10 min read

Finding The Customer

Hip new-media options and loads of customer data are ushering in a new age of marketing. Smart tech leaders team with marketing to get closer to the customer.
With the help of an E-mail survey tool, Hyundai Motor America put together one of its most successful promotions last year. The carmaker contacted existing Hyundai owners and prospective customers, asking them what options they most want in a new car, then packaged those options into a special edition of its Sonata sedan with $750 worth of add-ons, including heated seats, automatic climate control, and a built-in garage-door opener. After racking up 15,000 sales of the special edition, an E-mail survey of buyers told the automaker the promo worked: 11% of the buyers bought the special edition specifically because of the options.

Marketing has long been a blend of numbers and nuances, with data crunchers and creative types forced to live with one another. But this relationship is about to get even more complex and intertwined as customer-interaction tools grow richer and more complicated. A slow shift is on: Carmakers and other consumer-goods advertisers still pour most of their marketing money into print, TV, and radio, but there's a clear move to shift some of that money to more-interactive channels. And those channels create a new opportunity to pitch products and ask for ideas.

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Business-technologists need to be ready to support the conversation marketers want to have. "If you can feel it or sense it or perceive it, you can measure it, and if you can measure it, then you can find a way to make it better and refine the methodology," says John Krafcik, Hyundai's VP of product development, strategic planning, and marketing.

While there's a fierce buzz around emerging marketing channels, from blogs and RSS feeds to podcasts and even satellite radio, it's unclear how they'll develop. Hyundai, by agreeing to make XM Satellite radio receivers standard equipment in its cars by 2007, gets a channel that broadcasts exclusively to Hyundai customers. Why would anyone listen to the "Hyundai channel" over the dozens of other satellite channels? The company hasn't figured that out yet. But it plans to use the same online survey tool it used for the Sonata campaign, MarketTools Inc.'s Zoomerang, to gather data on customer responses to the radio messages.

Forrester Research predicts that spending on online advertising and marketing will grow from nearly $12 billion last year to more than $26 billion by 2010. Search-engine marketing is expected to grow most dramatically, nearly tripling from $4.3 billion to $11.6 billion, while online display advertising will double from $4.1 billion to $8.1 billion, as will classifieds, which will go from $2.2 billion to $4.7 billion. E-mail marketing appears to be leveling, from $1.4 billion to $1.7 billion.

Southwest Airlines is shifting funds from conventional to online channels, says Kevin Krone, Southwest's VP of interactive marketing.

Southwest Airlines is shifting funds from conventional to online channels, says Kevin Krone, Southwest's VP of interactive marketing.

Photo by Matthew Mahon
Southwest Airlines Co. shows how emerging channels are starting to change the company's interactions with customers and its dependence on data. Blogs and other emerging channels aren't mature enough yet to justify throwing a lot of dollars at them, says Kevin Krone, Southwest's VP of interactive marketing. But the airline is moving money to search-engine advertising and banner ads. "We've started to see those really pay off in terms of effectiveness, and as we do, we're shifting funds from some of the traditional channels to online channels," he says.

Even more intriguing is how Southwest's marketing and IT teams are trying to build a direct connection to customers, without media middlemen. Since early this year, Southwest customers have been able to download Ding, a small application built on the Microsoft Foundation Class framework that sits on a PC waiting to be pinged with offers from Southwest. The airline uses a proprietary messaging format to push special fares and deals to these customers.

Ding lets customers interact closely with Southwest without providing personal information--just a ZIP code and home airport. Southwest isn't using that data to customize offers yet, although Krone says it could tune offers to specific markets. Travelers who want focused offers can provide a frequent-flier number, and Southwest will tune Ding messages based on their travel history. Krone is tracking the click statistics (which he declines to share) and the service's buzz. "We're starting to hear some anecdotal stories of evangelists out there telling friends and neighbors about the virtues of Ding," says Krone. "That's the win in the customer world--when you have customers excited about what you're saying to the point that they become an advocate for what you're doing."

Companies are sitting on mountains of customer data, which new-media channels could feed. The average size of a customer-data warehouse in industries that are customer-data intensive, such as financial services, retail, telecommunications, and travel, has grown fivefold in the past decade, from 4.5 terabytes in 1995 to 23.5 terabytes today, and is expected to reach 30 terabytes by 2010, according to a Customer Data Integration Warehouse survey of 347 global IT organizations completed this month. In a survey of database marketers, Forrester found that three-fourths of companies have a customer database with at least 5 million names in it, and one-fourth have databases with more than 50 million names. Almost all of the companies surveyed have information ranging from transaction records and third-party data to telemarketing and E-mail contact histories.

