If a Product is Free, are you the Product? Part 2
A while ago, I wrote a post about how our use of social media can be advantageous in finding us special deals, helping us contact friends and find new jobs. In this post, I wanted to look at the other side of the coin. Namely, what do the companies offering us these free services and special deals get out of it?
To start, let's look at one of the obvious and less technical uses of data products: Grocery Shopping!
Shopping
While this may seem rather simplistic, the use of shopping data linked to a loyalty card has been the clearest example of the power of data in creating strong product propositions. While many will talk about the potential of Facebook and Twitter (I'll come onto this in the future); the loyalty card has proven to be the best promotional tool available.
So, we know that our shopping habits are collected when we use our Clubcard (Tesco), Advantage card (Boots) or our Costa Coffee card. The shopping habits of consumers have been tracked by supermarkets since electronic PoS (Point of Sale) and computerised stock controlled systems were introduced in the 1980s. The humble barcode changed the game for supermarkets.
This made it possible for companies to track what was being bought in which stores (and when) so they could make sure that the right products were always on the shelf. After a while they also noticed that they could link this to predictions of what would be needed in the future.
Some good examples of this are stocking more burgers and ice creams if the weather forecast is good or stocking extra cranberries if a popular TV chef is about to make a nice looking recipe (this actually happened!).
Now, today, we all carry around a Clubcard or Nectar card when we go shopping. It means that we can collect points for discounts, get special deal vouchers and so on. However, how do the supermarket get something out of this?
Making data pay for the Supermarkets
As I mentioned before, using the data collected from store cards is a nice way to track general stock levels but this doesn't need our personal data to do this. The real use for supermarkets is creating brand loyalty and encouraging further sales to you of not just their own products, but those of 'carefully chosen partners'.
Repeat Business
If you have a loyalty card with Tesco and have ever used their website for shopping as well as their stores, you may notice something clever / scary (delete as appropriate). Your normal purchases are already in your Favourites, even if you've never shopped online before.
This means that your day to day shopping habits are being recorded by Tesco to enable them to make it easier to shop on their website. This is good for you but even better for Tesco.
By knowing the products you like and when you buy them (for example, you may only buy luxury items once a month after pay day) they can market alternatives to you as special offers to get you to switch to a higher margin brand (possibly one of their own).
You'll also get this kind of thing through the post each month with your clubcard statement. In fact, Tesco send out approximately 3 million personalised marketing emails each month. By personalised, I mean that the content is actually tailored to suit a particular customer with certain offers shown and others suppressed.
This is really clever stuff. Tesco have gone as far as selling their clubcard data back to their own suppliers to help them plan independent marketing activity. For example, a sausage supplier sees that people in Lancashire buy an opposing brand: why not push your own brand with an offer in Tesco stores and local billboards or newspaper adverts to change that situation?
Tesco have turned something that they generate as part of their normal business (but which isn't the reason for their business) into a revenue making and saving tool. This is known as Data Exhaust and is a way that many clever companies are using your data (with or without the personal bits) to make extra money without having to ask you for it.
Sainsbury's and others are doing similar things with Nectar card vouchers printed at the checkout and the use of the Nectar card in different retailers helping to give those companies (and their partners) an idea of what to market to whom and when to market it.
You can buy flights, paint, groceries, petrol, electricity and insurance with your Nectar card. If you book a holiday with one Nectar partner, what's the bet that another could offer you cheap holiday insurance or reduced price sun cream soon after? If this isn't happening already, then I predict it will be! By the way Nectar, if you'd like to buy this idea off me, let me know..!
In the future, the alignment of the big supermarkets with new services such as utilities, banking, medical care and so on will make them even more powerful in shaping our buying habits with them and using our data to help their partners make even more money from us. While this marketing technique isn't that new, some of the methods and technologies involved really are! In a few years, we'll all be paying at the till using our NFC-enabled phones (the chip technology in an Oyster or pay and wave debit card) which link into our loyalty card account.
In theory, you could pay for each item as you pick it up in a more advanced version of the Waitrose self scan technology and your movements around a shop could be used to further hone the very clever methods used today to draw you to certain offers as you browse. With everything from bananas to TVs having an NFC chip on their price label, this is an exciting time for retailers and marketers; without even considering the power of live adverts pumped to your smartphone as you shop depending on your location and previous habits. Scary huh!?
I want to try and keep these blog posts short and sweet (and drag out the fun for as long as I can). So while I've given a brief overview of some of the clever ways supermarkets use data as a product today and could do even more in the future, I want to move onto one of the other areas mentioned in Part 1 in a future entry.
