I am very pleased to appear before you today on behalf of the National Retail Federation, and thank you for the invitation to speak on this subject.  My name is David Johnson, and I am Vice President of Direct Marketing for Lands' End, Inc., in Dodgeville, Wisconsin.  Lands' End employs approximately 7,600 people in the U.S. and abroad.  We are a global direct merchant of classically-inspired clothing for men, women and children, soft luggage and products for the home, sold through regular mailings of our catalogs, our Web site - landsend.com - and a number of retail outlets.  Last year, Lands' End's revenues exceeded $ 1.4 billion, and we mailed packages to approximately 6.7 million customers. 

The National Retail Federation (NRF) is the world's largest retail trade association with membership that comprises all retail formats and channels of distribution including department, specialty, discount, catalog, Internet and independent stores. NRF members represent an industry that encompasses more than 1.4 million U.S. retail establishments, employs more than 20 million people -- about 1 in 5 American workers -- and registered 2000 sales of $3.1 trillion.  NRF's international members operate stores in more than 50 nations.  In its role as the retail industry's umbrella group, NRF also represents 32 national and 50 state associations in the U.S. as well as 36 international associations representing retailers abroad. 

Although we are now an international merchant, many of the things that today set Lands' End apart are those same values on which our founder, Gary Comer, built the business he founded in 1963.  Indeed, one of the principles that continues to guide our business states: "We believe that what is best for our customer is best for all of us. Everyone here understands that concept. Our sales and service people are trained to know our products, and to be friendly and helpful." 

Through this dedication to the customer, Lands' End has been able to separate itself from the pack in customer service.  Indeed, in the book Customer Service,^[1] author Fred Wiersema lauds Lands' End (along with five other companies) for its ability to service the customer above and beyond the call of duty.

 When people are asked to define good customer service, they commonly say that it involves dealing with consumers honestly and fairly, a view that no one can seriously dispute.  Many others also view a component of good customer service as treating everyone equally.  Let me suggest, however, that equal treatment is not good customer service.  Rather, great customer service recognizes the very unique wants of each individual consumer and strives to meet those needs.  Thus, great customer service does not view every customer as a nameless, faceless person without individual preferences - someone that in the absence of any other information needs to be treated just like the next person.  Instead, great customer service uses all available information to assess each individual's particular tastes, and then deliver goods and services that meet those desires.  In short, rather than treating all customers equally, great customer service is built on the premise of treating different customers differently. 

Access to information is critical to our ability to deliver this level of service.  Information is used to identify and satisfy customer needs. Lands' End does not automatically know which products and services consumers want.  Information beyond a person's name and address allows us to tailor our interaction with the customer to make it more effective and more satisfying for the consumer.  As Mr. Wiersema states in his book Customer Service, two of the most key components underlying the ability to provide exceptional customer service are (1) the employment of up-to-date information technology, and (2) the personal, one-to-one relationship built with every customer. 

"Although they conduct their business in completely different areas of industry, these organizations actually have many things in common with regard to how they function: 

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"They employ the latest information technology at each level of their business.  This shouldn't be surprising: Information technology lends itself to strong customer service, and early on, these companies all recognized the advantages, the instant gratification, that the Internet and other technological advances could offer them.  Rather than trying to dazzle the customer with the latest bells and whistles, they use technology to make their products and services easier to acquire and operate - as well as more efficient. 

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". [T]hey use that technology to gain a profound understanding of what these customers want and need.  The notion of building profiles on every customer they interact with is important to them.  If Customer A likes something different from Customer B, these companies want to know that ahead of time.  . 

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"These companies build personal relationships with their customers.  They are not mass-production factories when it comes to connecting with their constituents.  Each customer who deals with these organizations is given premium treatment and made to feel he or she is valued as an individual, able to call a service representative time and again.   .

 This degree of one-to-one attention requires a commitment to training, to coaching, and to teaching associates the best listening strategies and most efficient methods for giving and receiving input.  It takes computer technology, as well as dedicated personnel willing to record each customer interaction onto databases so that it can be activated later and used as a learning tool for fellow workers."^[2] 

In testimony before Congress in July 1999, Federal Reserve Board Governor Edward Gramlich stated: "Information about individuals' needs and preferences is the cornerstone of any system that allocates goods and services within an economy." The more such information is available, he continued, "the more accurately and efficiently will the economy meet those needs and preferences." What Governor Gramlich was talking about on a macro level, I can guarantee Lands' End is striving to do on a micro level. 

