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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."
I live in Central New York where we have the pleasure of shopping at Wegmans Supermarkets. Wegmans uses a shopping card, is very receptive to even the smallest suggestions from customers, and goes out of their way to satisfy all customers. They track purchases carefully and have a giant database from which they mark trends and make changes. To put it simply, they rely less on the brand name and more on continuously improving and changing. For this reason, they have sent at least three different supermarket chains in the area scrambling or out of business. Wal-Mart hasn't even made much headway because Wegmans is so good.
Then there's GM. This dinosaur doesn't give people what they want--a well-built car that lasts a long time and sells for a reasonable price. Simply put, they don't get it. They believe that they have always been and that they have always done things the one true way.
Which company will grow?
Yeah, I'm as old as my UID would suggest.
The local Tesco store near where my parents live has killed most local commerce and the next town (5 miles away) suffered greatly until a supermarket was given permission to build a large store on a town centre site there.
It is more correct to say that the hypermarket has changed Britain, but Tesco happens to be by far the most successful example. IIRC the statistic is that 1 out of every 3 GBP spent in the UK is spent at Tesco.
In their defense they say "Tesco tries to see off criticism by arguing that it gives customers what they want and keeps staff happy." You could easily turn that around any say that they reinforce customer habits by offering them offers on their usually consumed high value items. You rarely see offers on bread, milk and sugar. Rather more on your favourite desserts and higher margin goods. By suggesting that others purchased Turkey Twizzlers with Claret and then offering other Turkey Twizzlers offers on Claret rather sounds like moving everyone towards a common denominator to me. But one thing is for sure, it sure sells product! So if your goal is to survive in the continual drive to make consumers consume more and more (and at credit too - with the Tesco credit card, Tesco loans and with a Tesco banking service) then you're onto a winner by being just like Tesco.
Conversion Rate Optimisation French / English consultant
In essence, isn't the Tesco loyalty card system like a sophisticated representative democratic process? People "register to vote" using a loyalty card, vote by buying goods, and Tesco watches the results of the "election." Tesco knows who buys what and can thus go to suppliers and argue for changes that are more likely to satisfy customers.
Although non-loyalty card users still count at Tesco (all retail is a type of democracy in that people vote with their pocketbooks), I'm sure that the product choices of loyalty card users are far more influential with Tesco and thus with suppliers. In that regard not having a loyalty card is like not having a voter registration card.
Some might argue that voting should be anonymous, like political democratic elections, and perhaps it should. Yet non-anonymous voting provides valuable information -- e.g., Tesco might notice that, for example, people who buy lots of hot soups in the winter don't buy high-sugar fizzy drinks in the summer or some other correlation that is only observable if you can know that shopping basket A and basket B (6 months later) represent the same voter. These long-term correlations aid in both store assortment planning and forecasting.
Two wrongs don't make a right, but three lefts do.
Here in the UK, we have legislation that protects personal information. Tesco have a public declaration on how the information is used, and in general consumers are happy: http://www.tesco.com/clubcard/clubcard/index1.htm
If you don't want Tesco to know you've bought the Vaseline and a spatula, simply don't hand over your Clubcard when you buy.
So your shopping experience can go smoother and faster?????? Are you kidding me?
Why do you assume that these stores are using your information to provide you with better service? Yes, that may sometimes be its ancillary effect, but their overall focus and intent is to squeeze as much money out of you as they possibly can. Read some of the studies sometime as to how they use this information.
One store, by studying its databases, found that men often buy beer and diapers on Thursday evenings on the way home from work. Knowing that men are less price sensitive than women generally, and also that such "home from work" purchasers are less likely to be using coupons and comparing prices, the store decided to wildly jack up its prices on beer and diapers on Thursday evenings.
They don't use these cards in some benificent, "oh, let's be kind to the customer today" ways. They're trying every which way to soak you on price! And you go right along with it.
Man, there ought to be a style of hat for the opposite of tin foil, for folks like you who are so incredibly gullible that they will believe anything a store tells them.
I think maybe a nice plastic wrap hat should do it. Anyone got any other good ideas? What is the opposite of a tin foil hat?
I am usually OK with self serve gas, but pumping gas is a very small number of operations. I am not happy with self-serve checkout because the machines are designed to work with dumb, inexperienced people and in my experience, a poorly calibrated scanner. Even with good scanner, my experience is better with using actual check-out people is that they ring through a stack of items without the hinderance of the unresponsive and demanding computer, maybe at twice the speed. What it tells me is that stores are too cheap to hire minimum wage workers, and those stores are willing to stick me with an expensive garbage machine to save themselves a few bucks at my expense in time and frustration. I would much rather they hire more cashiers and other service people, not less.
