Tom Gauld, 47, joined Welland, Ont.-based Canadian Tire Acceptance Limited (ctal), the financial services arm of venerable retailer Canadian Tire, in 1992 as vice-president of marketing. He was promoted to chief operating officer a year and a half later, and appointed to his current position in January 1996.

Prior to joining ctal, he spent a year as president of Roadmaster Leisure of Niagara Falls, Ont. Before that, he worked for a total of four years at Spalding, about two as president of Spalding Canada and another two as managing director of Spalding Sports in Europe.

Gauld also spent a number of years working in marketing positions with SmithKline Beecham in Canada and South America, Bristol Myers in Canada and the u.s., General Foods in Canada, and Unilever in South Africa.

Q. I’m interested to learn more about ctal’s ‘customer for life’ customer relations strategy. What does it mean and how did it come about?

A. ctal is a reasonably-diversified business and about a year and a half ago we sat down as an executive group and reviewed our business.

From this, we developed a statement of purpose for the company that would pull together all our activities and give better focus for future activities. In that statement of purpose, came the concept of building lifetime customer relationships through developing payment and other types of services we could supply to Canadian Tire customers.

If you follow the logic, the role of ctal, as a subsidiary of Canadian Tire, is to support Canadian Tire by providing to Canadian Tire customers services that build more and more relationships with those customers. As we do this, we add to that lifetime value of the customer.

Because there are several elements to Canadian Tire – there’s the retail element, the petroleum division and us – we all have to work together to keep those customers for life. If any of us does something to lose customers, they’re lost for everyone.

Q. Prior to the formulation of that statement of purpose, did ctal have have a focus on building customer relationships?

A. We have modified our strategy.

The direction we were going was to sell to third-party companies various platforms and services we had developed for Canadian Tire customers. What the statement of purpose really did was focus us more on putting our energy and resources on the Canadian Tire brand.

We still do some third-party business, but it’s limited to generating economies of scale on existing platforms. For example, we run an auto club, so we would run an auto club for a third party if it would require a minimum of customization. But what we won’t do is create new platforms for third-party companies, which was a direction we had been going in.

We now have a clear, single-minded focus on serving Canadian Tire customers. We build our business through four key strategies: (1) Through knowledge about and the understanding of our customers; (2) Through the development of new products and services to meet the needs of our customers; (3) By matching the right services to the customer at the right time; and (4) By providing the service quality and value that will keep our customers for life.

Q. Who handles your call centres? Do you do it yourself or do you source from outside suppliers?

A. We do all of our call centre work. The call centre is our contact with our customer and we consider it to be the most fundamental part of our marketing program.

We don’t see the call centres as problem resolution centres, but as a marketing arm. So once a person is a ctal customer, any call they make to ctal is answered by a ctal employee.

Q. What issues would you have with using outside call centres?

A. The concern would be commitment. The commitment that people have to the company is reflected in the quality of the service that they provide to the company.

I believe that an employee who shares in the success of the company – in our case, employees are involved in profit sharing – can best share a sense of enthusiasm for the company and its products with the customer. There are lots of instances of companies outsourcing their customer service and so forth, but I’m not sure that’s the right way to go.

I think there are dangers in that. Sometimes employees are incented to handle a certain number of calls per hour and to get rid of a customer quickly. It can become too much of a numbers game and not enough of a caring game.

Q. You say you view your call centres as marketing tools. Do you consider equipment purchases and the costs of running the centres to be marketing expenses?

A. How we handle it in the [profit and loss statement] is an accountant’s problem. But the investments we make in our call centres to assist the reps in being able to provide good service could be viewed very much as expenses and investments in marketing.

The best opportunity we have to sell or to keep customers is in that one-to-one contact, so the more information the customer reps have at their fingertips about customers and their relationships with us, the better they can be served.

The faster we pick up the phone, the less we transfer the customer – a lot of this is accomplished through technology. If you believe that is fundamental to keeping customers for life, I guess you would have to say those investments are marketing investments.

