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Mark Abernethy

The alchemists

2000

The Bulletin

Submitted for Best Feature category

Crude oil was nicknamed black gold at the beginning of the last century for its capacity to forge a new currency. The new gold of the 21st century doesn\u237\'92t drive cars or boilers. It is consumer information - the data streams, data capture and data mining that with the power of the internet adds up to a new currency of "infonomics".\par }\pard \sb120\sl360\slmult0\nowidctlpar\faauto\rin0\lin0\itap0 {\fs18\lang1033 From bar-code scanners and banner ads to credit-card swipers and personalised web pages, infonomics is the value in what companies can learn about our behaviour.\par Information is not valuable in itself. But with the right data and meticulous "slice-and-dice" techniques, companies can avoid marketing to the wrong customers thus saving on production and marketing overheads; and they can "cross-sell/up-sell" more of their services and products to those who are ready for other products.\par Primarily, proper mining of customer data helps a company retain its customers. And as the mantra goes in marketing departments: you can increase your profits by 80% by improving your customer retention by 5%. In some companies, this equation could mean a difference of $1bn.\par At the heart of infonomics is technology that collects behavioural data from input points such as the internet and card swipers, and sifts it through databases with fuzzy logic, neural networks and intelligent machines. Together, these technologies can form what are known as "personalisation engines" which decide what we want to buy tomorrow based on what we bought last month.\par The technology is just the enabler; the real revolution of infonomics may end up being the concomitant shift in focus from the shareholder to the customer.\par "The thing about the information age," says Ujwal Kayande, senior lecturer in marketing at the Australian Graduate School of Management, "is that business can no longer be purely about the needs and demands of the company; it is now about the needs and demands of the consumer.\par "Companies can collect and process more information than they ever could in the past. But how do they use it? Do they try to sell you more products or do they use the information to provide better value to you?"\par With so much computing power available, Kayande says it is inevitable that some companies will abuse their new databasing abilities while others will use it to create what all business still revolves around: customer relationships.\par In the information age, says Kayande, we will know the good companies because they talk about "customer value"; the others will still be banging on about "maximising shareholder wealth". The good firms will meet our needs before we even know we have them, rather than filling our letter boxes and email accounts with junk mail.\par The power of infonomics, and the flood of new technologies to handle customer information, means the rise of virtual brands such as American Express, Yahoo! and Fly Buys that focus their resources on customer relationships.\par "You can\u237\'92t put a value on it,\u237\'92 says American Express\u237\'92 head of consumer cards, Barry Arnold, of the company\u237\'92s 45 million-strong database. "It\u237\'92s like trying to put a value on a brand - what is the value of information?"\par There isn\u237\'92t an official value on the world\u237\'92s most famous commercial database, but the American Express company certainly knows how to lever revenues out of its customer lists.\par Unlike some multinational brands, which split their databases into territorial or divisional fiefdoms, American Express holds a single proprietary database of every transaction we make, what we bought, where and when we bought it.\par "It\u237\'92s a pretty good assessment of how you live," says Arnold. "You are what you buy."\par The world\u237\'92s largest travel agency performs segmentation and "targeting" exercises on this vast pool of demographic and behavioural information in order to narrow down the chance that we want what they\u237\'92re selling.\par If you decline an offer, you are tipped into one internal database; accept, and you\u237\'92re progressed into another. If the company has for instance, a Canadian promotion, it can "drill down" to all people who visited Canada in the past six months, and all categories within that cohort dependent on what type, duration and class of travel they undertook.\par The process is about to become further sharpened by AMEX\u237\'92s aggressive strategy on the internet.\par The finance giant is building online services that shift the focus to the customers by allowing them to personalise their accounts. It has even become an online publisher with its glossy }{\i\fs18\lang1033 Travel & Leisure}{\fs18\lang1033 magazine which allows readers to click through from hyperlinks in the text and make transactions based on what they were reading. From this sort of customised exercise, AMEX gets even more information on its customers.\par The customised approach was pioneered by internet super brands Yahoo! and AOL - companies with no branches or products to speak of, but enormous databases, unassailable goodwill and global spread (AOL has 22 million subscribers; Yahoo! has a 22-country network in 13 languages).\par Virtual companies like these have refocused in line with Kayande\u237\'92s view of the information age: that the consumer rather than the shareholder, is king. It is instructive that in interviews with Barry Arnold at AMEX and Nancie Pageau, marketing director at Yahoo! Australia and NZ, that neither mentions "shareholder value".\par If the information age has created infonomics, then the smart companies are realising that the crucial ingredient in keeping the information flowing are those old-fashioned concepts of customer loyalty, trust and satisfaction.\par "Four years ago we started My Yahoo!," says Pageau of the dynamic personalisation engine that sits in the heart of the internet\u237\'92s most-used directory. "We decided the internet was not actually a broadcast model; it\u237\'92s about being in touch with people and giving them what they want."\par The information that Yahoo! garners non-stop as soon as you go into one of its sites is used to bring the user further and further into a community. All the features of Yahoo! are personalised - from the clubs and footy tipping to the chats and even the auctions, mail and messenger services. All contain a customised element that the consumer controls and which means Yahoo! is less likely to serve banner ads or promotions that are unwanted.\par Pageau says the power of using consumer information in the right way is the difference between spam and a helpful offer. This, in turn, translates to a good customer relationship as opposed to one that doesn\u237\'92t exist. In a world judged on page views, registrations and dwell time, it shouldn\u237\'92t surprise to hear that Yahoo! has one of the highest retention rates on the worldwide web.\par It\u237\'92s not only the Americans and their relentless marketing programs that are part of the infonomics revolution. In Australia, Fly Buys - the consumer loyalty program owned by Coles Myer, Shell Oil and 20 other retailers and run by Loyalty Pacific - is expanding to take advantage of the amount of information that can not only be collected, but also mined with the use of powerful new technologies.\par Now in use by one third of Australian households, and growing by 25,000 new households per month, the Fly Buys scheme has 5.5 million cards in circulation. The scheme is sufficiently successful that Coles Myer chief executive Denis Eck rates the loyalty program\u237\'92s information flows and databasing as one of the platforms on which Coles Myer will succeed in the new economy.\par Head of marketing at Loyalty Pacific, Phil Hawkins, says the database collected on buying patterns allows the company to tailor mail-outs to a degree most Australian companies cannot achieve. Hawkins calls Fly Buys a "dynamic program" which is why its central functions and transactions are shifting to the internet in May, allowing a greater sense of "real-time" data. Members will be able to check points, take awards, receive special promotions and join the program online.\par By taking personalised information from the web site and aggregating data across sales at 22 participating businesses in the program Fly Buys doesn\u237\'92t have to be constantly stuffing junk offers in mail boxes; the sophisticated databasing systems allow less mail-outs for a greater return because offers can be tailored to narrow profiles rather than mass offers made to mass mailing lists.\par Less for more? We\u237\'92ve only heard the beginning of infonomics.\par \par }\pard \sl360\slmult1\widctlpar\aspalpha\aspnum\faauto\adjustright\rin0\lin0\itap0 {\fs18\lang1033 * American Express, Yahoo! and Fly Buys all have strict privacy policies and do not sell their databases to third parties.}{\f20\fs22 \par }}