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Tim Schiffers

Senior Vice President Corporate Development

Direct Group Bertelsmann

Business Intelligence at BCADon’t do it without IT: Managing customers in a highly competitive environment

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Agenda

BCA An introduction to company and business model

UK Book Market The challenges and BCA’s response

New Database Architecture at BCA SAS as overall database marketing environment

ROAC Benchmark SAS as integrated business intelligence solution?

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Agenda

BCA An introduction to company and business model

UK Book Market The challenges and BCA’s response

New Database Architecture at BCA SAS as overall database marketing environment

ROAC Benchmark SAS as integrated business intelligence solution?

4

Company Overview BCA

BCA (Book Club Associates) formed in 1966, now 100% owned by

UK market leader in book club and mail order marketing

Specialist in Direct Marketing and Cross ChannelCustomer Relations: Direct Mail, Press/Inserts, Doordrops, Online, Telemarketing

Annual marketing spend of over £45 million

General clubs Fiction clubs Specialist clubs

Employees 500

Members 1.5million

Turnover ~ £100million

BCA in Numbers

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Overview Direct Group / Bertelsmann

Employees 76.2k

Turnover (€)17.0bn

Bertelsmann

Members >30mi

Turnover (€) 2.2bn

Direct Group

BCA is the fourth biggest book club business of Direct Group Bertelsmann, the world market leader in direct-to-customer business

Other BertelsmannDivisions

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The Club Mechanism

NM Marketing CM Marketing

Introductory Offer“Choose 5 books from 99p”Channels:- direct mail- door drops- press / inserts- online- telemarketing

Regular Catalogue Mailings(10 – 16 Mailings pa)- expert editorial selections- overall discounts- special offers / promotionsFull E-Commerce Websites

Commitmentto buy a certain number of books over the term of the membership (e.g. 4 books in a year)

Enforcement Mechanism- negative option- default

Buying licenses from publishers in contrast to retailers that buy from wholesalers

Book Club Rights

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Agenda

BCA An introduction to company and business model

UK Book Market The challenges and BCA’s response

New Database Architecture at BCA SAS as overall database marketing environment

ROAC Benchmark SAS as integrated business intelligence solution?

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The UK Book Market – An Increasingly Competitive Landscape

1995 2000 2005

Traditional Competition:Concentration of Booksellers

New Competitors:E-commerce &Supermarkets

Other Factors:Format change &Price Perception

‘95 – ‘97• Heavy discounting,

but without real analysis

‘98 – ‘00• More selective discounting • Stores become homogenous• Central buying introduced

‘97• Watersone

buys Dillons• Borders buys

Books Etc.

‘98• WHSmith buys

Menzies

‘03• Ottackars buys

Hammicks

‘97• AMAZON

launches in UK

‘99• BOL

launches in UK

’01• AMAZON takes over operation

of Waterstones website• BOL is integrated into BCA

and becomes club business• Supermarkets increase focus on selling

media products, initially music and videos / DVD’s, but continuously more books

• Concentration on key titles

• Tesco online becomes key competitor of AMAZON for online book retail

• Hardbacks are in decline as a format

• Size of supermarkets and chains leads to focus on key titles, which is reflected in publicity

• Cheap or free book promotions of magazines and newspapers

Net

Boo

k ag

reem

ent d

isba

nded

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BCA Strategy

• Continuity Business

• Complementary “Club Extra” offers for book club members, sourced through strategic partnerships:

Book ClubCore Business

• Recruiting and servicing members in the traditional Book Club model

• Build on:• unique publisher

relations / editorial expertise

• state-of-the-art database marketing

• high performancesystems (SAP, SAS, Microsoft)

to constantly improve efficiency & effectiveness

Additional Products and Services

New BusinessInitiatives

• Leveraging assets and / or know-how into related new businesses, e.g.:

• Magic Offers (direct selling)

• Video/DVD, Music, Toys, Gifts(with e.g. )

• DVD Rental:

• Party plan concept forchildren’s books and toys:

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CRM at BCA – Managing the Member Life CycleCurrent Member

GOAL:Intro-payer

New Member

Less Active Member

Dormant Member

Lapsed Member

Multi-buyer / Active Member

• Improve customer relations and customer management across all channels and stages of their membership

• Thus, increase efficiency and effectiveness and consequently maximize profitability

Commitment Reminders- Different chains according to behaviour to date

and stage in membership

Segmentation - Different treatments depending on current

and forecasted future behaviour

Contact Suppression- Frequency reduction for slow

buyers

Dormancy Reactivation- Special messages and

promotions for dormant customers

- Slow buyer programme

New Member Models- Response modelling- Backend modelling

DormancyPrevention- Special

messaging and promotions for members identified as at risk

Cancellation Reversal- Dedicated campaigns for members

that have cancelled recently

New Member ContactStrategy

New Member Activation- Welcome

material- Welcome

e-mails

Payment Reminders and Dunning- Different chains according to

life stages

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Agenda

BCA An introduction to company and business model

UK Book Market The challenges and BCA’s response

New Database Architecture at BCA SAS as overall database marketing environment

ROAC Benchmark SAS as integrated business intelligence solution?

