Retail’s common language

Clive Humby, co-founder of dunnhumby looks at the language of customer data and how it affects not only the store, but relationships between businesses.

Clive Humby
Clive Humby

At dunnhumby, we often use the phrase ’customers speak to us in the complex language of data – telling us what they want, need and expect of their retail experience’. This language is proving a game-changer in the world of retail. My previous articles have focused on how to use customer insight to create a relevant offer for customers. But the language of customer data goes far beyond the walls of the store to affect other parts of the business as well including the relationships between businesses.

We all know that the relationship between retailers and manufacturers is often adversarial, with the issue of discussion frequently focusing on trading terms. Unfortunately, the innocent casualty is the customer – who gets sidelined in the ongoing commercial battle as their voice goes unheard.

Sharing data creates long-term value

Only when both sides work together will customer insight be leveraged to improve the customer experience to the maximum of its potential. This customer focus in the relationship doesn’t actually displace the commercial aspect of the relationship between suppliers and retailers. But what it does do is provide a common basis and common long-term objectives for both parties to work towards, rather than trying to score quick wins.

Collaborating to create long-term value has been shown to work in the US where dunnhumby data helped one of supermarket group Kroger’s suppliers launch a new product – one-calorie-per-spray salad dressing. It was initially launched using a diet message but when the customer data revealed a quality or taste message would have been more appropriate the marketing was tweaked and a disappointing launch was turned into a success.

Changing the marketing approach

Such insightful analysis of product launches enables brands to change their marketing approach if repeat purchase levels initially prove disappointing. They also have the capability to modify the pricing and alter the way their products are promoted in-store, which lessens the chance of a failure and helps them optimise sales. Crucially, this also ensures customers are getting exactly what they want.

This is pretty powerful insight but it can only be fully utilised through collaboration. This has been recognised not only by Kroger but other dunnhumby clients such as Tesco and Casino who are all helping suppliers like Procter and Gamble, Coca-Cola and L’Oreal use their customer data to garner insights on the performance of their own brands.

Collaboration helps reward valuable loyal customers

Another key method of using the data collaboratively is through the distribution to customers of personal, individual highly-targeted vouchers that meet their shopping needs. The loyalty programmes of Casino, Tesco and Kroger are the vehicles for delivering these vouchers and they are uniquely designed to reward the most loyal customers rather than focusing solely on potential new customers.

Such a focus on the most valuable shoppers is at the heart of the dunnhumby approach. Rewarding loyal customers, rather than chasing new ones, represents a sea change in conventional marketing thinking and Casino, Tesco and Kroger have worked hard to convince suppliers like Coca-Cola and Procter and Gamble to create coupons for their loyal customers rather than new ones.

Relevant offers drive response rates

This targeting of loyal customers must be combined with making the offers and promotions highly relevant otherwise the coupons are no different to valueless spam. We’ve found the more relevant your offer, the fewer gimmicks you’ll need to sell it. It will sell itself because it is what people want.

Proof of how relevancy can drive unheard of levels of response is the fact that using customer insight on till coupons has enabled Tesco to achieve a 20% response rate compared with the paltry 1% that is typically achievable from glossy, high-production junk mail.

Insight leads to relevant advertising

Customer insight is also empowering retailers and brand owners to collaborate in order to create more relevant advertising. In some cases this has led to major changes in companies approaches to marketing but the end result has always been the same: more satisfied customers.

This was the case at Casino, where the retailer had traditionally been very reliant on distributing promotional leaflets every 10 days, but dunnhumby discovered that customers who lived far away from Casino stores struggled to be loyal. This insight gave the retailer confidence to reduce the number of leaflets it sent out and contrary to expectations the stores saw increased sales despite the smaller number of mailings.

Analysis of customer data also prompted change at Kroger in the US that had traditionally sent a weekly mailer with a front page dominated by the three biggest discounted products.

We recommended Kroger broaden the appeal of the offers by targeting each promotional product to a different customer grouping. In one mailer therefore, a blueberry offer might appeal to an upmarket customer, a special offer on Tide detergent would probably appeal to everyone, and a large discount on a basic brand will appeal to a price-sensitive shopper.

Competitors collaborating for customers

Most impressive is that the customer data is also leading to collaborations between competing manufacturers. Although they are two of the most prominent global competitors, Kroger was able to use customer data to persuade Pepsi and Coca-Cola to appear together on one of its weekly mailer.

It convinced the two companies to share the front page of its big Thanksgiving weekly mailer and the joint-promotion led to both brands selling three times more soft drinks than previously, thereby highlighting how putting the needs of the customer first can often bring benefits to business too.

It’s what we call a win-win-win approach: the manufacturer wins, because they can understand and communicate directly to their customers, the retailer wins because they are able to deliver an offer that meets their customers’ wants and needs, and most importantly of all, the customer wins because their voice is being listened and responded to.

That’s why customer data truly is the common language of retail.

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