Jan 27, 2004 Volume 3 Issue 30
A Case History about CRM
Fred Newell is a biz friend from the last century.
He knows more about retail marketing than any two other people on earth. His conferences are outstanding. You may have read about his books in this space, because I've spoken of him before.
His E-zine shares stories ... and with permission from Fred here is one I'm sharing with you. Fred says all credit for this excellent story and message goes to Vice President Devon Wylie.
At a conference Steve Goodroe, CEO of dunnhumby USA, shared the story of how a little company with a funny name and a retailer with a very famous name came together to create one of the most successful loyalty programs in the world.
Steve first explained to the audience dunnhumby's approach and then went on to explain how it was applied to Tesco's Club Card Program.
When husband and wife team Edwina Dunn and Clive Humby created dunnhum in 1989, they proposed that their clients strive to:
Tesco, then the U.K.'s second-largest grocer by a large margin, first teamed up with dunnhumby in the mid 1990's. Tesco had decided to implement a loyalty program, and had first settled on running it themselves in three stores. Unimpressive results followed, and dunnhumby was asked to join them in their efforts. The test and learn approach was used in 12 stores, and the Tesco Club Card program was born.
To help Tesco compete in the marketplace, dunnhumby proposed a throwback to 40 years prior, one that would focus on some of the same strategies of the corner grocers of England's past. The two companies decided to work together to create a modern "corner store" by using the individual customer as their focus.
To do this, the definition of customer loyalty was turned on its head. There would be a move away from averages. "It is important to note," said Steve to the audience, "that there is no longer any average customer." Consumer insight has changed ways of thinking--- both about the customer and about the business.
The average/typical/trade margin/product-based approach is no longer sufficient. Instead, "All of us need to focus on a truly customer-based business; one that sees the customer as an individual through complex segmentation strategies that focus on share of spend, not just profit," he said.
"Furthermore, our goal should be changing the way they think about us." Tesco's explosive growth and success of the 1990's was proof that they are one company that truly accomplished this. Tesco's customers began to feel appreciated and receive relevant offers. The rest is history.
Tesco's Chairman Sir Terry Leahy placed this mission statement in the center of one of the company's annual reports: "Continually increasing value for customers to earn their lifetime loyalty." And that is exactly what they did.
Tesco's Club card program boasts 10 million active households and captures 85% of weekly sales. It is also a symbol of Tesco's commitment to their customers as individuals: multidimensional customer segmentation and tailored communications--- as of last June, four million unique quarterly mailings--- prove to Tesco's customers that they can count on their " local grocer" to know them.
Mailings are tailored to the needs, interests, and potential interests of Club Card members. Customers are segmented into cost conscious, mid-market, and up-market segments, which are in turn segmented into healthy, gourmet, convenient, family living, and so on. These sub segments are then segmented further and communications are tailored to each.
Impressively, Club Card coupon redemption is in the 20%-40% range and cost per redemption decreased since the inception of the Club Card Program. By targeting in such a relevant way and treating customers according to their individual behaviors, needs, and desires, Tesco came to understand that a higher-value coupon is not needed when you've reached the right person in the right way with a tailored message.
In the five year period following the implementation of the Club Card program, sales have increased by 52% and still grow at a rate higher than the industry average. Store openings and expansions have increased Tesco's floor space by 150%.
In the online space, tesco.com boasts 500,000 transactions weekly, totaling nearly two billion pounds in sales each year. The profitability, plus the size of the tesco.com business and the number of transactions it completes, makes tesco.com a truly unique online grocery store.
So how did Tesco do it? How did they go from distant second to the undisputed leading grocery chain in the U.K.?
As Steve explained to the audience, Tesco focused on the individual. To gain loyal customers, customers must be at the center of your CRM strategy (as well as the focus of the business itself). It's not the technology, not customer profitability, not loyalty programs or cards; it's the customers themselves--- as individuals--- that should truly be at the center of all that you do.
"The fact is," began Steve, "that CRM is difficult to define. It's somewhat misunderstood, largely misused, and in some cases abused-- often by the very people who strive to define it."
"The one thing we can all agree on is that the focus is on the customer." Unfortunately, people often put too much emphasis on the components (such as the technology) of CRM instead of the basis (the customer). Once this customer-centric vision has truly been established, the individual customer can truly begin to be understood and valued, and loyalty can be earned.
For instance, Steve pointed out to the audience that often, U.S. based businesses focus their CRM programs too heavily on the communication; the "how and what do I communicate" portion of their CRM strategy. Instead, Steve proposes that more time be spent using CRM towards strategic business decisions.
Wile the communication or " who-what-how-when" strategy is undoubtedly a very important component, Steve suggests companies "make sure they spend as much time thinking about the business decisions that should come out of CRM as they do about the communication and messages themselves."
Once a loyalty program is established, a company can move from old performance reporting to building a basic customer language to using the language to gain a detailed customer understanding.
If CRM is approached correctly and applied effectively, marketing spend can often be reduced--- an outcome the entire organization can benefit from and appreciate. For Tesco, the media effectiveness of the Club Card Program has allowed them to save money on promotions and increase sales at the same time.
