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18 several thousand ' seed' products. As the model is built over billions of associations over time, the clustering gets deeper and more complex as time goes on, in the same way that a rolling snowball gathers momentum as it picks up snow while rolling down a hill. Crucially, this algorithm is living, which means that new products get pulled into the model all the time. It also means that the initial starting points ( the ' seeds') for the analysis cease to become relevant, with some seed positions moving. The Rolling Ball can also track changes in the dimensions of a product, for example as one product becomes more mainstream, its ' exotic' score would drop. Thanks to the Rolling Ball algorithm, a unique DNA profile for each Tesco shopper is created, based on the correlations and classifications of products in their shopping basket. Yet, despite the depth of insights analysed by the algorithm, the original customer information is remarkably unobtrusive - simply the contents of their shopping basket. It's interpreted from no more detail than an observer in the supermarket gazing into their trolley. Hardly Big Brother. The rest of the Tesco story is well known by most in the UK, and predictably there is a happy ending. As we'll show in detail, Tesco's business grew and grew as it learned to listen to its customers and respond to their needs, launching new ranges, changing store formats, sending customers' relevant vouchers and offering new services like banking. Today, there are around 14m active Clubcard members. Across the pond On March 4th 2002, dunnhumby spread its wings across the Atlantic to Cincinnati, Ohio. Our mission? To see if we could replicate the success of running the world's most successful retail loyalty programme at Tesco for Kroger, a US retailing giant. We needed to persuade Kroger that knowing and following your customers could be a winning business strategy for them too. Before we joined forces with Kroger, the retailer's sales were declining. Kroger was the second largest grocery retailer in the US, attempting to compete with Wal- Mart on price, and suffering as a result. In an early meeting Kroger management any colour you like as long as it's any colour you like

19 told dunnhumby that its stores were doing a great job, but that Kroger needed more customers. After analysing the available data, it didn't take long for dunnhumby to realise that the opposite was in fact true. The stores were missing an opportunity. Kroger didn't need more customers, it just needed to pay more attention to the customers it already had. The lightbulb moment came when we told Kroger management that even their best customers were only spending half their shopping budget in their stores. Indeed, if Kroger could persuade its existing customers to spend their full share of wallet, they would be able to triple sales. In June 2003, Kroger and dunnhumby formed a joint venture called dunnhumbyUSA to provide shoppers with a more customised shopping experience. The quiet American So what does Kroger look like? It is America's largest traditional supermarket and third- largest retailer overall, with over $ 70bn ( around £ 50bn) in sales across 2,500 supermarkets and 65m shoppers. In 2003, it didn't have a clear customer strategy, but Dave Dillon, then Kroger Chief Operating Officer, now Chief Executive, wanted to create a new loyalty card programme that wasn't merely a promotional tool. Loyalty programmes work a little differently in the US. At Kroger, yellow tickets are placed on products signalling that Kroger Plus cardholders will get immediate discounts at the till. dunnhumby has since helped Kroger launch a targeted quarterly mailing programme sending customers relevant coupons and discounts. Over the last four years, Kroger has rolled out its Customer 1st programme, a strategic initiative that has overhauled the retailer's range, pricing, store layout, promotions, store experience and trained 320,000 staff to ensure that it offers what its customers want. Today, dunnhumby sifts through 40bn purchases made on 4bn shopping trips by 42m card- carrying Kroger shoppers across the US. It has discovered seven different shopper segments such as ' budget shoppers', ' watching the waistline' and ' family- focused.' the dunnhumby journey