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2 Customer data is changing the secrets of competitive success. For companies struggling to navigate their way out of trouble in today's tough economic climate, customer data is the answer. For companies wanting to differentiate themselves from competition - analyse your data. For companies looking for a valid, sustainable strategy that places customers at the heart of decisions - make insight your secret weapon. Data is good for customers, brands and retailers. The story of how customer data can boost the fortunes of companies can be seen in the improving financial results of our three biggest clients since we began working with them. Casino ( trading profit + 7.3% 2008 on 2007), Kroger ( Q4 2008 profits + 8%) and Tesco ( first- half profits 2008 + 11.3%). And contrary to conspiracy theories, data is good news for customers too. From a remarkably innocuous pool of information, ie ' What's in your shopping basket?', we are able to mine insights that help business personalise their offering - from the services they provide, to the marketing messages they send, thus eradicating unwanted junk mail. Moreover, customer data helps companies to identify and thank the most loyal customers. Kroger, Casino and Tesco are creating new standards for loyalty programmes, making the most of their links with individuals to reward loyalty and tailor ranges, prices and promotions to maximum effect, as we'll illustrate in the rest of the chapter. Saying thank you It was Kroger's chief executive, Dave Dillon who first described our work as the secret weapon in fighting Wal- Mart and after many years of losing ground, Kroger has now staged a remarkable recovery. Before dunnhumby and Kroger formed a joint venture in 2003, Kroger was battling Wal- Mart using a Hi- Lo strategy, but it was disadvantaged because it lacked the scale to compete on the same buying terms as its competitor. Instead, following a customer data- driven strategy that targets communication and personalises every element of a store's offer, from range to price to promotions, in order to satisfy customers, has reaped rewards. In Casino's full- year report for 2008, published in March 2009, the French retailer cited: " increasingly effective marketing with dunnhumby" as one of the strategic reasons for its 7.3% any colour you like as long as it's any colour you like

3 profit growth. Casino knows that the retention rate of its loyal customers is 20% higher if they have experienced the rewards of the programme and spent their points. In 1995, when Tesco Clubcard launched, one of the reasons it was so revolutionary was because the retailer was properly investing in rewarding loyal customers, rather than throwing money at chasing elusive customers it didn't have. And it works. Over the last 10 years the proportion of Tesco's growth from existing customers spending more, is greater than growth from new customers. This approach represents a sea change in the way marketing investment is spent. A sea change Think about it. Most companies spend their marketing budgets offering huge discounts or broadcasting glamorous TV ads to attract new customers. In some sectors, especially financial services, these special deals are only available to new customers, while the loyal customers get nothing in return for their loyal service. Edwina Dunn, Chief Executive and co- founder dunnhumby, elaborates: " Most manufacturers chase this elusive customer prospect, they all run after their competitor's customers but we can prove that if they were to spend that money rewarding people who already use their product their existing customers would spend even more." Saying thank you to existing customers is the new way of doing marketing. That's where dunnhumby's partners act differently. Retailers including Kroger, Casino, The Home Depot, Gruppo Pam and of course Tesco all invest serious money in rewarding their most loyal customers. Tesco, which has been running its programme the longest, knows that every £ 1 it invests in Clubcard leads to a much larger uplift in sales, together with longer- term benefits. But the process of analysis that enables retailers to say thank you to the right customers is not simple; shoppers tend not to fall into neat bundles. dunnhumby calculated that only 342 of 3.5m Casino customers bought all 10 of the French supermarket's top 10 selling products. This insight helped Casino understand that every customer has very different products in their shopping baskets. We are all individuals and only those companies who truly understand their customer data will be able to treat us as such. secret weapon