The path to customer loyalty can be difficult, however, when your customers don't really care about their relationship with you. They may want to be recognized and appreciated, but they will never be " loyal" in the true sense of the word. They aren't loyal to you as they may be to a partner, a team, a political party, or their employer.
Just ask yourself: are you really "loyal" to your bank, your airline, your grocery store? Probably not. "No matter," says Steve. "They still have to be the focus of your CRM strategy and your business." Because, although your customers don't want a "relationship" with you, they do want you to remember who they are. They want you to communicate to them that their business matters and they want you to do it in a relevant way.
"Your customers want to be treated better than the people that come and go and better than the people that haven't even arrived yet--- the ones that many companies spend most of their money trying to get." "And," says Steve, "Your customers know when you get it wrong. They know that you spend a lot of money and time elsewhere instead of on them. They may get your emails, but they're not particularly relevant--- and neither are most of the messages they are getting."
Instead, make your data work for you. Ensure that it:
The worst (and very common) example of losing sight of the importance of customer data is the phone call that never reaches a human voice. Steve pointed out that "I'd trade 1000 airline miles and half of my perks just to be able to speak to someone at the airline who can help me in the right way when I need to."
So what does all this teach us? "That the secret of CRM is taking data and insights to change the way you think about your customers and your business; to move away from averages and towards customers as individuals."
Most CRM programs use a " plan/ act" measure" approach. It is a process where customer insights define marketing strategies and are acted upon by implementing customer-focused plans, and then measured. It is an approach that enables companies to evaluate their success, and to test, reapply and learn as they go. Importantly, this approach allows companies to change the business practices to respond to the individual customer--- and therefore, to practice true CRM.
For Tesco, the 12 store pilot program allowed them to learn from their mistakes without costing too much, to learn and reapply before full implementation, and finally, to build internal buy-in to the top--- one of the most important aspects of any CRM program.
In conclusion, Steve shared some important aspects of Tesco's Club Card program:
As a last bit of advice for the audience, Steve closed with the statement, "No matter how much time is spent trying to have the best program you can have, unless it's on the CEO's agenda--- unless it is embraced up top--- by definition, you'll sub-optimize what you are trying to do."
If you have questions or comments, go direction to VP Devon Wylie ... E-mail firstname.lastname@example.org, who pulled this excellent story and message together.
There is probably nothing new under the sun.
Most things are variations on what's gone before. Well, here is some of what's gone before ... this time Crazy Fads from the decade of the 1930's;
Stamp Collecting ... with the Help of President Roosevelt and less income to spend on leisure due to the depression, collecting stamps became very popular in the 30's.
Zoot Suits ...The zoot suit was a refusal: a sub cultural gesture that refused to concede to the manners of subservience. By the late 1930s, the term "zoot" was in common circulation within urban jazz culture. Zoot meant something worn or performed in an extravagant style, and since many young blacks wore suits with outrageously padded shoulders and trousers that were fiercely tapered at the ankles, the term zoot-suit passed into everyday usage.
In the sub-cultural world of Harlem's nightlife, the language of rhyming slang succinctly described the zoot-suit's unmistakable style: 'a killer-diller coat with a drape shape, real-pleats and shoulders padded like a lunatic's cell.
Board Games ... The game of Monopoly was introduced in 1935 by Parker Brothers.
This sparked a rage for board games. More than twenty thousand Monopoly board games were sold within the first week of release
Gambling ...The big depression of the 1930's caused an increase in gambling. People unable to make a decent living looked towards any means to add to their income. In this decade alone 15 states legalized horse racing.
Mandatory Hats ...Wearing a hat was a must for all well dressed men.
The Zipper ...Many people started using zippers for the first time due to the fact that it was less expensive than the previously used buttons.
Drive-in Theater ...Started in June of 33', by Richard Hollingshed. It was an immediate success; he went on to establish a drive in movie theater franchise throughout the United States. Starting with 100 theaters to 2200 theaters all in a 12-year period.
Monopoly ... Created in 1934 by Charles B Darrow. Although some say it was created many years earlier by Lizzie J. Magie.
Her version was called The Landlords. Basically the same exact game, just Darrow added a lot to the idea and many say he improved the game. When Darrow brought the game to Parker Brothers, they later sent him a later saying they rejected the idea for having too many fundamental errors.
However, Darrow was selling the game to all of his friends and decided to have a printer make him up 5,000 copies of the game. He then sold them to a store in Philadelphia-- Parker Brother rethought the idea and in 1935, Parker Brothers introduced the game of Monopoly and 20 thousand sets were sold in one week.
Betty Boop ... Americas first cartoon flapper icon. The first appearance of Betty Boop was in the 6th Talkartoon starring Bimbo, entitled "Dizzy Dishes" (1930.) Grim Natwick was the first animator to draw Betty, who had not yet been officially named. He took inspiration for Betty's spit curls from a song sheet of Helen Kane, commonly called the "Boop Oop a Doop Girl".
