How Market Leaders Use
Technology & Data Solutions
to Achieve Competitive Advantage
Boston College
October 27, 2004
Mike Iaccarino – President & CEO
Agenda

Introductions

Using Database Marketing to Achieve
Competitive Advantage


Hilton 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
Vision
Leading direct and digital marketing company
that creates measurable business results
through database marketing services
Mission
Help clients maximize the value and loyalty of their customer portfolios
through
● analytics,
● multi-channel direct communications, and
● database marketing technology
Approach
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
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Strong Relationships with Blue-Chip Clients
Financial/Insurance
Telecom/Tech
Travel/Consumer
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Healthcare
Not for Profit
Leading Provider of a Broad Range of Integrated
Marketing Services
Forrester WaveTM: Database Marketing Service Providers1
Risky
Bets
Contenders
Strong
Performers
Leaders
Strong
Epsilon
Harte-Hanks
Merkle
Rapp Collins
Experian
KnowledgeBase
Marketing
Current
offering
BeNOW
CSC
Fair, Isaac
Acxiom
Market presence
Weak
Weak
Strategy
Strong
1. TechStrategyTM Research: Buyer’s Guide To Database Marketing Service Providers, April 18, 2003, ©2003, Forester Research, Inc. Reproduction Prohibited
2. 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
HOTELS
To a network of interconnected earning and redemption
partners with exchangeable currencies and highly
dynamic incentives to drive specific behaviors

AIRLINES
CARS/CRUISES

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

Grow
Share-of-Wallet
Create barriers to switching
Retain & drive frequency
Exploit shelf space

Drive
Lifetime Value
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Enhance operating
capabilities & efficiencies

Enhance
ROI / Economics
Results
Among HHonors members since 2001

Share of wallet
+ 50%

Preferred program
+ 19%
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
+ 12 points

Loyalty scores
+ 4 points

Front desk friendly
(satisfaction, return intent, recommend)
+ 3 points
Overall

Increased active membership 10%

Increased multi-stayers

Increased stays per multi
11%
5%
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Summary
Market leading organizations in every industry that
successfully leverage data & technology for marketing
strategy:

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
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Q&A
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