Stay tuned!
To start, let's look at one of the obvious and less technical uses of data products: Grocery Shopping!
Shopping
While this may seem rather simplistic, the use of shopping data linked to a loyalty card has been the clearest example of the power of data in creating strong product propositions. While many will talk about the potential of Facebook and Twitter (I'll come onto this in the future); the loyalty card has proven to be the best promotional tool available.
So, we know that our shopping habits are collected when we use our Clubcard (Tesco), Advantage card (Boots) or our Costa Coffee card. The shopping habits of consumers have been tracked by supermarkets since electronic PoS (Point of Sale) and computerised stock controlled systems were introduced in the 1980s. The humble barcode changed the game for supermarkets.
This made it possible for companies to track what was being bought in which stores (and when) so they could make sure that the right products were always on the shelf. After a while they also noticed that they could link this to predictions of what would be needed in the future.
Some good examples of this are stocking more burgers and ice creams if the weather forecast is good or stocking extra cranberries if a popular TV chef is about to make a nice looking recipe (this actually happened!).
Now, today, we all carry around a Clubcard or Nectar card when we go shopping. It means that we can collect points for discounts, get special deal vouchers and so on. However, how do the supermarket get something out of this?
Making data pay for the Supermarkets
As I mentioned before, using the data collected from store cards is a nice way to track general stock levels but this doesn't need our personal data to do this. The real use for supermarkets is creating brand loyalty and encouraging further sales to you of not just their own products, but those of 'carefully chosen partners'.
Repeat Business
If you have a loyalty card with Tesco and have ever used their website for shopping as well as their stores, you may notice something clever / scary (delete as appropriate). Your normal purchases are already in your Favourites, even if you've never shopped online before.
This means that your day to day shopping habits are being recorded by Tesco to enable them to make it easier to shop on their website. This is good for you but even better for Tesco.
By knowing the products you like and when you buy them (for example, you may only buy luxury items once a month after pay day) they can market alternatives to you as special offers to get you to switch to a higher margin brand (possibly one of their own).
You'll also get this kind of thing through the post each month with your clubcard statement. In fact, Tesco send out approximately 3 million personalised marketing emails each month. By personalised, I mean that the content is actually tailored to suit a particular customer with certain offers shown and others suppressed.
This is really clever stuff. Tesco have gone as far as selling their clubcard data back to their own suppliers to help them plan independent marketing activity. For example, a sausage supplier sees that people in Lancashire buy an opposing brand: why not push your own brand with an offer in Tesco stores and local billboards or newspaper adverts to change that situation?
Tesco have turned something that they generate as part of their normal business (but which isn't the reason for their business) into a revenue making and saving tool. This is known as Data Exhaust and is a way that many clever companies are using your data (with or without the personal bits) to make extra money without having to ask you for it.
Sainsbury's and others are doing similar things with Nectar card vouchers printed at the checkout and the use of the Nectar card in different retailers helping to give those companies (and their partners) an idea of what to market to whom and when to market it.
You can buy flights, paint, groceries, petrol, electricity and insurance with your Nectar card. If you book a holiday with one Nectar partner, what's the bet that another could offer you cheap holiday insurance or reduced price sun cream soon after? If this isn't happening already, then I predict it will be! By the way Nectar, if you'd like to buy this idea off me, let me know..!
In the future, the alignment of the big supermarkets with new services such as utilities, banking, medical care and so on will make them even more powerful in shaping our buying habits with them and using our data to help their partners make even more money from us. While this marketing technique isn't that new, some of the methods and technologies involved really are! In a few years, we'll all be paying at the till using our NFC-enabled phones (the chip technology in an Oyster or pay and wave debit card) which link into our loyalty card account.
In theory, you could pay for each item as you pick it up in a more advanced version of the Waitrose self scan technology and your movements around a shop could be used to further hone the very clever methods used today to draw you to certain offers as you browse. With everything from bananas to TVs having an NFC chip on their price label, this is an exciting time for retailers and marketers; without even considering the power of live adverts pumped to your smartphone as you shop depending on your location and previous habits. Scary huh!?
I want to try and keep these blog posts short and sweet (and drag out the fun for as long as I can). So while I've given a brief overview of some of the clever ways supermarkets use data as a product today and could do even more in the future, I want to move onto one of the other areas mentioned in Part 1 in a future entry.
Stay tuned!
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