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Old Database Architecture BCA

Objectives

• Implementation of an efficient DatabaseMarketing Solution to support:

– New and Current Member campaigns– Media Sales processes– Ad-hoc analysis– Modelling

• Replace the existing systems (Protagona, Customer DB, FastStats)

• Optimise the business processes

Before

SAP R/3

Protagona

FastStats

CD2 +Doc1

BW

CustDB

Issues

• Very long campaign run-times

• Very long update run-times, leading to infrequent updates of customer database

• Array of different technologies

• Over-complicated business processes

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CustDB

Benefits New SAS Database Architecture

Before

SAP R/3

Protagona

FastStats

CD2 +Doc1

After

CD2 +Doc1

SAP R/3

SAS

• Significant reduction of IT costs

• Improved business processes

• Complexity reduction

• Reduction of data replication

• Significantly improved database marketing capabilities

BW

BW

Objectives

• Implementation of an efficient DatabaseMarketing Solution to support:

- New and Current Member campaigns- Media Sales processes- Ad-hoc analysis- Modelling

• Replace the existing systems (Protagona, Customer DB, FastStats)

• Optimise the business processes

Benefits

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SAS

New SAS Based Database Architecture

SAP R/3

PSA

Segmentation Templates

Update Customer Account In SAP R/3• Default• Programme• Marketing Message

Update Internet & IVR

OutputSystems

Database Marketing(Analytics, Modelling, Segmentation)

Other data sourcesInternet, …

BW Cubes

Integrated Solution for:

- Campaign management

- Database marketing

- Data warehousingD

ata

Cle

ansi

ng

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Improved Database Marketing Capabilities due to SAS

Totally up to date data as updates are run daily instead of monthly

Elimination of data redundancies and discrepancies

Faster deployment of campaigns and running of analysis

Very robust environment with checks and balances as well as security layers

Openness of platform will allow to easily ad further SAS components and tools

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5

2

3

4

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Agenda

BCA An introduction to company and business model

UK Book Market The challenges and BCA’s response

New Database Architecture at BCA SAS as overall database marketing environment

ROAC Benchmark SAS as integrated business intelligence solution?

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The ROAC Benchmark – Setting the Stage

Overall Situation BCA

SAP R/3Transactional Backbone

(Finance, Sales Order Process,Billing and Payment, Marketing

Campaign Planning, …)

Database of R/3(> 3.4 TB)

Database(≈ 1 TB)

Database(≈ 450 GB)

BWReportingAnalysis

SASAnalysisModellingSegmentation

• R/3 as the transactional backbone• BW utilised for:

– Reporting– Analysis– Base for Protagona (segmentation engine

until 09/2004)• SAS

– Analysis– Modelling – Segmentation

– Current Member campaigns– New Member campaigns– Media sales

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Core Questions

The ROAC Benchmark – Setting the Stage

• Does BCA (or other clubs) really need 2 data warehouse systems?

• Does SAS offer adequate and sufficient functionality in the areas of:

– Analysis – Reporting (Finance, Marketing, … )– Scenario building & forecasting – Profiling

• Does SAS provide a sufficient technical environment in terms of:

– SAP integration– Scalability & flexibility– Performance

• Does an integrated solution based on SAS provide cost advantages in comparison to a split BW / SAS environment?

• Does an integrated solution provide synergy potential?

SAP R/3Transactional Backbone

(Finance, Sales Order Process,Billing and Payment, Marketing

Campaign Planning, …)

Database of R/3(> 3.4 TB)

Database(≈ 1 TB)

Database(≈ 450 GB)

BWReportingAnalysis

SASAnalysisModellingSegmentation

?

