience via a Gift card voucher from any selected retail outlet.

The loss of transparency on advertising spend

Despite having some success, RedBalloon had issues targeting both new and existing customers. Part of the problem was that between 2011 and 2017, the CEO and the Marketing Director had largely outsourced most of the firm's marketing activities. As a consequence, customer acquisition costs had skyrocketed from $0.05 to nearly $50 per customer. There was limited transparency surrounding the allocation of advertising budgets. However, it was apparent a considerable part of the advertising expenditure was simply being used to repeatedly entice the same customers over and over. Worse still, RedBalloon was spending in excess of $45,000 per month on retainers for a number of advertising and media agencies. The retainers, organised and approved by both the previous marketing director and the CEO, had been in place since 2014. 1008GBS Business Decision Making T1 2021

In 2017, founder Naomi Simson was disillusioned with what she saw. Since 2011, she had stepped back from operations to focus on philanthropy. However, when the marketing director and the CEO both left the firm, she decided now was the time to take a more hands-on approach. Her first action was to appoint Stephanie Williams as the new marketing director. Stephanie had worked in both digital marketing and media agencies and had considerable experience in consumer research. Together, Williams and Simson started by trying to gain an understanding of the customer journey, identifying which groups of customers were visiting the firm's website and what were the key points in the 'marketing funnel'. They felt the right type and amount of data would provide valuable insights into customer attitudes, preferences and purchase behaviours. Simson was particularly interested in the level of 'consumer engagement' across the firm's digital channels and, more importantly, wanted to know whether customers were buying RedBalloon experiences for themselves or as gifts for others. This kind of information would be critical for Williams and the marketing team in determining advertising budgets and the types of media channels used.

An AI-enabled solution

When she came back to the firm, Simson had made an executive decision to stop using four of the five agencies being paid retainers. She kept a digital media agency on the books to maintain digital marketing while she and Williams investigated the current situation. However, both Simson and Williams realised RedBalloon needed help and they knew it needed to be digital. The solution was "Albert", an AI-enabled tool that analysed RedBalloon's customer databases and ad accounts to target, optimise and run their ad campaigns through sophisticated machine learning capabilities. Autonomously, Albert was capable of sifting through large amounts of data and converting it into valuable insights to be used to both inform and create different ad campaigns - in real time - across multiple channels and devices. For Naomi Simson, she saw Albert as a way to immediately eliminate many of the manual, time-consuming tasks currently being done by costly agencies. The automation would also give RedBallloon the ability to execute and scale their efforts at a pace they hadn't previously experienced. In addition, it would allow time for marketing staff to better focus their attention on developing and deploying creative strategic marketing plans to grow the business.

Revolutionary results

Piloting AI-enabled technology requires lots of data, something RedBalloon had in abundance. The in-house IT team was able to access the necessary data by developing a specific API (application programming interface) that automatically linked the firm's databases with Albert in real-time. The IT team carried out necessary testing and a three-month trial was initiated. The results were promising.

In the first hour of operation, Albert optimized over 46,000 keywords and within 24hrs could proficiently identify and test approximately 6400 keyword variations of any given Google Adwords advertisement being used by RedBalloon. Effectively, Albert was "learning", leading to further improvements of RedBalloon's digital campaigns on Facebook and Google Adwords. To provide context, this task alone would take a person with significant search engine marketing (SEM) skills around one year to complete, seriously inhibiting first-mover advantages. The initial implementation was so successful that within the first month of operation, Albert had significantly reduced the acquisition cost per 1008GBS Business Decision Making T1 2021 customer from $50 to less than $17, an initial saving of over 60% per customer. The 3-month trial suggested customers were receiving better service, employees had more time to grow the business and shareholders would likely enjoy long-term increases in operating margins.

Following the trial, Simson was faced with a range of options. Should she deploy the Albert system across RedBalloon's global operations as a way to generate future growth? Or would it be better to outsource the process to a digital agency? No doubt, going with Albert would involve considerable IT infrastructure and knowledge, as well as high on-going licencing costs for the software. Simson decided now was the time, but she needed to ensure all stakeholders were managed appropriately. That would be the major challenge.

QUESTIONS:

Having decided the trial was a success, Simson was ready to deploy Albert across all RedBalloon's operations. The implementation of Albert would require a significant up-front investment, as well as on-going fees. The project would take 6-9 months to complete. Throughout the project:

1. What internal/external stakeholders should Simson 'keep informed' and why?

2. What internal/external stakeholders should Simson 'manage closely' and why?

3. What internal/external stakeholders should Simson 'monitor' and why?

4. What internal/external stakeholders should Simson 'keep satisfied' and why?