One Small Step

One of the toughest aspects of implementing a customer relationship management program is obtaining the very information that makes CRM work—the customer’s personal information. Many consumers are reluctant to reveal personal data without a good reason and most retailers are cautious about invading a customer’s personal privacy.

But the web has changed that process. Today, retailers are building up impressive customer databases that they then use to pitch personalized products to customers—and they’re doing so by the simple means of soliciting e-mail addresses. Illuminations.com Inc., for instance, has 2 million customers’ e-mail addresses in its database and it communicates with several hundred thousand of them weekly. One of the most effective ways it gathers e-mail addresses is to slip store receipts into a brochure advertising the Candlelight Club. The brochure urges customers to go online and register for the club with their e-mail addresses. “The response rate has been substantially higher than we had hoped, and it’s driving new business,” Clay Lingo, director of direct channel sales and operations, says.

There’s no doubt that CRM continues to be important to retailers. In fact, Jupiter Research Inc. reports that CRM spending by retailers will nearly double from $1.7 billion last year to $3.2 billion in 2006. Retailers struggle with how to populate those CRM databases with usable and current data. The problem: “For the most part, retailers are dealing with anonymous customers in the stores,” says Don C. Peterson, president and CEO of Edina, Minn.-based NetPerceptions Inc., which markets analytics-based CRM software to retailers and others.

A lot of back-end work

Thus the approach that multi-channel retailers like Illuminations takes. Illuminations operates 84 stores and mails several hundred thousand catalogs a year, in addition to operating its web site. Like other direct marketers who sell through catalogs, Illuminations can identify its catalog customers and knows how they shop and what they buy. But that’s not true at the store, where a customer could have bought from the web site already, or from the catalog or store or could be a new customer altogether.

And so Illuminations tries to identify customers, then pitches targeted offers to get them back into the store or to become a multi-channel customer. Customers who sign up for Illuminations’ Candlelight Club receive an e-mail immediately offering a discount good at the web site, on the phone and in the store. “The open rates and the click-through rates are very good,” Lingo says.

Illuminations plans to use the Candlelight Club, which it launched this year, to forge a tighter bond between the customer and Illuminations by sending periodic e-mails with decorating ideas, signing up the customer for the Illuminations catalog, providing advance notice of new items, sales and special events and creating seasonal specials just for Candlelight Club members.

Once the relationship is established, Illuminations tracks what the customer buys and then sends personalized e-mails. “We do a lot of back-end work to look at what customers are buying, then we target them very precisely, even down to what scent they like,” Lingo says.

Illuminations, which employs Yesmail Inc. to manage its e-mail database and mailings and Return Path Inc. to manage e-mail changes of address, does nothing special to encourage store associates to ask for e-mail addresses at the point of sale, Lingo says. Rather, it simply sets the expectation that asking is part of an associate’s job. Corporate managers do, however, encourage division managers in weekly conference calls to get the word to store personnel to gather the addresses and the company publishes a periodic newsletter in which it lists the 10 most and 10 least successful retail stores in getting e-mail addresses.

Simple, effective

E-mails are a simple although effective way to create the first steps of a CRM program. “You can start small and pick an application to get started with,” Peterson says. “The simplest tends to be e-mail because it doesn’t involve a lot of integration with the call center and the web site.”

Brylane L.P., which operates nine web sites and catalogs, also is starting its web-based CRM initiative with e-mail. But while Illuminations is undertaking its CRM program from a marketing perspective, Brylane’s is coming from a customer service perspective. “To be successful we need to give the customer the greatest information we can,” says Gary Kazmer, senior vice president of customer relations of Brylane. “Our goal is to cut down the number of non-order phone calls and e-mails coming in.”

Brylane, whose brands include Chadwick’s of Boston, Lerner Catalog, Lane Bryant Catalog, King Size Direct, Brylane Home and Brylane Kitchen, is taking a very deliberate approach to its CRM program. The company set out four months ago to identify a starting point. “We used analytical data to determine exactly what we were going to go after,” Kazmer says. “In a down economy, new customers are hard to come by. We wanted to put something together to reward our best customers and make sure that whatever we did was measurable.”

Brylane has operated a call center-based CRM program from NetPerceptions since the middle of this year. It features a special 800 number for preferred customers and those calls get priority in the calling queue. When they answer the calls, call center reps tell the customers they are preferred customers. Brylane also is testing special offers to preferred customers, such a free shipping, free returns and discounts. The company is still testing offers and methods to determine which work best, Kazmer says. Brylane is independent of the Lane Bryant chain of stores.

