The power of personalisation

Clive Humby, co-founder, dunnhumby discusses how Tesco’s success is grounded in the power of personalisation.

Clive Humby
Clive Humby

I’ve always loved the line in the British comedy Open All Hours where Arkwright, the owner of the corner shop is asked accusingly: “Genuine Jamaican Ginger Cakes? What do you mean genuine? They’ve never been anywhere near Jamaica.”

Arkwright responds with great indignation: “What’s that got to do with it? We sell Mars Bars, don’t we?”

Open All Hours is a comedy institution, as are the characters and the setting it was based on. The corner store is widely believed to be the peak of personalised customer service – Arkwright the typical shop owner who knows the names of his customers and their regular orders.

With £1 of every £7 spent in the UK being spent with Tesco, the Tesco brand has arguably become a British institution. Many would be quick to point out its differences to Arkwright’s store, but actually the foundation of Tesco’s phenomenal success lies in its similarity.

Tesco and other global players such as Casino and Kroger have realised the importance of Arkwright’s personalised service to ensuring successful growth. Their customers may not often chat with the store manager, but they are thanked for buying their favourite products regularly and offered relevant deals.

So Tesco’s success and status as a British institution is actually based on the very same thing as Arkwright’s: The power of personalisation.

Personalising business – the power of customer understanding

The customer understanding that a loyalty programme can provide allows companies to radically change their way of business with confidence- because it is based on customers’ needs and wants. When we first worked with Kroger in the United States, one of the major problems we faced was the size of the range.

Kroger stores carried a massive 60,000 products, compared with a mere 40,000 in your typical Wal-Mart! Unsurprisingly, this was confusing customers. So we ran some analysis to identify non-essential products from 10 different categories that we believed could be removed from the shelves without upsetting customers and potentially losing sales.

We radically suggested Kroger remove between 8% and 45% of the products from each of these 10 categories. The company’s fears about lost revenues were unfounded because rather than falling sales, volumes increased in nine out of the 10 categories as customers found it much easier to shop the edited ranges.

So this was a problem for customers (and therefore the business) and we solved it by looking at the answers customers wanted, needed and expected. The importance of customer understanding that this example highlights is no flash in the pan. For us, as with Arkwright, the commercial and the customer perspective cannot be divorced – they are two sides of the same coin. And that’s the case across the entire business.

New products people actually want

It’s a principle that can be applied to developing new products that actually appeal to customers. The ability to understand the wants, needs and desires of the customer base has made it possible for dunnhumby’s clients to launch ranges with an unprecedented level of confidence.

Consider the case of Casino Délices. We discovered a group of customers among France-based Casino’s 3.7 million loyalty card members that we classed as ’gourmets’. They were not interested in ready meals but wanted premium ingredients and knowledgeable staff at the deli counters.

The range was developed with the help of a Michelin star chef and has grown to include cocktail party nibbles and ready-to-cook meals that involve some preparation by the shopper. Crucially for a new launch, the Casino Délices range has enjoyed repeat purchases with some products delivering above-industry standard results.

Real insight grows share of wallet

Another successful insight-driven brand launch was the Finest range from Tesco. Knowledge drawn from the Tesco Clubcard highlighted that there was a sizeable and significant group of customers who would be prepared to pay a little more for premium products.

The problem was that although these customers did most of their shopping at Tesco stores they also visited Waitrose or Marks & Spencer for special treats and during key spending periods like Christmas.

Such has been the take-up of the Tesco Finest brand by these existing customers that it has leapfrogged Coca-Cola in terms of value of sales in the UK. The real insights needed for such successful product and brand launches can only be gained from the analysis of real shopping data.

Brand extensions driven by customer knowledge

The effectiveness of the insight in being able to pick out customer needs means it is now recognised as the vital tool in identifying potential new launches and initiatives. Within Tesco it has been the spark behind innovations such as 24-hour opening, the Healthy Living range, Organics and SoGood (a private label soya milk brand), as well as in entirely new sectors like mobile phones and financial services.

These examples have demonstrated how customer understanding can personalise the business, but have not touched on possibly the ultimate example of personalisation. This February, Tesco sent out 13 million statements – 9 million of which were unique. No three people got the same combination of vouchers because all of them were handed out based on each individual’s wants and needs.

So, as for Arkwright and the corner store, success is based on the realisation that the customer and commercial perspectives are two sides of the same coin: the power of personalisation.

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