Quelle: CIO USA
Remember all those big promises the dotcoms made about being able tomarket to their customers on a one-to-one basis? All thatfancy-schmancy personalization technology they had behind theirwebsites was supposed to make it happen. They would track theircustomers' every click, purchase and page view and then makerecommendations about what books, CDs and clothes their customersshould buy. As we all know, personalization technology didn't pay offin time to save dotcoms' skins.
In fact, personalization has been the Web's biggest unfulfilledpromise, at least so far. It has disappointed companies and consumersalike for several reasons. first of all, efforts that many companiestout as personalization are really just exercises in simplisticcustomer segmentation. Just because a letter from a bank about a homeequity loan is addressed to "Dear Meridith Levinson" instead of "DearValued Customer" doesn't mean it's tailored to Meridith's needs,especially when she is single, rents an apartment and doesn't need a$20,000 credit line. That is an instance of a bank segmenting anindividual into some category of customer it deems worthy of a homeequity loan. Neither the bank nor the consumer wins in this situation;the bank doesn't sell a home equity loan, and the customer doesn't getoffered the Roth IRA she really wants.
The second reason personalization hasn't lived up to expectations isbecause off-the-shelf personalization technologies focus on givingcustomers specific recommendations based on what they've bought in thepast. And those recommendations don't differentiate between gifts andpersonal purchases. If Dad, who usually buys classic rock CDs forhimself, purchases a Korn album for his 12-year-old son, he may startgetting recommendations for grunge every time he logs in. And that'sjust annoying. By contrast, when a customer patronizes abrick-and-mortar store, he can get sensible recommendations oneverything from house paint to upholstery swatches by simply asking aclerk. And it takes a lot less time.
Despite such disappointing outcomes, there are a handful of companiesthat understand the essence of personalization and are doing it right.They realize it's about determining a customer's unique needs andoffering products and services that satisfy him. For instance, at SanFrancisco-based Reflect.com, a Procter & Gamble spinoff, women cancustomize cosmetics, moisturizers, cleansers, shampoos andconditioners that best suit their skin and hair care needs. And ifyou're fed up with Weight Watchers and the Atkins' diets, essentiallyone-size-fits-all regimes, eDiets.com offers weight loss and fitnessplans tailored to your individual activity level, dietary preferences,medical history and emotional needs.
B2B companies are also finding that their customers viewpersonalization as a value-added service. For example, PSS WorldMedical, a $1.8 billion distributor of medical products and diagnosticimaging equipment, is expanding its business by personalizing itsonline catalog according to its physician-customers' type of practiceand what their colleagues are buying. Although only 6 percent of PSS'scustomers currently use the Web on a monthly basis to place orders,the company has increased its incremental sales by $200,000 a monthsince the launch of its online system.
All three companies have based their personalization efforts on onefundamental principle. They put strategy first and technology second.They had to figure out if personalization was right for their businessand how they could make it work before installing a single piece ofcode. Company executives also realized they had to fully integratetheir information systems so that they could access and share customerinformation in disparate databases.
Tellingly, none of these companies rely exclusively on off-the-shelfsoftware. Instead, they use entirely homegrown applications or somecombination of packaged and custom-built software. (Off-the-shelfpackages often don't include the functionality that many companiesneed to access and integrate legacy customer information.)
Finally, at least two of these companies are using theirpersonalization systems to reach the Holy Grail: getting customers tospend more money with them through cross-marketing. If a Reflect.comcustomer orders another bottle of customized shampoo online, she isimmediately greeted with a pop-up ad that offers her a special deal onthe conditioner that goes with that shampoo. And when a dermatologistshops on PSS's personalized website, the site automatically shows himother products that are most popular among his owncolleagues.
If the pundits are correct, every company will have to individualizeits products, services and interactions with customers in order tostay competitive. Only then will the promise of CRMincreased customerrevenuesbe fulfilled.
Weighing In, Online
EDiets is one of a handful of subscription-based Internet pure-playsto have survived the shakeout and achieved a profit. The dotcompersonalizes diet plans to overcome its biggest handicapnot having theface-to-face weigh-ins that programs like Weight Watchers and JennyCraig offer. With eDiets, members weigh themselves in their homes andtrack their progress on the site. To compensate for not havingregional weight loss centers, eDiets has to customize its weight lossplans to such an extent that they appeal to people who have growntired of Weight Watchers and Jenny Craig's cookie-cutterapproach.
