Tesco: great example of the perils of data driven marketing & neglect of the customer experience?

Tesco continues to do ‘badly’ in the UK

The other day I was reading the business press and the following piece on the poster child loyalty schemes/analytical CRM/data driven business management caught my eyes:  Tesco UK sales fall for more than a year.

If you don’t know then let me remind you that for many years the loyalty/CRM folks were holding up Tesco as the shining example of how to run a business intelligently/smartly and out compete your competitors by harnessing data and using this insight to drive/run the business.  And about a year ago the wheels came of the bus.

What got Tesco here?

Looking at it from the customer perspective, I say that the difficult economic environment forced customers to take a closer look at Tesco.  Some of these customers noticed that the ‘great deals’ from Tesco were actually more marketing gimmicks than genuine value.  And they noticed the poverty of the overall shopping experience – stores, products, service….. Here is a comment that speaks of the marketing gimmicks:

“..   It is consistently more expensive than Asda, Morrisons, even Sainsburys. It’s offers are phoney.  Strawberries “half price” at £2. Never seen them at £4 at Tescos or any other supermarkets. Asda had them at £1 so Tesco offered 2 for £2.50 next day, but smaller punnets. Their price drops are a joke, they drop from inflated price (Sometime BOGOF price) and are still expensive. They must think the public are fools and I suppose some are – they don’t even look at prices.”

As a strategist and business consultant, I say that like many successful businesses that end upon hard times Tesco’s strength became its weakness.  Put differently, Tesco placed pretty much all of its emphasis on data driven marketing and business management.  And in the process it gradually sucked the life out of brand and the customer experience. Rather like a television whose picture quality degrades gradually such that you don’t even notice these small changes until one day you happen to view a television that works properly. The recession was the wake up call for customers.

The data driven marketing allowed Tesco to maximise response and sales by personalizing the offers and coupons to the needs/interests of shoppers.  One the business management side, the Clubcard based analytics allowed Tesco to stock the right products in the right stores.  It also allowed the business to penny pinch on various areas including the stores, the products and the staff in the stores.  This is the classic example of the ‘extraction’ mentality powered by data driven analytics – in my view they power each other.  If you have worked  with database marketers you might have learned that their focus is on optimising return on the campaign as opposed to maximizing the long-term value of the customer. Often what optimises the ROI on the campaign does the opposite for longer term customer lifetime value and loyalty.  The opposite also applies.

What do retail experts say?

According to the Guardian piece (bolding is my work):

“At its annual results in April, Tesco’s chief executive, Philip Clarke, announced a £1bn makeover of the UK chain designed to “put the heart and soul back into Tesco” after domestic profits fell for the first time in more than 20 years. With more than 2,700 stores, Tesco’s domestic chain pumps out two-thirds of the group’s profits and Clarke admitted it had taken “a little bit too much away from the shopper” during years of penny-pinching to boost the bottom line.

And according to the Telegrah piece Phil Dorrell, a director at retail consultants Retail Remedy, says the following ( the bolding is my work):

“Tesco is treading water but the paucity of its long-term marketing strategy could still drag it under. Tesco… continues to offer a bland and soulless shopping experience and will be hard pushed to maintain its market share over this financial year. The leadership still seems to be focused on the quick fixes, more appropriate to running a store than a business”

And finally 5 questions for you to ponder

1.  If Tesco was genuinely customer-centric, all those years that it was touted as being the poster child of customer-centricity, then why is it in the state that it is in today?

2.  Is it possible that customer-data/insight centricity (which is what often passes of as customer-centricity) is not actually authentic customer-centricity?

3.  If intuition is such a poor guide to decision making and salvation lies in data driven insights that drive rational decision making then how is it that by pursuing this path Tesco has ended up here?

4.  Is it possible that what is rational over the short-term is not rational over the longer term?

5.  Is it possible that what occurs as rational to data scientists and data driven marketers and business managers is actually irrational because customers are human beings and as such irrational factors such as the brand, the customer experience, authentic customer care matters and weaknesses show up over the longer term?



Brand Experience: highlights from the 2011 Best Experience Brands Global Study

I have read the Best Experience Brands report published by Jack Morton Worldwide and want to share the highlights with you.  For the purposes of the report and this post a ‘Brand Experience” is defined as “any of the interactions (direct, indirect) you have with the specific company or its products and services”. The findings of the report are based on 1,603 consumers (USA, UK, Asia, Australia) completing an online survey during Aug/Sept 2011.

Which brands deliver unique experiences?

It is probably no surprise to you that Apple comes at the top of the list.  Who else is on the list?

  1. Apple
  2. Disney
  3. Google
  4. Microsoft
  5. Mercedes
  6. Coca-Cola
  7. Sony and IKEA
  8. BMW
  9. Amazon
  10. Louis Vuitton

I find it interesting that this list is made up of such a diverse range of companies: industries, business models, value propositions etc.

