Photo: RetailWire
Customer data is grocery’s new battleground
Rick Ferguson, CLMP
Through a special arrangement, presented here for discussion is a summary of a current article from The Wise Marketer, a website and newsletter serving the global loyalty industry.
The old model of using customer data simply to target coupons – pioneered by Dunnhumby in the U.K. and Kroger in the U.S. – is now merely table stakes in grocery. Succeeding against Walmart’s scale and Amazon.com’s digital and delivery expertise will require grocers to orient their entire business model around customer insight.
A recent Wall Street Journal article detailed how Kroger’s data scientists are exploring ways to leverage data throughout the customer lifecycle and at every stage of their journey. Apps, for example, are being tested to offer suggestions based on whether the customer eats meat or needs help finding recipes for chicken.
“For store managers, meanwhile, a program is in the works to allow them to literally see how products are selling in a given aisle, using augmented-reality apps on their phones that show the prices and sales figures for the products found there,” according to the Journal.
This investment in analytical insight and digital delivery is designed to return food retailers, at scale, to the mindset of the corner grocers of a century ago who knew their customers so well that they could stock what they wanted and anticipate their needs before they came into a store. In theory, the investments also provide a competitive advantage that even Amazon can’t match: the ability to tailor shelves, communications and the in-store experience with a truly local flavor and reach into that store’s community.
Indeed, industry analysts predict that the successful grocers of the next decade will resemble Silicon Valley tech companies more than traditional grocers. Yet the game may be won by long-storied and venerable grocery brands that are reinventing themselves, such as loyalty marketing pioneer Tesco, where Dunnhumby first plied its trade 20 years ago.
According to Forbes, Tesco Labs has up to 50 projects underway at any time, conducting experiments with VR and AR, connected home devices, near field communications and mobile apps. Forbes wrote, “Applying cutting edge analytics and the most up-to-date data is the supermarket’s answer to dealing with obstacles ranging from evolving customer behavior, to facing up to newer competitors.”
Discussion Questions
DISCUSSION QUESTIONS: Do you believe that customer data will transform the grocery shopping experience? What benefits will be most obvious to shoppers? Do regional grocers have any advantage over national chains in leveraging data on a localized basis?
Poll
BrainTrust
Phil Chang
Podcast Host, Retail Influencer, Fractional CMO
Julie Bernard
Chief Marketing Officer, Verve
I can’t believe that this is some new insight — I’ve been guiding brands to use data in this way for more than a decade. And the data has always been there for those that have known what to acquire and how.
The problem has been one of acknowledging where the value lies. Brands/retailers have taken the shortsighted route: acquire some data and quickly try to sell something with it. Whereas the best use of data is to offer something meaningful in return without purchase expectation and the long tail benefit will be increased sales. Leverage data to create a valuable experience for the consumer and ultimately the consumer will reward the effort with a sale — quite possibly without discounting profits away.
An example of my approach is to take the data analysis and initiate a dialog that gently validates or refines the assumptions before risking the relationship by say offering a vegan chicken recipe or coupons.
No — customer data will not transform the grocery experience, for three reasons. First, it’s not like this is a new data form — we’ve had this data for years and we’ve had sufficient computing power to make meaningful headway. That we haven’t made that much progress suggests that we won’t in the near-term. Second, in a grocery paradigm where shoppers almost always have a choice of where to shop and are not highly loyal to a chain, having your own customer data is only half the story. Why do I buy some products at Kroger and others at Publix? I know the answer, but do they know? Third, using augmented reality to provide sales data is very cute, but a total misapplication of effort. What more can a store manager possibly glean from that view than an automatically updated spreadsheet with alerts that stock is running low?
Data should be driving all the decisions that we make. We used to make “gut” decisions because we didn’t have data or we had more anecdotal data. Now we’ve got more data than most people know what to do with. We have reviews, social feedback, surveys and hashtags, on top of all the POS data.
Customer data is transforming how we do things, and makes for better decisions if we know the key indicators we’re looking for. The trick will probably be to be nimble and quick with data and stay away from analysis paralysis.
Regional grocers may have an advantage of moving faster than national chains from a procurement and executional standpoint but they’ll also need to be able to manage the larger data flow that is coming in.
Nice point Phil, but just one thing — how do you think regional grocers will get more data? Because by virtue of being a large national grocery chain they will have a lot of data but regional grocers don’t have that flexibility!
