Magazine Article | March 1, 2002

What Are Your Customers Telling You?

Source: Innovative Retail Technologies

Hidden within your sales transactions is valuable information about your customers. CRM (customer relationship management) taps this data mine and can assist your entire enterprise.

Integrated Solutions For Retailers, March 2002

Looking around the marketing department at Chico's, one might think that the women's apparel retailer only sells to its close friends and family. Its employees respond to hundreds of unsolicited customer e-mails a week and talk about them as if they know them. "We like to give the customer a name. We think of her as our mother, our aunt, our friend," said Bari Horton, director of direct marketing at Chico's. "Customers write to us and say things like, 'I love my clothes, and I named my cat Chico!'"

Its customers are so vocal that Chico's had to listen to what they were saying. One day Horton received a check for $254 from a Chico's customer. Along with the money came a request for one jacket, a pair of size three pants, and a necklace. Horton ran to her boss, VP of Marketing Jim Frain, in disbelief, "Can you imagine just sending a check for $254 and assuming that it would get to someone?" she said. "One woman even sent me her credit card number. I had to call her back and tell her, 'I can't do that!'" Horton didn't know what to make of the requests since the Fort Myers, FL-based clothing chain didn't offer catalog or e-commerce shopping at the time. But as more mail orders appeared, Chico's started thinking that maybe it should stop running to the closest store to fulfill orders. Its customers clearly wanted more shopping options. So, in May 2000 the retailer launched an e-commerce Web site and added a 35-person call center to its brick-and-mortar apparel business of 303 stores.

And believe it or not, its customers were right. The Web and catalog channels contributed $11 million to Chico's $360 million in sales last year and the two additional shopping channels are expected to grow by 40% in 2002.

Those first few customer letters and e-mails now adorn her office wall as Horton learns about Chico's customers through a more technical means - CRM (customer relationship management). Chico's customers spoke up and the retailer listened in a way that increased its customer database from 300,000 to 2 million names in three years. What are your customers telling you? Are you willing to listen? The next step, however, is making sure you can manage a response.

CRM - An Evolutionary Venture
Chico's investment in CRM wasn't quick or all at once; it evolved over the last decade. The retailer's attempts began in 1991 with a primitive, paper-based loyalty program called Passport. The program rewarded shoppers who spent at least $500 over time with a lifetime discount of 5% off their purchases, along with other benefits such as a Birthday Bonus, Double Discount Days, and Secret Sale invitations. The program seemed to be a great incentive to encourage loyalty, but Chico's couldn't measure the program's success or failure. The system used flat files (records that have no structured interrelationship), running on an AS/400 to manage customer data, but did not provide information on quantity, type, or location of customer purchases.

Years later, Chico's conducted its first credit card reverse append with an outsourced company. This allowed Chico's to use addresses from its credit card transactions as a basis for direct mailings. Chico's could see the response of the mailings based on sales lift and how many offers were redeemed in the stores, but since the mailing was outsourced, Chico's couldn't connect anything back to a customer name. "Once we could see that our customers responded to direct mailings, we knew we needed to bring the program in-house and get our hands on that data," Horton said.

In 1999, Chico's implemented Connected Retailer CRM from STS, an NSB Company (Montreal). "We did not have a consulting firm come in and tell us what we needed to do. A lot of what we do now has been an evolutionary process, and it worked because we knew the specific market we wanted to target." The difficult part was determining how to reach those customers. Based on its past reverse credit card appends, the retailer had 300,000 customer names plus 30,000 Passport member names from its existing loyalty club. This was a start, but Horton admitted that CRM could take even the most well-prepared retailers for a bumpy roller coaster ride.

Database Integration Is An Uphill Climb
One of the first hills Chico's encountered was gathering the store sales and customer information from the point of sale (POS). When Chico's first started working with CRM, it had to poll the data from old MS-DOS POS systems to the Connected Retailer SQL server at Chico's headquarters so that the customer database could be updated with the day's sales. But, in order for the stores to receive the most recent customer database, Chico's had to then update each store's server. "After more than a year of replicating the data every evening, we installed Windows-based POS software from CRS Retail [Newburgh, NY]. Now we still poll the data every night, but it goes into one central repository on an AS/400 after the CRM SQL server is updated. This way, each store can access the customer database information as needed throughout the day," Horton said.

Another common obstacle many retailers have to overcome when implementing a CRM system is integrating its multiple selling channels. Since its channels were built at different times, Chico's created separate silos of customer information instead collecting it all in one central database. "For more than a year, our catalog and e-commerce customer information sat in a different database than that of the stores. It would kill us because we knew we had information on the same customer coming in from two sides, but we couldn't see it all in one single view," Horton said. Chico's Web site and call center both use order processing software from CommercialWare, but the database of information does not automatically integrate with the Connected Retailer SQL server database. To overcome this obstacle, each night Chico's transfers any CommercialWare activity into the Connected Retailer database. This solved marketing's difficulty when it came to seeing all customer activity for direct mailings, but it still did not provide Chico's call center with a 360-degree customer view. Since the call center only works in CommercialWare, it could only access that database; an employee on the phone with a catalog customer couldn't recognize that a customer regularly shops in the stores, as well. "It was important for employees to have access to both Connected Retailer and CommercialWare when on the phone with a customer. The best we can do for now is to have the call center employees toggle between the systems. In CommercialWare they can place the orders, and in Connected Retailer they can look up a customer's store purchase history," Horton said. Chico's is currently working on a way to merge the two databases within the CommercialWare application.

Use CRM Across The Entire Company
Horton understands why some companies are overwhelmed by the thought of CRM. "Retailers think it's just for the big guys because there is so much information and so many different systems to track it. But we look at it as our customers telling us what we need to know. They are truly talking to us," she said. So, what are they saying?

Now that its multiple channels are connected in one database, if marketing sees an increase in catalog sales, it can notify the merchandising department of the trend immediately. "If we get 100 orders for a linen blouse from women in New York through the call center, we can relay the information to the allocation and product development department immediately," Horton said.

The marketing department mails 1.4 million pieces a month to its customer base. The mailings range from catalogs and coupons to birthday offers and promotional event notices. Before anything leaves the marketing department, however, the database is carefully combed to find customers most likely to bite at the offer. "If the system says a woman hasn't been in the store in over eight months, we ask why she didn't respond to our mailings. Perhaps she moved away from a store and is now shopping online, or the offer no longer entices her, or we changed the styles or colors. Based on the reasons, we can choose to focus on her differently, such as through e-mail offers instead of mail," Horton said.

And although the Connected Retailer database resides in the marketing department, the information it houses is shared among all departments. For example, with the help of ESRI mapping software (see sidebar on this page), the CRM database has helped Chico's real estate department to determine the best place to build new stores, and the advertising department which medium would work in a particular area of the country.

Horton stressed that in order to form good customer relationships, the marketing department first needs to cozy up to its MIS department. "We have to love our MIS department, and they should love us [marketing]. We rely on them to integrate all of our systems and work with us as we go," Horton said. "If we decide we want to track multiple coupons offers, customer demand, or affinity circles for customers, MIS has to make it happen. If we want to do a simple yes/no survey at the register, it requires programming at the POS. There is not one out-of-the-box system to fit your company's entire CRM strategy."

The CRM solution that Chico's has established managed to pay for itself in less than a year. Passport members, who once were 9% of Chico's business, now account for 60%. Through their shopping behavior, Chico's knows that Passport members spend 40% more each time they shop than regular customers and go to Chico's every four to five weeks looking for a new assortment. Horton's department knows when customers shop, what they buy, and what compels them to buy, thus proving that even in the world of CRM, actions speak louder than words.