Coles sends me emails advertising cat food. I have a dog.
OK, I can’t specifically recall an ad for cat food but that’s what the experience feels like.
You see I don’t bother to look at the Coles spam much anymore because it is of no relevance for me. I did happen to glance at last week’s offering though – a special on women’s wear at KMart.
In all the data Coles collects on me via its Flybuys loyalty scheme, you might well wonder what makes Coles think I’d be in the target market for KMart women’s wear. I’d be more likely to buy cat food – some of those sardine dishes look quite tasty.
The reason for the women’s wear offer is that Coles is not thinking. Woolworths is.
Woolworths CEO Brad Banducci and various analysts were a little short on detail while explaining how the company outperformed Coles on first-quarter sales. It wasn’t just a matter of spending $1 billion on cutting prices and “customer service” – it was thinking about what it knows.
Both major supermarket chains run loyalty schemes that collect massive amounts of data about their customers. But there’s no point collecting the terabytes unless intelligence is applied to its meaning.
Coles appears to tell me about stuff it’s desperate to get rid of. The emails I receive from Woolworths tell me about stuff that I want to buy. When there’s a deal on Carman’s Original Fruit Free Muesli or Black Swan Yoghurt, I’m in there – and loading the basket with all the other stuff I need or want while I’m at it.
Four years ago, Woolworths paid $20 million for a 50 per cent stake in data analytics company Quantium.
The AFR last year reported Quantium was worth $400 million or so – but the value to Woolworths is considerably more than that. Quantium is a local leader in making sense of Big Data, in getting Woolworths to engage me. It’s working.
There’s no secret about what Quantium is doing for Woolworths. A video on the Quantium website explains how the “personalisation engine” works and claims that the result is customers are five times more likely to purchase product than would be the case with standard marketing.
Woolworths’ comparable food sales grew by a very sharp 4.9 per cent in the latest quarter, while Coles’ sales were effectively flat, up just 0.3 per cent.
“Coles appears to tell me about stuff it’s desperate to get rid of. The emails I receive from Woolworths tell me about stuff that I want to buy.”
Of course there’s much more than customer emails behind a jump like that – the offer has to be right, the store attractive, the goods on the shelf. But it sounds to me like greater engagement is what was behind Banducci’s comments on building sales.
“One of the areas we’ve been struggling in … has been the big-basket family,” he said. “We’ve been very focused on that customer and slowly we’re starting to get a few more of them into our stores.
“It’s still very early days – I’d hardly declare victory, but we’re starting to see some movement, which is pleasing.”
If Coles is worried about that “movement” – and it will be – it should be much more worried about what’s coming next.
A Quantium metric for the effectiveness of Woolworths’ “personalised communications” is a 24 per cent increase in customer engagement – how satisfied customers are with the communications they are receiving. It’s generating hundreds of millions of dollars in incremental sales.
That’s pretty damned good – but it’s not the best.
Amazon is the gold standard in using its customers’ data, in offering customers what they want to buy even before the customers might know it. Some 30 per cent of Amazon’s sales are estimated to come from Amazon’s recommendations to customers. Quantium and Woolworths have that statistic in mind.
Coles? Well, maybe if it were a can that combined sardines and anchovies, that could be worth trying.
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