During his 13-year tenure, Sir Terry Leahy grew Tesco’s market share from 20 to 30% to become Britain’s biggest supermarket, as well as building the company’s ecommerce offering Tesco.com, which remains the biggest online food business today. No longer at Tesco, the Liverpudlian is now kept busy with his portfolio of private investment, using his experience at the helm of Britain’s biggest food retailer to fund and mentor start-ups that typically tend to have some intellectual property, including mobile commerce solutions provider Eagle Eye and online retailer The Hut.
Perhaps inexplicably linked to his investments in the ecommerce space, Leahy recently told MyCustomer.com of the importance of a data-driven strategy at a time when many high street retailers such as Comet, Blockbusters and Woolworths have gone to the wall. “The key is to use data to better manage the supply chain and operating systems but also to understand customers in a way that can create more relevant benefit for the customer. By doing so, customers will create loyalty, and from that comes more spend and more profitable spend. That’s the economics of data,” he said at IBM’s Smarter Commerce event in Monaco.
Leahy explains that retailers can understand customers’ wants and needs, as well as keep an eye on competitors, by using research that relies on bigger samples of data, preferably in real-time, in order to improve efficiency and create a window into the outside world that illuminates what’s in front of you. Failure to do so will leave your business flying blind, he warned.
“In the old days you used to see a problem in the real world and respond to it in a reactive way, nowadays you have to have the ability to gather data to analyse, plan the systemic response and to implement that. So you need to have this ability to analyse and act.
“The challenge for the moment is that the theory is known but it's not being practically applied so there are relatively few examples of genuinely multichannel customer engagement. There are practical problems in getting old systems to work on new platforms and so that's a lot of the work that companies have got to get through but if you keep focused on how that will benefit customers and therefore benefit you, it provides a lot of momentum and motivation to push through that difficult systems development.”
Leahy admits that making those changes internally is not the easiest of tasks, however. He advises that data-driven leaders can advocate this approach in two ways: one is by articulating more clearly the purpose of the organisation which is to create benefit for customers. Second, and what follows on from that, is that if you bring the voice of the customer (VoC) into the organisation everybody's likely to listen, the VoC is more persuasive than the CEO's voice or what the middle managers think, he says.
“It's a very compelling idea that the business is directed by its customers. And you need the senior leadership team to be truly committed to the idea of running the business for customers. The acid test is in whenever you have to make a choice (which is a lot) between the interest of the business and the interests of the customer, how often do you choose the customer?
“Everyone in the organisation will notice that and if you start choosing the customer, they will start choosing the customer. The top of the organisation needs to spend time with data; they spend too much time in meetings discussing things which are less important.”
Had more top-line retail execs taken this data-driven approach, would the British high street be witnessing fewer closures? Leahy believes that this is potentially true for specific sectors such as electronic goods and books and entertainment where there’s been a very fast move online.
“Mobile marketing has become terribly important,” he says. “As you get this data about customers from digital marketing you can respond instantly in terms of where they are, what they're interested in. The friction costs of first gathering data and then deciding what to do with that are much less than in the old days when it took ages to go to the print department or book advertising space based on your data.”
To illustrate, Leahy points to Tesco’s Clubcard loyalty scheme, implemented by Leahy himself back in 1995 and now considered a case study in innovative marketing after it provided the supermarket with invaluable insight into customer shopping patterns and behaviour. To evolve with the emergence of mobile marketing, Leahy created a partnership between the retailer and Eagle Eye, a mobile marketing platform provider in which he now invests, that transformed the Clubcard reward vouchers from paper to digital, doing so almost completely in just three months.
The future of retail
So how does Leahy envisage retail will progress further and what effect will disruptive technologies such as mobile have on the traditional British high street? “There will be a high street but it won’t be as we know it,” he said.
“There’ll probably be more residential things like opticians, nail bars, hairdressers and so on. There'll be a lot of stores of different types such as virtual stores that use displays you can transact with, as well as click and collect for online. And food will be there because it's hard to see food move all online so there’ll be lots of eating places. Mostly, the high street will need to be attractive because people will only spend time on things that are engaging and attractive
And given the recent rise of the omnichannel shopper – or ‘the ubiquitous shopper’ as Leahy described them – how can retailers use data to serve customers not just through multiple channels but across channels?
“The best way is to be able to engage, if you can, the individual consumer and to use two-way information to maintain the relationship,” he said. “You’re only going to do that if the business is useful and so you have to work out how your knowledge of the customer allows you to be useful and then you'll be useful in multiple channels.
“For the consumer, online and offline becomes invisible, they’re just interested in the needs they have and whether you as a brand can help or not and they almost won’t notice how you do that. Whether it's via mobile, on the computer, a virtual display or a real store, they want you to be ubiquitous but under their control so that if they need you they can use you. And that's where a lot of companies are falling down,” he said.