While many of our customers love the technology and the wealth of information that is available over the Internet, many other customers want the direct interaction that they can get over the phone from one of our highly trained customer sales representatives.  We are agnostic as to how we interact with the customer - whether it be through the Internet, the phone, mail or one of our outlet stores - but we do need to know their preferences in order to build the infrastructure necessary to effectively communicate with them via their preferred medium.  We also need to know our customers' preferences with respect to the products and services available - either now or in the future - to our customers.  While some would prefer to learn about the entire array of Lands' End product offerings, others' interests are more limited and they would prefer to only receive catalogs from a certain selection of our assortment of apparel and home goods.  This type of information educates us not only on what we should be communicating to our customers today, but also provides Lands' End with information on every detail - including assortment, color, fit, level of quality, and price - that we should provide in future products and services. 

The information required to provide these tailored interactions with our customers comes from a wide variety of sources.  One obvious source is the customer himself or herself in the form of preference surveys.  It is possible to extensively survey customers to determine their individual preferences, but such data is not only expensive to acquire, its acquisition runs contrary to the customer service commitment of an organization such as Lands' End.  Frankly, it is a bother for a customer to complete questionnaires telling businesses what they expect in products and services.  Because of these limitations, such direct information is oftentimes unavailable and somewhat unreliable.  For that reason, we look to customer purchase history and other acquired information in order to more reliably assess our customers' needs and wants.  By assessing information on purchases that consumers actually make and services they actually use, consumers are offered products and services that respond to their demonstrated needs and desires. This greatly reduces the cost of developing those products and services and the risk that they will be out of line with consumer demand - thereby reducing the price that consumers pay for them - and mitigating the inconvenience and delay associated with stopping consumers to ask about likely preferences. 

Admittedly, we often hear complaints about customers receiving mailings that they don't want.  But Lands' End - and I strongly suspect every other direct merchant - has no interest in sending catalogs or other information to customers who have no desire to receive it.  Frankly, that is a waste of our time and money, and frustrating to the consumer as well.  Thus, we use all information available to us to assess the likelihood that any catalog we send out will be welcome in the customer's home.  To the extent that cataloguers send mailings to people who are not interested in the offering, I suggest that the problem is not one of too much information sharing but rather too little reliable information, forcing businesses to employ mass marketing techniques instead of more targeted efforts to a more appropriate and appreciative audience.

 Moreover, the ability to collect and assess individual purchasing activity gives Lands' End the ability and comfort to provide enhanced services to customers that we might not otherwise.  As an example, Lands' End sells its products with a guarantee that is second to none.  Under our "Guaranteed. Period.^®" policy, any customer can return any product at any time for any reason.  A guarantee this sweeping is, by its nature, subject to abuse, and by offering it Lands' End has placed unprecedented faith in its customers that they will not exploit the return policy.  But Lands' End's comfort in offering our "Guaranteed. Period.^®" policy is enhanced by the availability of individualized purchasing and return data that allows us to track and check abuses.  In short, this information assures that the few that might exploit the guarantee don't ruin it for the overwhelming majority of our customers that are fair and reasonable in their returns.  

Likewise, the availability of certain products and services by their nature - and particularly so of many of the services available over the Internet - all but require that some information be shared among companies.  As examples, Lands' End offers online models which a customer can use to virtually "try on" clothes, and a "personal shopper" that, applying conjoint analysis techniques, offers purchasing recommendations to online shoppers much as a sales clerk would do in a retail store.  For these types of services to become accepted and useful to the consumer, they must also become standardized throughout industry with the individualized models and preferences portable from site to site.  This type of information sharing will ultimately enhance the breadth of products and services available to the consumer. 

And consistent with the trust and loyalty that our customers have shown us, Lands' End is also quite responsible the information we share with others.  Indeed, the only data we currently provide to others are one-time-use list exchanges, which include only customers' names and addresses, and then only with high quality companies that share Lands' End's commitment to product quality, customer service and value and could, therefore, offer products and services attractive to Lands' End customers.  And regardless the medium by which we interact with our customer - the Internet, phones or mail - customers may at any time request that their information not be shared with others, or that they be removed from our files altogether, and that request will be honored. 

So in answer to the question posed by this hearing - "Is the Customer's Privacy Protected?" - the good news is that currently available information is principally shared responsibly, consistent with the expectations of consumers and in furtherance of everyone's interests - the consumer's as well as the companies that serve them. 

Again, thank you for this opportunity to speak before this Subcommittee, and I welcome your questions and comments.