I’ll slice this two ways. 1.) They’ll have the same raw data but be able to do more with it. Regional grocers generally have a better grasp of their customers’ wants and needs — they can be more specific and slice more insights out of the raw data they have. 2. Regionals can collect more and analyze more. Right now, the prevailing thought is that national chains have more processing power. Technology is changing, and regional chains will get access to cheaper, more agile tools that will help them compete with nationals.
Grocery retailers and brands have been analyzing shopper data for decades and while new insights will continue to shape and evolve the grocery shopping experience, I’m skeptical that this represents some form of significant transformation. I believe these will be incremental gains and refinements.
As for who has the advantage — I say the national chains. In my experience, national chains generally have greater resources and more sophisticated tools and techniques for analyzing and applying insights from data.
I can see benefits using customer data technology to help grocers determine a customer’s needs. But I also wonder if we are losing sight of some of the basic principles that impact sales. The article talks about the grocers knowing their customers so well a century ago that they would know what they wanted. That’s true, but they also knew every customer personally. They knew about their lives, and they interacted with all of them.
The grocer back then was someone in the customer’s lives who got to know them. The more we rely on technology alone, the more we lose that personal human touch, and that is so important for maximizing the in-store experience.
Today we are inundating customers with an app for this and an app for that. Many customers download them at first but soon become bored because there are too many apps to stay on top of and use. So I think customer data technology is an excellent tool but, for a grocer to be hugely successful, they need to combine that technology with an outstanding in-store experience created by store associates engaging customers, sampling, sharing recipes and more to make each visit spectacular.
You simply could not be more right Art. You said it better than I, but the truth is that all these “advances” are ends in themselves and have nothing or very little to do with the customer’s experience or satisfaction.
Spot-on, Art! I somehow missed the experience component but as you said it’s an important component of grocery retail.
Pulling past purchase data is a given at this point and will not differentiate any retailer from the rest. The next frontier is predictive data. Stores can now profile shoppers based on comparison to other shoppers with similar shopping history and increasingly predict what a given shopper will buy in the future. Stores who make relevant and value-added recommendations to consumers will win; stores who get it wrong will be seen as lacking in credibility.
Mining customer data has become critical for all shopping so why not in groceries? Eating is something we do every day. The real question will be, how do the majority of retailers compete with what Tesco, Kroger and Walmart have spent on this? Even Kroger, as stated in the Wall Street Journal article, is feeling the bite from what they spent on hiring data scientists, engineers and app developers. They are expensive and can speak firsthand to that fact.
Regional grocers will need to truly focus on their customers more than ever before but I think it will be impossible to do that without being able to effectively and accurately analyze and take action on their data quickly.
This discussion is framed too narrowly. Retailer data is absolutely transformative, but not just to the retailer. More broadly, it is transformative to how digital marketing will work.
Right now there are two big publishers in digital — Google and Facebook — in terms of ad revenues. Amazon is now north of $2 billion in ad revenues without even trying hard! But now, they are offering an ad network from Amazon.com that leverages Amazon profiles — displays deep buying behaviors and is fully integrated across screens. I predicted in a blog that you will see Amazon become the third behemoth of digital advertising because they are a combination of Google (as much product search occurs on Amazon as Google) and Walmart. then one week after the blog Google and Walmart announced a JV! And Walmart already offers an ad network to their vendors. This is the next big sea change in both brand and performance marketing. Huge retailers are becoming publishers and ad networks. And it is all because of the customer data they have.
Customer data could transform the grocery shopping experience — but it probably won’t. The reason is that the grocery shopping experience is fundamentally about a physical retail environment serviced by a rigid and uniform supply chain. Tweaks and variations are possible of course, some that will make a meaningful difference in the CX. But transformation would require a complete rework of the business system — and that will be too expensive and too hard for the majority. Some of the strongest will evolve over time with a gradual migration to new systems — Walmart, Kroger and now Whole Foods come to mind. Others will thrive by serving consumers who prefer the current CX to online or delivery and doing what they do now very well. Some of the strongest or highly differentiated regionals — H-E-B, Wegmans and Sprouts — come to mind in that group.
The ability to use and understand data has the power to transform everything. Unfortunately, if a retailer is using the data to “get people into the store” they are losing the value of the information. The data will tell what people want and how they want it. It should transform what the brick-and-mortar store is all about. But it won’t. It will be used by the retailers to try and stop the consumers from transforming and the retailer will lose.
I’ve almost given up commenting on any topic related to “data.” It’s just so pointless at times.
