Loyalty guru Clive Humby delivered a searing speech at the Great Loyalty Debate at BAFTA last Friday, accusing supermarkets of having “totally forgotten what loyalty is about”, describing Morrison’s new loyalty scheme as a “waste of time” and concluding “the system is broken”.
Speaking for over an hour without notes, Humby took advantage of his grandee status (he and Edwina Dunn exited dunnhumby 3 years ago after selling it to Tesco) to deliver a warts and all summary of supermarket retailing and brand marketing today.
He opened by considering the question “what is loyalty?” Perhaps surprisingly for a self-confessed maths nerd, Humby’s definition is not frequency of purchase, or share of requirement, but passion. A good example of this? A Harley-Davidson tattoo. How many brands can boast of such a relationship with their consumers? And yet according to Humby, seeking a ‘relationship’ at all is entirely missing the point. Brands should seek not a relationship, which in any case is usually shorthand for unsolicited direct communications, but relevance.
Relevance in Tesco’s case meant value. When all other supermarkets had to price promote items to beat the market, Tesco developed Clubcard and its coupon system which allowed them to offer customers personalised discounts on the things most important to them, without reducing the headline price on shelf. This played a huge role in allowing Tesco to maintain a 6% net margin, comfortably beating the industry average of 3-4%.
So where did it all go wrong? Humby described a recent store visit to Tesco. The problems start as soon as you enter the store: promotions. Far too many of them. So many, in fact, that “the consumer would be a fool to do anything but shop around”. And that goes not just for brands within a category, but retailers too. And with so many promotions in the store, the role of coupons for loyal Tesco shoppers is massively diluted – why bother saving a 50p off coupon for Persil when there’s always a big name brand on half price?
The problem according to Humby is that marketers have forgotten the strategic purpose of Clubcard – to say ‘thank you’ – and have become distracted by the targeting capability to send ever less relevant offers, knowing that brands will fund direct switching more than they will rewards. So Clubcard becomes another unsolicited marketing channel.
As technology makes it ever easier to collect data, the customer strategy behind its deployment and use becomes even more important. For Humby, this is the piece that is missing.
Sainsbury’s and Morrison’s are now using ‘brand price match’ strategies, dismissed by Humby as “telling me how much you’ve overcharged me by and offering to make it good next time”. He contrasted this with Starbucks, whose customer communications programme is fully integrated with their customer data and whose focus is rewarding the customer.
Having left dunnhumby, Humby and Edwina Dunn now focus their time on investments in other data businesses such as Starcount, the social media analytics company and Purple Seven, which analyses theatre ticket purchasing. Social media is where people truly express their passions, says Humby, and the data is free and comprehensive. That’s a heady mix for someone who admits “I just love peering into people’s lives and trying to understand them”.
6 nuggets of insight from Clive’s talk
Just because you can, doesn’t mean you should. Technology makes many things possible, many of which are not the right thing to do. Start with a clear strategy in mind and use data and technology to help you get there.
Big data doesn’t just mean a lot of data. Big data means bringing different data sources together to create a unique, multi-faceted view of the customer which is greater than the sum of its parts.
Beware of segmentation. People have many identities, they are not one thing or another thing. Use dimensional scoring to describe customers’ propensities more subtly. You don’t necessarily have to refine into a single segmentation.
Promotions (too many and too deep) are destroying the grocery and fmcg industry. We have trained the consumer that they would be a fool to do anything other than shop around constantly. Since consumers are not fools, this is what they now do.
You don’t need a loyalty card to analyse customer data. With the decline of cash, it’s now easy to analyse transactions using payment card data.
What people say is always different to what they do. Only behavioural analysis can provide insights into what actually works. Attitudinal research can never give the full, actionable picture.
The Great Loyalty Debate was hosted by Hive (www.hiveonline.co.uk) and the Institute of Promotional Marketing.