January 4, 2006, 12:00 AM

Playing Host

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H2O Plus uses a number of e-mail initiatives to promote sales, including messages triggered by birthdays, store relocations, or product launches. It also sends welcoming e-mails to new customers, and follow-up e-mails at 90 days and 10 months if a new customer is inactive. The database allows the retailer to zero in on its target audience, McLaughlin says.

Those targeted mailings have paid off in the form of higher conversion rates. E-mail marketing programs to inactive customers resulted in a 5% conversion rate, while mailings triggered by birthdays had an 18% conversion rate. H2O Plus also saw a 40% increase in online sales during the first year of the program. In addition, an e-mail marketing program to loyal customers produced a 20% click-through rate.

The integrated database also enables H2O Plus to cut marketing costs because it verifies weekly whether it has valid e-mail addresses for customers. Customers with valid e-mail addresses get only an e-mail promotion; only those without valid e-mail addresses or who have opted out of e-mail get a direct mail piece. “If the customer has either opted out, or we have an invalid e-mail address, we trigger an electronic mailing list that goes to our fulfillment house, and that person gets a postcard or direct-mail piece,” McLaughlin says. “Literally 60% of direct-mail costs are eliminated by sending e-mail instead.”

Loyalty Lab’s hosted CRM system also enables multi-channel retailers to collect and analyze data across all channels without installing special software. “Retailers have point of sale systems if they have stores,” Goldstein says. “If they have a web site taking orders, they already have a web system. They don’t want to rip this stuff out but they want a CRM program that cuts across all their channels.”

That was the goal of Montana Legend, which sells premium Angus beef online and through a catalog. “There were a couple of things that were very important to us,” says Keith Lauver, CEO. “One was the ability to personalize offers, and another was to seamlessly integrate with our existing systems.”

The retailer already had inventory and basic order management and fulfillment systems but wanted to get a specialized CRM tool, Lauver says. “They offered a web-based ASP model and we were already using another ASP web model,” he says. “All we had to do was connect the two, and that’s been really straightforward.”

Because it is an ASP model, Loyalty Lab can have a CRM program up and running within 30 days, Goldstein says. That time frame is typical of hosted models, McGeary says. Most hosted models can be deployed within 45 to 90 days, outperforming the minimum six to 12 months needed to deploy comparatively larger, on-premises applications, according to Jupiter.

Card i.d.

To enable it to collect data from a multi-channel retailer’s operations, Loyalty Lab asks for a retailer’s product data and the daily keylogs from the web site, catalog, and retail stores. Customer transaction information is then automatically sent to the retailer’s database on Loyalty Lab’s web site.

Loyalty Lab’s system also can identify shoppers in the stores based on the type of card they use, whether it’s a debit, credit or loyalty card, Goldstein says.

Loyalty Lab charges retailers a flat fee of $5,000 to $10,000 per month. When a retailer’s CRM program reaches 250,000 members, Loyalty Lab charges an extra penny per member per month. Retailers also are charged additional fees for e-mail comparable to those charged by major e-mail providers such as CheetahMail, Goldstein says.

Loyalty Lab gives the retailer software that allows employees to query the database for specific information. Retailers can ask for data segmented by such criteria as customer preference, customer transactions, and demographic profile. The CRM system also enables retailers to set up customized marketing initiatives, such as triggered e-mails or rewards programs.

Quick results

Montana Legend experienced improvements in e-mail campaign results shortly after it tested the program in December. It will go live this month.

To be sure, Elevation and Loyalty Lab aren’t the only vendors offering hosted CRM solutions. Indeed, many vendors of traditional CRM systems are coming out with hosted applications.

And hosted CRM isn’t for every multi-channel retailer. These programs make the most sense for retailers that don’t want to use home-grown CRM programs but don’t have the money to spend on an on-premise program, Jupiter’s McGeary says. “The on-premise model requires a huge upfront investment, plus you have to have the infrastructure in-house as well as the technological know-how to run the application,” he says. “The hosted model offers a lower-cost entry point.”


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