1. Letting Them Come Behind the Counter Arthur Middleton Hughes VP Strategic Planning M\S Database Marketing www.msdbm.com DMA 83 rd Annual Conference New Orleans, LA Saturday Oct 14 th 2000 2:30- 3:45 PM Pre-conference Workshop

2.  Customer Management  Internet Services Competitive Advantage Through Advanced Technology

3. The Old Corner Grocer

4. Customers today want:  Recognition  Service  Information  Convenience  Helpfulness

5. Two Kinds of Database People Constructors People who build databases Merge/Purge, Hardware, Software Creators People who understand strategy Build loyalty and repeat sales You need both kinds!

6. Examples of Profitable Strategies  Recognition and Personalization  Building relationships  Surveys and Responses  Loyalty Programs  Customer and Technical Services  Collaborative Filtering  Event Driven Communications

7. Event driven communication: Dear Mr. Hughes: I would like to remind you that your wife Helena’s birthday is coming up in two weeks on November 5th. We have the perfect gift for her in stock. As you know, she loves Liz Claiborne clothing. We have an absolutely beautiful new suit in blue, her favorite color, in a fourteen, her size, priced at $232.00. If you like, I can gift wrap the suit at no extra charge and deliver it to you next week, so that you will have it in plenty of time for her birthday. Or, I can put it aside so you can come in to pick it up. Please call me at (703) 754-4470 to let me know which you’d prefer. Sincerely yours, Robin Baumgartner Robin Baumgartner, Store Manager Ridgeway Fashions Leesburg, VA 22069

9. Marketing to Customer Segments GOLD Spend Service Dollars Here Spend Marketing Dollars Here Reactivate or Archive Your Best Customers - 80% of Revenue Your Best Hope for New Gold Customers Move Up 1% of Total Revenue These may be losers

10. The Web is the greatest database marketing vehicle ever invented

11. We can bring back the intimacy of the Old Corner Grocer

12. Communicating  Screen: Thank you for your order  Email: Your order has been received  Email: Your order will be shipped  Email: Your order was shipped  Email: Was everything to your satisfaction?  Cost of all of the above? Nothing!!!

13. Staples does it well

14. 30 seconds later: Email

15. Welcome back, Arthur!

16. Staples has 1.4 million visitors per month

17. The Office Depot Web Response Form

18. 2002 Online Small Business Market over $100 Billion

19. Something new: Collaborative Filtering  On-line deciding what a customer is interested in, based on a few known facts

20. The principal behind collaborative filtering:  Each person has a unique (and changing) view of the world.  In large populations, there are often similar preferences  If hundreds of people who like A, G, and X also like W  Then if you like A, G and X, you may also like W.

21. Collaborative Filtering requires sophisticated software  It is possible, on line, to determine the next best product for any customer, based on the customer’s past preferences and those of hundreds of others with similar preference profiles.  While the customer is on the phone, or on line, you can develop a profile and come up with intelligent recommendations.

22. How Netperceptions used Collaborative Filtering in the UK  GUS is largest cataloger in UK. Gets 20% cross sell on catalog orders.  Installed NetPerceptions system  In six weeks got 40% cross sell on catalog orders with same staff.  Very “spooky” results which really worked.

23. Who uses collaborative filtering:  Bass Pro Shops  Mattel Toys  Home Box Office  Petsmart.com  Kraft Foods  Proctor & Gamble  Publisher’s Clearing House  Shop at Home network  Time Warner

24. How the Web is changing Database Marketing  Recognition  Reaching out  Customer service  Supplier Relationships  Information  Ordering parts and replacements  Building personal relationships

25. Reaching out: How Web Ads Differ

26. Four steps in web response  Impression: your banner appears on a viewer’s screen: $6 per thousand.  Response: Viewer clicks on your banner and sees your web site  Lead: viewer gives you her name and email address  Sale: she buys something.

