Slashdot Mirror
Can a Customer Loyalty Database Change a Society?
Retrospeak writes "'Organisations that continue to put the brand at their epicentre and pay only lip service to the notion that the customer is king, will fail. It's just a matter of time.' So says business strategist Clive Humby. His marketing company, Dunnhumby handles the loyalty scheme database for Tesco, the third-largest retailer in world and the biggest retailer in Britain. This fact combined with a strong customer loyalty program means they may have one of the largest databases in the world. The Economist goes on to state that Britain itself is being changed by the secondary effects of Tesco's massive customer-driven database." From the article: "Some of these changes are small. The dust jacket of a book that was to be sold in-store was recently altered because a Tesco buyer did not like it. Others are more fundamental. Before the Clubcard came along, the largest panels that suppliers could use consisted of around 20,000 people. But suppliers can now pay for access to the database and many just rely on Tesco."
By "Tesco buyer", they don't mean a normal retailer customer, but one of the Tesco employees who is responsible for buying stock to put on Tesco shelves. If they don't like the book cover, then it's not going to go on Tesco shelves.
Tesco use a Teradata data warehouse analytical/relationship marketing. They're a division of NCR.
Wegman's recently moved into my old neighborhood, and I can attest it is one of the most well-run companies I've seen. The stores are huge, the selection is tremendous, and the focus on building a positive customer experience is intense.
Wegman's seems to be a little more serious about their customer database and the quality of data it contains. My mother-in-law tried to use my wife's Wegman's loyalty card, and they checked her ID and wouldn't let her use it. I would really like to see the type of things they're doing with their DW.
There is a large assumption here, which is that only the customer who was issued the card is the person that ever uses the card, which is not true. Especially when said cards have incentives like "points" that can be accumulated to obtain free items, or a straight discount for using the card. Such card "borrowing" will skew the data in the database, since the computer assumes that the card equals the person, which is not necessarily true.
Card borrowing does skew the data, but how high is the actual frequency of this practice? Moreover, I'd bet that many card borrowings are between demographically similar people. If one 22 year old college student borrows a card from another 22 year old college student, then the effect on Tesco is minimal. Yes, card borrowing affects the data, but I doubt it ruins it.
You could argue that Tesco's buying policy really is only concerned with the aggregate information anyway since they won't make a purchase decision based on a single cardholder, and this aggregate is unchanged by card "swapping". But then why do you need to track individual information?
Aggregate data only gets a company so far. Consider the problem deciding where to put a new store. The only way Tesco can accurately do this is by cross comparing the census records for the proposed area with Tesco's own data on who buys how much and from what distances at its existing stores. If Tesco knows that people drive 20 miles to reach a Tesco, then its less likely to put another Tesco within 10 miles of an existing one. And if Tesco sees certain demographic groups is a new area, they can estimate likely sales and the best product assortment by studying the sales habits of those demographic groups within its loyalty card program. Breaking down the customer base by distance to store, types of goods bought, ages, income, etc. all help the company do a much better job of store siting, merchandise assortment, forecasting, etc.
Yes, only aggregate data is useful. But the loyalty card program lets Tesco aggregate data in new ways -- aggregate by customer age, gender, distance to store, household income, or tendencies to buy products. Store-level aggregate data or even simple market basket analysis isn't going to give as good an insight into the relationships between customer categories and shopping habits.
The answer is because they can. However the whole concept of "keeping a file" on someone is rather macabre. I have access to my criminal record, my medical record and my credit record. I should have access to all information ANYONE keeps on me unless it's being used to prosecute me for a crime. When is this going to happen at the supermarket? Until then, I refuse to use these cards.
I very seriously doubt that Tesco spends millions of pounds (probably tens of millions of pounds) on its loyalty card database just because it can. Most businesses insistent on a bottom-line improvement in the business before laying out that kind of money. And if a company does spend that type of money and doesn't get a profitable return, they stop the program. Morevoer, the type of data collected by a loyalty card program is perfect for assessing the business benefits of a loyalty card program. Tesco started their program 10 years ago. I doubt it would still be in use today if it didn't provide direct benefits to the company.
Two wrongs don't make a right, but three lefts do.
Anyone here ever read Jennifer Govenment by Max Barry?
It's a crime drama/thriller set in a future where People take the name of the company they work for as their surname (John Nike, Ken Wal-Mart, etc.); and customer loyalty cards and brand recognition inpsire riots, war and murder.
I read it the same month I read Farenheit 451, (which might be the single best book I ever read.)
*THAT* was a fun month for paranoia, I can tell you.
All y'all that haven't read those two books need to go out and do so IMMEDIATELY. Thank you, Public Library for having them on the shelves.
"Lawyers are for sucks."
- Doug McKenzie
The British GDP is about 1 Trillion [1.7 T USD]
That seems a far cry from 1 out of every 3 GBP. Unless you mean, maybe, actual currency passing thru the stores, at some point.
This issue is a bit more complicated than you think.
What's the point? Take the following example:
Ask to use the store card. I have been doing this for years and have never been turned down by the register oprtator.