C&B Notes

Follow the Customer

Tailored website offerings enabled by increasingly complex data collection and analysis are enhancing online experiences for consumers and driving revenues for businesses.  Orbitz.com is using a seemingly nondescript datum to price discriminate against their wealthier customers.

Orbitz Worldwide Inc. has found that people who use Apple Inc.’s Mac computers spend as much as 30% more a night on hotels, so the online travel agency is starting to show them different, and sometimes costlier, travel options than Windows visitors see.

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Orbitz found Mac users on average spend $20 to $30 more a night on hotels than their PC counterparts, a significant margin given the site’s average nightly hotel booking is around $100, chief scientist Wai Gen Yee said.  Mac users are 40% more likely to book a four- or five-star hotel than PC users, Mr. Yee said, and when Mac and PC users book the same hotel, Mac users tend to stay in more expensive rooms.   “We had the intuition, and we were able to confirm it based on the data,” Orbitz Chief Technology Officer Roger Liew said.

The sort of targeting undertaken by Orbitz is likely to become more commonplace as online retailers scramble to identify new ways in which people’s browsing data can be used to boost online sales.  Orbitz lost $37 million in 2011 and its stock has fallen by more than 74% since its 2007 IPO.  The effort underscores how retailers are becoming bigger users of so-called predictive analytics, crunching reams of data to guess the future shopping habits of customers.  The goal is to tailor offerings to people believed to have the highest “lifetime value” to the retailer.

In another example, Tesco is marrying the collected data from its Clubcard loyalty program with online customer identification to personalize its website for individual visitors.  From a recent speech by CEO Philip Clarke entitled “Follow the Customer or Die”:

“Think back a generation, to the 1980s, when I began my career in retailing.  Many retailers would know their customers individually.  Some customers you would know by name.  Others you’d know well enough to give a friendly smile and ask “how are you today?”  And you could do this for a very simple reason: you would see the customer.

This relationship between retailer and customer had not really changed from the dawn of trade.  We were still in the era of the individual.  If you knew and understood each of your customers inside out, you could give them what they wanted.  By doing that, you could earn the most important thing of all: customers’ loyalty — the all important ingredient of successful retailing.  Loyal customers are the most precious asset any company can have.  A loyal customer is one that returns to shop with you time and again, enabling the retailer to invest, grow, innovate.  But to win that loyalty, a retailer has to reward the customer.

Tesco realized the importance of loyalty almost 20 years ago, when we took a step that would transform retailing, by creating Clubcard.  Thanks to the bar code and computers, we could gather mountains of data about what products each of our customers was buying.  By analyzing it, we could personalize our offer, giving customers offers and incentives to shop with us.  For example, if someone started buying nappies, we could offer them the things you need for a young baby.  It was a way of saying “thank you”, of showing we cared, and we valued their loyalty to us.

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Clubcard remains a critical building block in our plans.  Clubcard gives us data.  Data about food is more insightful than any other kind of data: you are what you eat.  But now we’re turning Clubcard digital, correlating the data we have about what food people buy with sources of data — social networking data, mobile phone data, payment methods — so we can get to know our customers better still, and use that understanding to deliver an even more personalized offer.

For example, we’re now making changes to our UK website to highlight promotions that are relevant to the customer who is browsing the site.  Using Clubcard data, we would show, for example, offers of our Everyday Value range to price sensitive customers, and offers of our Finest range to more upmarket customers.”

* A recent piece from The Economist also discusses this issue and sums up the issue with it’s title: Caveat Emptor.com.