Case Study 1: A Giant Step for Mattress Giant (May 2007)
Mattress Giant is one of America's largest bedding retailers, with 240 stores in 14 states. For years, the company spent more than $20 million (about RM70 million) annually, about 10 percent of its revenue, advertising to people in their mid-30s, whose household income was $30,000 - $40,000 (about RM105,000 - RM140,000) per year .and who drove domestic car. As it turns out, the company, headquartered in Addison, Texas, targeted the wrong audience. Market research was practically nonexistent. The audience was not determined by any rational analysis; it was based on the executives' gut feeling.
When Steve Williams joined the company as its new chief information officer (CIO), he convinced the chief executive officer (CEO) to do things differently. Interestingly, sometime before Williams was hired, the company started to implement an information system that integrated point-of-sale (POS) and inventory/distribution systems. However, because salespeople complained that the system was too complicated to use, the implementation project was halted after the system had been installed only in 35 percent of the stores. Williams knew he had to change the CEO's mind and proceed with the system's implementation.
To learn the business, Williams took a month away from his office. He visited Mattress Giant stores, listened to salespeople, watched the sales process, sold mattresses and encouraged employees to speak out about the information technology (IT) department. He traveled to distribution centers, observed the delivery process and loaded delivery trucks. He also read e-mail from customers and learned about their experiences with the service.
Listening to Williams' experience, the executive vice president of sales was convinced of the need for the POS system in all the stores. Next, Williams continued his educational campaign with the other executives. He convinced the chief finance officer (CFO) that what he proposed was not to spend money on information technology but on important business initiatives that involved information technology. He described how the company could save costs. Then, he earned another supporter.
Williams kept reminding his fellow executives that the decisions they made could be solid only if they based them on information collected from the integrated information system. Cooperating with the loss prevention department, he used the information system (IS) to find branches that violated inventory security breaches. The company recovered thousands of dollars in stolen merchandise and manual errors, but only at the stores that were already linked to the system. And, that, exactly, was Williams' point. The executive vice president of sales, the CFO and the CEO now supported his quest to complete the system's implementation throughout the chain. Later, the implementation was completed.
With the data all the stores collected through their POSs, the IS generated a fact-based profile: predominantly female, about 43 years of age, with household income of over $75000 (about RM262,500) per year. As a result, the company completely changed its advertising strategy. Now, it advertises on television shows that are watched by this demographic group, such as Friends, rather than on Monday Night Football. Focus groups and advertising campaigns target a well-defined population, one that is the most likely to purchase from the company. In the process, Williams also changed the image of his IT department from a technology dictator to a solution provider. It is fair to assume that the company's 5.7 percent revenue increase in 2002 was at least partly thanks to this chain-wide IS.
~ Extracted and amended from Management Information Systems (4th Edition), 2004 ~
~ Effy Oz -Course Technology ~...