Q. Are your marketing expenditures increasing this year versus last year?

A. We have dramatically increased our spending, year over year, for the past four or five years.

Q. Does this include your costs in setting up the call centres?

A. No, I’m talking about marketing expenditures in the traditional sense. Loyalty programs, advertising, direct marketing and otherwise. In our call centres, the cost goes up primarily according to the number of calls we handle, inbound and outbound. That tends to go up in proportion to the number of customers we have. And that is related to the number of services we offer and how many customers we have for each service – and both of those have been growing.

Q. What do you spend on marketing?

A. A lot. We will probably spend in the order of $25 to $30 million this year in traditional marketing.

Q. What agency handles your account?

A. Wunderman Cato Johnson. They’ve had it for the past four years. We hired them at the time we began to increase our marketing efforts. Prior to that, we dealt on an ad hoc basis with a number of agencies, brokers, creative houses.

Q. How do you handle your database needs?

A. As you can imagine, we have a huge database. Right now, we have over four-and-a-half million names in the database. We do our own management, access and analysis.

Because we are a direct marketing company, our whole business is based on the database. Everything we do stems from the information we have in the database. It is critical to us and so it is a core competency for us.

Q. Do you rent out information from your database?

A. As a matter of policy, we do not share any of the information we have on our customers with anyone outside of Canadian Tire. We consider that information to be sacrosanct. We will not sell lists or share lists or customer information with anyone else.

Q. It is sacrosanct for business reasons or ethical reasons?

A. lot of our information is credit information. But despite that, when customers do business with Canadian Tire, they do business on an element of trust with the company. I think the selling or sharing of lists breaks that trust.

For another thing, we are trying to build our relationships with customers and the selling of lists just clouds and clutters their mail even further. It’s probably at counter purposes to our own goals.

Q. Do you share information between the different departments within Canadian Tire?

A. Everything that is in our databases is used by all parts of the company to develop new products and to market those products.

The information we have on our customers is quite rich: we know whether a customer is a member of our auto club, we know whether they’re using our credit card, we know the types of products they might be buying in our stores.

This knowledge allows us to target our products and services very finely, with very little wastage. That also helps us avoid bothering customers who might not be interested in the product or service we might be marketing.

Q. Is your database organized by customer or product?

A. It’s not as simple as that. We have a number of databases linked to each other, and they’re not all organized the same. Some are customer based and some are product based. We are moving to having one clean database based on the customer.

Q. When do you think you’ll get there?

A. It’s a long process that will probably take us another couple of years.

Q. How many databases do you have?

A. ctal started as a credit card company. That was the primary business and we had call centres for it. Then, over the years, we introduced a warranty product, an insurance product, a telecom product, and every time we introduced a new product or service, we set up a call centre for it.

As the number of services we offered increased, it got to the point where we had almost 20 call centres. They were all here, in the Welland area, but were run by different departments and different groups. The result was that if a customer called in for one product and then asked for information on another product, we had to transfer the person.

The rate and number of transfers we were doing was clearly unacceptable to providing the type of service we wanted to provide. That problem led to the work we’re doing to create what is really one big call centre where the representatives are trained on all of the products and can answer customers’ questions no matter what product they are calling in about.

Over the last year of so, we’ve dramatically reduced the number of transfers and have amalgamated the various call centres into a smaller number under similar management with similar processes and training and so forth. This has enabled us to serve our customers considerably better at a lower cost.

Q. What are ctal’s revenues?

A. About $350 million in 1997. In 1993, our revenues were about $200 million. Most of that growth has come from the new products and services we’ve launched in the last four years.

Q. Do you have more new products in the works?

A. Yes, we have all sorts of ideas.

The Canadian Tire trademark is associated with a wide range of categories including household, lawn and garden, sporting goods and now financial services. Our role is to develop new services that, in our customers’ minds, fit within the that trademark.

Our strategy is to ask our customers what type of products they believe Canadian Tire could offer them, then develop the products and then market them against our customer database.