Microsoft Windows Server SystemCustomer Solution Case Study

L’Oréal Gets 62 Per Cent Response Rate on Luxury Products Customer Promotion with Lower Direct Mail Costs

OverviewCountry: FranceIndustry: Cosmetics/RetailCustomer ProfileL’Oréal is the global brand leader for cosmetics, luxury goods, and skin care products distributing in 130 countries on five continents. With 18 global brands, L’Oréal recorded €14,533 million (U.S. $17,589 million) sales in 2005.Business SituationL’Oreal decided to implement a company-wide customer relationship management (CRM) system. It wanted to combine the product-centric marketing approach with a greater focus on the customer.SolutionWorking with Siebel, and advised on the architecture by Microsoft® Services, L’Oréal standardised on Siebel CRM and Analytics software running on Microsoft Windows Server SystemTM Engineered and Microsoft SQL ServerTM 2005 database.Benefits Strengthens customer brand

loyalty Direct mail costs down up to 57

per cent Targeting gives response rate of

“With the Siebel solution running on Microsoft Windows, we achieved a 57 per cent decrease in the volume of direct mail on one promotion. Through more accurate targeting, we achieved a remarkable 62 per cent response rate.”

L’Oréal, the world’s largest global beauty, skin care, and

cosmetics company wanted to broaden the scope of its

luxury products marketing to focus on customers. It

decided to implement a company-wide customer

relationship management (CRM) system starting with a

pilot in South Korea. Working with Siebel, and advised

on the architecture by Microsoft® Services, L’Oréal

standardised on Siebel CRM and Analytics software

running on Microsoft Windows Server SystemTM

Engineered and Microsoft SQL ServerTM 2005 database.

The CRM solution has helped engender greater

customer loyalty and reduce churn. Thanks to more

accurate targeting, direct mail volume has been cut by

as much as 57 per cent for a single promotion, but with

a high response rate of 62 per cent. Time to market for

new campaigns has been shortened and L’Oréal has

gained a 360-degree view of customers across multiple

SituationL’Oréal is the world’s global brand leader for cosmetics, luxury products, and skin care treatments, distributing in 130 countries on five continents. With 18 global brands including Ralph Lauren, Lancôme, and Garnier, and €14,533 million (U.S. $17,589 million) consolidated sales in 2005, L’Oréal is constantly innovating to maintain its market share. More than 51 per cent of L’Oréal’s customers are in Europe, with 36 per cent in North America, and significant business in Asia including emerging markets such as South Korea.

L’Oréal wanted to sustain its high performance in the beauty industry by sharpening its knowledge of its customers through a company-wide customer relationship management (CRM) capability. The Paris-based company decided to focus on its luxury product division, which, thanks to loyalty programmes, had an ideal customer foundation and the greatest potential to enhance its marketing campaigns.

Daniela Giacchetti, Head Customer Strategy Officer, L’Oreal, says: “We wanted to gain a consistent and integrated view of the customer across various channels including the Internet, point of sale, and our customer care call centres. We also need to find a new business driver and combine the product-centric marketing approach with a greater focus on the customer. We were only too aware that as competition increases business growth can be stunted by customer switching. We wanted a CRM capability that would provide us with more opportunities for customer relationship building.”

Giacchetti was convinced that greater knowledge of the customer would increase the opportunities for cross selling. For example, a data mining study on customer behaviours for Lancôme France showed strong cross-selling potential to market beauty products for lips with other products such as nails.

To cross sell effectively, L’Oreal needed to create a single database in house with all its personal data about customers, which had previously been hosted by several agencies. Giacchetti says: “By standardising on one database solution, we wanted to improve our flexibility so as to respond quickly with new marketing campaigns and promotions.”

Another driver was to make more effective use of marketing budgets through more accurate targeting. Giacchetti says: “Increasing brand’s customer knowledge means increasing the productivity of marketing investments. For example, it is good to know who are the 20 per cent of customers responsible for 50 per cent of the total revenue in order target promotions and service dollars on these most valuable customers.”

SolutionL’Oréal was already contracted with Microsoft for IT services worldwide, but the company turned first to Accenture for consultancy on implementing a CRM solution. L’Oreal chose Siebel Consumer Goods 7.7 software running on Microsoft® Windows ServerTM 2003, part of Microsoft Windows Server SystemTM Engineered, in addition to Siebel Business Analytics. L’Oreal is also

“We wanted to gain a consistent and integrated view of the customer across various channels including the Internet, point of sale, and our customer care call centres.” Daniela Giacchetti, Head Customer

Strategy Officer, L’Oreal

using HP StorageWorks for its storage area network (SAN), as well as other HP hardware

Laurent Fontaine, Customer Manager, Siebel, says: “Siebel Consumer Goods 7.7’s major advantages are that marketing, sales, and customer service are fully integrated, helping companies improve their brand management, increase their trade and customer marketing return on investment (ROI), decrease their customer service costs, and build customer loyalty and demand.”