Currently, ATMs aren't about shortening lines but getting cash at convenience, putting machines in where there isn't space to put a mini-branch, and for customers to get their money at any hour.
Banks did try getting ATMs to reduce the amount of manpower needed to run the bank, but as it turns out, the number of bank tellers has not decreased, and ATMs are very expensive to maintain. Bankers basically bought them just to save themselves money, but thankfully that backfired.
Tesco give you back 1% of what you spend - so there's a very strong incentive to make sure that all your cards are registered to your home address.
They don't pull much of this "card member discount" crap that stores here in the US do. When i lived in the UK I would probably use half of all the coupons that tesco mailed to me - they were THAT effective.
This story reminds me of a book written by Max Barry, titled Jennifer Government...
In that book, there are 2 major customer loyalty programs with all big brands participating in one of them. The world is run by the corporations, employees take on the name of their employer and the police is now a publicly owned security firm (participating in one of said programs) which only investigates crimes if they can bill the investigation (on the victim of course)
Stores that use these tracking card systems always charge more than stores that don't. There have been many studies that have proven it. Check the Wall Street Journal. You can prove it yourself, I did. Just check the prices of items in the store, before and after they go on sale with a card discount. One week the frozen fish is 2.99. The next week, it's 3.79, but you get .80 off if you use your card! You're saving .80! What a bargain! As long as the sheep who shop there think they are saving money, the store is more profitable, so it's all good, right?
By the perception of illusion, we experience reality
...or, you happen to move from one area where one chain of stores is owned by the same parent corporation as a different chain where you're moving to.
I make it a point to use my Dominick's card whenif I happen to shop at a Safeway. I don't care one bit that it's linked to my old address in Illinois, same with my Jewel/Osco card when buying chocochip cookies at Albertson's.
I guess I try to keep my shopping rather local if I can, even if it costs more and the service seems to be worse (yeah, right) than the big chains.
Do I know the owners of Roth's Grocery stores in Oregon? Nope. But I'd rather do that then help make Safeway, Wal-Mart or Alberton's any richer than I have to. Yes, they employ people in the area, but so does Roth's, so that argument is moot to me.
Some of you may be interested in reading a bit about these so called loyalty card programs here. http://www.nocards.org/
I am not usually the tinfoil hat type, and these people tend to go a little overboard with some of their logic (especially on the RFID side) but most of their information about the loyalty card programs I have found to be true.
Having worked for a grocery chain for 8 years and most recently a pharmacy chain for 12 years, I am very familiar with the pricing and promotion models used in both. Buying product, setting prices, and developing promotions was my job. The apparent savings offered to these loyalty card holders is nothing of the sort in most cases. Most chains simply raise the normal everyday price of an item and then offer what used to be the everyday price (pre card program) to only those willing to apply for and use the card. This is effectively charging a privacy tax to anyone not wishing to participate in the data collection program. Ironically, that privacy tax pays for collecting data on card holders, with no true cost benefit to any customers.
My favorite example of this is something near and dear to my heart, my coffee creamer. Back when only one of the three grocery chains in my town had a card program, my favorite coffee creamer retailed everyday for $1.19 in all three stores. Even the card store had to maintain that price everyday to stay competitive with the two non-card stores. This was a few years ago, when this card program was just catching on full force in the US. Well, eventually the other two chains joined in the scam and suddenly the price of my coffee creamer started to go through the roof. This item began retailing from $1.79 to $1.99 everyday but with a loyalty card price of $1.19 to $1.29. This is a non-dairy product, so fluctuating milk prices had nothing to do with it. If I had raised everyday prices in my category by 50-60%, I could have stopped buying and taken a long vacation before too long!
The pharmacy chain I left this spring just implemented one of these card programs about 6 months before I left. I was one of the only dissenters when the topic first came up in a marketing meeting. Everyone else claimed that we just had to have a loyalty program "because we look out of place if we don't." My stance was that not having one of these irritating programs could be a great marketing point. Unfortunately, most market research falsely indicates that the average consumer loves these damn things and of course our management team wanted to be loved.
Once it was decided that they would start their own program, I began to investigate the subject a little deeper and found the site above. It was at that time I also started to seriously think about my role in the process and began looking to get out of retail all together if I couldn't find a new employer with a little common sense and a focus on true customer service. I don't feel right charging more to people who simply wish to remain unmonitored.
If you are lucky enough to live near a grocer and/or pharmacy which does not have a loyalty program, do yourself a favor and support those stores. Tell the managers you shop in their stores because they don't insult your intelligence by offering you artificial savings in exchange for spying on you.
The Stone Age did not end because humans ran out of stones. - William McDonough