Recently, a Harvard Business Review article suggested that the downfall of Tesco, a UK based grocery giant, was in part due to an overreliance on data-driven marketing practices. To be blunt, this idea is just wrong. Research shows that businesses effectively using customer analytics enjoy 10.5% year-over-year increase in annual company revenue, increase customer satisfaction by 8.1% annually – all the while increasing the number of positive social media mentions by 14.6% annually. But beyond these statistics, how do you explain the success of data-driven marketing giants like Amazon, Nordstrom, Dollar Shave Club, and other companies who consistently outperform their competitors through data-driven marketing practices? What’s more, the position taken by the HBR article doesn’t fully articulate the whole situation, as Chuck Chapek, Principal of JAC CRM Consulting notes:
Data-driven marketing cannot be successful in a silo. It must be part of an eco-system that delivers the right product at the right price at the right time. It is possible to put the blinders on and become too data-driven and not see all the market factors at work outside the company, but I don’t subscribe to the belief that a well-managed company would maintain this approach to the point of self-destruction.
The fact is, when companies use data to identify and respond to customer needs, they succeed, but when companies misinterpret or ignore the voice of the customer expressed in data, they fail. In the case of Tesco, contrary to what the HBR article suggested, it wasn’t reliance on customer data that contributed to their downfall from a leader in its category, but rather, not bridging the gap between data and actionable insights needed to address evolving consumer needs. Specifically, here are several areas where Best-in-Class data-driven marketing practices directly contradict the moves that Tesco made as highlighted within the HBR article.
Failing to understand and address the voice of the customer:
As the HBR article notes:
Tesco had committed to customer research, analytics, and loyalty as its marketing and operational edge. For example, the supermarket ingeniously succeeded at Internet-enabled grocery shopping in ways that Webvan—remember them?—could not. Tesco was digital before digital was cool. Tesco’s Clubcard loyalty program was launched under Leahy in 1995 and redefined both the company and the industry.
These advances, though, reflect transactional analytics – are people buying from us, are they signing up for loyalty programs, etc. – where marketers are only looking at business exchanges. Users of customer engagement analytics tools, which track all interactions across multiple channels in order to develop a rich and up-to-date view of customers, (including customer behaviors), however, measurably outperform their peers without such business intelligence. This is enabled by not utilizing new channels or marketing tactics just because they appear ‘cool’, but rather by tracking changes in consumer needs and wants through analyzing consumer behavior (e.g. purchase history), feedback, and sentiment to maximize the benefits of customer analytics.
- The Difference: Tesco had customer data, but did not have an understanding of how that data translated into the voice of the customer.
Lack of Integrated Data:
Implementing a Best-in-Class customer analytics program requires firms to first integrate all the customer and operational data captured across different channels in structured and unstructured forms. Without such integration, organizations lack a single and timely view of the customer, thus risk delivering untimely or irrelevant messages in comparison to consumer wants and needs. The HBR article briefly mentions Tesco’s multi-channel customer interactions (e.g. in-store, web and etc.) which validates that the company needed to establish successful integration across the different systems, thereby capturing data across different consumer touch-points. For example, a recommended best practice would be to integrate point-of-sale (POS) data captured in-store with data captured through the web or mobile applications.
Moreover, an integrated view of the customer across all channels requires a level of standardization across the organization. For systems to connect and share information, they must record and report consistent metrics across relevant channels, which also reduces the level of human error or biased business decisions influenced by interpretations. As Travis Wright, Chief Marketing Technologist for CCP Global notes:
A data practitioner, much like a statistician, can bend data to suit what they’re trying to showcase. I’ve seen social media managers and analytics professionals showcase data in reports that makes them look good and competent, while masking or not including the data that may show them in a bad light. You need to know your goals, understand which metrics support your goals, and learn which reports and metrics that are largely worthless.
In the case of Tesco, integrated customer data would have helped the organization focus on the right metrics for their customers as well as for their business, and prevent any masked or withheld data from skewing their reporting.
- The Difference: Best-in-Class customer analytics organizations aim to integrate customer data collected across all relevant channels for customers, whereas Tesco seems to have only collected customer interaction data across the channels that mattered to Tesco, and even these channels did not provide a clear, integrated customer view.
Not Using all channels with relevant, channel-specific KPIs
The HBR article makes several references to Tesco’s multi-channel customer engagement efforts, and asks if the data-driven approach used as part of consumer interactions through these touch-points were the culprit for Tesco’s downfall. An important note regarding this observation is that the article seems to miss the importance of deploying customer analytics to use the right channels to interact with consumers, along with using data as part of marketing programs across all channels. The latter refers to incorporating some form of intelligence in customer interactions across different touch-points, however, it doesn’t mean that companies regularly measure the impact of each channel on the organization’s key performance indicators (KPIs).
If Tesco simply adopted a strategy of using all available channels to interact with consumers, this would have meant that they risked allocating unnecessary resources to channels that provide minimal or no return related to their previously established KPIs. Best-in-Class customer analytics users, on the other hand, are far more likely to determine the KPIs that reflect their success, and use business intelligence tools to regularly track how each channel contributes to these KPIs. This allows these top performers to constantly optimize their channel-mix by ensuring that they use the touch-points that deliver the greatest impact in driving revenue, and creating happy customers.
In Tesco’s US markets as well, such an omni-channel perspective would show that factors like pricing are extremely important to customers. Though the HBR article seems to conflate simplicity and lack of gimmicks as differentiators in the UK, in the US, the ability to deliver value through sales, coupons, and loyalty cards is something that’s significantly appreciated by consumers. As Chapek adds:
Since the US recession in 2007, there has been a change in the consumer shopping landscape. First, cost of goods (CPI) has increased more than 10%, but median household income has decreased. This has put a lot of pressure on the consumer. It has made them even more price conscious. In most instances it is the deciding factor for purchases.
- The Difference: Best-in-Class firms do not let KPIs dictate which channels matter to their customers; they take the channels that matter to their customers, and align KPIs for those channels to reflect how performance benefits the business.
Overall, if the Tesco case study were to be taken as a warning to marketers, it wouldn’t be on the dangers of data-driven marketing, as the Harvard Business Review article suggested, but on the consequences of getting data-driven marketing wrong – especially in the eyes of customers. Had Tesco heeded the voice of the customer expressed in their data, perhaps the company wouldn’t have made the detrimental business decisions that led to its downfall, but today, that’d only be conjecture. What I can say, is that because Tesco didn’t follow the patterns of Best-in-Class data-driven marketing and customer analytics organizations, they of course, did not share in Best-in-Class business performance. And in such cases, even the best data can’t save businesses from choosing to make the wrong decisions.
For more on data-driven marketing and customer analytics best practices, read Aberdeen Group’s free research, including:
- Voice of the Customer: Big Data as a Strategic Advantage, April 2014
- Customer Engagement Analytics: How to Use Data to Create (And Keep) Happy Customers, May 2014
- Customer Communications Management: Maximize CEM Results with Interactive Content, November 2014
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