Live from Ad:Tech San Francisco: Home Depot’s Got Technology Nailed

The theme of 2005 Ad:Tech San Francisco is “The Age of Engagement”, and John Costello, executive vice president for merchandising and marketing at The Home Depot, offered attendees some real-life examples of how his company uses technology to get customers involved.

Technology plays a part in creating that customer bond, but it can’t do it alone, Costello said. “The success of technology in the future may be defined more by how it engages and interrelates to other aspects of the business than by pure innovation,” he said. “There was a feeling that technology would change the world and replace old media, old retailing, old product development. But we’re seeing a convergence of technology and those old business elements.”

Last year, Home Depot’s 1,900 stores rang up $70 billion in sales. But customers don’t elect to shop there because of the company’s size; they choose it because it’s close and familiar. Home Depot’s challenge has been to maintain a personal connection with its customers.

With the mass market dying off and retail channels blurring, consumers have more choice in what, where and how they want to buy, Costello said. In that environment, Home Depot has deployed technology to reinforce its brand and its product marketing with customers.

Costello outlined three examples of how his company has integrated technology into other existing aspects of merchandising. The company prides itself on the know-how of its associates, but found that it was over-marketing to men, even though half its transactions were with women. So more than a year ago, it inaugurated a series of in-store “Do-It-Herself” classes in home improvement classes targeting women. Home Depot used conventional TV and print marketing to publicize the classes but also used e-mail, direct mail and postcards to reach the target audience. A micro-site allowing women to go online and register for the workshops proved particularly effective, because the students could give the company feedback on what they wanted to learn. To date, 200,000 women have signed up for the workshops, and 97% have said they would attend another one. The top complaint, Costello said, was that the courses weren’t long enough.

Home Depot’s relationship as a sponsor of NASCAR racing taps into the tremendous loyalty that sport engenders among fans, and takes advantage of the fact that while fans see commercialism in other sports as a spoiler, in racing they view it as an enabler. Home Depot differentiates itself from other racing sponsors by building it into some clever TV spots and offering on-field activities at races — such as letting kids build homemade model race cars.

Finally, Costello pointed out, Home Depot has become the country’s third largest appliance retailer in the space of four years. Last December the company rolled out an appliance section of the Home Depot Web site that allows customers to research, browse and then buy appliances online. While the commerce part of the site was crucial, equally important was building in the ability to reach customers in a number of different ways. The company launched a classic direct mail catalog for its appliance sales division.

“Rather than telling our customers that they must purchase appliances online, in the store, or via catalog, we turned the control over to the customers and made it easy to do research online and then go into a store and purchase,” Costello said. For example, outdoor grills have become a complex big-ticket purchase for consumers. Home Depot organized its in-store grill departments to make it easier for buyers to compare features and prices, but did the same on its Web site, with take-home brochures, and with in-store kiosks that provide take-home spec sheets.

Other touch points where technology can aid with customer engagement include digital I-store signs that answer the simpler product questions — about extended-life light bulbs, for example — and free up salespeople for consulting on more complex home improvement projects. Home Depot is also mining its warehoused sales data for new ways to build customer relationships.

Costello offered some guiding principles for using technology to engage customers:

* Create differentiation and relevance for customers

* Embrace the permission-based world. With too many options, customers are going to sit back and ask, “Who do I want to let into my world?” Costello said. “We’re going from broadcasting out to being invited in.”

* Adapt to convergence. With all the examples cited above, “The key is not the technology in itself, but how that technology interacted with the other elements of the marketing mix,” he said.

The Internet has the potential to become the ultimate marketing tool, combining the accountability of classic direct marketing with a reach that far exceeds the traditional mass media. “The challenge is understanding how to maximize that,” Costello said.