Commentary by Jonah Bloom

St Regis Has a Customer Database, And Knows How to Use It

Companies Like CVS, Automakers Trying to Ally Database with One-to-One Tools

By Published on .

Every time I check into a hotel with my editor Scott (no jokes, please, this is America) we find ourselves reflecting on the fact that despite previous visits to the same
Jonah Bloom, executive editor of Advertising Age.
hotel, they show no knowledge of us. Not so much as a "good to see you again, Mr. Bloom."

Does it matter that they don't seem to have a record of our visits? Not really; neither of us have any particular room requirements. Equally the lack of recognition hardly leaves us feeling like valued customers. I recently decided to change where I stay when I go to Chicago -- I might not have moved had I felt my loyalty was rewarded.

I mentioned this the other day to Howard Draft, general to a fast-growing army of direct-marketing whizzes at his agency, favored customer of many a fine tailor and another of those walking arguments against those who say there are no characters left in the business.

Using a database
Mr. Draft quickly made my midrange hotels seem even worse. His regular New York haunt, the St. Regis, checks him in and out automatically and prepares his room according to his tastes -- down to the right brand of bottled water. Perhaps, I suggested, the problem with my hotel chain is that it doesn't have a customer database. "No," said Mr. Draft, patiently, "it has a database. It just doesn't know how to use it."

This distinction is important, and getting more so. Senior executives at several "mass-marketing" organizations -- Ford and GM, for example -- have recently said they see the future of marketing in customer databases allied to one-on-one communication tools. If companies of clout invest more in these tools, it'll be those that use them best that win.

That means more than segmenting customers and sending them relevant communications,

Savvy marketers are making operational changes based on customer behavior as documented by database studies.
it means making operational change based on customer behavior, what Mr. Draft calls "behavior-path marketing."

Theory in action
If you want to see theory in action, delve into the work of CVS Pharmacy. It recently passed the 50-million mark in terms of customers carrying its Extra Care card. "It has near-perfect visibility into its best customers, and can examine exactly how each of them shops," says Forrester analyst Eric Schmitt, who has studied CVS's "exemplary" left-brain tactics.

The retail-pharmacy giant uses the information gleaned from the loyalty program to communicate news and offers to customers that is tailored closely to their purchasing habits. But it has also gone so far as to rearrange some stores according to that information.

For example, while standard merchandising strategy suggests that if the best-sellers are gift cards, shaving cream and painkillers, all three should be displayed front and center. But CVS knows, says Schmitt, that its most valued customers (the 20% who yield 80% of sales), are cosmetics browsers too, so it might put cosmetics within sight of the painkillers, as that's one of the regular purchases by the most valued customers.

Color-coding for valued customers
CVS also developed color-coded signage, completely independent of its stores' standard footprint, that helps those most-valued customers navigate favorite sections of the store. That color-coding is also employed on the Web site and in circulars.

CVS won't talk about its efforts, but analysts believe it's worked to increase the number of items bought by valued customers and helped boost same-store sales. That's called having a database and knowing how to use it.

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