Due to its size and the need for greater ease of access, Lowe's moved its data warehouse on to a Teradata platform towards the end of 1995 and at this point Irons says the company started to think about direct or database marketing.
Lowe's first looked at what it did know about its customers. From its market research and exit surveys in which it interviewed customers as they left stores, the company knew it had two broad classes of customers - the relatively affluent baby boomers and commercial business customers. It also knew that 15-20 per cent of customers used the company's private credit card, another 20 per cent paid by cheque, another 20 per cent used a bankcard and the rest paid cash. However, Irons says Lowe's didn't know much below that level. It was difficult to understand what those customers' buying habits were and the company was concerned about customer acquisition and retention.
The company had also launched some special interest, free-of-charge publications on topics such as gardening, woodworking and home decorating. These enabled Lowe's to obtain subscribers' names and addresses and obviously let it know what their interests were, but there was no way of knowing if the subscribers actually responded by coming into the stores. In addition, Lowe's had a lot of what Irons calls "shoebox data " containing names and addresses of people who, for example, had registered for a prize at the opening of a new store, or who had complained and returned products.
In fact, according to Irons, Lowe's initially had 50 different sources of information about its customers. Irons' staff built a data model from these sources, to which they added what Lowe's wanted to know about the customers. Lowe's also introduced a process for store cashiers to ask customers for their phone numbers where this was practical and not too intrusive. These were then reversed through the phone directory to obtain the customers' names and addresses, which were recorded in the customer database along with the items purchased and form of payment used. This information was of particular value in the case of customers who didn't use Lowe's private credit or frequent buyer cards.
Irons admits that initially the customer data contained inaccuracies, multiple entries and redundancy. But by the time he left Lowe's, the company was matching 70 per cent of its transactions against promotions, which Irons considers the proof of the pudding in a CRM system. "You can't say you mailed John a promotion because you know he's interested in gardening and that he came into the store and bought these gardening products unless you can match those transactions to him. You must be able to say [definitively] that on July 16, 2001 you mailed him and that three days later he was in the store and bought the products you suggested he buy, " Irons says.
"As the data cleansing of the customer database evolved and the transaction matching expanded, we did bigger and bigger promotions. You have to continually update the database for changes of address and other details. The US Postal Service sells a computer file containing address changes that we used to keep the database current and we came up with the idea to contact people after they had moved. These might be existing customers who had moved into a new store's market or potential new customers who had moved into our marketplace. We suggested items they might want for their new home and it was a phenomenal success.
"The response rate [in number of trips made to the store in the first 90 days after they were contacted] was around 19 per cent and the cost of contacting them was less than $US1 each. Great ROI. " vFrom Retail to E-TailAfter leaving Lowe's, Bill Irons founded management consulting firm WLI Enterprises, which focuses on retail strategy, logistics and IT. He is practice leader at WLI. Randall Mott, on the other hand, chose to remain in a CIO role, albeit in a different industry.
As senior vice president and CIO at Dell, Mott is responsible for managing the company's global IT infrastructure and reports to the office of the CEO. "I spent 22 years in retail and from a career standpoint I wanted the experience of being in another industry. I was not interested in going to a different retailer, " he says.
"In Dell, I saw an organisation that reminded me very much of Wal-Mart in the 1980s in that it was very innovative in its space and in a position to grow very competitively. I felt I could bring some value to that as well as learn a lot. Manufacturing, sales and marketing had not been part of my career and I saw that as an interesting challenge both personally and professionally. I've now had 18 months to learn what I had 16 years to learn at Wal-Mart before I took over as CIO there, " Mott says.
With 35,000 employees - 2500 of them working in internal IT - and $US32 billion in sales last year, Mott says Dell is very similar to many of its corporate customers. Consequently, one of Dell's objectives is to validate its own products in an internal environment. Mott's group works with Dell's engineering groups and other areas of the business to showcase Dell's products running its in-house applications. The goal is to demonstrate that Dell is a technology company and not just a PC company, and thereby act as a reference site for its sales teams.
Mott also claims that Dell's Web site, www.dell.com, is a good example of best practice in IT, as is Dell's supply chain management in that the company builds to order and keeps very little (four or five days) inventory, all of which is components rather than finished goods. In fact, he says his new role is similar to his CIO role at Wal-Mart in that both companies view technology as an enabler and think of IT as a strategy rather than a cost. Consequently, he says that by being aligned with and part of the business strategy, the IT professionals in both organisations have a much higher sense of accomplishment.
"Companies really need to have their [top] technology person on the executive committee. Without those ears and voice at the table they miss out on the business strategies being discussed, what the challenges are and what their technology choices are - that's key. I was fortunate to sit on the executive committee at Wal-Mart and I have that opportunity at Dell too.
"The other thing is to make sure you stay focused on what's important to the company and what you are trying to achieve, and not let yourself get into the mode of trying to do everything for everybody. Because regardless of the size of your organisation, there's only a limited amount of resource, " Mott says.
Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.