The Three C's of Database Marketing: Customer-focused, Corporate-centric and Complex

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October 01, 2001
Marketing | Technology
Robert Needham - rneedham@us.ibm.com

© 2001 Hospitality Upgrade. No reproduction without written permission.

The hospitality industry has recognized for a couple of years now the need to change the way it treats its loyal customers. The concept of leveraging your customer base through increased service levels is what customer-centric businesses such as hotels now strive to achieve. The industry seems to be more in tune with customer loyalty than ever before. It’s not surprising that since higher competition for the same customer, increased marketing efforts by all and increasingly more attractive venues and properties, all give the customer more choices for spending their money.

 


Pressures on the corporate enterprise and ultimately their respective properties in making a higher profit margin force fundamental business changes. In order to maximize the true enterprise profit potential, you must understand and fully service your loyal customers (the customers you already know) to keep them visiting your properties and contributing to the corporate enterprise. The business focus can be realized through leveraging today’s technology and professional services as a vehicle for change. The pressures to better service the customer and extract more profit have warranted the building of a customer-centric data warehouse, now more than ever.

Many vendors approach the hotel industry by demonstrating the many flavors of tools that they claim help you manage your customer base. Customer relationship management (customer loyalty), data warehousing and campaign management are just a few buzzwords you may hear as you consider means to help you better service your customer. Unfortunately, many vendors fail to realize that tools alone will not solve the pressures being felt across the entire industry.

The key to success in leveraging your customer base is to manage the loyal customer like an asset. In order to do so, the various enterprise operations need to pull all the disparate customer data sources into a single data warehouse and leverage the information inside that data warehouse or store. Only then can the hotel company begin to appreciate the cross-enterprise value of the customer.
 
A number of industry pressures make it challenging for the hotel enterprise to compete, but nonetheless point to the need for effective corporate marketing based on centralized customer data.

Pressure Point #1
Increased Competition for the Same Pool of Customers

The real picture of the customer can be assembled with all of the information pooled together in one customer-centric data store. In the past it wasn’t too difficult to understand who your valued customers were when you were viewing an individual at a single property. The technology needed to understand their behavior could be gathered from the existing operational database with simple SQL statements. However, the simplicity quickly vanishes when new properties are acquired, and the customer master file is rolled up to the regional and enterprise level. The problem becomes more complex when you consider that many customers visit the same enterprise properties, in multiple instances. Moreover, the corporate enterprise is constantly acquiring new properties with more customer master files.

Pressure Point #2
Get Big and Survive

A challenge area for these enterprise organizations is getting the individual properties to consider their customers as corporate (enterprise) assets. From the corporate perspective all of the assets (or customers) belong to the enterprise. From the property perspective it’s every property for itself—this is how the properties are compensated and recognized by the corporate enterprise. This will be an evolving pressure that will not be resolved until a centralized marketing structure replaces property-level marketing. Until then, corporate integration will be limited to the once a month corporate meeting where the property management team updates the corporate enterprise leaders.

Brands with franchised properties have an opportunity to provide value to their franchisees by aggregating the data from all of the properties and providing reports and query capability at the individual property level. Comparisons to groups of similar properties’ performance metrics can also be made so local management can focus on problem areas. New metrics such as revenue per available customer, including all sources of customer revenue, can also be made available for comparison and analysis.

Pressure Point #3
The More Customers You Attract– The More Profit You Earn?

The hotel industry has typically pitted one property against another, trying to attract the most customers, using many and various mass marketing techniques. The assumption was the more customers you attract to your property, the more revenue you bring in to the property. The theory remains intact, but the profitability picture is very different. As more information is assimilated about the customer base, more abusers of multiple-property promotions are being discovered. Customer master files are pooled together with many hidden challenges that make it difficult to determine how many customers you really have, how often they visit the property and what their true corporate enterprise profitability picture looks like. When you determine what the correct profitability statement is on a customer basis, then you can begin examining who the most profitable customers are.

How to Approach a Customer-Centric Enterprise View

A good corporate enterprise customer may look like a different person at the corporate enterprise or regional level compared to a view of the same person at the individual property level. Problems arise when this good enterprise customer is viewed as an undeveloped customer by a property that they may only visit occasionally. This property has no way of knowing what kind of value this customer delivers to the enterprise.

