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March 20, 2000

Companies See Gold In Outside Data Analysis
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Once practiced by cutting-edge, technology-driven companies as a way to gain a competitive edge, CRM is now being pursued by all kinds of businesses. "Companies without that technological edge now want to leverage their existing IT and use rent-to-buy strategies to improve customer relations," Gartner's Nelson says.

Smaller companies may not be as savvy about CRM applications and tools, and in many cases, upper management may not want to invest millions to build the technological infrastructure to support them. By outsourcing, these companies can use outside experts to help improve customer relations, while working on a fixed budget, Nelson says, to demonstrate small gains. Ultimately, those gains are used to justify the cost of investing further in tools and technologies that provide additional CRM-type data analysis.

Hilton Hotels Corp.'s HHonors program is a prime example. The HHonors marketing data mart supports 140 concurrent customer-service agents and houses information on 3.5 million active customer records. More important, the data mart is used to target personalized messages to any of the 6 million members who log on to the www .hhonors.com Web site to check account balances or access program information about rewards.

This personalized marketing is used for cross-selling, upselling, reinforcing recognition, and valuing customers for their uniqueness. For example, if a customer repeatedly travels to a particular Hilton Hotel in New York, he or she might see a specific advertisement offering a discount or reward for additional night stays at that location.

The data mart was outsourced to Epsilon when HHonors moved from a mainframe to a client-server environment in 1997, because of the difficulty of migrating some costly mainframe applications and the limited staff available within HHonors to handle the transition. "Epsilon's history in direct marketing and plying data into personalizing customer service was key to our growth plans," says Jim VonDerheide, senior director of database marketing at HHonors, in Beverly Hills, Calif.

The system receives information on customer stays from 500 hotels worldwide, making sure bonus points and miles are stored in the data warehouse, located in Epsilon's Dallas office. The HHonors system consists of two Sun 5500 servers, which store records on more than 25 million stays in an Oracle database.

The customer information is used to trigger specific advertising and promotional messages when customers visit the HHonors Web site.

VonDerheide says the outsourcing relationship works well for three reasons. First, Epsilon's focus on direct marketing is central to HHonors' growth goals. Second, he considers Epsilon's staff his staff: There are 18 full-time Epsilon employees dedicated to the HHonors program, and Hilton is charged based on the cost of those full-time employee equivalents. And third, strong support from the IT department at Hilton has ensured a smooth technical transition to the current system.

The hotel chain's IT department viewed Epsilon as a partner from the beginning, offloading the difficult, cost- and staff-prohibitive migration to client-server systems. The Hilton IT department and Epsilon work closely to maintain and upgrade systems and applications, VonDerheide says.

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