Getting the right product to the right customer at the right time to the right channel at the right price is a challenge of enormous complexity when you’re the major Canadian retailer Hudson’s Bay Company (Hbc). Rob Shields, Hbc’s vice-president of CRM and Loyalty and co-chief privacy officer, spearheads the effort to line up more than one million products with the spending of something like eight million customers. He takes a scientific approach to this monumental task, always calculating costs and measuring results.
“The expression is ‘retail is detail’ and this is highly detailed, scientific work,” he explains. His focus is “how we get precision working for us – not only to be more efficient with our dollars but more effective; to speak to a lot of people about one thing or one thing to one person.”
When Shields took on his current role two years ago, Hbc had turned its focus on customers to complement the product focus necessary as a retailer. The company redesigned and consolidated its existing multiple loyalty programs and launched its Hbc program which it expanded into all its stores. That gave customers one card and four different places to earn points: The Bay, Zellers, Home Outfitters and Hbc.com.
This redesign and launch required constructing a new database which brought together all the aspects of each customer’s relationship with Hbc. The Oracle database includes the loyalty program database which manages all the loyalty reward points and balances. It also has a database dedicated to the Hbc credit card system and another database dedicated to the product inventory system.
An overall hierarchy permits Shields and his team to query, for any given customer, where they shopped, what they purchased, whether they used a credit card or not.
“In the past, most of the people had only looked at one database for one piece of information, like: how many t-shirts did we sell?” he says. “Now we can say: how many t-shirts did you sell, where did you sell them, what tender were they purchased on, were the loyalty cards used or not, and who [bought them]?”
Extracting the information
He reports they use a number of tools to extract the types of information needed, depending on what it is and where it resides. “It might be just basic mainframe programming, it might be C++, it might be SAS programming. Typically for us we are using SAS code because our analysts aren’t so much looking for operational reports as we’re going in for discovery and insight.”
He says SAS code is the most flexible for exploring “because the language is written in a way that is easy to understand and more intuitive than some of the other programming languages. You can create insertions into the code and deletions from the code without having to rewrite the entire programming set,” he continues. “You can save it and go back into it or not if you want. It is a very flexible way of looking at your data. Once it’s in SAS, you can export it to spreadsheets or whatever seamlessly without any challenge.”
Getting the ROI
Shields sees the ROI of their CRM capabilities deriving from what you can do with the data — for example, using it to reveal information that will lead to better business decisions.
“Often times we were in the position where we thought we were making the right decision and then we said ‘have we looked at what customers that will effect?’ or ‘what will they buy or stop buying as a result of that because it is a destination purchase?’ And we have seen that ‘wow,’ maybe we shouldn’t make the decision because we’re going to jeopardize a bunch of things.
“A more practical, tangible side of the ROI is simply by driving through customer initiatives that have an immediate return,” he adds.
Shields cites the example of a campaign they ran during the past holiday season. It began with the question: “do we have anybody who has not shopped with us in the past three to six months?” The database confirmed that a significant population of people had not. A campaign was designed and launched to re-engage customers during the peak season by offering extra loyalty points the next time they shopped at an Hbc store. The amount of points varied by customer.
Hbc uses a number of different vehicles to communicate to customers. Sophisticated direct marketing capabilities permit customer monthly statements that ‘speak’ to customers one to one. Shields says they use SAS code and develop “very sophisticated business rules and decision trees that basically take all our business objectives for the organization for that point in time.”
He stresses that Hbc staff never see the individual customer files. “That’s the idea of the privacy. [Customers] get a bunch of things offered to [them] that I don’t know about. All we do is the macro. On a monthly basis, all our customers go through these business rules and decision trees.”
He gives the example of linking an upcoming sale in men’s wear with customer Joe who has purchased in menswear but not lately or maybe never has. To encourage him to try it out, his statement includes an offer for menswear.
“Our statement on a monthly basis goes through and tells [the customer] about eight different messages that we think [he/she] should know about in our Hbc and then three offers,” Shields elaborates. “We might say there is a new Home Outfitters opening around the corner and here are the crossroads and bonus points for going for the first time. It is really taking a moment in time on a monthly basis, speaking to [customers] about what is going on.”
Integrated with POS
Hbc recently gained the ability to ‘speak to customers’ through its point of sale contact. Its POS technology, which is a mixture of NCR and IBM products, has been upgraded so that a customer making a purchase gets a message on the receipt itself. It may be an offer to earn bonus points in a related department, for example.
“That’s all integrated into one model,” says Shields. “It would have appeared on your statement, but now it has appeared on your point of sale. We may replace that message within your statement going out in a few months because we’ve already talked to you about that. If it works, we will probably replace it.”
Importance of measuring
Shields reports they are always tweaking their CRM initiatives and, more importantly, always measuring them.
“If you don’t have a solid way of measuring the incremental behaviourial change at the customer level, then you shouldn’t be doing it,” he stresses.
He believes in having “a very disciplined, scientific methodology when you approach campaigns, including a control group. Then, you measure by subtracting out your control group and calculating the incremental revenue and the incremental gross profit margin minus all costs that go into the program or campaign,” he continues. Just noting a two per cent sales lift, for example, doesn’t cut it for Shields because it might have cost more than it earned.
“You should go through those campaigns calculating in the amortization on the IT system, fixed costs of a percentage of the overhead, direct variable costs like software costs – all that should be factored in at some level (as) part of the campaign,” he adds.
“If you run enough campaigns and you do it in a strategic way and it is smart, every single one of those will pay for itself and then some. Obviously as you continue to actually put them into the market and you learn from them, that helps you refine the model as you go forward.”
Ensuring a positive ROI
Here are four steps to a healthy ROI, according to Hbc’s Rob Shields.
Build the asset knowing how you’re going to leverage it, i.e. using it in marketing, merchandising, real estate, finance and product development.
Leverage it. He says Hbc built the database on a pay as you go philosophy. Spend a little money, get some back, reinvest.
Find a way to create money from the asset. Using it to provide information to other departments is good, but it really doesn’t create money. It creates better decision making, but does it really create money? No, he cautions.
Manage it. There’s going to be a million requests of you. People will want to go in and make changes. There will be initiatives underway that may compromise what you’re doing or overlap. Manage the asset in a way that keeps its integrity high.
“Build, leverage, monetize, manage,” he summarizes. “If you can’t answer how you’re going to approach each one of those areas, I would say ‘why are you doing it?’ Your four wins have to be in there somewhere.”