Microsoft Services was tasked with defining the technical architecture helped by Avanade, a joint venture between Microsoft and Accenture, specialising in solutions implemented in a Microsoft environment. The team designed and implemented a pilot CRM solution in South Korea. It was chosen because of its sophisticated and advanced multi-channel marketing including point of sale, Web, e-mail and wireless messaging.

Initially Siebel Consumer Goods and Siebel Analytics were implemented on top of the Microsoft SQL ServerTM 2000 database. Through L’Oréal’s Enterprise Agreement with Microsoft for volume licensing, SQL Server 2000 was upgraded to Microsoft SQL Server 2005, which will give L’Oréal more powerful tools to analyse its customer database.

L’Oréal also chose the Microsoft environment for the development of its Web sites. Denis Kraus, Chief CRM Architect, L’Oréal, says: “When we were about to choose the appropriate environment to run Siebel, we already had a great deal of confidence in

Microsoft technologies. We’ve been using the Microsoft .NET Framework and Microsoft SQL Server for several years to develop and run more than 200 e-business applications and Web sites worldwide.”

Following the success of the pilot in South Korea, L’Oréal in December 2005 extended the solution to support the mass-market domain in France, which is already increasing the customer knowledge segment of the database for direct mail promotions.

Giacchetti says: “We’re looking at a global roll out of the solution over three-to-five years. Change management in CRM takes time, especially when 99 per cent of promotions are targeted on product rather than the customer. However, we’re working on introducing the CRM solution in the U.S. and China this year and are starting several projects in Europe. We’re seeking to cover half of the total number of country operations in three years and 70 per cent in five years. In some of the smaller centres CRM will not be applicable.”

BenefitsL’Oréal has improved customer brand loyalty, benefited from an improved response rate and lower cost of direct mail, and gained a consistent 360-degree view of its customers across multiple channels.

Improved Customer Satisfaction Strengthens Brand LoyaltyL’Oréal operates in a highly-competitive marketplace for luxury beauty products where customer retention is a key performance indicator. Giacchetti considers that

“Critically, we’re now more agile as a business. We can accurately quantify the effectiveness of marketing investments and customer/segment profitability.”Daniela Giacchetti, Head Customer

Strategy Officer, L’Oreal

the most significant benefit from the solution has been improved brand loyalty.

“We can now classify ‘value customers’ more easily and aggressively retain them,” she says. “There is now less risk of customers switching because of their disappointment at ‘random treatment.’ Our targeting used to be based on age level, but now it considers past purchasing history and other benchmarks.”

Improved Response Rate From Clients with Lower Direct Mail Costs Siebel Business Analytics is helping L’Oréal to mount cost-efficient direct-mail campaigns and increase revenue per sale. Giacchetti gives as an example a recent campaign aimed at male customers in South Korea.

“With the Siebel solution running on Microsoft Windows®, we achieved a 57 per cent decrease in the volume of direct mail on one promotion. Through more accurate targeting, we achieved a remarkable 62 per cent response rate. In another campaign for skincare, we cut the volume of direct mail by half and achieved a 78 per cent response rate.”

360-degree View of the Customer Across Multiple ChannelsL’Oréal is building a CRM system that provides a 360-degree view of the customer, spanning all available brands across multiple channels, including the company’s 200 Web sites and thousands offline points-of-sale (POS) terminals and call centres.

Giacchetti says: “In the past, we never retained a campaign history per customer and campaigns were product based. With our knowledge about the customer, we can now integrate data from different channels and segment customers according to value and behaviour.”

Georges-Edouard Dias, Strategic Business Development Division, L'Oréal, adds: "Siebel is the best solution we have found to manage an end-to-end process from consumer analysis and segmentation to creation, execution, and measurement of the success of marketing campaigns.”

Marketers Generate Product Campaigns Quicker By implementing a single CRM system and a powerful in-house database solution, L’Oréal has improved time to market for its product campaigns. It is now easier to share best practice, and make use of sophisticated data mining scoring for targeting.

Giacchetti says: “Critically, we’re now more agile as a business. We can accurately quantify the effectiveness of marketing investments and customer/segment profitability.”

Microsoft Windows Server SystemMicrosoft Windows Server System is a line of integrated and manageable server software designed to reduce the complexity and cost of IT. Windows Server System enables you to spend less time and budget on managing your systems so that you can focus your resources on other priorities for you and your business. For more information about Windows Server System, go to:www.microsoft.com/windowsserversystem

For More InformationFor more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234 in the United States or (905) 568-9641 in Canada. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to: www.microsoft.com

For more information about Siebel products and services, visit the Web site at: www.oracle.com/siebel

For more information about L'Oreal products and services, visit the Web site at:www.loreal.com

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Document published June, 2006

Software and Services Products

− Microsoft SQL Server 2000− Microsoft SQL Server 2005− Microsoft Windows Server 2003