Goldfish, it is said, have only a four second memory and so do some retailers ­ despite vast reserves of loyalty card data. But the internet will make it much easier for all staff to have full consumer histories always at hand. Claire Murphy explains how Hello?" "Ah, hello Madam, I'm calling from Tesco. We've noticed you buy Always sanitary towels, but having checked your shopping records I see that you haven't bought them for a couple of months. Can I interest you in a special offer we're running at the moment on pregnancy testing kits?" Probably not a call Tesco would contemplate unless it wanted to hit the front page of The Sun for all the wrong reasons. But loyalty card data collected by the major supermarkets should allow them to have at least this level of knowledge about their customers. In the five years since Tesco has been running its Clubcard, it must have amassed enough knowledge of some customers' preferences and habits to know them better than their own mothers. However, there is a great difference between collecting data, and processing and actually using it. Although Tesco issues customised coupons with its quarterly mailings to Clubcard holders, there has been a growing sense among retail industry insiders that much of this information was going to waste. Sainsbury has yet to follow its rival down the personalised voucher route, Asda prefers to use its marketing money to reduce prices, while Safeway has now pulled out of the loyalty card business altogether. There are three main reasons why three of the big four have shied away from effective, individualised customer communication. Firstly, cost. Safeway confirmed to The Grocer that "while we could get any amount of information from the ABC cards, it was very expensive to work out useful data from it. We decided that the cost was not worthwhile." Secondly, although it has been proved to be a valuable way of increasing sales, many in supermarket management still view the use of customer data with suspicion. "It's not seen as strategic," says Edwina Dunn, chief executive of Tesco's database management agency Dunn Humby Associates. "Although Tesco is now convinced of its value, data analysis has historically been viewed as akin to direct marketing, which in turn is seen as shifting leftover products." But thirdly, and potentially most significantly, once a retailer elects to create a two-way exchange with customers, it opens up a Pandora's box of problems which can ultimately destroy loyalty rather than increase it. A customer may be offered a special deal, tailored to them, by post. They may then ring the supermarket's call centre to see if they can use the coupon to buy another variety of the product. Or they may go to the supermarket's online shopping site and attempt to redeem the coupon there. They may even approach an assistant in a store, asking for more information on the offer. But unless the retailer has installed a database system comprehensive enough to cope with every channel that the customer can use to interact with the store, problems will occur. It's the classic difficulty, experienced by virtually any company large enough to have developed departmental fiefdoms, of one corporate arm not knowing what the other is doing. The solution, in the jargon of the marketers, is embracing multi-channel CRM (customer relationship marketing). "Customers are always going to use the channel which is most convenient to them," explains Dave O'Connor, head of solutions in the consumer business unit at software firm Oracle. "And they have a right to expect to be able to restart the conversation wherever they left it off, whether that was via the web site, by post, or to a call centre operator, without having to start from scratch every time. "If I as a customer apply for a new account on your web site, but when I ring the call centre to add some details soon afterwards nothing is known about my application, I would feel frustrated. "It is like every time you see a friend, reminding him or her what you told them last time. People we have good relationships with know what we like. They remember past conversations and what we had planned to do between when we last spoke and now. They can therefore ask what I thought of the film last night, how my daughter's birthday party went at the weekend or if my back is feeling better? How can you have a meaningful relationship with a complete amnesiac?" Although the internet has opened up more channels, creating a more complex web of channels for retailers to juggle, it also partly offers the solution to corporate amnesia. For although data has proved tough and costly to manipulate via the loyalty card, it has now proved cheaper and simpler to use on the internet. Online retailers, Amazon being the best example, have excelled in the practice of quickly absorbing customer preferences, turning it swiftly around. Customers have only to use the Amazon web site a few times before the site greets them by name and guides them through a list of spookily relevant books and videos, derived from what they have bought, or searched for, in the past. This level of interactivity is now open to retailers investing in their online home shopping operations. Ironically, the investment also offers the opportunity to spread a more sophisticated, CRM-inspired, computer system through a company. This, is turn, will increase the effectiveness of the retailer's customer communications through other channels. No surprises, therefore, that Tesco is ahead on both fronts. Its investment in its internet based home shopping operation has been developed in parallel with its moves to stay ahead of the game in using its Clubcard data. This autumn it will start making Amazon-style real-time personal recommendations to its online shoppers. This is exactly the same principle as working out which offers to send to customers in its quarterly mailings, except that online the process happens immediately. Having reached one million online customers has made it financially feasible for Tesco to invest in this technology. Its partner in this venture is Net Perceptions, the US owned company that installed Amazon's system. Nigel Abbott, Net Perceptions territory account manager in the UK, claims that using his company's software can raise sales by around 20%, as well as encouraging customers to visit the online store more often. So if it's that beneficial, why isn't everyone upgrading their computer systems so that every part of the organisation shares a giant customer database, fed by the online recommendations? Cost, as ever, pops up again. The initial investment in the technology is not small, and in a fiercely competitive market, shareholders hold retail directors accountable for every penny of outlay. There is also the matter that supermarkets, unlike other sectors, have not until recently had to rely heavily on technology for anything other than ordering systems. "The industries currently showing the best use of customer intelligence are banking and telecoms," says Ray Welsh, director of product and market strategy for marketing software company Xchange. Both have had to install sophisticated computer systems to run their entire operations. Supermarket retailers, however, have been investing in giant stores, which has effectively taken them further away from individual customers." But resistance goes beyond mere cost and tradition. Abbott believes that the politics within retailer organisations can hamper development. "Historically this has always been something that the IT department has dealt with, and they can lack the overall appreciation of business which would help them see the benefits. They're most likely to say Oh, don't bring me yet another piece of kit that is going to add to my problems'. "Top management can see the effect on the bottom line, but the IT department will be charged with implementing it." Abbott adds that Tesco has become the exception to this rule, principally because it has installed people running its home shopping operation who have both technical and business expertise. Sainsbury, meanwhile, has outsourced its IT management to Andersen Consulting. "The age and complexity of our current systems are hampering our ambitions for e-commerce," says chief executive Sir Peter Davis. "Through Andersen Consulting we have identified a platform that gets us where we want to be and fast." Yet fighting the ivory tower of the IT department may not be the only cultural battle for a manager keen to bring in an all embracing computer system. There may be a much harder battle to change the culture of an organisation that believes only the marketing department needs to bother about what customers do and think. O'Connor believes that the grocery sector has been particularly slow to recognise the benefits of taking a more strategic approach to communicating with customers. "They are starting to change, but the attitude has generally been one of securing products at the best possible price, putting them on the shelves and then waiting for them to be sold." Banner McBride, part of the WPP group, has worked with retailers including Tesco and Woolworths to help their front line staff buy into the idea of providing top quality customer service. Senior consultant Cliff Ettridge thinks that convincing every person in an organisation to think smartly about customers is difficult for supermarkets. "They are often not in a position to pay top whack for shop floor staff, so cannot rely on then being highly motivated. Also, many employees will be part-timers just looking for extra cash rather than a career. They won't be prepared to go that extra mile for their employer." The solution to this problem, adds Ettridge, is to convince people that they stand to gain personally by thinking harder about customer service: "You can show them that they will feel better as human beings if they give a higher standard of service." Ultimately, thinks Dunn, grocery retailers have a straight choice between increasing the quality of their interaction with individual customers, or choosing to focus on low prices, Asda-style. But if they set their targets high and pick the former, they are going to have to start facing up to some tough calculations. Because neither the technology, nor the expertise to make the necessary changes in culture, come cheap. {{FEATURES }}