This article is more than 1 year old

Big Data, empty bellies: How supermarkets tweak prices just for the sake of YOUR LOVE

Loyalty is everything - but data analysis can go too far

Value, not price

Marr says another big shift in the use of big data is starting to happen as retailers see the value in incorporating the customer and market data they hold with a host of other external pieces of information to give them a whole new level of insight into the prices they should be charging at any given time.

“For example, it could be linking social media trends, search trends on Google and weather information, or even geodata being made available by government. You can base pricing dynamically off these insights. There are a number of retailers starting to do that on a small scale.” Marr says.

Given that potential, Tesco’s decision to explore a possible sale of Dunnhumby, the brains behind its Clubcard loyalty scheme and regarded as a jewel in the Tesco crown, seems bizarre. Dunnhumby’s insight may have helped Tesco overtake Sainsbury’s as market leader in 1995, but even still finding a buyer for the mooted £2bn price tag might be a stretch.

While pricing will always be important, Marr believe the real differentiator for supermarkets will hinge on their ability to understand their customers and build relationships with them. The success stories at both ends of the market – from cut-price retailers such as Aldi to high-end supermarket Waitrose – certainly support that theory. Rather than a race to the bottom on price, the customer decision to spend their hard earned cash is more about coalescence around certain values.

Another big shift in the use of big data is starting to happen as retailers see the value in incorporating the customer and market data they hold with a host of other external pieces of information to give them a whole new level of insight into the prices they should be charging at any given time.

Another trend emerging is the use of in-store digital display technology, with Electronic Shelf Edge Labels (ESLs) becoming a key part of retailers’ store innovations, according to ABI Research.

ABI predicts ESL revenues will increase sixfold to almost $2bn by 2019.

ESLs allows retailers to display consistent pricing across their channels and in-store updates to prices can be made at the same speed as online. According to the US National Retail Federation, Amazon changes its prices 2.5 million times daily, but even in stores like Walmart they only make around 50,000 price changes a month.

ESL means promotions can be rolled out in tandem with online offers, retailers can be more responsive, allowing consumers to benefit from promotions in near real-time. If consistent price is fundamental to building trust with consumers, this has got to be a good thing.

For all the focus on price, it’s value that is the real differentiator, according to Smith-Bingham. “You’ve got to be doing something that is targeted at your customers to drive trust but ultimately drives sales. If your proposition is simple enough you won’t need lots of technology to make it work. But the question is, how sustainable are the Lidl and Aldi propositions? As they want to be more personalised and more convenient, they will need technology to win.”

The challenge for retailers is how to add that value.

In many ways, what is playing out now is a continuation of past strategy by the retailers – just do things better.

Loyalty, promotions and customer relationship management (CRM) systems are helping grocery retailers to develop more effective personalised communications and marketing campaigns.

Dr Jeff Bray, Waitrose follow of retailing at Bournemouth University, actually reckons that big-data analytics hasn’t moved on much since the days of Tesco’s pioneering Clubcard, launched in the 1990s. “I don’t think there’s much opportunity for supermarkets to do things cleverer than they are already,’ he told us.

Meanwhile, there’s a feeling consumers are actually growing tired of the personal insight the supermarkets now have into our shopping habits, viewing it increasingly as intrusive. Exactly where limited line discounters have the edge over the Tescos of this world may well boil down to their relative simplicity. It’s not about one-off deals or tailored price promotions, just consistently low prices and a pared down proposition.

At the end of the day, mining the value of loyalty schemes matters more than crunching the numbers simply to adjust prices. Retailers know that and are therefore playing their technology cards close to their chests, should they tip their hand to the rivals and concede competitive advantage.

During the course of researching this piece, we approached all the major food retailers to talk about how they were using IT to fight the price and loyalty war. None agreed to play ball.

“Setting prices and making offers is not actually very clever,” Bray says. “The reality is that commercial income is driving decisions far more than clever algorithms that try to encourage people to spend more.” ®

More about

TIP US OFF

Send us news


Other stories you might like