Improving the Odds

Marketing and IS at last join forces to seek the jackpot of customer intimacyReader ROI READ THIS ARTICLE to learn - How marketing can partner with IS to achieve customer intimacy - New marketing applications for data warehousing and the Internet - Which tools can increase marketing's internal effectiveness Get with the program. E-commerce, ERP and other temporary fashions that have recently hogged our attention are yesterday's news. The next big thing has arrived. Call it "Customer Relationship Management," "One-to-One Marketing," "Enterprise Marketing Automation" or any of the other catch-phrases that have cropped up, but the coming competitive frontier is about finding, knowing and delighting customers. In the past, businesses competed by making stellar products and later by meeting the needs of the average customer. Today the goal is to know and serve every consumer, one at a time, and to build long-term, mutually beneficial relationships.

Information technology is the key to achieving customer intimacy. But the people who need to wield the key are, ironically, in the one department that hasn't yet been flattened and reshaped by the IT thumbprint: marketing. Until recently, marketing was the last great holdout of the technology revolution because technology didn't seem to address marketing's imprecise, creative mandate. In addition, marketers and IT people tended to regard each other with distrust, misunderstanding and misgivings about one another's priorities. "If you had one of these continuums on a circle, marketing and IS would probably be 180 degrees opposite each other," says John Boushy, senior vice president of IT and marketing services at the Memphis, Tennessee-based casino and entertainment company Harrah's Entertainment. But that's all changing now as marketing takes a dominant role in shaping organisations' interactions with consumers.

Marketing thus becomes the company's darling and the information systems (IS) department's new best friend. Together, marketing and IS are finding innovative ways to understand and reach customers. In the process, they are discarding their ancient enmity and fundamentally reinventing the relationships between businesses and their customers. "Marketing is about designing things that meet the needs and wants of customers, and today the use of information is how you meet some of those needs," says Boushy. "So IT very much becomes the means to the marketing ends. It's like you must join these entities with Velcro." All Grown Up: Database Marketing The root of all IT-enabled marketing is the common database. Marketing outfits have been using databases for years to get a picture of their customers, either working with IS to leverage a company-wide, huge data warehouse or creating their own simple, stovepipe database. Using data mining tools, companies can figure out which of their customers are most likely to buy a given product, respond to a certain communication medium or defect to the competition.

Companies can even gauge which of their competitors' customers are ripe for the taking. This is all basic stuff. But now that IT and marketing are making a concerted effort to know and please customers, databases are becoming more strategic and even a little sexy. Marketers have many new windows available to them for viewing the customer, and warehouses are jam-packed with the additional information this provides. Besides the ubiquitous telemarketing centre and direct mail campaign, companies can communicate new products, services or promotions to consumers via e-mail, Web-based product registration or customer service and community forums on the Internet. Hitachi Semiconductor (America) notes the interests and needs of its corporate customers electronically through cookies that track their comings and goings on the site.

British Airways uses basic observation as a path to customer intimacy.

According to Bob Dorf, president of the Stamford, Connecticut-based marketing consultancy Marketing 1 to 1/Peppers and Rogers Group, British Airways flight attendants notice what their most valuable passengers choose and then enter that into a laptop computer onboard so that the next time the passenger in seat 3B flies with the airline, she automatically receives an extra pillow or a Diet Coke with no ice, as she prefers. Marketers are also becoming more sophisticated in their use of data warehouses, applying their results of data mining in the pursuit of customer intimacy. For example, Mary Kelley, vice president of database and relationship marketing at Charles Schwab Co in San Francisco, told the audience at the July 1998 DCI Marketing Automation conference in New York City that Charles Schwab is striving to use its data warehouse to discover how much money a customer isn't investing with Charles Schwab. "If a customer invests $US10,000, we want to know if he has a million dollars elsewhere that he isn't investing with us and why not," Kelley says.

Spiegel's Redmond, Washington-based Eddie Bauer subsidiary uses catalogue sales information in its data warehouse to determine the best sites for new stores and to eliminate duplicate retail mailings to customers who shop at both retail and catalogue channels, says CIO Jon Nordeen. The $US14 billion Dallas-based consumer products company Kimberly Clark uses its data warehouse in the business-to-business sector to market to its customers' customers. The company identifies individuals its distributors market to, such as the building manager of a particular company, and targets that person with mailings about the benefits of Kleenex, Scott towels and other Kimberly Clark products, says Tom Ahonen, director of business systems.