Every month, as many as 40,000 people sign up for eDiets' freenewsletter, according to Steve Johnson, the company's CTO. And eachquarter, approximately 100,000 new dieters pay $45 for a three-monthsubscription to the program. The subscription entitles members toweekly fitness and meal plans customized according to their eatinghabits, dietary preferences, medical conditions, and emotional andweight loss needs. The Deerfield Beach, Fla.-based company has morethan 300,000 paying members and 9.8 million opt-in subscribers to itsnewsletter.
Before the company went online, Johnson worked with professional,licensed dieticians to build eDiets' proprietary diet engine fromscratch. The diet engine, which runs on Windows NT, relies on acustomer database and a meal plan database connected via software. Thesoftware extracts information from each database to produce thecustomized diet plan for each member.
When a new customer registers on eDiets, she fills out aquestionnaire, indicating her current age, weight, height and gender.Then, selecting from pull-down menus, she specifies whether she hasany dietary preferences or restrictionssuch as being a vegetarianandindicates if she has any medical conditions, such as high bloodpressure, hypertension, diabetes and high cholesterol. Finally, sheindicates whether she's a couch potato, exercises moderately or isvery active, and if she eats when she's stressed, depressed or upset.She submits the questionnaire to eDiets, and it gets stored in thecustomer database.
Not everyone gets a customized diet. The company advises dieters tocheck with their doctor before beginning any diet or fitness program,and they won't give you a diet if you're within a recommended weightrange. Instead, the service may tell you that you're within yourtarget weight and that trying to lose additional weight isunhealthy.
For eDiets' business to survive, it has to make sure members return tothe site on a weekly basis and renew their subscriptions after threemonths. To encourage them to do that and ensure they feel supported intheir weight loss efforts, eDiets uses the same proprietary technologythe company has developed for generating the personalized diets. Forinstance, if the system finds that a member hasn't logged in forseveral weeks, it will automatically send that individual an e-mailencouraging him to stay on track, says Johnson.
The one drawback to the plan is that many members find the onlineprogram isolating. "With an online weigh-in, there just doesn't seemto be the motivation to stay on program the way there is with aface-to-face program like Weight Watchers," says a former eDietssubscriber.
EDiets tries to combat that handicap with chat rooms and bulletinboards on its website, as well as a toll free number dieters can callfor help or a kick in the pants. If a member calls to say she's havingtrouble staying on the diet because she's hungry all the time, eDiets'staff can access the member's information through a Web-basedapplication that is linked to the diet engine and the customerdatabase. They can see the meal plan the customer is currently usingand adjust her caloric intake.
The personalized approach seems to be paying off. EDiets celebratedits first profit one year after it launched online in November 1999and has been in the black ever since. The company earned approximately$11.4 million in revenues in 2000 and an estimated $25 million in2001, 90 percent of which were generated through paidsubscriptions.
The Beauty of Integration
Like eDiets, Reflect.com also developed proprietary technology tocustomize its productsin this case, skin and hair care products andcosmetics. When the online company (which is majority-owned by Procter& Gamble and 15 percent owned by venture capital firm InstitutionalVenture Partners) launched in 1999, many onlookers were skeptical thatthe company could actually do such a thing, says Jonathan Grayson,Reflect's CIO. Besides convincing women that customizing beautyproducts is possible, Reflect.com also has to carve a niche for itselfin the highly competitive beauty care space.
Now, when a customer wanders on to Reflect.com and indicates aninterest in buying eye cream, she is prompted to fill out aquestionnaire that will help Reflect.com create a product that suitsher needs. She indicates, for example, whether she gets dark circlesor puffiness under her eyes, whether she would like the skin under hereyes to be smoother, if she has laugh lines that she wants to reduce,and if her eyes are sensitive.
Once she completes the questionnaire, it is transmitted toReflect.com's homegrown matrix system and its IBM Webspheretransaction system, which processes the order. The matrix system is aconnected system that learns from example rather than following presetprograms. The matrix determines which active ingredients should orshould not be included in a product given the parameters the customerhas provided. So if the customer purchasing the eye cream indicatesshe wants to minimize dark circles under her eyes but thinks hercrow's feet give her character, her eye cream will be made withvitamin C to treat the dark circles, but vitamins A and K, whichsupposedly reduce wrinkles, will be left out.