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On its web sites, Brylane has just begun a program of informing customers about the steps in the order process, such as order status, returns or exchanges, finding out if Brylane carries a product that doesn’t appear on the site, and so on. It is basing the enhancements on specific customer feedback. “We did a lot of customer surveys to ask customers what they meant when they said certain things,” Kazmer says. For instance, a customer who asks “Where is my order?” might be asking because she hasn’t received it or she might be asking because she wants to make a change to it and is wondering if it’s too late. Similarly, a person who says she has a billing problem may be referring to the charge as it appeared on her Visa statement or she may be inquiring about Brylane’s deferred billing program. “Finding out exactly what people were looking for was another hole to plug on our web site,” Kazmer says.

Anonymous store shoppers

Gaining customer information on the web or from catalog calls is easy compared to learning customer data from the store shopper. And to be really successful, retailers need to make sure they are gathering information in all channels, then using it in all channels. That’s easier said than done. At J. Crew Group Inc., measuring who is doing what across all sales channels “is one of our biggest challenges,” David Towers, vice president of e-commerce operations for J. Crew, told the Shop.org Annual Summit in New York in September. “Multi-channel retailing is more than just the three channels of store, catalog and web,” Towers said. “It’s three squared, because you have three channels for browsing and three for buying, and there are all these different iterations of customers you serve.”

At first, J. Crew identified store shoppers and web shoppers by capturing credit card information at the store and matching that with credit card data captured in web transactions. It halted such a practice when it was deemed illegal, Towers said.

Knowing who is spending how much where and why, said Towers, can determine where a retailer should be investing or easing back on investments. “This is a matter of optimizing costs across the organization and of proving the worth of all of the channels so that you optimize all of them for all your customers,” he said.

J. Crew, which uses a CRM program from Art Technology Group Inc., tackles the challenge of gathering customer data with creative merchandising. “We are looking at coupons on the web to maximize shopping the store,” Towers said. “We also want to be able to use personalization technology so that we give a compelling personalized message to visit the store. We want to say to the customer, get up from your Dell, here are the directions to the store in Austin near you, park in lot B, walk into the mall just past the Orange Julius and into our store. There you will find a sweater in stock that is a perfect fit with the jeans you just bought online. That’s the type of personalization we are trying to achieve.”

Some retailers are finding, however, that they already have a wealth of information about customers, whether they shop in the store or on the web. That information comes from the gift registry—and some retailers are making registries the key to a multi-channel CRM program, says Catharine Harding, vice president of retail solutions at technology provider Blue Martini Inc. “Gift registries are a great CRM opportunity,” she says. “It’s the most data that customers are ever going to give you about their about their likes and their preferences.”

Streamlining

The Internet and e-mail streamline the entire process, Harding says. “Weddings are planned hugely online these days,” she says. “Most young couples are comfortable with the Internet and e-mail.”

Some retailers incorporate e-mail into the process from the very start, encouraging couples to use e-mail to alert the store that they intend to register. That way, stores have a follow-up mechanism if the customer doesn’t register. Once the couple registers, the retailer can use the ease of e-mail communication to cross-sell and up-sell the couple. For instance, the store can compare the information with other registrations and up-sell the couple based on amount of items in the registry, noting, for instance, that the average couple registers for 12 place settings for china and the six they’ve registered for may not be adequate. “With minimal cost and marketing intervention, you can create a campaign to build the registry,” Harding says.

The retailer also can use e-mail to alert couples to impending events. For instance, most retailers discourage couples from registering for towels and linens more than three months before the wedding because of the problems of keeping current styles in stock. And so three months before the wedding, the retailer can send an e-mail to the couple telling them it’s time to register for towels and linens. Even after the wedding, the relationship continues. The store can review what has been unbought in the registry and offer the couple a discount on remaining items.

One key to success in a multi-channel CRM program is quick identification of the customer when the customer arrives, say analysts. So, for instance, stores might want some mechanism to identify a customer as the customer shops. “By the time customers get into checkout, most retailers don’t want to send them into the store again,” says Peterson of NetPerceptions. Thus some retailers issue cards to customers that they can swipe in the store to find specials. Others, such as Nordstrom Inc., use web-enabled checkout counters throughout the store or browser-equipped PCs in a back room so sales associates can identify customers and make the appropriate pitches.

However they identify the customer, though the desired result is the same: Creating a good feeling which will bring the customers back to the store or the web site. And the Internet is playing an increasingly important role not only in executing CRM but also in understanding CRM results. “We put source codes on all clickable links,” says Lingo of Illuminationa. “So if a customer receives an e-mail, clicks on the store locator and then shows up in the store, we’ll know right away how that customer got to us.”

kurt@verticalwebmedia.com