One to One

The next evolutionary step in database marketing is targeting one customer at a time. BMG Direct, the New York City-based direct marketing division of BMG Entertainment, uses its data warehouse to coordinate the 50 variations of a single promotion that are mailed out to its eight million club members in any given period. BMG's customers are classified into 14 different musical genre preferences and further divided by length of membership. Based on those factors, each member receives different promotional offers, lists of music titles on sale and monthly featured music selections. The longer customers have been in the club, the bigger the discounts they receive. "Our entire business is dependent on our ability to segment our customers so that members receive catalogues and offers with the right kind of music, a featured selection we think they would like and at a discount level in line with their membership in the club," says Elizabeth Rose, vice president of strategic planning and electronic commerce. "There's virtually nothing we can do as marketers that doesn't have systems implications. For me, there are certain people whose phone calls I will pick up every time, and they include the top three systems guys I work with." Harrah's is also mastering the art of one-to-one marketing. In 1997 it launched its Total Gold national guest-recognition program, which rewards loyal customers with points and complimentary offerings. When a customer swipes her Total Gold identification card at a slot machine or presents it when checking into a Harrah's hotel, the account number is transmitted to Harrah's data warehouse in Memphis, Tennessee. The data warehouse sends back her detailed history to the casino property and alerts the property employees via an electronic pager or a PC screen that this customer needs to be welcomed. "When an Atlantic City customer who's never been to Las Vegas goes there and inserts a Total Gold card into a slot machine, within seven seconds we know who that customer is and make sure that information is accessible in Las Vegas," says Boushy. The program engenders such loyalty that in its first four months, from September to December 1997, there was a 60 per cent increase in customers that chose Harrah's when travelling to a new casino over the same period before the Total Gold card program was started, and has continued through August 1998. The Vegas property almost doubled its cross-market visitation (Atlantic City customers going to Las Vegas and vice-versa) revenue, and cross-market play overall increased by more than $US16 million, says Boushy. Cleveland-based KeyCorp uses its data warehouse to cross-sell new products to existing customers, says former vice president of Direct Marketing Jonathan T Hill. For example, if the warehouse "notices" that a customer is buying a lot of home improvement products, it may suggest to a customer service representative that he offer the customer a low-interest-rate home equity loan. This capability in itself isn't particularly new. But Key has taken it a step further and now generates customer leads without any human intervention. At the end of a customer call to the bank's voice response unit, the system automatically informs the customer that she's been approved for a home equity loan and asks if she'd like to receive an application. "I was afraid they'd hear [the voice response unit] and hang up, but that's not what's been happening at all," says Allen Gula, chairman and CEO of Key Services, the IS arm of KeyCorp. "We've had better success than we ever thought we would." Enter the Internet More than anything, the Internet has precipitated the trend toward one-to-one marketing. It is certainly the most economical way to communicate with customers, says Tom Haas, vice president of consulting at Hunter Business Direct, because it only costs about 5 cents to e-mail a customer, compared with as much as $US5 for direct mail, $US8 to $US24 for telephone sales and $US40 to $US400 for a field call from a sales rep. And it's definitely faster. Planning and executing a traditional marketing campaign used to take three months; today it can be done over the Internet in four hours, says Hal Steger, vice president of marketing at enterprise marketing-automation vendor Rubric in San Mateo, California. The $US15.2 billion computer giant Dell Computer of Round Rock, Texas, uses the Internet to provide key customers with personalised Premier Web pages. Sitting inside Dell's firewall, the pages contain product, technical and industry information of interest to the particular customer. By taking advantage of this innovation, the customer doesn't have to waste time trying to find what it needs among Dell's reams of information, and Dell gets a more loyal customer, says Joe Marengi, senior vice president and general manager of the relationship group at Dell. Customers can communicate with their Dell account team and buy additional products online. Dell even coordinates discounted employee purchase programs through the customised page. Executives on the customer side can use the site to look at their company's entire order history.

Hitachi has gone a step further, actually allowing customers to download sample products for use in product simulations. In the past, Hitachi's customers had to buy a semiconductor device and range through mountains of paper documentation to see how it worked in the electronic equipment they were building. But now they will have the ability to download technical "CAE/CAD symbols" from Hitachi's extranet that summarise how the product works, and they can use that information for testing in computer simulations. "In the past you would have to buy it, have some administrative people put in those footprints manually and then import it into your CAD system," says Jim Rey, director of marketing communication. "Now it's a matter of going to your Web site and downloading it." The result may be fewer actual purchases up front, but in the long run Rey expects this capability to win Hitachi more customers. Eventually, Hitachi will expand this extranet offering to the public Internet, he says.

The BMG Music Service Web site is linked to its data warehouse. As soon as a customer logs onto the site, the page automatically reconfigures to reflect the customer's musical preferences and account history. BMG music customers receive different prices and music selections and can use the Web site to refuse a featured selection, which otherwise is automatically sent. Customers can also search 12,000 titles of music (20 times as many as listed in BMG's paper catalogues), listen to sound samples, view account history, submit customer service transactions, change listening preferences and, for classical club members, submit questions to BMG's music editors. In addition to the customer loyalty it fosters, BMG's Web site enables the company to learn from and react to customer preferences in a timely manner, says Rose. Prior to the site, by the time marketing received a comment or knew how well a particular musical selection or promotion did, it was already working on several mailings down the line. But now they can analyse response rates and individual preferences for each marketing campaign and make adjustments more quickly to upcoming mailings.

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