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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."
As long as customer databases are mistaken for customer service, it'll certainly not change anything for the better.
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.
I seem to remember a hackers conference where it was suggested that everyone should bring along their loyalty cards, and then do a swap.
If enough people did this, the databases would suddenly start to pick up on unexpected trends - customers whose profile suggested eating tofu and lettuce would suddenly be buying cigarettes and crisps etc.
It seemed like rather an interesting idea to me...
A database isn't needed for this. If the two Tescos were instead simply two unrelated corner shops, they'd still be selling different things. Local shops tend to do that - sell things that are in demand instead of things that are not in demand. No special database needed.
It's useful for other stuff though, like the article says, customer profiles means you can send a specific set of discount vouchers to each customer based on their preferences. You could get a similar effect by shipping all vouchers to all customers, but I suspect this would be less effective as most people are more likely to use a couple of vouchers that they find interesting rather than look through a booklet of dozens of vouchers to find ones that are interesting to them.
That's a bit silly, really. It leads to bland stuff that has been toned down to not offend anybody. Sure, if it offends a whole bunch of people, it might make sense to alter it, but one person?
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
This seems like the perfect implementation of an affinity program. I find the closing parapgraphs regarding the OFTs interest troubling.
Tesco is a public company listening to customers, providing them with the goods and services they desire, and doing so for a fair price. Somehow to a group of people (and the OFT) that is improper. Since when did the "small shops" receive some type of right to exist and operate? If Tesco provided a better value for customers then that is where the customers will go.
I did the majority of my grocery shopping in Tesco while living in the UK. The stores were good, and I could even get home delivery. There were a couple small corner shops on the way home from the tube station as well. If I needed a loaf of bread, carton of OJ, or a pack of smokes they were a good quick stop. If stocking up my pantry/fridge for the week I'd go to Tesco. The small shops didn't have the products I wanted to buy.
a loyalty card with rfid and customers with remote control implants.
"Smedley, there's a customer in aisle 7 with a weakness for cream filled donuts - jerk him over to aisle 3 quick!"
try { do() || do_not(); } catch (JediException err) { yoda(err); }
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.
Welcome to the world of datawarehousing which has been going on for more than a decade. How is this news?
It's news because it's turning into a giant datawhorehousing these days...
"A door is what a dog is perpetually on the wrong side of" - Ogden Nash
Tesco use a Teradata data warehouse analytical/relationship marketing. They're a division of NCR.
What is the point of this? All it would do is screw up all the marketing research, resulting in them shoving more crap you don't care about down your throat whenever you go to buy groceries.
Personally, I hope to hell they learn everything they can about me so that my shopping experience will go smoother and faster.
Every time i go to Tesco, without fail, they ask me the same question "do you have a tesco clubcard?"! Do i have a fucking tesco club card? do i?? if i had a tesco club card would i be standing there holding out my money without it? would i actually forget to take it out? I know they are trained to do this, they have no choice and i know by the tone of their voice they are fucking fed up of saying it more than im fed up of hearing it, in fact i feel sorry for them - to have to say the same phrase 100's of times a day while listening to people saying it all around you must be hell. Theres hardly any other talking going on at the check-out, the only thing you hear is the total and do you have a mother fucking tesco club card. Sometimes I wonder, should i just get a tesco club card to make them shut up? even having to pull an extra thing out of my wallet every time would make up for it! If getting a card ment just being handed one and not having to fill anything in then i probably would, but it probably takes a form a mile long. If tesco want me to use a card then its going to have to be anonymous and not require me doing anything.
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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.
Regretably, the fact that Wal-Mart doesn't use loyalty cards is one of the few admirable things about them.
"Lawyers are for sucks."
- Doug McKenzie
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.
The grocery chain (and tesco) really don't CARE about your identity. They are generally perfectly happy to give a loyalty card to a form made out to "Mickey Mouse" and an address of the local city office.
What they want is the BUYING PATTERNS... and they get this IRRESPECTIVE of your identity. The fact that people who buy Milk on Tuesday, also buy Boneless turkey thighs on Saterday is interesting. Who those people are is not terribly interesting.
This is why, chains with loyalty cards PRINT your discount coupons AT THE REGISTER as you go through. No wasting coupons mailing them to people who don't come in. No mailing cost, etc. And once again, your identity is of no consequence.
Go get the discount card. Put a fake name and an address four blocks over. They DON'T CARE....
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
What's the point? Take the following example:
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
Ask to use the store card. I have been doing this for years and have never been turned down by the register oprtator.