Disney World Redefines CRM Strategy

With sliding attendance rates and a brand that's losing its luster among the children of the digital age, Walt Disney World is launching an ambitious, next-generation CRM play that's based on mobile, real-time interfaces with customers. The goal：to redefine the customer experience and ferret out new value. ( CIO Insight)

Sitting on a curb with their three children one humid afternoon in October inside MagicKingdom, the oldest of Walt Disney World's four Orlando theme parks, Jeff Pawlowski and his wife were in a sour mood. Long lines demanded waits of as long as two hours at some rides inside the 47-square-mile fantasy extravaganza, and the lines at the food stalls and restaurants weren't much better. "Today has been the worst," Pawlowski complained.

The Pawlowskis aren't alone. Throughout the amusement park industry, long lines, fidgety crowds and high ticket prices continue to rank as the top customer turnoffs. Meanwhile, Disney's theme parks have been particularly hard hit by sliding attendance figures and decreasing revenues. Bob Iger, Walt Disney Co. 's president and COO, told securities analysts on Nov. 20 that the Parks & Resorts division took in $6. 4 billion in revenues in the year 2003 ended Sept. 30, 1 percent less than 2002's $6.5 billion, which was already down 8 percent from 2001. Iger blamed the sluggish performance on lower hotel occupancy rates and a further decline in attendance.

At the same time, Disney's costs continue to rise: Health care and pension costs for the company's 54,000 employees in Orlando alone cost the company nearly $250 million in 2003. Clearly, the goal for now is to do more with less. And Walt Disney Co. CIO Roger Berry is at the center of that mandate. To help Disney usher in "digital decade," Berry has been helping to create a risky but cutting-edge technology strategy designed to help Walt Disney World restore the luster of its aging brand, increase efficiencies and boost attendance-as well as the bottom line.

Berry's mission; to use Walt Disney World as a test bed for one of corporate America's most ambitious try outs of the business use of IT convergence-the combination of global positioning satellites, smart sensors, wireless technology and mobile devices, including one that looks like Mickey Mouse himself-to reinvent the customer experience, influence visitor behavior and ease crowding throughout the parks.

Leading by the Nose

For now, the most visible manifestation of the new strategy is a 10.5-inch-tall stuffed doll called Pal Mickey. With a powerful infrared sensor in its nose, the doll acts as a virtual tour guide, providing tips on which rides have the shortest lines and information on events. How does it work? A zipper in its fur conceals a central processing unit, an internal clock, small speakers and a tiny infrared sensor. When the doll is carried into the park, the sensor receives a wireless data upload from one of the 500 infrared beacons concealed in park lampposts, rooftops and bushes, which transmit information from a Disney data center. When the doll receives a new piece of information from a nearby beacon, it giggles and vibrates to indicate that it has something new to say. Squeeze its hand or stomach and it will tell you about an upcoming parade, a shorter line at another ride, or trivia about the area of the park you're walking through.

With more than 700 prerecorded message variations, Pal Mickey always has something to say, whether it's telling a child a corny joke or keeping kids entertained with interactive games while they wait in line. The product was designed for kids, says Michael Colglazier, vice president of operations strategy and technology at Walt Disney World, but "when we tried it out on kids in test research, they'd hear Mickey, and then they'd put him up to their mom's or dad's ear.” Vaughn says Pal Mickey also tested favorably on a majority of adults “because suddenly they felt some of the pressure being lifted of having to know everything [about the parks] and make sure they weren't missing anything.”

Technologists speak of Pal Mickey as an experiment in bridging the gap between static data about a customer and the customer's dynamic behavioral preferences, which depend on the customer's physical location and movements at any given time. In other words, it's all about dynamically matching data with context梐 new concept and the next big development in the evolution of CRM, in the view of futurist Paul Saffo, research director of the Institute for the Future in Menlo Park, Calif. , a technology think tank. C. K. Prahalad, the Harvey C. Fruehauf Professor of Business Administration at the University of Michigan Business School and coauthor of The Future of Competition, agrees. "Disney is experimenting with a customer strategy that goes beyond today's CRM," he says, "using not just the data, but data in the context of individual customer behavior.”

Alarm over Privacy

The subject of location awareness makes some consumers skittish about the potential for privacy abuse. Indeed, some skeptics warn that such persuasive technologies cross the privacy line, especially when they appear to be friendly. "Is it potentially creepy? Yes," says B. J. Fogg, director of StanfordUniversity's Persuasive Technology Lab. "But because Mickey Mouse is the interface for customer interaction and has such credibility with people, Disney can do things with persuasive technology that probably a Microsoft or a WorldCom could not.”

Disney executives acknowledge that there was some worry that Pal Mickey might be seen as a customer tracking device-more of a Big Brother than a trusted tour guide. But Disney insists that as they consider how to make Pal Mickey even more interactive, the intent is to help parkgoers customize their Disney experience for maximum value and convenience.

For now, Disney is betting customers will see Pal Mickey as a convenience. The doll's ability to surprise parkgoers with relevant information in real time-to have Pal Mickey tell you as you're walking through Adventureland, for example, that "pirates are sneaking around," and then to turn a corner and spot Captain Hook and Smee signing autographs for a group of children-has proven to be more of a delight than a cause for alarm over privacy.

