Supermarkets can understand their customers through the transactional data they accumulate, but it's far more difficult for other brands and retailers to do the same. And many are in danger of building "digital ghettos", says Clive Humby, as they focus on the few who interact with them on digital platforms.
As one of the founders of dunnHumby, the data analytics business that helped propel Tesco to a dominant position in the UK grocery sector, and now the chief data scientist at Starcount, Humby is worth listening to on this subject. Speaking at last week's DMA Customer Engagement event, he argued that many businesses make the mistake of believing that their own data tells them everything about their customer; "in reality, it tells them very, very little," he said.
"You know where they live, you know perhaps 30 transactions in the last couple of years. But you don't know how they live their life, you don't know much about their family. Supermarket data is great at telling you those things, most transactional data isn't." By looking at a supermarket trolley, he pointed out, you can tell if someone is trying to lose weight, if they have kids, if they can cook.
Loyalty cards offer one way of collecting more data, but with modern till technology even those are obsolete, Humby said. "I can take your credit card, I can hash it so it's encrypted and I can link all the baskets of all the people who've ever come in my store. I might not know their name and address at home, so I might not be able to mail them in the traditional sense, but I can still deliver a relevant message at the till, in the moment as part of the transaction.
"I can still get all of the benefits from understanding the mix of things that people put in their basket together and how they relate. I can see people who come back a lot, who come back a little. Apart from one-to-one contact, I don't need a loyalty program any more to understand you."
Further, purchase data is of limited value because there is no context, Humby added. "We don't know whether that's the most important visit I'm making today or a simple, extra add-on."
But the explosion of ways of connecting with customers is leading businesses down a dead-end as they look to hoover up data from the new platforms available.
"We're going to end up with digital ghettos in our data," he warned. "There's going to be 10% of customers who've chatted to us five times or used the app – and there's going to be a great big raft of people who've done nothing but buy once. And how do we be relevant to that big mass?"
To drive a business forward, you need to try to understand everybody, he contended, "not the few people who just happen to use all the widgets that we think we're clever building". From his own experience, he observed that clients were able to understand a very few customers really well – customers who were then "bombarded". But do they really want to be reached that often, he asked?
The result is that a big marketing program that used to be little bit for everyone is now all focused on a few. "It doesn't generate the returns and the board starts asking why? Why are we spending all our money on these few customers when all the latent value lies in the long tail."
That's the real challenge for marketers, Humby suggested. How do you reach all those people who aren't using your app, who aren't talking to the chatbot, who aren't visiting the website but simply going into your store four times a month? "Are you really going to turn around to them and say 'we don't want you anymore because you're not generating enough data for us, you're not generating the value we need'?" And what do you do when people anonymise their purchases through the use of concierge services?
"It's more fundamental than just marketing", he added. "Do we want a society where some people can get the benefits of the offers, the discounts, the things that our business wants to do, and some people can't because they have or have not got a mobile phone? Or they're willing or not willing to load our app? Or are willing or not willing to talk to our chatbot?"
That's a question that needs to be answered in the boardroom, not the marketing department, he said.