Yet getting the right message through using the right avenue remains tricky. Too often, Continental Airlines Inc. might send a golf-package promo to a passenger on one of its opt-in weekly E-mail lists when that person cares nothing for golf, acknowledges Kelly Cook, director of customer-relationship management. Continental is working on technology designed to prevent such problems by ensuring that messages cross-reference the customer database to guarantee relevance; Cook declined to provide specifics.

Still, Continental believes its Web site is letting it build closer ties to its customers. A quarter of passengers use the site to print boarding passes, up from 6% a year ago, opening an opportunity to push personalized messages to 35,000 customers a day. The airline has started putting messages directly on the boarding-pass page, so a passenger who just reached a key frequent-flier milestone would get a congratulatory message.

Major League Baseball has gotten serious about its customer-data mining the past two years and is plumbing its Web site as well as wireless options. In 2003 it deployed SAS Institute's customer-relationship-management software, which it has used to amass profiles of more than 200 million fans. The league uses that data to customize its site for visitors through an "items of interest" menu that accompanies the page that serves up league standings, one of the statistics that fans most frequently seek. "There's so much information coming in. How do you take it in, analyze it, and give people the experience they want to have?" asks Kristen Fergason, VP of marketing for Major League Baseball Advanced Media.

One way is to use mobile media to reach fans, rather than wait for them to come to you. The league sent text messages to a million fans who provided cell-phone numbers, asking them to vote for the players who should get the final spots on the rosters for last month's All-Star Game.

BMO Bank of Montreal also is using customer data to fine-tune products, and it's trying out a new mix of channels to reach customers. A few years ago, the bank determined that its customer database--which totals 3 terabytes of data on 8.5 million customers and 30 million prospects--was the ticket to grabbing a larger share of the credit-card market. So the bank developed its Mosaik program, which lets customers build their own credit cards online and through call centers. It was an ambitious initiative that required IT, analysis, and marketing pros to collaborate as never before. After studying the customer data and deciding on a list of credit-card offerings, the bank contacted every customer to market the new options--via branches, telemarketing, direct mail, and the Web site.

To do this, the bank needed to segment customers more efficiently. It relied largely on a campaign-management application from Unica Corp. that it used to build a "decision engine" that segments customers into 16 types, each associated with a sequence of business rules that further segment them, says Matthew Fabian, BMO's senior manager of customer acquisition and development.

That lets BMO change campaigns faster as results from offers and ads come in and allows it to run up to 80 targeted campaigns a month. Since Mosaik was launched in fall 2002, credit-card-related revenue has surged more than 20%, and the attrition rate of credit-card customers is down 16%.

For Hyundai, watching what car shoppers are looking at online is one of the ways it stays in touch with would-be customers. It runs the E-mail polls with a few $600 licenses for the Zoomerang online-survey-management tool. It has invested even more in the technology to establish a "shopper quantification" program that combines outsourced clickstream analysis from Compete Inc. with a custom tool built using Hyperion Solutions Corp.'s Brio business-intelligence software, which tells Hyundai how it's doing with online car-shoppers. The tools let the company know "what's going on in the digital channel to make packaging, pricing, and marketing decisions," says Paul Whitworth, director of strategic planning and brand development.

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>> $26 billion
Expected spending on online advertising and marketing by 2010

>> 23.5 terabytes
Average size of customer-data warehouse in customer-data-intensive industries

>> 35,000
Number of personalized messages Continental Airlines pushes daily to customers

The service provides Hyundai with data on shopping activity at more than 30 automotive sites, which is extrapolated to represent overall auto shopping. Hyundai uses that data to measure indicators such as share of shoppers, closing ratios, and cross-brand shopping trends. The custom tool also accumulates and analyzes data from Hyundai's Web site to offer insight into demand for colors, models, options, and other product variations. The two data sources are mapped against each other.

The results have kept Hyundai from making ill-informed decisions. In May, sales were flat compared with April, but Hyundai's custom-analytics tool indicated that demand among shoppers for information on its Sonata sedans was double what it was in April. Further investigation uncovered the source of the disconnect: Hyundai didn't have inventory with the colors and options that shoppers wanted. "In the old days, we'd have said, 'Oh, we don't have enough demand,' so we'd have offered another customer rebate," Whitworth says. Instead, the company adjusted its dealer inventory to better match what buyers were seeking.

Emerging online channels haven't yet remade the ad market. Where they're having an impact is among smart companies that are teaming marketing and IT to study and interact with would-be customers in many more places along the buying path, paying close attention to every customer every step of the way. "The consumers who were silent now are powerful," says Atefeh Riazi, CIO of global advertising agency Ogilvy & Mather Worldwide. "The question is, are we listening?"

Illustration by William Rieser