Richard Brasher, the CEO of Tesco‘s UK operations, recently said that the country’s largest grocer is now looking beyond the data of its Clubcard loyalty scheme to understand more about how its customers “live their lives”. As retailers face an increasingly challenged consumer, understanding their behaviour may mean the difference between success and failure. Where is the industry heading? Petah Marian investigates.

As retailers face an increasingly challenged consumer, understanding their behaviour continues to become increasingly important.

Since the beginning of the downturn, retailers have focused on broad-stroke promotions to get customers into their stores but, according to recent research, they are now are facing “promotional fatigue” and are seeking a more “360 degree understanding” of their customer.

The vice president of customer support at software company Aldata, Mark Croxton, which commissioned the research, said that the company has noticed a shift away from promotional management and towards gaining a real insight into customer behaviour.

Meanwhile, the CEO of Tesco’s UK division, Richard Brasher, whose Clubcard and relationship with Dunnhumby, is considered to have the deepest understanding of its customers of any retailer in the world, said the retailer is now looking beyond that data it collects to get more of a sense of how its customers “live their lives”.

Speaking at the Retail Week conference a couple of weeks ago, Brasher said that the retailer is listening “more carefully about how they live their lives – their hopes, their dreams and ambitions” and that all of this information doesn’t “result in an average” and must be considered as “individuals”.

As part of that Brasher said the retailer has been interviewing a number of its customers in their homes in order to build a deeper understanding of their customer base.

The retailer has spend some 16 years gathering data on its customers through its much lauded and much feared partnership with Dunnhumby, so this second look is likely to provide colour to its existing warehouses of information, rather than charting a new course for the retailer.

However, this comes after the retailer has spent some 16 years gathering data on its clients, so this announcement is more likely to provide colour to the warehouses of information it already has, rather than charting a new strategy.

Tesco’s deep understanding of its customers has led to most of its competitors following suit, according to Croxton.

“Tesco probably pushed it over the edge there, in terms of what is has got, in terms of demographic and customer data, they seems to be using it to provide a lot of localised and area specific price promotions now, which is scaring the competition a bit. They’re having certain promotions and things going on at different store levels, because they know that’s what that customer who shops in that store said,” says Croxton.

“I think retailers have figured out that running a loyalty programme is pretty pointless unless you’ve got a pretty powerful analytics programme behind it,” he adds.

While Tesco has led the way in terms of understanding its consumers, the sector is set to develop further with the rise of smartphone technologies and as the technology becomes more integrated into the different facets of retailers’ businesses.

Croxton expects that, in coming years, retailers will develop their understanding further as they break down the silos between the different aspects of their multi-channel offers.

“They’re now demanding that their supply chain systems are integrated across all the channels the customer wants to shop and that helps a lot in terms of understanding what the customer wants,” says Croxton.

Will Barnett, enterprise architecture consultant at Leading Resolutions, and  previously responsible for IT architecture at Tesco, says the next steps for the UK’s major retailers will be to look to understand consumer lifestyles as they extend their offers into other areas like financial services.

“As you grow they look at how your family and how your model changes, and the services they offer. So being able to offer financial services, car services, mortgages, marriage services, the whole suite and gamut of services as you go through life are something that Tesco has been very interested in for a very long time. And they’re starting to get more sophisticated in the way they use your customer data so they can offer you lifestyle choices,” says Barnett.

However he adds: “I don’t think they’ve figured out yet how to take those Clubcard offers into ban services, mobile telephony to customers, but I think that’s coming.”

Smartphone technology is also set to be a key driver of insight across the sector in the coming years. Mike Shipley director of customer insight at IT provider Torex says that, in future,  if business intelligence tools notice that a store is particularly quiet, it will link to a “vouchering engine”, and send out targeted offers to previous customers that are in the local area.

“Business intelligence is morphing from just doing clever stuff with historic data to giving insight reporting into a business, right through to pushing offers out,” in a real time way says Shipley.

MARKS AND SPENCER launched a similar version of this in partnership with O2 earlier this year, when it began offering the phone provider’s ‘You Are Here’ location-based marketing services, which sends MMS messages to O2 customers when they enter areas owned by the retailer.

However, more information may not be better, as increased data may limit the access FMCG manufacturers get to store placements in their categories. Croxton says that the increased levels of data available to retailers may mean that they do not need the insights from category captains around how they should lay their stores out and around product positioning.

“Retailers are now running programmes where they can collect individual customer information and demographic information about their customers and I’d be very surprised if they’re sharing that level of data with suppliers”says Croxton.

This increased level of information could also play against manufacturers when it comes to negotiating with retailers. “A sophisticated retailer like Tesco now has quite a significant advantage over its suppliers, in that it holds a lot more information now about customers than the supplier can have. So I think they’ll probably use that in their business relationship to screw them even more,” emphasises Croxton.