Here we’re shown this nice picture of melons, bananas, apples, etc. all displayed nicely with customers selecting that they want. You can see, smell and feel the produce and you feel richer and blessed to be surrounded by such bounty.
And then the article talks about how “a program is in the works to allow (retailers) to literally see how products are selling in a given aisle, using augmented-reality apps on their phones” and how Tesco has over 50 programs “conducting experiments with VR and AR, connected home devices, near field communications and mobile apps.” Really? And how exactly does that beat an observant store employee noticing that it’s time to bring out more bananas?
All this data technology has become an end in itself, made so by people who produce this stuff. It has little to do with the customer experience. Likewise, the guy installing a water softener in my garage was trying to get me to download their new app so I could track salt use, etc. on my phone. My other option was to notice when the “low salt light” was flashing any time I pulled into the garage. Good grief!
Can data transform the grocery experience — no. Converting the data into actionable insights about the customers and their shopping patterns might, as long as the retailer can then execute against the insights better than their competitors.
Stephen pointed out that retailers will only be able to collect data on their customers and not those of their competitors. If those competitors can use the data they collect better, then they will keep the customers.
This is bread and butter stuff! As the article notes, Tesco and Kroger — via dunnhumby — have been using this type of insight for years. The only possible exception is for companies like Aldi — where the proposition is one-dimensional and straightforward enough to negate the need for in-depth customer data.
However, as any observer will know, dunnhumby and especially Tesco have had their struggles in maintaining growth and share. The lesson here is that insight is only a tool to aid sound decision making. Actually making the right calls and executing well are the real keys to success.
Whether regional or national in reach, those grocers with loyalty programs and/or branded apps can very definitely transform the shopper experience, provided they invest the time and talent into understanding from their customers what is most meaningful in the way of a tailored in-store experience.
Locally-sourced product mix, shelves stocked with the most sought-after items, personalized communications that nurture trust with customers, presented at the right time and in the right manner, and a very intentional in-store experience can in tandem uniquely position grocery retail as a destination consumers will desire to spend time and dollars. The key is building trust with judicious use of the new analytics and insights.
Well, I guess we could say that AMAZON is busy using customer data to transform the grocery shopping experience. As for everyone else, there are still too many barriers in the way: as Ken says, too shortsighted a view of the opportunity, as well as too many silos, an IT investment perspective focused on cost containment rather than strategic investment and too few internal skill sets prepared to use the data gathered in any long-term, strategic way.
We just completed a study on customer engagement in retail, to be published in December. What I learned is that retailers think “promotions” are the same thing as “engagement.” And that pretty much sums up everything that is wrong in retail today — and grocers are no exception.
Customer data is already transforming the retail shopping experience — including that of grocery. The potential impact of combining customer data and grocery shopping was exemplified in Amazon’s acquisition of Whole Foods. The amount of data generated by the multiple visits to the physical or online food aisles represent a treasure trove of insight at the individual level as well as aggregate at store or category levels.
The most obvious benefit to shoppers is a more personalized experience that transcends price offers. It means offers that communicate to my lifestyle and healthy choices. It means introducing technology that makes my life easier and shopping fun (can augmented reality help here?). It means easing or eliminating the real bugaboo of physical grocery shopping experience — the queues and the checkout ritual. It means investing in ways to earn my trust for repeat purchases and making me your brand advocate.
Advantage will accrue to those taking actions based on data more so than on being a regional or national chain. Management’s and the company board’s mindset on the new rules of retail will determine the degree of success on profitably growing their top line.
Additionally, it’s really a nuanced treatment of the longstanding debate over centralization versus decentralization. You need a centralized digital core that allows back-office efficiencies and consistencies across the company and with its trading partners. On the front end, maximum flexibility and agility are necessary to adapt at the speed of the consumer. Across both, you need to collect, analyze and combine customer and product data in novel ways that impact the shopping experience. For decades we’ve shouted from the mountain tops about making retail more data-driven, technology is finally making it easier to pursue the emerging visions emanating from the new retail mindset. Consumers are demanding it!
For decades, grocers and other retailers have been using customer data for insights well beyond couponing and promotion. This is not new news. In fact, Kroger, through their original dunnhumby joint venture, offered manufacturers access to The Shop, a reporting-and-insights tool that helped brands and partners understand their customers. Looking at the whole of their purchase behavior across the entire store — all categories and all products — The Shop enabled brands to inform future strategies for overall messaging, packaging, pricing, assortment, service, product adjacencies, etc.
