Arik Hesseldahl

Recent Posts by Arik Hesseldahl

Seven Questions About Smarter Commerce for IBM’s Craig Hayman

Recently IBM has been talking about making lots of things “smarter.” There’s the “Smarter Cities” initiative, and its ads talk about creating a “smarter planet.” Broadly speaking, making something smarter means making it more efficient, and less costly, time-consuming or less wasteful as a result.

Earlier this month, Big Blue made an announcement on the subject of “smarter commerce.” The idea is to throw some cloud computing resources at classic problems that businesses face in selling their products and services, especially around marketing. The cloud provides the computing horsepower needed to do deep analytics to find out if marketing campaigns are meeting their objectives, by gathering lots of data about customer preferences, especially online: Nearly two-thirds of all consumers make a first purchase because of a digital experience.

The effort has grown out of two IBM acquisitions, Coremetrics and Unica, both acquired last August, and through IBM’s detailed study of the inner workings of more than 2,000 individual businesses. The result is the IBM Coremetrics Web Analytics and Digital Marketing Optimization Suite, which IBM says automates and simplifies the creation of things like online marketing promotions and ad targeting.

I talked with Craig Hayman, Vice President of the WebSphere, Application and Integration Middleware Software Division of the IBM Software Group, about what smarter commerce means.

AllThingsD: We hear IBM pronouncing various things as “smarter” these days. You’re focused on smarter commerce. So what is smarter commerce, who does it affect, and how?

Hayman: If you think about consumers, and you think about the amount of technology that they have at their hands, to reach out to read reviews and talk to friends and families, they’re incredibly empowered. There’s not one purchase decision that they make that is not impacted by some element of social networks. What does that do to the companies that have to deal with that by offering the best products and services, and you see companies are struggling to do that. To make the right offer at the right time with the right price. When they do it well, we all talk about how it went well; and when they do it badly, we talk about how annoying it was. We looked into enterprises and industries and we found some very inefficient processes in how they buy and market those goods and services, how they sell them, and how they service.

How big a problem is this?

We looked at 2,000 different customer deployments to understand the best practices around that, and we were very surprised, because first off, this is a huge segment. It amounts to about $20 billion worth of software spend, and we realized that when you are able to do something compelling, there are some incredible stories about customer value and increasing loyalty and retention. That led us at IBM to invest in our own capabilities, but we also spent about $2.5 billion on new acquisitions in this area in 2010 alone to help us.

What sorts of things did you learn?

How can you help a customer get customer insight and understand what your future customers are doing? One way to do that is through analytics. Find a way to get that data to the marketing professionals as quickly as possible to help them better run a marketing campaign. We called it our Pegasus release: Track the analytics of how future customers are interacting with different channels, sometimes up to 1.5 billion pieces of data per day. We feed that data back to the marketing pros, integrate it in a way that’s connected to their campaigns, and adjust them based on the results. If I ran a Twitter campaign versus an email campaign, I’d be able to compare the results, including geolocation of the respondents, to show if it’s effective.

Have you tried this with any customers yet?

Seton Hall University was running a social media campaign to bring in more students. And we were able to show them that most respondents were coming back through those links through two zip codes: One was South Orange, New Jersey, where the college was located, and one was a commuter town nearby. If you wanted to target the people who already know about the college, you’re doing a great job. But if you wanted to target students from overseas or from other states, you’re doing a lousy job. We were able to give them those metrics and they were able to shift their campaign and attract more students from a wider range of places. The main problem is to know how well your campaign is working, and having the data to prove it one way or the other, and help you tune it.

Companies are always struggling with things like inventory and distribution and logistics, how much stuff to have on hand to meet anticipated demand and so on. Can this sort of thing help on the back end too? If you market too well, you might find you don’t have enough of the item you’re promoting, for instance.

One element of people’s frustration is when you get an offer and you go to buy it and it’s not there. The customer walks away unhappy, and the company has wasted money marketing to you. You may end up going to a competitor. It’s a triple-whammy. So now we say, let’s find some visibility into the supply chain. We don’t manage the supply chain, but we can see what’s in it, so you know what’s in stock, where it’s in stock, down to what truck it’s on and where it’s going, so you can be sure you have the inventory when people go to buy it. We did this with Crocs, the rubber shoes. They sell through small mom-and-pop shops, but also through major retailers like Nordstrom and Macy’s, and also online and through their own stores. People were ordering through all these different means, and they were having stock-outs. People would order and it wouldn’t be available. We acquired a company called Sterling Commerce that gives complete visibility into the inventory no matter where it is in the supply chain, and render that through each of those channels. We helped them to virtually eliminate stock-outs for Crocs.

But in this case you don’t help manage the supply chain specifically?

No. But we integrate with all the supply-chain systems out there. We have a view that you shouldn’t have to rip and replace everything you already have to get this benefit. You shouldn’t have go through a five-year ERP or supply-chain rollout to benefit from smarter commerce. You should be able to work with what you already have.

What other areas of commerce do you touch?

Companies often sell through a series and partners, and generally you want to get those partners up and running and selling your product as quickly as possible. If you’ve got a hot item, you’re looking for new partners to fulfill the sales need. That’s another thing that Sterling helps with. We worked with a big transportation company, CSX Transportation — they used this to reduce the time it takes to on-board a partner from two days to 10 minutes. You can easily see the benefit of that.

Image via IBM’s Flickr feed.


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