Case Study: Eddie Bauer

Summary: Customer relationships are important to any retailer. But for a mem
ber of the exclusive group of retailers who have successfully integrated their
brick-and-mortar, Web, and catalog channels, customer relationships are about
more than just understanding behaviors: They're about making them happen.

Back in 1920when the first Eddie Bauer store opened its doors, personalized
customer service was one of the company's trademarks. One can imagine Seattle
shoppers being greeted by name and offered suggestions by helpful sales staff
who understood their tastes and remembered their past purchases. The com
pany has certainly changed since then-Eddie Bauer has grown to over 500
stores in 49 states, with a catalog circulation of 105 million across the United
States and Canada-but its service mentality is surprisingly consistent: under
standing the merchandise customers want and providing it to them in the opti
mal way.
 CRM in Marketing

70 of
Spiegel Group-is one
division of the
a bonafide channel triumvirate
claimto a
company-now

Indeed, the
who can lay
acclaimod
businesS, and
an
tiny handful
of retailers stores, acatalog retailers
a brick-and-mortar
b r i c k - a n d - m o r t a r

that includes Although most

shoppers. Bauer's three
site for Web sweetspots, Eddie
Internet
their Internet complementing
struggling to find suggests,
are still company's data
and, as the
channels are thriving
one another.

WHAT THEY DID:

Eddie Bauer, explains
the com
of CRM for
Harry Egler, Vice President a two-way dialog with its cus
being centered on
pany's CRM strategy as and wants"
certain needs
tomers.."Our customers
arecoming to us with
have to provide relevance, as well as be able to have an
Egler explains, "so we usually set up to accommodate
intelligent dialog with them. Retailers aren't
this type of interaction."
knowledge of its cus
In the mid-1990s, the company began to realize its
requests. "It
tomers was rudimentary, as was its ability to respond to customer
was like pulling teeth for a brick-and-mortar customer to get one of our cata
logs," Egler recalls. Initial research suggested opportunities were falling through
the cracks due to alack of an integrated view of thecustomer. Indeed, customer
data was dispersed across the company and not easy to find, let alonegather
and analyze. Eddie Bauer began exploring what it would take to attain the
360-degree customer view.
As the company began developing new metrics for understanding cus
tomer behavior, it also invested in the technologies that would enable the
inevitable customer analysis considered by executives to be acritical
next step.
The company began building a strategic infrastructure to deliver
analytics, including a powerful Sun platform and an IBM sophisticateu
along with analytical technologies that DB2 data warehouse
included SAS and its accompany1n8
decision-support and data-mining capabilities. The new business intelligen
environment enabled Eddie Bauer not
also to applythe findings to only to examine customner behavior but
pany calls its rapid predict future behaviors
modeling through what the com-
The company now has aenvironment.
behavior and has reached the complete view of its customers and their shopping
tion. Eddie Bauer proverbial
recognizes a customer retailing brass ring: channel integra
regardless of whether she orders from
A Marketing AutomationChecklist for
Success 71

acatalog, in a store, or over the

Internet. Moreover, Eddie Bauer can segment
that customer's spending to determine her most
profitable channel,
helping optimize customer profitability across all [Link] in turn
fine a point on it, Egler adds that this gives Eddie Bauer the putting too
flexibility to
manage each channel autonomously and still gain an overarching view
of
total cross-channel profitability.
Such newfound knowledge has crossed the transom from research to
tactics. Marketing can choose which of the company's 44 catalogs best fit a
customer'sprofile and likely needs. The company can also analyze data to
determine how frequently it can and should communicate with its
custoners.
Although Eddie Bauer bases most of these decisions on the goal of
communicating to the customer through the right channel at the right time,
there's also the very real issue of cost. "We can afford to send our most valuable
customers a broader assortment of products, explains Egler, referring to the
company's diverse offerings of not only men's and women's apparel but an
assortment of home soft-good and furnishing products. The company's
ability to score customers based on their propensity torespond to campaigns
gives it the intelligence it needs to get customer interaction decisions down to
a science.

