Building a business with data insights4 min read . Updated: 05 Oct 2008, 11:30 PM IST
Building a business with data insights
Building a business with data insights
Edwina Dunn, the chief executive officer of UK-based marketing consultancy Dunnhumby Ltd, says turning consumer insights into something actionable can make a dramatic difference to a business. She should know. A focus on customer behaviour by Dunn and her partner Clive Humby played a key role in enabling their client Tesco Plc. to become one of the world’s most successful retailers. Tesco went on to become their biggest stakeholder.
In 2001, the UK retailer took a 53% stake in Dunnhumby in exchange for sharing its consumer-related information with the consumer insights company. In 2006, it increased its stake in Dunnhumby to 84%.
Through Tesco Clubcard, Dunnhumby works with anonymized information (data stripped of personal details to prevent identification of source) from at least 13 million UK households; the data is updated weekly.
This insight is provided to Tesco and its suppliers so that they can better understand and respond to the needs of different types of shoppers. This information is also used to tailor the mails Tesco sends to its loyalty programme members so that the offers and promotions are relevant. Since the launch of the loyalty card, Tesco’s market share in the UK retail space has increased from 13% to more than 30%, says Dunn.
Besides Tesco, Dunnhumby sells consumer insight, offers consultancy, decision support tools and strategic analysis to companies such as US retailer Kroger Co., French retail company Casino Guichard-Perrachon SA, Proctor and Gamble Co., GlaxoSmithKline Plc., Muller Dairy UK Ltd, Nestle SA, Unilever Plc. and Coca Cola Co. Dunnhumby continues to add more names to its client base despite scepticism about how the data mining specialist can expand optimally when Tesco remains a majority shareholder.
Dunnhumby, which is growing at more than 40% a year, employs at least 800 people in the UK, Ireland, France, US and India. It reported sales in excess of $280 million (about Rs1,313 crore now) in 2007-08. The company entered India last year, setting up a centre in Gurgaon. In an interview, Dunn spoke about the importance of knowing what a consumer wants, and what a smart marketer needs to do in order to be more relevant. Edited excerpts:
What are the opportunities and challenges of entering a new market? How can a consultant help a retailer entering a new market?
A consultant can help companies find clues and patterns to what customers are buying and why. Turning these insights into something actionable is what makes a dramatic difference to the business. All of our work starts with data. There are three types: customer data (this could be from a loyalty card programme), sales data (this could be from electronic point-of-sale) and traditional market research data.
Data insights are used to build a client’s business by matching better all aspects of the retail operation to the needs and aspirations of the customer. At the retail operations end, the data can be used to improve the sales offer: product range, availability, pricing and promotions. On customer engagement, it can help companies better understand, interact and respond to their customers.
What role does perception play in purchases? How much of a purchase decision is influenced by marketing?
What are your experiences about India? Has the practice of targeted marketing and understanding consumer behaviour picked up here?
Many innovative marketing strategies and channels are being used in India; however, there is a huge opportunity to make them more targeted and relevant to customers. In such a large and fast growing market, the temptation of marketers is to focus on the scale of the audience rather than relevance of the message.
We have found that the more relevant the offer, the fewer (marketing) gimmicks you need to sell it. It will sell itself because it is what people want. Marketing, therefore, needs to move beyond communication and promotion to driving the core offer of consumer businesses. For instance, which products (should be marketed), where and at what price.
How is consumer behaviour in India different from, or similar to, the rest of the world?
Fundamentally, consumers are similar all over the world. We are all motivated by the same factors, but to different degrees. Understanding the influence of factors, such as price, quality and convenience, on different customer groups allows consumer businesses to tailor their offer and be relevant. Around the world, the growth in the fast moving consumer goods (FMCG) sector has slowed down and so has it in India.
What kind of marketing strategies do companies such as Hindustan Unilever Ltd, Proctor and Gamble Co., Reckitt and Benckiser (India) Ltd, which already have a lion’s share of the Indian market, need to find new growth?
Growth is always dependent on the ability to continuously offer what consumers value. As the market environment changes, currently towards a greater focus on price for instance, it is important to use the best sources of insight to remain connected to these changing consumer priorities. Innovation is also a massively important source of future growth. Product innovation should again be driven by detailed understanding of the changing needs of different groups of consumers.
How is a retail marketing strategy different from other marketing strategies?
The fast moving nature of retail marketing is what differentiates it the most. In such a fast and competitive market, the retailer who reacts first to emerging trends or external factors, such as increased (rate of) inflation, will have a huge advantage. The key here is to start small: Test new strategies in a small way so that consumer reaction can be gauged quickly. This can mitigate the risk that a large-scale roll-out carries for the business.