Data-Driven Dollars

Pal Mickey isn't the only effort on Disney's part to beef up results at the division. Under Destination Disney, the name for Disney's new customer experience strategy, the company intends to leverage technology, both up front and behind the scenes, in hopes of personalizing the park experience. It starts with an expanded uber-database of customer information that can be updated on the fly, giving Disney more insight about its customers. "Historically, if you went to a theme park twice in a row, Disney was unlikely to know that," says John Parkinson, chief technologist for the Americas for Cap Gemini Ernst & Young and a CIO Insight columnist, whose company has advised Disney on its customer strategy. Now, though, Disney will be able to slice and dice data to influence a customer's total vacation experience, from the hotel to the park ride. It can also make assumptions about visitors' buying behavior and personal preferences in real time, and refine those assumptions as it collects more data about customers.

Once in the park, the idea is to be able to give parkgoers up-to-the-minute information specific to their preset preferences via their cell phones.Got a restaurant reservation in a half an hour? Disney will remind you to keep it by sending a text message to your cell phone. Don't want to miss the fireworks? Your PDA will beep you. Disney wants to make that data accessible across all lines of business, so that any employee at any given time can access or add information to a visitor's profile. "If they know, for example, that I spent a lot of time in the Dinosaur exhibit at Animal Kingdom, because I bought a lot of stuff there using my park pass, the CRM engine could figure out that if there's a special-edition DVD coming out, they should tell me about it," says Parkinson.

Another initiative that ties in with Destination Disney is a Web site called Magical Gatherings, specifically intended to boost new revenues and group business bookings by encouraging far-flung family members to collaborate online to plan their next reunion or group event at Disney World. Jordan Rohan, an analyst for SoundView Technology Group Inc., an Old Greenwich, Conn.-based securities research firm, says that Disney's strategy appears to be on target with what the company needs to do to increase business. "In the next few years, Disney needs to use the Internet to capture the e-mail addresses of every Disney visitor and potential visitor. With that capability, Disney can have more control over guest attendance by offering very specific promotions to highly valued guests," he says.

Destination Disney doesn't stop there. Berry and crew are also rolling out interactive, location-aware programs to help Disney executives cut costs on the back end, in park operations and logistics. The effort will include helping to manage the park's fleet of 267 buses, which shuttle an average of 150,000 parkgoers a day. GPS and mobile Internet technology let Disney run its fleet based on real-time customer demand rather than set schedules-helping to eliminate lines and wait times as well as cut excess operations costs.

Down the road? Disney says it is looking to expand its digital-imaging services. Executives won't elaborate, but insiders say this could include a program that may, for example, let visitors staying at a Disney hotel use their room television sets to review and buy photographs taken of them on rides during the day. Berry also says the resort is looking to improve Fastpass, a service that allows visitors to schedule ride times, thus avoiding long lines.

And some Disney observers expect even more experience-driven pyrotechnics, including a form of pay-as-you-go pricing. Rather than charge customers one fee for the entire day, data-smart cards linked to Disney's customer database could help Disney return to a multitiered pricing structure such as the old A-ride, E-ride approach, which charged customers more for the best and most popular rides. The concept is just another aspect of the effort to use technology to attract people back to the parks and perhaps segment customers for customized rewards according to the frequency of their business.

The Stakes are High

Will the strategy work? Theme park analysts and business strategy experts say it's a tall order-and a risky one. They suggest that Disney's new CRM strategy ahead of that of rivals Universal Parks & Resorts and Six Flags Inc., and more comprehensive-represents an experiment in the way businesses might interact with customers in the future. "The problem with today's CRM is that it doesn't engage consumers as equal problem solvers in the quest for value all around," says Prahalad. " The way CRM has evolved, unfortunately, is by taking a company-centric view of customers rather than using customers as co-creators of value. With Pal Mickey and other initiatives as first steps in a longer journey, Disney is attempting to redefine CRM, using it as a co-creator of experiences to help find and deliver value. " And making that fundamental shift won't be easy. In theory, it's great. But in practice, there's a whole host of things you have to figure out how to do, from practical engineering-type things all the way up to measuring the acceptability with the target population segment.

Meanwhile, analysts warn that company officials need to be mindful of their product. “Technology alone is not going to solve the problem," says Patrick McKeigue, an analyst at Independence Investments in Boston. Adds Jessica Reif Cohen of Merrill Lynch; "It's important to keep the attractions fresh. To keep people coming, they need to have new attractions or events. That's the issue with theme parks-you have to constantly reinvest. "

To be sure, it's a far-reaching experiment, say analysts. But it's a must-do in a corner of the entertainment business where competing for customers will be increasingly tough amid a sensory onslaught of digital and interactive experiences, an explosion of new digital and media devices, and a marketplace increasingly filled with customers who have no clue as to what it was like to be in an old-fashioned, digital-free environment. "Disney's only real risk-and it's a big one-is to know when to be digital and when to be human, and therein lies the greatest challenge with the next era of CRM as defined by Disney," says Saffo. " Sure the technology is tough, but the real test will be in knowing what to control and what to leave to chance. Either way, Disney's experience will be a lesson to us all in how to do customer service for the 21st century. "

Key Points of CRM

The establishment of CRM in a company involves many coordinated elements such as enterprise structure, business process, technologies and enterprise culture. When a company wants to set up a CRM system, it must take the following elements into consideration.

Establish a chart at the enterprise level indicating clients' data. The data must have a solid foundation and be reliable.

Don't plunge the construction of CRM into the traditional pitfall of " report forms". So far the CRM construction within many enterprises is limited to the narrow scope of the application of analytical report forms on the basis of database. CRM should go beyond this. If the analytical results cannot be properly applied, no return can be expected.

It is vital to synthesize the initial process of CRM. Only through this can the business intelligence and statistics and the analytical capability of database be fully developed to support or change the service quality of front desk service.

When CRM is used in active sales and overlapping promotion, companies must take into consideration such questions as how to share client information within different departments and how to protect clients' privacy.