There remains ample opportunity to tap into customer data in meaningful ways. While the insights have been available for years, the gravitational force of legacy mindsets and business operations has limited progress. Customer data and insights are not the barriers to progress; it is the comfort zone to which business leaders often cling — the ways they have “have always done things” — that is the underlying problem.
Now is the time for retail leadership to truly embrace real change at the levels of people and process. This is not simply an annual exercise in the shuffling of an organizational deck; the changes need to be meaningful. If companies are not willing to fundamentally alter how they run their businesses — particularly in terms of acting upon data-driven insights — then they may not be around in the next three to five to 10 years.
Being able to target customers down to the individual is a hugely exciting vision and the industry should strive towards this ultimate challenge. Retailers should not get lost in the journey, consumed by the vast amount of big data that will need processing to unlock this.
Recently I was involved in discussing a similar matter of retail big data with a number of retailers and the conclusion we came to was that they had become paralyzed by the analysis process. Getting back to doing the basics of analysis really well was a much more worthwhile investment of their time.
Nationals will have the advantage; this is because there is a law of diminishing returns to consider. The more granular the analysis, the fewer left in the pot of opportunity and the higher the cost to achieve this. With a national chain, hopefully the size of the opportunity pot will still be a sustainable size to support the costs involved.
All content will be data-driven. Content being defined as anything — video, coupons, recipes, promotions, offers, Facebook, Instagram, etc. Data-driven content will not transform shopping, but it will (and already has begun to) transform the shopping experience. Data is simply an integral part of shopping in a digital world. Grocers that leverage technology in a way that will be valued by their shoppers will be rewarded. Those that fail to experiment and grasp the future will be casualties of the digital transformation.
There is no question that customer data has begun and continues to transform the retail industry. As more retailers adopt the true machine learning tools available in the marketplace, we will see fewer store level out-of-stocks that still plague so many stores of all formats. All retailers, large and small, can take advantage of these technologies to drive incremental revenue by drilling down to “hyper-local” environments and taking into account internal customer data, like call center information, plus external data, like news, sporting events, weather and social chatter to build a more complete view of each shopper journey.
Customer data is table stakes. And it’s time to ask the next question: HOW can it be used more effectively to transform the shopping experience? Personalizing offers, curating store sets and optimizing the supply chain is used at many retailers today. Taking the customer experience a step further in customizing all content and even experiences will be the most notable piece.
Grocers have been using customer data for years. What’s new here is the methods in which they will use those data insights to deliver smarter offers to their customers and help return grocers to the days of old when they knew each customer personally and knew exactly what products they liked best. In other words, bring back personalization that matters and is relevant to their customers. Regional grocers may have an advantage here, but most likely only until such time as the national brands break through their internal data silos and realize they have access to more insights than they could imagine. What do they think Amazon has been doing in the grocery space all this time?
“Customer data” is a broad and deep term. For the most part it has meant transactional data — loyalty and POS data are driven by the decision to buy. The real frontier is learning about consumer behavior that is the antecedent of the purchase, both online and in-line.
The potential is enormous and don’t think for a moment Amazon and Kroger and Walmart are trying to make better apps. This is about proactively creating data not just mining what already exists. It is about measuring and understanding at an unprecedented scale.
The transformation will be enormous and if handled properly, almost transparent to consumers. Stores (both online and in-line as borders blur) will become more relevant to individuals and communities.
Artificial intelligence holds to potential to scale across the fleet of stores what a good store manager does — know your customers and your product and your people and your pricing and act to make your business as good as it can be.
I expect we cannot even imagine what grocery will be like when we can arm our stores with validated empirical data about the value of soft emotional drivers such as the appeal of smell, the need to nourish your family, or what food is healthy for me to eat.
Grocery is a very interesting area because of multiple reasons; shelf life, regular buys, organic demands, localized demands, etc. This is where customer data can really make a great difference. With customer data, retailers can accurately predict demand better, customer demographics at supply chain nodes, how to keep groceries fresh, etc.
I believe national chains will be better able to leverage this customer data because of the advantages that they have — an enormous amount of data, while data for regional players is very limited. As we say — more data is always better!
The famous Walmart data mining experiment which combined point of sale data and loyalty program data already exemplified several years ago, the significance of a multidimensional customer view and understanding. The experiment showed that male shoppers on Friday afternoons who came to buy diapers also bought beer. This experiment became the Northern Star for layout customization and considerations. Naturally, once this data is combined with digital footprints of our customers, the realm of possibilities becomes infinite and in online stores, the ability to provide customized and more profitable shopping experiences becomes ordinary practice.