Xchange, Inc.

Boston, Massachusetts

Major Moves in 2000

Changes name to Xchange Inc. Acquires Knowledge Stream Partners for $52 million Acquires CustomerAnalytics Forms preferred alliance with PriceWaterhouseCoopers

www.xchange.com

Junk. Spam. Phone calls from persistent people who can't even pronounce your name right. Surely one of the great achievements of BI-infused marketing should be a dramatic reduction in unwanted sales pitches and marketing clutter, right? Well, not yet. Recycling bins and email folders are bursting with the byproducts of marketing inefficiency and excess, all in the name of acquiring customers. The heat on privacy, while arising from serious concerns, is also tapping long-simmering anger about the amount of stuff "personally" addressed to us that we never asked for.

Rome wasn't built in a day: neither will the modern world of intelligent marketing. Companies are just beginning to understand customer retention - a far more difficult and data-intensive activity than acquisition. Integrated CRM packages are starting to bring process efficiency to traditionally inefficient sales, marketing, and service functions. However, what will elevate customer touchpoint activity above the noise will be the maturing of an area we will hear much about in 2001: customer analytics.

Xchange (formerly Exchange Applications) is building on its foundation as a premier campaign-management solution provider to become a leader in personalized customer communications. The company's path to success is through fusing realtime e-marketing with customer analytics, the hot new term for data mining algorithms applied to analyzing and predicting customer behavior. Customer analytics are essential to support sophisticated personalization and retention initiatives.

Xchange, which came of age in a more batch-oriented database marketing world, is facing a tough challenge from newer vendors that specialize in realtime interaction, such as E.piphany and Broadbase. And as a higher end player, Xchange has had to adjust to an exploding midmarket sector that demands marketing efficiency to keep costs down. In 2000, Wall Street sent Xchange on a roller coaster ride.

But just as brick-and-mortars beat back the dot-coms by successfully becoming click-and-mortars, established marketing solution providers have brought the e-religion to bear on traditional strengths. Xchange is focused on delivering realtime ECRM solutions that synchronize data across channels, rather than just the Web. Through partnerships with SAS Institute and Microstrategy as well as its own technology, Xchange is realizing a competitive advantage through analytical smarts. In April 2000, the company beefed up its analytical savvy by acquiring Knowledge Stream Partners, a respected data mining concern.

Customer analytics enable Xchange to bring efficiency to customer acquisition, which will be critical as companies try to implement the intelligence gained through data-intensive analytics to understand what kind of offers lead to better customer retention. Bet