Information, Please: Asking for It

The two biggest buzzwords in marketing – e-commerce and CRM – are linked in more ways than one. Each feeds the other, and both are, in turn, sustained by good customer data. This special report includes several stories on how advanced companies are using data in the service of customer relationship management. It also includes state-of-the-art updates by top database consultants.

Despite hype to the contrary, clickstream data is hardly the only information used by companies in pursuing their customer relationship management programs. Many firms prefer old-fashioned DM survey information gathered online.

For one thing, survey data is volunteered by the customers themselves, thus reducing concerns over privacy. For another, there is less of it, which makes it easier to use.

Robert Mondavi, a Napa Valley, CA-based winery that sells direct to consumers, has refined its old direct mail survey program and put it online. Instead of the original 21 questions, it now asks only four as part of a sign-up process for a free electronic newsletter. (To sign up, customers have to visit the Mondavi Web site, www.robertmondavi.com, where the firm hopes to eventually conduct most of its consumer business.)

The problem with the original survey was that much of the information turned out to be irrelevant in determining wine consumption behavior. For example, Mondavi stopped asking the sex of the participant after finding that men and women have very similar purchasing patterns. The firm also eliminated hobby and interest questions when it decided not to co-market lifestyle products.

Instead, the new survey is designed solely to identify two distinct subgroups: enthusiasts, who enjoy a glass of good wine now and then, and sophisticates, who obsess over cork-shaping and other enological details.

On a per capita basis, the two groups spend roughly the same on wine every year, but the sophisticates tend to buy expensive vintages with less frequency, while the enthusiasts drink cheaper wines more often. Mondavi decided it had to move enthusiasts into the more valuable sophisticates column, and it succeeded: Thanks to a variety of cross-selling efforts, the ratio has changed from 70/30 in favor of the enthusiasts to a 60/40 split.

Either by mail or online, Mondavi has gathered survey information on 75% of its 300,000-name customer database and is using that data. In August 1999, the company sent out 60,000 solicitations to members of its house file to join Ensemble, a new wine club. Fifteen percent responded, and the first 900 memberships – representing the total amount of limited-run vintages in its initial offering – were quickly snapped up. Since then, the club has been adding 900 new memberships every three months.

Three-fourths of the prospects for the club were sophisticates, befitting their higher level of interest in finer wines. The response rates between the segments bore this out: Sophisticates signed on at a 25% rate, while the enthusiasts joined at 8%.

According to Jennifer Becker, Mondavi’s vice president for direct and interactive marketing, the company has only been tracking purchase data since the founding of the club, and only on club members. But when they join the club or volunteer consumption as they register for the newsletter, their patterns are benchmarked and tracked for change, she says.

Orderzone.com

While this level of information suits Mondavi, it would never do for business-to-business marketers like Order zone.com. The industrial supplies marketer, a division of W.W. Grainger, regularly conducts both online and offline surveys and focus groups to determine how customers will react to ads in terms of both offers and placement. This determines the most important factors customers rely on when placing orders, which are then incorporated into the company’s marketing efforts.

This knowledge is of immense importance to a firm that offers products from six different companies under one brand name (the suppliers include maintenance, repair, product and service vendors).

By maintaining a “common face” for all six firms, Orderzone.com is able to provide one invoicing system, one customer care center and one Web site (www.orderzone. com). This makes it easier to serve small- and midsized businesses. It knows their order history across several product lines and manufacturers. (The firm also collects data on purchase patterns, both at client headquarters and at branch offices, as well as the names of contacts responsible for placing orders, approving payment and receiving shipments.)

Orderzone’s database – an enterprisewide system – also supports different pricing agreements negotiated by customers and suppliers.

Although it is trying to move print customers online, the firm continues to conduct surveys in all media. “If you have multiple techniques available for data collection, you should not rely on any one of them,” explains Jim Roots, Orderzone’s vice president for marketing. “If you do an online-only survey, you have biased your results to those who are already online. The data has less value [when used to make determinations] about those you are trying to get to come online.”

But online surveys do have advantages, says Roots. Customers are willing to spend more time with an online survey, as they can complete it at their leisure. “With a telephone survey,” he says, “you have to be strategic: Click in and click out.”

The firm also uses clickstream data. As registered visitors browse through pages on the site, the database learns what their preferences are and allows the firm to place relevant offers in front of them.

“We use direct mail to drive [site] registrations, and e-mail to drive [repeat] orders and frequency of purchases,” says Roots. “I spend direct mail dollars on registration e-mail for order conversion.”

The company recently concluded a yearlong study of two groups of customers. The control group consisted of offline customers who had not been solicited to move online. The other group was brought online and exposed to targeted cross-selling and upselling based on their preference information.

Six months later, the online group – which initially had similar purchasing patterns to the offline group – was not only using the online channel to make purchases, but had increased its offline purchases as well.

Guild.com

But not all marketers place their faith in surveys to guide their CRM practices. Guild.com, an online fine arts dealer, is so convinced of clickstream data’s value that its last paper catalog mailing – a million-piece effort launched in fourth-quarter 1999 – did not even include an order form. Instead, prospects were directed to the Madison, WI-based company’s Web site (www. Guild.com), where their viewing patterns could be captured.

For the non-wired, Guild.com did include an 800 number, facilitating interaction between catalog recipients and live operators. Many of the call center operators have degrees in fine arts, allowing them to gather through conversation the customer preference data similar to that yielded through clickstream data.

Online, Guild.com uses clickstream data to anticipate which types of art customers want to see. While purchase information is still important to the equation, the site records which items visitors look at time and again.

Guild.com’s chief information officer Nathan Harper understands that the average site offering – especially on the higher end – is not an impulse buy. “Customers are going to develop affection for it,” he says. “They may need to put together the financial resources for it.”

Guild.com’s database also captures the speed of a visitor’s browser. This information will help determine whether the firm should invest in high-broadband offerings, such as streaming video. A site such as Guild.com, which showcases both two- and three-dimensional art, would then be able to evaluate the benefit of investing in technology that permits a viewer to take a virtual walk around a sculpture.

The CRM applications for all capturable data are not as readily apparent. While many companies put a great deal of resources into building data warehouses and data marts, online marketing – which has made data collection easier – has also exponentially expanded the amount of information available.

Online CRM has also raised the bar in terms of customer expectations, according to Larry Goldman, vice president, customer solutions for Chicago-based Braun Consulting. Personalization, for example, which was once considered a novelty, is now edging toward mandatory among online marketers. The stakes have risen as well: Goldman says that while customers expect personalization, messages that miss their mark will alienate them faster than generic solicitations.

The ubiquitous nature of clickstream data may also hinder its use. “The first thing you have to do is develop a mechanism that strips off the data you don’t want as close to when it first passes through your system, so you are not submerged under this torrent of data,” says Bob Kestnbaum, president of Kestnbaum, a KnowledgeBase company. Clickstream data, he cautions, has its downside. “When [Web site hosts] observe what you look at, they have to recognize real limitations [of these data]. You can click on a page, leave to get coffee, and the page will be up for five minutes. Site navigation data are muddier and fuzzier [than RFM data] and therefore much harder to use effectively.”

The emergence of the new medium also has created new difficulties in governing traditional DM functions such as householding, in which information that comes in from disparate contacts of a single customer is linked. E-mail addresses are harder to link back to a single domicile – or company, if a business-based customer uses a personal address for professional activity.

For a few dedicated technophobes, however, the revolution will not be digitized despite the best efforts of companies like Guild.com tobuild online customers relationships. Fifty people who received the art site’s order-form-less catalog simply tore out the page containing what they wanted and stapled a check to it.