Six tips on winning with data from the UK grocer that pioneered the loyalty card

ORLANDO — How far ahead of the data curve was UK-based grocer and retailer Tesco PLC? It had to wait until 1995 to implement its idea for a customer loyalty and discount card (and gather valuable customer information) because, before then, computing to receive and crunch all the resulting data hadn’t been invented.

Speaking to attendees at the SAS Institute-sponsored Premier Business Leadership conference, Terry Leahy, Tesco’s former CEO, shared a number of data-inspired management tips learned over the years as he sought to make Tesco a global competitor and change the organization’s culture to one that is data-driven.

Today, Tesco is a British multinational grocery and general merchandise retailer and the second largest retailer in the world, when measured by profits, after Wal-Mart. Leahy shared 10 management tips, but here are six of the key ones from his presentation. And all of the things that made a difference, said Leahy, were based in some way around the use of data.

1. Find the truth

This is difficult to do, said Leahy, because it’s difficult to know how the world sees you, or to see yourself as others see you, as Robbie Burns put it. And for a business, it’s even more difficult.

“It’s incredibly difficult to form a consensus of how the organization is seen, how it fits in its environment, how customers see it, how the environment around it is changing and how it impacts the business,” said Leahy. “Everyone has an opinion. How do you get to a common view?”

What’s more, Leahy said no one wants to limit their career by coming in and telling management all the things they’re doing wrong. So bad news gets suppressed and good news amplified. And by the time it gets to the heart of the organization, it’s become a fairytale.

“Customers are the most reliable guide,” said Leahy. “If you develop the ability to listen, people will tell you a story about their lives, what they’re interested in, the needs they have, and how you’re relevant to them as a business. That gives you an amazing ability to change, and respond to what you learn.”

And if you do it well, said Leahy, you build a relationship with the customer, and that’s the beginning of loyalty, and a unique competitive differentiation.

2. Set audacious goals

“People need to be inspired by an organization. People have to feel like what they’re doing at work really is important; that it’s worth putting their back into,” said Leahy.

At Tesco, he set bold goals for the organization – be the No. 1 choice in the UK, be as strong in non-food as food, invent services retailing, and become a leader in global retailing.

“Your data efforts need to be serving the big strategic objectives of the organization,” said Leahy.

3. Vision, values, and culture

“I found that the soft side of management (values, vision and culture) can be more important than the (financial and technical things) you learn in business school,” said Leahy. “Speak to the heart instead of the head.”

Data is important to take the pulse of the organization, said Leahy. Learn what motivates people, and what their objectives are.

“We can’t solve all your problems, but we’re going to try to understand and help,” said Leahy.

4. Follow the customers

Once he built an organization designed to take in customer data, learn about where they’re going and build an infrastructure nimble enough to evolve in order to follow them, Leahy said Tesco never had to look for growth again and consistently out-grew the market.

“If you can use research and data to really listen to what’s happening out there you have a chance to respond, and if you do that you can stay relevant to customers, and that’s the source of your growth,” said Leahy. “I put the organization as close as possible to our customers and their lives, and as they changed, we changed. It really was as simple as that.”

And the basis of that information was data, said Leahy, which allowed for a series of innovations that provided the products for growth. A key step was Tesco’s launch of the Club Card loyalty card and program in 1995. He said they couldn’t launch it earlier as computers weren’t powerful enough to gold the data.

“It allowed us to go from mass marketing to personal marketing,” said Leahy. “We knew who customers were and what they bought, and we invented new retail formats.”

For example, at the time he said the wisdom was that bigger was better for grocers and retailers. Everything you could need under one big roof. Bur customer data and research showed customers were getting busier, and they didn’t have time to drive to the big store and get everything they need.

“We thought we could miniaturize things and bring the store to them, so it saves them time,” said Leahy. “We developed a concept called Teso Express, and it became our most successful format.”

It’s not just a matter of gathering the data and making the right call though. Tesco also invested in organization and technology and a supply chain that allows it to quickly develop and implement new formats, so it can respond quickly to where the customer takes them.

Other data-driven changes? Inventory data isn’t batched; it goes right into the backend so than when a head of lettuce is sold at a store, a farmer gets word to pick more lettuce and it’s at the store the next day. And heat sensors at the store door know when more people are coming in, so that more cashiers can be ready to check them out when they’re done, reducing their wait time.

5. The steering wheel

Tesco developed a management dashboard called the steering wheel to drive senior managers in their decision-making. But as important as dash boarding and data can be, Leahy said it’s still important to be very thoughtful about what objectives are set, what’s important for the organization, and how you measure against those things. Skill must be brought to that to make it powerful.

“Data doesn’t automatically balance itself,” said Leahy. “You need to balance it so that one source of data doesn’t become like an overdeveloped muscle, and skew the progress and performance of the business.”

6. Leadership through data

“You have to lead through data. Data is the voice of your customer, and you have to bring that into the heart of the organization, where the decisions are really made,” said Leahy. “And in the end, that voice of the customer has to take primacy over what the CEO thinks.”

When companies get it wrong, even when they’ve invested in data, Leahy said it’s often because they haven’t rebuilt the decision-making process to make decision around that data, and change the culture to accept that it’s the most important thing.

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Jeff Jedras
Jeff Jedras
As an assistant editor at IT World Canada, Jeff Jedras contributes primarily to CDN and, covering the reseller channel and the small and medium-sized business space.

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