27. Three categories of Web Ad Space  Run of Network (RON) from $4 to $6 CPM. Very good values here.  Affinity Group Space (Sports, business, travel) $10 to $20 CPM Can be productive  Branded Space (Yahoo, Excite, AOL) Very expensive $30 to $70 Often has very low response rate. Three categories of web ad space

28. Where should we put this ad?

29. In three days we discover that travel sites work best for Casio

30. Which sites work best for E*Trade?

31. Results Optimized by Cost Per Lead – after one week!

32. The big Web winner: Customer Service Hundreds of millions of dollars being saved today through use of the web Much bigger than consumer sales

33. How the Web is changing Customer Service 1980s: toll free numbers Thousands of agents reading screens Heavy cost: phone call and agents 2000: let the customers get their own information No cost for phone or for agents Customers like it better!

34. Letting them come behind the counter  Open your entire company to your customers  Let them find what they want themselves  It is cheaper for you, and customers like it better.

35. How Amazon saves millions

36. How Fedex Saves Millions

37. Let’s try it. Let Marriott plan a meeting in Ft. Lauderdale

38. We want 3 rooms with 50 attendees, golf and pool

39. Here are the properties. Let’s try the North Marriott

40. Here are the conference rooms we need

41. Here is the hotel

42. And, here is the location. Let’s make a reservation!

43. The Marriott Web Site:  1,700 Hotels $10 billion revenue  Marriott doesn’t own most of the hotels  Internet team began in 1997  More interactive, the more business  Meeting planners don’t need to visit the sites. All they want is on the web.  Booking a room for a business traveler is very fast

44. Supplier Relationships  All manufacturers will link to their suppliers through the web  Suppliers will check inventories, and replenish parts automatally  Manufacturers and retailers will buy through the web

45. The National Semiconductor FedEx Partnership  National Semiconductor handed over its entire logistics management to FedEx  All products from 6 factories shipped to FedEx warehouse in Singapore  National Order center in Santa Clara ships all orders to FedEx in Memphis  FedEx directs shipments to customers from Singapore

46. How FedEx Manages National Semiconductor Shipments Order Center in Santa Clara Shipments Orders Inventory Mgt. In Memphis Singapore Warehouse National Factories In Asia Orders from customers

47. Benefits to  Reduction in customer delivery cycle from four weeks to one week  Reduction in distribution costs from 2.9% of sales to 1.2% of sales  Elimination of seven regional warehouses in the US, Asia and Europe

48. FedEx – Omaha Steaks  Orders to Omaha simultaneously sent to FedEx and to Omaha warehouse with FedEx tracking numbers.  Both Omaha and Customer given FedEx numbers for tracking.  Omaha is out of the delivery business, and can concentrate on steaks and marketing.

49. FedEx - Omaha Steaks Customer Orders Steaks Orders sent to Steak Warehouse And to FedEx at The same time Steaks delivered To FedEx FedEx Delivers to Customer

50. Virtual Distributors  Distributors are location bound  They cannot stock all products  They cannot represent all manufacturers.  The web changes all that  You can provide access for your customers to everything that they want

51. Boeing Spare Parts Idle airplanes cost $7,000 per hour Quick access to Boeing parts keeps customers loyal Spare parts are an important revenue Buying Boeing parts keeps quality There are 2,000 Boeing part suppliers Old system: Binders or CDs + phone +fax

52. Boeing Spare Parts Website

53. New Boeing System Runs 24 hours a day Automatic verify part number Electronic self service Customers order without help Customers know which warehouse has the parts!

54. 2004 Aerospace Parts & Service 35% on Web Today 2004

55. Why customers like the web: My vacuum cleaner problem  We have a Hoover with a MicroFiltration Bag.  We wasted an afternoon going to six (yes six) stores looking for new bags. No luck.  So we tried the internet.

56. Finding Hoover on the Web

57. Ordering a Micro-Filtration Bag for my Hoover

58. Summary: Give customers total access  Invite your best customers into your company.  Let them rummage through your warehouse.  Let them look up technical data themselves  Make them a part of your company. You will have them for life.

59. 10866 Wilshire Blvd., Suite 370 Los Angeles, CA 90024-4354 Phone (310) 208-2024 Fax (310) 208-5681 http://www.msdbm.com