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What and Why ROAC Prototype as Benchmark The Concept

ROAC =Return On

Acquisition Cost =Profit over lifeAcquisition cost

• Measures the effectiveness of NM marketing investment decisions

• Is measured for each individual campaign

Complexities Requirements

• Expenditures and associated revenues are recorded over entire life of member

• Therefore ROAC will always have an element of actual performance and an element of forecast performance

• Profiles created so forecasts can be made- Lifecycle Profile

speed at which members leave- Activity Profile

idea of member quality over life- Purchase Profile

shows how much and when members spend

• Forecast has to be possible 6 months after the campaign begins

• Reporting process has to be automated; manual data inputs should be kept to minimum

• Profile production has to be automated; user should be able to specify level at which profile is produced

• Reports have to be easily accessible and easy to interpret for all business users

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Benchmark - Implementation

Transactional Data:• Customer• Campaign• Products

Financial Data

LoadingCleansingExtraction

SAS Foundation Layer

Segmentation Cube

SAS: Database MarketingSAS: ROAC Benchmark

SAP R/3

CampaignTemplates Ad-Hoc

Output

Staging Area

SAS Solution Adapter for SAP R/3

Architecture SAS:• SAS Base• ETL Server• Metadata Server

Tools SAS:• Enterprise Guide• ETL Studio• Data Quality Solution• SAS Base

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Benchmark - Implementation (II)

Transactional Data:• Customer• Campaign• Products

Financial DataData fromother

Systems

LoadingCleansingExtraction

SAS Foundation Layer

ROAC Aggregation Cube

Importfrom

MS Excel

Reporting

Segmentation Cube

ForecastingProfiling

End User (MS Excel, Internet)

SAS: Database MarketingSAS: ROAC Benchmark

SAP R/3

PrototypeTables

CampaignTemplates Ad-Hoc

Output

Staging Area

SAS Solution Adapter for SAP R/3

Architecture SAS:• SAS Base• ETL Server• OLAP Server• Metadata Server

Tools SAS:• Enterprise Guide• ETL/OLAP Studio• Data Quality Solution• SAS Base

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Benchmark Findings - Functionality

SAS provides very powerful tools for analysis and the running of reports as well as simulations

Forecasts and profiles can be generated efficiently with a great level of detail

All of the above is supported by a large array of analytical and statistical functionalityIn addition, the flexibility to produce own functionality remains

While use of reporting and what-if-scenario is facilitated by Excel, analysis and forecasting require in-depth knowledge of SAS

Data retrieval is fast and large sets of data can be sorted, grouped, structured and displayed quite easily

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Benchmark Findings - Technology

Initial implementation process is not simpleRequires deep knowledge of SAP as well as good knowledge of SAS, interface building and the extraction tool

Performance of SAS extraction depends on data volumes, SAS input requires extensive file testing

Data Extraction

SAS provides very powerful development tools (4GL language, good support of standard SQL)

Enterprise guide is well suited for development and power user team

Flexibility

SAS shows very impressive performance even on large volumesBut, system design must be done with performance in mind, some fine-tuning necessary

Performance with concurrent activities is fine overallEnterprise guide gives a lot of power to the users, this needs to be managed

Performance

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Benchmark Findings – Cost Advantages and Synergies

Unified environment will reduce costs in the following areas:- Development- AMS- Operations (hosting, hardware, storage)- Training

SAS pricing is rather complex and rent instead of ownership with maintenance differs from general industry practice

Integrated solution for database marketing and data warehouse provides significant synergy potential:- Reporting / analysis and database marketing to benefit from each other’s work

(scorecards, credit screening, segmentation, planning)- Reduction of duplication of efforts- Potential to integrate database marketing and parts of finance team

Cost Advantages

Synergies

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Benchmark – Results Summary

High acceptance within user community1

Powerful system with an excellent toolset

Broad set of standard functionalities

TechnologyIntegration SAP and SAS is acceptable

2

Flexible and scalable architectureImpressive performance

Cost3

Synergy Potential4

☺

☺

☺

Functionality

Integrated solution reduces the operational IT cost

Integrated solution provides synergy potential

Data retrieval and manipulation are fast

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SAS Could Definitely Serve as the One Integrated BusinessIntelligence Solution for BCA

SAP R/3

PSA

SAS

Segmentation Templates

Update Customer Account In SAP R/3• Default• Program• Marketing Message

Update Internet & IVR

OutputSystems

Data Warehouse(Reporting & Analytics)

ROACProduct AffinityAuthor AffinityProfilingCorrelations Product MixCustomer behaviour

Other data sourcesInternet, …

Dat

aC

lean

sing

Database Marketing(Analytics, Modelling, Segmentation)BW Cubes