Marketing Strategies, Customer Loyalty & The Web

1. Marketing Strategies, Customer Loyalty & The Web National Center for Database Marketing Orlando Sunday Dec 3 2000 8:30 – 11:30 AM Walt Disney Dolphin Arthur Middleton Hughes VP Strategic Planning M\S Database Marketing www.msdbm.com

2. Customer Management • Internet Services Competitive Advantage Through Advanced Technology

3. Agenda • Introduction: Database Marketing and the Web • Break • Lifetime Value • Recency Frequency Monetary Analysis

4. Compared with newcomers, Long term customers: • Buy more per year • Buy higher priced options • Buy more often • Are less price sensitive • Are less costly to serve • Are more loyal • Have a higher lifetime value

5. Retention is a measure of loyalty

6. Retention pays better than acquisition

7. Customers today want: • Recognition • Service • Information • Convenience • Helpfulness

8. Two Kinds of Database People • Constructors People who build databases Merge/Purge, Hardware, Software • Creators People who understand strategy Build loyalty and repeat sales • You need both kinds!

9. Examples of Profitable Strategies • Newsletters • Surveys and Responses • Loyalty Programs • Customer and Technical Services • Friendly, interesting interactive web site • Event Driven Communications

10. Event driven communication: Ridgeway Fashions Leesburg, VA 22069 Dear Mr. Hughes: I would like to remind you that your wife Helena’s birthday is coming up in two weeks on November 5th. We have the perfect gift for her in stock. As you know, she loves Liz Claiborne clothing. We have an absolutely beautiful new suit in blue, her favorite color, in a fourteen, her size, priced at $232.00. If you like, I can gift wrap the suit at no extra charge and deliver it to you next week, so that you will have it in plenty of time for her birthday. Or, I can put it aside so you can come in to pick it up. Please call me at (703) 754-4470 to let me know which you’d prefer. Sincerely yours, Robin Baumgartner Robin Baumgartner, Store Manager

11. Marketing to Customer Segments Spend Service Dollars Here • GOLD Your Best Customers - 80% of Revenue Spend Marketing Dollars Here Your Best Hope for New Gold Customers Move Up 1% of Total Revenue Reactivate or Archive These may be losers

12. The web is the greatest direct marketing vehicle ever invented

13. How the Web is changing Database Marketing • Recognition • Reaching out • Customer service • Supplier Relationships • Information • Ordering parts and replacements • Building personal relationships

14. Communicating • Screen: Thank you for your order • Email: Your order has been received • Email: Your order will be shipped • Email: Your order was shipped • Email: Was everything to your satisfaction? • Cost of all of the above? Nothing!!!

15. Now, this is recognition! Welcome Back, Arthur!

16. Immediate Feedback!

17. 30 seconds later: Email

18. Reaching out: How Web Ads Differ

19. Four steps in web response • Impression: your banner appears on a viewer’s screen: $6 per thousand. • Response: Viewer clicks on your banner and sees your web site • Lead: viewer gives you her name and email address • Sale: she buys something.

20. Three categories of Web Ad Space • Run of Network (RON) from $4 to $6 CPM. Very good values here. • Affinity Group Space (Sports, business, travel) $10 to $20 CPM Can be productive • Branded Space (Yahoo, Excite, AOL) Very expensive $30 to $70 Often has very low response rate.

21. Where should we put this ad?

22. In three days we discover that travel sites work best for Casio Clickthrough

23. Which sites work best for E*Trade?

24. Results Optimized by Cost Per Lead – after one week!

25. Something new: Collaborative Filtering • On-line deciding what a customer is interested in, based on a few known facts

26. The principal behind collaborative filtering: • Each person has a unique (and changing) view of the world. • In large populations, there are often similar preferences • If hundreds of people who like A, G, and X also like W • Then if you like A, G and X, you may also like W.

27. Collaborative Filtering requires sophisticated software • It is possible, on line, to determine the next best product for any customer, based on the customer’s past preferences and those of hundreds of others with similar preference profiles. • While the customer is on the phone, you can develop a profile and come up with intelligent recommendations.

28. How Netperceptions used Collaborative Filtering in the UK • GUS is largest cataloger in UK. Gets 20% cross sell on catalog orders. • Installed NetPerceptions system • In six weeks got 40% cross sell on catalog orders with same staff. • Very “spooky” results which really worked.

29. The big Web winner: Customer Service • Hundreds of millions of dollars being saved today through use of the web • Much bigger than consumer sales

30. How the Web is changing Customer Service • 1980s: toll free numbers • Thousands of agents reading screens • Heavy cost: phone call and agents • 2000: let the customers get their own information • No cost for phone or for agents • Customers like it better!

31. Letting them go behind the counter • Open your entire company to your customers • Let them find what they want themselves • It is cheaper for you, and customers like it better.

32. How Amazon saves millions

33. How Fedex Saves Millions

34. Let’s try it. Let Marriott plan a meeting in Ft. Lauderdale

35. We want 3 rooms with 50 attendees, golf and pool

36. Here are the properties. Let’s try the North Marriott

37. Here are the conference rooms we need

38. Here is the hotel

39. And, here is the location. Let’s make a reservation!

40. The Marriott Web Site: • 1,500 Hotels $10 billion revenue • Marriott doesn’t own most of the hotels • Internet team began in 1997 • More interactive, the more business • Meeting planners don’t need to visit the sites. All they want is on the web. • Booking a room for a business traveler is very fast

41. Supplier Relationships • All manufacturers will link to their suppliers through the web • Suppliers will check inventories, and replenish parts automatally • Manufacturers and retailers will buy through the web

42. The National Semiconductor FedEx Partnership • National Semiconductor handed over its logistics management to FedEx • Products from 6 factories shipped to FedEx warehouse in Singapore • National Order center in Santa Clara linked to FedEx in Memphis • FedEx directs shipments to customers from Singapore

43. How FedEx Manages National Semiconductor Shipments Orders from customers Shipments Inventory Mgt. In Memphis Orders Singapore Warehouse National Factories Order Center in Santa Clara

44. Benefits to • Reduction in customer delivery cycle from four weeks to one week • Reduction in distribution costs from 2.9% of sales to 1.2% of sales • Elimination of seven regional warehouses in the US, Asia and Europe

45. FedEx – Omaha Steaks • Orders to Omaha simultaneously sent to FedEx and to Omaha warehouse with FedEx tracking numbers. • Both Omaha and Customer use FedEx numbers for tracking. • Omaha is out of the delivery business, and can concentrate on steaks and marketing.

46. FedEx - Omaha Steaks Orders sent to Steak Warehouse And to FedEx at The same time Steaks delivered To FedEx Customer Orders Steaks FedEx Delivers to Customer

47. Boeing Spare Parts • Idle airplanes cost $7,000 per hour • Quick access to Boeing parts keeps customers loyal • Spare parts are an important revenue • Buying Boeing parts keeps quality • There are 2,000 Boeing part suppliers • Old system: Binders or CDs + phone +fax

48. Boeing Spare Parts Website

49. New Boeing System • Runs 24 hours a day • Automatic verify part number • Electronic self service • Customers order without help • Customers know which warehouse has the parts!

50. Why customers like it: My vacuum cleaner problem • We have a Hoover with a MicroFiltration Bag. • We wasted an afternoon going to six (yes six) stores looking for new bags. No luck. • So we tried the internet.