How Market Leaders Use Technology & Data Solutions to Achieve Competitive Advantage Boston College October 27, 2004 Mike Iaccarino – President & CEO.

How Market Leaders Use Technology & Data Solutions

to Achieve Competitive Advantage

Boston College

October 27, 2004

Mike Iaccarino – President & CEO

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Agenda

Introductions

Using Database Marketing to Achieve Competitive AdvantageHilton Hotels Case Study

Q&A

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Introductions

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An Introduction…

Mike Iaccarino, President & Chief Executive Officer

Epsilon

Leading provider of integrated Database Marketing and CRM solutions

35+ year history

675 employees

$150M+ in annual revenue

Offices in Boston, Dallas, St. Louis and Washington, DC

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Epsilon Overview

Leading direct and digital marketing company that creates measurable business results

through database marketing services 

Vision

Mission

Our goals are achieved through

● an unwavering commitment to each client’s success, ● unmatched client service,

● operational excellence, and

● the deep database marketing expertise of our people

Approach

Help clients maximize the value and loyalty of their customer portfolios through

● analytics, ● multi-channel direct communications, and ● database marketing technology

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Financial/Insurance

Telecom/Tech Travel/Consumer Healthcare

Not for Profit

Strong Relationships with Blue-Chip Clients

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Leading Provider of a Broad Range of Integrated Marketing Services

Market presence

Strong

Weak

Weak Strong

RiskyBets Leaders

StrongPerformersContenders

Harte-Hanks Epsilon

Merkle

Rapp Collins

KnowledgeBaseMarketing

Fair, Isaac

CSCAcxiom

BeNOW

Experian

Currentoffering

Strategy

Forrester WaveTM: Database Marketing Service Providers1

1. TechStrategyTM Research: Buyer’s Guide To Database Marketing Service Providers, April 18, 2003, ©2003, Forester Research, Inc. Reproduction Prohibited2. TechStrategyTM Research: The Value of Database Marketing Service Providers, March 14, 2003, ©2003, Forester Research, Inc. Reproduction Prohibited

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Using Database Marketing to Achieve a Competitive Advantage

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Database Marketing: A Definition

The discipline of continuously aggregating, interpreting, analyzing, and applying

information about customers and prospects to achieve business objectives

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Database Marketing: Components

Successful Database Marketing programs blend three skill sets

The Value Of Database Marketing Service Providers

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Market Leaders Agree

Database Marketing Organizations’ Influence & Budgets Are Rising

From Database Marketers Gain Influence But Lack Enterprise Coordination, September 2004

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Market Leaders Agree

Impact Of Specific Database Marketing Functions On Results

From Database Marketers Gain Influence But Lack Enterprise Coordination, September 2004

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Case Study: Hilton Hotel Corporation

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Case Study: Hilton Hotels Corporation

Can Database Marketing drive

economic value & competitive advantage

in an industry where a room is

increasingly becoming a commodity?

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Hilton HHonors Case Study: Situation

Epsilon currently manages every aspect of Hilton HHonors, Hilton’s industry-leading loyalty program

For 2,700 properties across 9 brands, manage nightly transactions and provide marketing tools

For 12,000 currently active program bonuses, perform 950 million computations daily, in real time, to generate over 300 million awards

For 11 International Call Centers with 500 Service Reps, 24x7, develop and manage all customer service applications

For more than 75 Airline, Retail, Financial partners, manage all transactions/data exchanges

For 6.5 million members, manage online website, all online and offline marketing communications

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Hilton HHonors Case Study: Situation

Manage a multi-currency, highly complex loyalty platform requires extensive technical, marketing and operational capabilities

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Hilton HHonors Case Study: In the Beginning

HHonors has grown from a one dimensional marketing program aimed at rewarding repeat

guests with “free” stays

One brand

One currency

One reward opportunity

One channel

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Hilton HHonors Case Study: Today

To a network of interconnected earning and redemption partners with exchangeable currencies and highly

dynamic incentives to drive specific behaviors

HO

TELS

AIR

LIN

ES

CA

RS

/CR

UIS

ES

FINANCIAL/RETAIL

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Hilton HHonors Case Study: Business Strategy On the Contrary

The Hilton HHonors program drives tremendous economic benefit to the Hilton family of brands

Over 50% of hotel stays are attributed to HHonors members (vs. 30% in 1997)

The program is a significant profit center for Hilton Corporation

There are 3 primary elements that drive this Data

Leveraging information on travel habits and patterns both at Hilton family properties as well as at partner airlines, retailers and providers to capture a comprehensive picture of consumer spending and travel profiles

Analytics Through sophisticated modeling, selecting very small, granular subsets of consumers

and offering them very specific, differential promotions and program benefits that drive incremental behavior (allocate investments based on opportunity)

Utilization of Technology Utilize a nimble technology platform to equip every consumer channel with intelligence

that allow Hilton to interact with each guest on a highly personalized basis, based on their preferences, informed by intelligent marketing models

Personalization

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Hilton HHonors Case Study: Business Strategy

Objective: Leverage the Hilton HHonors Program to drive profitable member behavior

Drive brand preference & competitive differentiation

Individualize the relationship

Foster cross-brand usage

Decrease marketing, reservations & customer service costs

Create barriers to switching

Retain & drive frequency

Exploit shelf space

Enhance operating capabilities & efficiencies

Drive

Lifetime Value

Enhance

ROI / Economics

Grow

Share-of-Wallet

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Results

Among HHonors members since 2001 Share of wallet

Preferred program

Members specifying that HHonors is the preferred over all the programs to which they belong (average = 3.6 programs)

Preference for HHonors up for every brand and across all tiers

Among Hilton Family hotels since 2002, % of high value members

Recognized as returning guests

Loyalty scores (satisfaction, return intent, recommend)

Front desk friendly

Overall Increased active membership

Increased multi-stayers

Increased stays per multi

+ 12 points

+ 4 points

+ 3 points

+ 50%

+ 19%

10%

11%

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Summary

View Database Marketing technology as a key strategic initiative View technology as a key to driving customer economics, not as a means

to cutting costs Understand that all customers are not created equal

Use Database Marketing technology to invest in the customers that have high current and potential value

Look at Database Marketing initiatives holistically: Need for combination of analytics, marketing communications and

technology Sophisticated technology without holistic, strategic plan does not yield

results

Database Marketing technology clearly can enhance and redefine brand experience

Market leading organizations in every industry that successfully leverage data & technology for marketing

strategy:

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Q&A