Only the best customers get into the Harbour Lounge at Harrah's Atlantic City. There, they can loaf on plush leather couches around a fire while looking out at the ocean through plate-glass windows and noshing on fresh pastries or any other delicacy their heart desires. Got a favorite vintner and vintage? You can bet the lounge manager will have bottles in stock for you -- and you only. The Harbour Lounge is typical of a new wave of posh VIP areas dubbed Diamond Lounges built by the casino giant on each of the 25 properties it owns or manages.
Surprisingly, though, many customers who receive this pampered treatment are actually diamonds in the rough -- day-trippers who wager a paltry $50 to $100 per visit to the casino. So how do they attain Diamond status? "Good customers will come 10 or 20 times per year. We're trying to identify people who see gaming as their primary entertainment option and spend more money with us over a longer period of time. It really is a frequency play," says David Norton, senior vice-president for relationship marketing at Harrah Entertainment (HET ), which booked $4.3 billion in 2003 revenues.
A frequency play with a high-tech edge, that is. Harrah's asks each customer to sign up for its Total Rewards loyalty program and uses cards issued to program members to track their activities. Behind the scenes, a sophisticated data-warehousing system from TeraData, a subsidiary of NCR (NCR ), tracks and analyzes the information.
COLD, WARM, OR HOT.
The system spots low-rollers worth big bucks based on how frequently they visit. That helps Harrah's treat these customers particularly well. Starting in November, 2003, it has used this data to craft personalized offers based on customers' habits, such as accommodation upgrades for long weekenders. The result: Harrah's has upped its take of customers' gaming budgets from 36% to 43%. "We know our customers are becoming more loyal, and we are growing our sales," says Norton, who estimates that the return on his investment in the technology is running at 60%.
Welcome to the new era of real-time, highly personal, high-tech marketing. Driven by computer systems that relentlessly harvest data from a customer's activities, new marketing is radically changing the way companies sell their products, treat their customers, and run their businesses.
These tech tools also are making it easier to judge the efficacy of marketing campaigns and to cull bad leads from good ones. Says George Skaff, vice-president for marketing at Wyse Technologies, a San Jose (Calif.) company that helps clients reduce PC purchasing costs by linking networks of simple terminals connected to powerful servers: "When we take leads, we parse them into cold, warm, or hot leads. We can dice and slice every piece of data that we have in the system to allow us to do it. Finally, I get the answer to the million-dollar question: What's the return on the marketing investment?"
Ironically, using technology to pinpoint customers' habits is helping businesses return to a kinder, gentler past, when the corner grocer knew his customers and could tell Mrs. Smith that good blueberries would be coming in next week if she wanted to bake a pie for her church group. That familiarity was long thought lost in the world of giant multinationals, but now it's coming back, thanks to nifty new software that helps businesses create two-way interactions and better tailor products to customer's preferences.
"Most companies are looking for ways to attach themselves to customers and have a continuous dialog with them," says Donovan Neale-May, the executive director of the Chief Marketing Officer Council.
That could mean Harrah's treating a frequent gambler to Liza Minelli tickets when she walks into a casino. Or it might mean a cell-phone company offering a customer who regularly calls in for help a tutorial on how to use his handset. Or a supermarket sending customized coupon offers to frequent shoppers as text messages delivered to their cell phones.
Unlike past marketing efforts, which were generally targeted to demographics and regions or lists of sales prospects compiled by third parties with little discrimination, the new marketing lets companies personalize their pitches like never before -- and at light speed.
"They're doing real-time analytic runs of customers that allow a sales agent to deliver an offer in the context of a call. It's not just based on demographics. You're seeing very granular analysis on a specific interaction and a specific request. This was simply not possible two or three years ago," says John Ragsdale, a principal analyst with Forrester Research.
As a result, more companies are using advanced marketing technology tools from the likes of Siebel Systems (SEBL ), Oracle (ORCL ), SAP (SAP ), PeopleSoft (PSFT ), E.piphany, and Salesforce.com. According to tech researcher AMI Partners, 54% of large businesses used some type of advance marketing software in 2003. That's significantly higher than 2002's 37%. According to Framingham (Mass) tech consultancy IDC, the overall marketing-technology sector hit $7.2 billion dollars in total revenue in 2003. By 2008 it should grow to $11 billion, a 52% increase.
True, software companies have long hyped the promise of using technology to better market goods and services. They've promised automated management and tracking of contacts and broad overviews of all the available information on any given customer or sales campaign.
POST BIG BANG.
Companies have spent tens of billions on these efforts over the past five years. But installing and integrating such complex systems into existing network infrastructures often required more than a year. More often than not, companies took the "kitchen sink" approach to the projects, trying to alter sales, marketing, customer service, and other functions simultaneously, while retraining entire organizations on new software and business procedures.
"The early days of CRM were characterized by Big Bang implementations. A lot of those very large early projects did not have good results," explains Ragsdale. Symbol Technologies (SBL ), General Motors (GM ), and a host of others have suffered through busted marketing-technology implementations.
The second round of CRM and marketing-tech, though, is enjoying a much greater rate of success for a number of reasons. For starters, companies have downsized their ambitions. "What's totally different now is they purchase with a discreet goal in mind," says Mary Wardley, vice-president for enterprise-software research at tech consultancy IDC Corp. While earlier versions of these systems were mostly reserved for big companies, many of the latest offerings can be bought on a per-seat basis for a few thousand dollars a year or less.
DREDGING THE DATA WELL.
Increasingly, this technology-marketing software is being delivered as a pure service over the Internet by the likes of Salesforce.com and Siebel Systems. Gartner anticipates that within a few years, one-quarter of all marketing-technology applications will be delivered via the Net. That means customers won't need to add any software or endure installation delays and snafus.
Often, potential clients can even try the systems out before they sign long-term deals. Disk-drive maker Seagate Technologies (STX ) decided in 2003 to go with hosted applications from Salesforce and MarketFirst, which offers the ability to cull in-house databases for potential leads and set up targeted e-mail campaigns in a matter of hours. "How long it took to deploy this stuff and how much integration was required were major factors for us," says Paul Miller, senior manager of global marketing at Seagate.
Before it installed the new system, Seagate had been going through a cumbersome process to better target customers. It began by buying marketing lists for campaigns. That entailed lots of nettlesome data manipulation involving Excel spreadsheets and consultations with outside e-mail marketing campaign experts. Now, Seagate can tap the deep well of customer data that had been locked in its own databases and pour that information automatically into marketing-software applications.
Those applications, in turn, can parse out which customers should be targeted with a specific e-mail pitch and even run test campaigns. "We can do message testing or subject-line testing that take a small sample. We might change two or three variables before we send them out to the entire audience," says Miller. So far, Seagate has upped its marketing-campaign response rate between 30% and 50%.
All of these advances are dramatically altering the way companies think about marketing, according to Forrester's Ragsdale. It has become more of a science and less of an art, with more accountability and more flexibility. Marketing pitches will increasingly be formulated on the fly rather than in brainstorming sessions. And more and more powerful analytical tools will take personalization in marketing to a higher level. That could mean lots more sales dollars coming in from Diamond Club cardholders and disk-drive purchasers alike.
By Alex Salkever, Technology editor for BusinessWeek Online