Betty started out being designed as a human-like dog, only her black button nose and floppy ears hinting at her canine nature. These ears later became her round earrings, in part due to the fact that the Fleischer animators had a tendency to change animating styles and features of characters from cartoon to cartoon, and sometimes within the same cartoon. (In "Bum Bandit"-1931- Betty's nose changes from black to white and then back again in the same cartoon.)
Her high baby voice, like her spit curls, were in imitation of singer Helen Kane. Her first starring role was in "Betty Coed" (1931), which also marked the first time the name Betty was connected with the character. In "Any Rags" (1932), Betty became completely human, and her ears permanently became earrings. As for her famous garter, Betty started out with two, then early drawings showing her still with ears show the garter on her right leg. When she became a regular, however, and her features were officially set, the garter moved to her left leg, and stayed there.
Miniature Golf ...In the early 1900's, miniature golf was actually the short game of regulation golf. The name quite frequently used in the early years was "Garden Golf" and it was played with a putter on real grass. In the 1920's & 30's, "rails" or "bumpers" started to appear, confining the ball within a boundary. The playing surface was changed to hard-pressed cottonseed hulls, which created a smoother putting surface.
The game of mini golf was extremely popular among movie stars and celebrities, which helped spawn new links all across the nation. During the 1930's, there were approximately 30,000 links throughout the country with over 150 rooftop courses in New York City alone. The American population was hooked on miniature golf, as not only a leisure time game, but also a sport that any gender, any age could excel without any handicap or without being a well-conditioned athlete.
Hood Ornaments ...Little metal design that were attached to the hood of your car.
Stickball ... A game similar to baseball, but played by kids in the streets. Was popular in big cities.
Wing Tipped Shoes ... Popular shoes during the swinging era. Shoes usually had a dark colored trim/wing tip.
After a dozen grand years in the deserts of southwest Arizona, ROCKINGHAM*JUTKINS*marketing is moving to the seaside coastal town of Morro Bay, in central California.
With the WWW, E-mail, overnight delivery and an ever ready airport that allows me to hop quickly to SFO or LAX for points onward, our business model will not change. We'll still be here to work with you!
When all the details are in place you'll be the first to know. Looks like the move is on for the end of February. We already have a phone number (will share it later when it goes "live"). Along with a mailing address and all contact specifics.
Isn't moving soooo much fun!
. . . and one more loose thought
Friend Ernie Schell brings you this message.
Direct commerce order management systems have changed a lot recently. The Annual Conference of the eCommerce & Catalog Systems Forum will showcase what's new.
Designed for CEOs and CFOs as much as CIOs and IT Managers, the Conference features Case Studies, Best Practices, Fraud Prevention, attendee roundtables, and an Exhibit Hall. If you want to "compare notes" and "network" with your peers, this is the place to be.
For more details, see www.ecsforum.org. PLUS - get a $50 discount (off the posted price) for each attendee. Just put "RAY" in the "Reference Code" box when you sign up.
A couple of weeks ago I reviewed the new book by John Coe.
Part of that read included planning the best possible B-2-B campaign. And the creative to go with it. Well, here we are again ... with a supporting thought from our most popular philosopher ... Anonymous;
"Few things are created and perfected at the same moment."
"Quotes with Direction" has been a part of my web site collection from day one. If you like quotes visit the archives ... www.rayjutkins.com/quotes/. There's a new batch up every 4 weeks.
"It IS What's Next!"
It's become known as "the story".
I've shared it with a number of health care organizations, a database marketing business, a direct marketing firm, a publishing organization, a DM association - and several others. And I'm ready to bring it to your group. (Visit It IS What's Next!)
When you have a need for a 40-60 minute program, I'll give you this different, interesting, meaningful, warm and true action presentation. If you want a half-day interactive seminar, that can happen, too. For your club. Your company. Your organization. Your association. Your school or University. Any group you have. At any place. At any time. For any reason.
It IS What’s Next! is available to you as a Keynote Address. As a special program. As an opening or closing presentation. As a different / unique session.
Magic Marketing Minutes
Prospecting Part II
Everyone would like more new business. Those who are successful in getting it do so because they plan to get it.
Here are 9 ideas to help you be better with your prospecting.
9ine ideas to help you be good at prospecting for new business.
... and one more Idea
An eon ago Burt Dubin came into my life. And has stayed. We continue to swap ideas.
One area of common ground is we're both speakers. And, Burt is a "teacher" ... working with professionals helping them grow to masters - as well as new comers just breaking in to the speaker business.
To learn more about what Burt might offer you, visit his exclusive resource and most interesting web site. Plus, you may wish to opt-in for his FREE E-zine. It's easy - surf to www.SpeakingBizSuccess.com and take a tour. Or send an E-mail to email@example.com.
... another Idea
New business friend Gerry Sacks of Houston, Texas sent me here. It turns out this leading information resource from the financial world offers a collection of marketing & sales ideas. Still, no matter your business, you will find good material here. Offered by 80+ experts (including me!) ... visit ProducersWEB.com
by ROCKINGHAM*JUTKINS*marketing, all rights reserved.