Advances in business intelligence software are helping retailers get to know their customers — and, more important, sell them more stuff — like never before. Yet those same retailers admit that mining customer data can sometimes result in errors that can frustrate or even bewilder their customers.
Take the case of Steve Barrow, vice president of information systems at Lubys in San Antonio. Barrow, an American Express cardholder, received an offer in the mail from American Express for a complimentary financial consultation. He returned the postcard to accept the offer and later received a 10-page financial guide targeted at gay men, lesbians and domestic partners.
Barrow, a heterosexual whose wife is the secondary cardholder on the American Express account, was surprised and puzzled by the packet. An American Express representative said the incident was a simple mix-up.
Bill Bass, senior vice president of e-commerce at Lands End, a retailer of casual clothing, has also been a victim of misplaced marketing. He bought his daughter a Britney Spears compact disc about a year ago as a gift from Amazon.com and still gets solicitations for the Backstreet Boys, N Sync and other bands "Im not remotely interested in," Bass says.
For its part, Amazon says it lets customers designate whether an item is a gift or not, so it wont be included in their personal profile. Customers can also delete information from their profiles to ensure they dont get offers for items theyre not interested in, an Amazon representative says.
The bottom line is that customer databases contain a wealth of information for Internet retailers, but the technology that mines that information is far from perfect. Still, companies using the software say the information they are gaining, and the potential uses for that information, are invaluable.
Estée Lauder has been using the Internet to enhance its brands globally and develop a powerful direct marketing and communications database with customers, says William Lauder, president of Clinique Laboratories. "We have a three-dimensional product, and technology does not exist today that allows consumers to sample our products online," Lauder notes. "Ultimately, what makes the Internet so exciting for us is data mining."
Estée Lauder launched Clinique.com in 1996, and today the site makes up 0.005 percent of total retail sales for the brand in the U.S., Lauder says. But Clinique.com has 1.1 million users, and 28 percent are new users of the brand. The company also owns Gloss.com, an online beauty site that it plans to relaunch in September.
Using e-mail marketing campaigns, Estée Lauder notifies customers of in-store events and promotions. It can target specific customers online who express an interest in a particular brand. The company ultimately doesnt care where the customer buys the product — either online or in the store — as long as she buys it, Lauder says.
E-mail can be an inexpensive way to reach regular customers. A catalog mailing costs an average of $1 per customer, but e-mail can cost as little as 5 cents, according to a Forrester Research report. Although fewer and fewer people "click through" on banner advertisements, about 10 percent respond to e-mail, according to Forrester, and a quarter of those buy something.
Lands End executives think personalization is going to be the most important thing going forward on the Internet, Bass says. The clothing retailer offers an online tool that allows men and women to enter their dimensions and create a virtual model for trying on clothes. Customers who use tools like that are 80 percent more likely to buy from Lands End than customers who do not, Bass says.
Personify, an analytics software and service provider, created mining programs for Ofoto and Wine.com, and has several Fortune 500 companies among its clients. Data mining doesnt come cheap. Software starts at about $325,000, and a company may spend another $50,000 to $100,000 to deploy and integrate it. Personify also offers analytics as a hosted application, with a one-time fee of about $250,000 and an annual hosting fee of $60,000.
"Interactive data provides an unprecedented opportunity for businesses to know more about their customers and prospects, and to serve them better," says Barry Wright, Personifys president and CEO. "Marketers, for example, can design campaigns based not just on what people buy, but on everything else they do: where they go, how they respond to offers, what they look at but dont buy, as well as what they have purchased over time."