Because Reflect wanted to go beyond customizing products topersonalize its every interaction with every customer, Grayson had toovercome the biggest challenge companies face when trying to dopersonalization effectively. He had to create an infrastructure inwhich disparate data sourcesfrom Reflect's e-commerce transactionsystem to its CRM, manufacturing and fulfillment systemscould all beaccessed as one. And he did that in two ways: by basing all of thesystems on Oracle databases and by making them feed into an Epiphanydata mart. For example, the transaction server, the Web server and thehomegrown system that formulates each customized product access thesame database. The data mart also pulls information from those serversand systems. So if a buyer who once customized eye cream replaces it,Reflect.com will automatically cross-market other eye products to herin a pop-up ad.
Whether a customer rejects or accepts the offer, Grayson says, herresponse is fed back into the Epiphany system. This way, she won't bebombarded with offers for products in which she's not interested, andReflect.com can alter the segments of customers to which certainoffers are targeted based on the type of women who have responded tothem.
To date, Reflect.com has created about 3.5 million unique products,according to Grayson, who says that the cost of customizing isslightly higher than mass-producing similar high-end beauty products.Since it first launched, Reflect has received $85 million in fundingfrom Procter & Gamble and Redpoint Ventures. Grayson says the companyis on target toward profitability, but he declined to release specificfinancial numbers. According to Jupiter Media Metrix, Reflect is thelargest beauty products site on the Web.
Companies that don't customize their own products but want topersonalize their marketing and sales campaigns can use the sameapproach. Access to information in different systems is key when itcomes to tailoring interactions with customers, says Grayson. With it,companies get a more detailed understanding of their customers'preferences, which "allows you to tailor messages that don't lookcursory or thrown together," he adds.
A Doctor on Board
Personalization is not just for B2C companies. PSS World Medical, anup-and-coming distributor of medical supplies and diagnostic imagingequipment, is finding that the power of personalization works as wellin the B2B space.
Today, the Jacksonville, Fla.-based company controls 15 percent of thephysician supply business and competes directly with 10 otherdistributors, including divisions of such big name companies asMcKessonHBOC and Cardinal Health. To differentiate itself from itscompetitors and crack bigger accounts, PSS launched two portals,MyPSS.com in December 2000 and MyDIOnline eight months later. Itcustomizes these portals according to each customer's practice typeand brands the pages with the customer's name or logo.
Small private medical practices and large health-care organizationsalike use MyPSS.com to order more than 56,000 products includingeverything from basic bandages and syringes to test tubes and petridishes. Radiologists use MyDIOnline (the DI stands for diagnosticimaging) to select from more than 8,000 SKUs including mammographicand X-ray equipment, film and chemicals. The portals are built onBEA's Web Logic Application Server and run on BEA's commerce componentframework and personalization server. Customer information is storedin a centralized Oracle database. The company's ERP system, sales-force automation application and databases are pulled together usingIBM's MQ Series middleware.
When a customer first registers to use one of the catalogs, sayMyPSS.com, she can choose to see only the products that are relevantto her practice type. Once she begins placing orders, PSS maintains areal-time list of all the products the physician ordered during thepast 18 months ranked in descending order by quantity. This section,called MyItems, makes it a lot easier for a doctor to find the 20items he has purchased (out of a catalog of 56,000). PSS can also usethe list to show one dermatologist what her colleagues arebuying.
Wayne Meyerson, director of e-business for PSS, says therecommendations encourage people to shop more. "Because we make it soeasy for people to buy online, we see a 20 percent higher average sizeorder on MyPSS.com as opposed to through the traditional methods ofthe phone and sales rep," he says.
As an added advantage, PSS can use the personalization information itcollects to determine whether a customer is a member of a smallprivate practice or belongs to a much larger clinical system. If thelatter is the case, David Ramsey, CIO of PSS World Medical, alertsPSS's corporate accounts staff, who then attempt to open more accountsacross that entire clinical system.
Ramsey says that big accounts were always tough for PSS to win in thepast. But with its personalized tools, PSS's sales force is pitchinglike Pedro Martinez. "With the technical ability we have topersonalize a site in a day, we can walk in on a prospecting deal andshow them a customized site with their logo, their colors and theircontent needs,'' Ramsey says. "It's interesting how well that plays topeople's egos. It is helping us win large accounts that we've neverbefore been able to win."