THE CHALLENGES
Despite being ahead of the curve, Eddie Bauer is a testament to CRM's com
plexity. With its lofty multichannel and one-to-one goalsgoals, the company
would point out, that are being achieved-Egler admits they might have been a
little too ambitious. "We wanted to get to Mecca right away," he [Link] cites
three different CRM tactics: evolutionary,where each step is logical; revolution
ary, which involves significant business change; and interdisciplinary, leveraging
CRM to adiverse set of decision-makers.
"Everyone wantsto get to 'interdisciplinary' immediately" Egler explains,
but there are incremental steps across CRM development. We probably tried
biting off more than we could chew early on." Eddie Bauer
has also had its share
the resulting
of business process issues as a resultof its CRM strategy, but
customer-centricity. If
changes ultimately contributed to a greater degree of
made sure organizational
he had it todo over again, Egler says he would have
earlier in the CRM lifecycle.
and business processes were considered
 CRM in Marketing

72

, are changing. In
GooD ADVICE:
intimately
aware that
the rules of retailing

Internet speed, Harry

and
1these
Eddie Bauer
is fragmentation,

be a cornerstone
customers to
market
hypercompetition,

with of the
days of relationship
begins with the
Egler considers
a learning
advantage. Such a relationship objective
competitive 2-9).
company's
customer value
(see Figure
of building
overall
Likethe CRM
programitself, such alearning
relationship is a

disparate Customer
never-endi
data and
ng
Eddie Bauer has replaced
journey: The fact
that
with over a terabyte of online
customer
information--
purchases to channelI
systems
outdated legacy
addresses to itemized past preferences
from names and
easier.
makes that journey a lot

THE GOLDEN NUGGET:

practicing the learning relationship model, Eddie Bauer has dis.

Since it began of its channels can spend un to
cOvered that customers who shop across all three
through only onechannel. The com.
five times more than customers who shop
contributes the highest
pany can then understand which of its three channels
proft for each customer, driving tailored content to itscatalogs and more per
sonalized offers to its shoppers.

Gather DATA
about the customer

which builds
OBJECTNE:
Build Customer Value Convert to
stronger
CUSTOMER (revenue, pvofitablity & INFORMATION to
RELATIONSHIPS satistactio) DIFFERENTIATE
Customers

Use to CUSTOMIZE each

oter
Communication
luteraction
Figure 2-9: The
learning relationship
(Courtesy of Eddie Bauer, Inc)
The Manager's Bottom Line 73

Like other CRM best practices, Eddie Bauer has institutionalized its con
viction that CRM is about more than mere technology-it's about business
strategy. "CRM has fundamentally changed the way we market," says Harry
Egler, who insists the strongest marketingstrategies fuse CRM with the com
pany's brand. Asthe self-described custodian for customer focus, Egler credits
the mixof technology, business process and organizational change, and data
with helping EddieBauer get CRM right. "We now realize what we don't know"
says Egler, citing what could be Eddie Bauer's most powerful CRM finding
So far.

The Manager's Bottom Line

Despite the foreseeable payback of CRM in marketing, a recent survey of
175companies with immediate CRM plans in place indicates marketing
automation lags behind other CRM initiatives such as customer support.
Why the slow start?
Money, for onething. According to the same survey, 72 percent of the
largecomnpanies responding planned on spending $l million or more on their
CRM initiatives. Relationship marketing tactics such as customer segmentation
and automated campaign management pay off only if acompany is ready to
use the results to improve customer interactions.
And if a company isn't clear about its business processes, CRM can back
fire. Differentiating customer treatment based on partial customer data can
result in the wrong message toa customer, ultimately doing more harm than
no interaction at all.
Successful marketing tactics use the results from customner interactions
to improve future interactions, paving the way for high-impact decisions such
as these:

Shifting marketing dollars toward campaigns more likely to generate high

responses
" Understanding the characteristics of high-value customers, finding such
characteristics in customerswho have a high value potential, and changing
interactions accordingly

13."Lots of Companies are Thinking About Customer Relationship Management, But

September l5, 2000.
Progress Can Be Very Slow-CRM Under Scrutiny Information Week,
 CRM in Marketng
74

Improving the effectiveness

of high-cost channels (such as face-to-face
revenue streams
sales) to maximize their
Institutionalizing personalized communications
for specific customer
segments
delineating
Understanding research and purchase patterns and further
segmentation criteria to improve future interactions or stimulate
one-to.
one marketing
The goal of CRM in marketing is to noveC-level customers up to B-level
customers and B-level customers up to A-level customers and to motivate
A-level customers to stay that way-indeed, to buy more. It is to ensure the
optimal type and frequency of communication, regardless of how "sticky" the
Web site, the number of free giveaways, or the cost of the advertising campaign.
It is to ensure that the company is the customer's first choice.
To succeedon this distinguished mission, a company's marketing proces$
must be well defined. It must institutionalize the practice of customer differ
[Link] must act on the information it analyzes. Moreover, it must
not
exist in a vacuum, but must support the other business
processes that surrou
it, including the customer support and sales
two chapters. processes described in the nest

Cf
kia

Kandivli (E)
&sat
MUMBAI-101