Three key insights emerge from the research

I doubt that the key findings are any surprise given that research study after study points towards the same direction:

  • The brand experience drives consumer purchasing decisions.  60% of consumers agreed with the statement “My overall experience with  a brand is the single biggest factor in whether I decide to purchase a product or service” – only 5% disagreed.
  • Consumers will pay more for unique experiences.  44% of consumers agreed with the statement “I am willing to pay a premium price for a product or service if I know that I will have a unique experience with that brand in some way”. Not surprisingly the consumers that have more money (are the least affected by the recession) are the ones that are more willing to pay this premium: 58% of consumers in Asia v 28% of consumers in the UK.
  • There’s a big gap between what matters to customers (in terms of the brand experience) and what brands provide in terms of unique experiences. Only 26% say that their past experiences have been unique; 62% are looking for that unique experience.

What are the top experience drivers?

Given that customers have jobs to do / get done (including elevating their status or looking cool) and that is the primary reason that they interact with companies it is not surprising that the product/service  should be the top experience driver.  What are the other experience drivers?  Here is the most important experience drivers:

  • Products and services that meet your needs
  • Understands your needs
  • Continues to serve and engage you after you’ve become a customer
  • Exceeds your expectations
  • Makes it easy to find information and buy their products, wherever and whenever I shop.

What is interesting is that the experience drivers that deliver a UNIQUE brand experience are somewhat different:

  • Initial impression the brand makes on you
  • Continues to serve and engage you after you have become a customer
  • Understands your needs
  • Differentiates from similar products
  • Employs people who anticipate your needs

I find it interesting that consumers do not want to be forgotten (or taken for granted) once they have become customers -they want brands to continue to serve and engage them.

Which experience categories matter the most?

The report subdivides the “Brand Experience” into categories: Product Experience; Shopping Experience; Customer Experience; Discovery Experience; Community Experience; and Digital Experience. If you put the experience drivers into categories and then look at which ones matter the most to customers (listed earlier) then it becomes clear that the Product Experience, the Shopping Experience and the Customer Experience categories are the ones that matter the most.  Lets take a closer look at each of these three categories – specifically what they are made up of and how highly they are rated by consumers.

Product Experience

  • Products and services that meet your needs (6.1 out of 7)
  • Invents new ways to enhance their products or services, after you have become a customer (5.6)

Shopping Experience

  • Makes it easy to find information and buy their products wherever and whenever I want to shop – store, online, mobile  (5.8)
  • Provides an efficient shopping experience (5.8)

Customer Experience

  • Understands your needs (5.9)
  • Continues to serve and engage you after you have become a customer (5.8)
  • Exceeds your expectations (5.8)
  • Educates you about how to use their products and services and become a smarter customer after you have become a customer (5.6)
  • Employs people who anticipate your needs (5.3)

Other key highlights

If you have read my posts you will know that I am of the view that there are important differences between women and men when it comes to needs and wants.  Here is what the report has to say on that and other demographic differences:

Women are more responsive and receptive to experience.  Women are more likely to agree with the statement that the experience influences their brand choice.  They are also more likely to be willing to pay a premium.  Furthermore, women rank some experience drivers much higher then men: “Understands your needs” (73% v 65%); “Continues to serve and engage you after becoming a customer” (71% v 62%); “Exceeds expectations” (72% v 60%).

People over 55 are a less willing to pay a premium for brands that offer a unique experience.

Affluent consumers value experiences more and are more willing to pay a premium for unique experiences.  The experience drivers that particularly important to these people include: “Understands your needs”; “Continues to serve and engage you after you have become a customer”; and “Educates you about how to use their products and services and become a smarter consumer, after you have become a customer”.

US consumers (of all the consumers who took part in the survey) have the highest expectations around the “Customer Experience” categoryof the “Brand Experience” as defined in this report.

UK consumers are much less demanding than US consumers – they are much less likely to cite “Exceeding expectations” as an experience driver that motivates/influences their purchasing decisions.

Asian consumers are the ones that are most likely to say that the experience is the single biggest factor in brand choice and they are the ones that are most willing to pay a price premium for unique brand experiences.

My point of view

All research should be handled delicately.  Bias is present in most research in a number of ways some deliberate and some unintentional.  Also there can be a big difference in what say, what people do (and will do) and what people say they do or will do.

The research ‘supports’  my point of view that the most important lever for improving the “Brand Experience” and growing your business is to make/sell great products/services that create superior value for your customers – allow your customers to get their jobs done cheaper, faster, easier, better.  A little while ago I wrote a post titled The Missing Piece of the Customer Experience Puzzle – to point out that the product/service was being neglected by the Customer Experience movement.

What men and women want is different and women are more experience driven – the softer (caring) dimensions of the ‘Brand Experience” matter more to women.  I wrote a post on what matters to women: how to engage the female customer and deliver the right experience

“Exceeds expectations” is a key driver – which tells me that just delivering to expectations is not enough.  Does that mean that the ‘just get the basics right and forget about delighting customers’ school of Customer Experience is wrong?  I’ll let you make your own decision.

We do not need more research to tell us what matters to consumers.  What is missing is the Tops who are willing to act on what the numerous research studies tell us.