There have been models developed using surrogate keys that completely isolate the individual customer and their associated transactions in a customer-centric database, which is the first step in recognizing the most loyal of customers. The model separates all of the different transactions that a customer can engage in, specifically where the transaction data is collected in conjunction with the customer’s loyalty or frequency card number. As a result, a hotel is able to determine a rating system that values the customer as a corporate enterprise customer, assigning a value to the customer both at the property level and the enterprise level. This allows for all corporate enterprise properties to understand how valuable this person is—regardless of how much they may be spending at a single property.

What Has This Got to Do with Marketing?
If I Build It, Will They Come?

Once the customer-centric enterprise view is in place, the next level of challenges will be uncovered. Marketing treatments sent out from different properties to the same customer are often very different in their value—unless the customer visits and uses their loyalty card similarly at each property. One property may offer free room nights based on the customer’s loyalty to their property. Another property belonging to the same corporate enterprise may have a range of offerings or interest generators to the same individual not knowing what the sister property is marketing to them. A lesser-valued offer is a wasted mailing. A similarly attractive offer is cannibalization. Many of the same offers are an over compensation (from a corporate enterprise perspective) giving out freebies from many of the same corporate enterprise properties. For these reasons a regional marketing position must be taken to insure against dissimilar marketing treatments to the same enterprise customer, due to the perception at the property level. This person isn’t simply the gate keeper as to what marketing pieces go to whom, rather he or she would inform any of the properties with dissimilar treatments to either increase the value of this dissimilar offer or deploy a different offer based on the other properties’ treatments.

If I Build It, Will It Be Profitable?

Not all of the marketing treatments can explain what is driving your business. Closed-loop marketing treatments are marketed redemptions that are associated with an individual customer for a particular duration of time. The redeemable treatments that are not tracked back to an individual customer can’t be analyzed with respect to the profitability that the customer contributed to the property and enterprise surrounding a particular event.

The treatments that attract the most profitable, revenue-generating guest will need to be analyzed for future targeted marketing. Marketing treatments can be changed and redeemable pieces interchanged to determine exactly what is driving that individual customer to that individual property. The history of reactions to these events by an individual can be determined for a more precise marketing strategy to this individual and individuals who act similarly. More complete marketing treatments can be offered to entice other revenue-generating areas i.e., spas, retail, restaurants, shows and more. These areas will need to have the customer data and the activity data sent back to the data warehouse for matching to their existing transactions and finally contributing to their overall profitability.

Once you understand what treatments are effective to which customer segments, targeted marketing can be performed.

OK, I’ll Build It… Now What?
Considerations When Tackling a Corporate Customer-Centric Data Warehouse

The decision to undertake this size of a project is significant. A data warehouse will be an unproductive investment if not erected with a clear goal and a direct path to the business problem it was originally intended to solve. Before you set the budget aside, make sure enough money is allocated in order to solve at least one business question with respect to the overall business problem stated above.

Also, keep in mind that there is never a single tool to purchase that solves the business problem. Many vendors in data warehousing appeal to your sense of sight rather than solving your business problem. The tools should be considered a part of the overall solution design and not as the single answer to this multi-part problem.

Finally, all the changes are not necessarily IT changes. CRM is not an individual tool solution; rather it is a business strategy to manage your most powerful asset—the customer. This is a corporate-directed philosophy and not just an IT problem.

The decision to implement a corporate customer-centric data warehouse must involve several departments, especially marketing. The benefits of the project for the corporate hotel enterprise must also be presented to the properties, who will initially be concerned with the issue of loss of control over their customer. Ultimately, the entire enterprise will recognize the significance of this project and the competitive advantage it will provide when fighting for the loyalty of the customer base. The ultimate winners will be the customers and those of you successful at retaining the loyalty of this highly profitable target market. So keep in mind: if you build it right, they will come. You must leverage the information to your benefit across the enterprise.

Robert Needham is the CRM and data warehouse project executive/principal at IBM Business Intelligence Consulting & Services. He can be reached at rneedham@us.ibm.com.



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