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A four-part series: Marketing is being revolutionized by the onrush

of new and more sophisticated information-technology tools. How is

information-driven marketing changing the business world? This series

will examine the ways innovative companies are gaining competitive

advantage via the savvy use of information-powered marketplace

strategies and tactics. Part 1 appeared in the Oct. 2 Ad Age.

Part 1: The perils and promise of today's quickly forming

information-driven marketplace.

Part 2: Its impact on new-product development and on pricing and promotion strategies.

Part 3: Information-age implications for consumer package-goods and grocery marketers.

Part 4: A call to action for companies preparing for the information-intensive marketplace.

Membership has always had its privileges for American Express

cardholders. Now information gathered by computers behind the scenes is starting to make those privileges more worthwhile.

In the past year, American Express Co. has begun to use several new supercomputers and high tech programs that enable it to quickly marshal extremely detailed information about its customers' purchasing habits for quick-turnaround marketing programs.

The information is being used to shape deals, discounts, and special invitations for AmEx customers to restaurant openings and other events-all tailored to their interests, demographic profiles, geographic locations and lifestyles.

It's a three-way win: Marketers can get their messages, promotions and special offers in the hands of the people most prone to want their products and services, without wasting efforts on unlikely prospects; AmEx customers get offers tailored to their interests; and AmEx is positioned to complete the transaction with its charge card.

"We know a lot about our customers: who they are, where they shop, what they like and don't like. We make their lives easier with this information, and we can deliver very targeted customer groups to marketers who want to reach these specific people with compelling offers," said Marcos Rada, director of communications for New York-based AmEx.

AmEx won't divulge specifics of its database marketing systems, but it has added significant new programs and equipment in the past 12 months that dramatically enhance the speed and sophistication of the information gathered from consumers.

With the new capabilities, it now only takes a few days to create a customized marketing program for merchants targeting AmEx customers; in the early 1990s, it took weeks and sometimes months to do the computer legwork necessary to pinpoint such audiences.

For example, an airline expanding service to a new route can have AmEx, in less than 48 hours, isolate a group of AmEx frequent travelers to that particular part of the world for a promotional offer or travel marketer tie-in. Similarly, a restaurant that wants to increase its dinnertime business can ask AmEx to mine its database for members who have patronized the restaurant at lunch but not in the evening; it then can, for example, send those members a coupon offering a 20% discount or a free glass of wine if they come for a nighttime meal.

"We can give merchants a select group of customers who would be likely to respond to a certain offer using the American Express card," said Mr. Rada of American Express.

AmEx calls its evolving information-driven marketing programs "direct marketing," but the practice is significantly different from that of most bank charge card issuers using general customer information for mass marketing purposes. This stems from a fundamental difference between AmEx's back-office operations and those of its major competitors.

In the case of MasterCard and Visa, explained David Hilder, the analyst who follows AmEx at the Morgan Stanley & Co. investment banking company in New York City, "a restaurant sends its charge to a merchant processor, which sends it to the Visa network, which turns around and sends it to the issuer, which might be Citibank or First USA, and then, in the case of First USA and many other companies, the actual processing is done through First Data.

"This means that Visa and MasterCard do not generally have access to all the data, and they certainly do not have access to it on as easy a basis as American Express does, because you have at least two and sometimes three or more different parties to any given transaction, and therefore, any given piece of information can reside in a number of different places."

"American Express has a major strategic advantage because it is a `closed loop' operation" that handles the entire transaction process, Mr. Hilder said. "Discover potentially has the same advantage, though it does not seem to be pursuing this type of microsegmentation."

Although technological advances are playing an enabling role in these new AmEx initiatives, equally important has been a shift in management thinking.

"The declining cost of transaction processing and data gathering is important," said Mr. Hilder of Morgan Stanley, "but something that is more important is that American Express decided that it was important to do this.

"If you don't think it is important or worth it to do this as a business proposition, it doesn't matter how low the cost of processing is. American Express, for a long time, had a culture that-even though it did a lot of marketing-was not marketing-driven in the sense of being driven by what customers wanted. It was driven by American Express' own sense of what it would like to offer.

"There was a certain arrogance bred in that culture, but that has changed significantly."

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