Saturday 1 May 2010

Tesco says "Good day number Six" (or 7, 8, 9...)


So Tesco is moving into housebuilding - looking to develop four mini-villages in the South East, having already constructed flats next to stores in Clapham and Kensington.

Discussed in a recent news article in the Grocer, it talked of how Tesco is looking to diversify beyond retail. However I'm gonna go out on a limb here and suggest that these developments might just include one or two shops and I'm betting they have a Tesco brand above the door.

This does seem like a reversal of how things used to be.

In times gone by, companies like Cadburys would build villages to support their workers - with the beautiful village of Bournville being one such example. This allowed the company to ensure it's workforce was well looked after but also close by.

Fast forward 100 years and now it seems Tesco is building towns around it's stores to support it's customers. A ready supply of customers for their whole value chain, from the bricks and mortar houses, to the mortgage to pay for them, the Tesco Direct table and chairs to go in it and the food and drink to eat at it. When you throw in the clothes that they wear, the fuel in their cars and the life insurance in case the worst happens you've pretty much got cradle to grave coverage.

It's not just Tesco though looking for a greater slice of us.

Facebook is another brand that just seems to get closer and closer to it's end users. Its new Social Plugins functionality including the "Like" button takes Facebook (and all your friends) directly into a retailers e-commerce site. Allowing you to "like" products which your friends can see as well as seeing products that they like.

As this expands, Facebook will be building a wealth of information not only on the brands you like but the individual products, allowing advertising to be increasingly targeted and covering an ever growing slice of our online activities. As Mike Murphy, Vice President of Global Sales at Facebook says:-

If I’m Coca-Cola and if I have a Like button on my landing page, my site, and on Facebook, I’m looking to collect as many Likes as possible because it gives me the ability to publish into the news feeds. It also gives me the ability to use that influence on friends of friends on Facebook and makes them more likely to engage with my ads.

You only need to look at Yahoo Consumer Direct - which in the US joined offline purchase behaviour with online advertising - to see what an additional data overlay like that can bring to advertising effectiveness. On the Yahoo website it describes how well it worked saying:-

In an analysis of Yahoo! Consumer Direct versus non-Yahoo! Consumer Direct campaigns, Nielsen reported the average Yahoo! Consumer Direct campaign generated 50% greater short-term sales per impression than the average non-Yahoo! campaign measured by Nielsen. For a 60 million impression campaign, that translates to an incremental $300,000 in short term sales.

Not all brands or sectors are being quite so successful at getting closer to their customers though- with some almost seemingly in reverse.

The balance of power within insurance for example has shifted more to the comparison sites and away from the individual brands who actually serve the customer.

This is not through a lack of data though - this sector knows very well who their customers are, they have simply failed to build and develop direct relationships with them, focusing instead on acquisition and in the process losing the right to have an ongoing conversation.

This is also becoming increasingly difficult for online retailers, with a rise in affiliate marketing of 38.2% in 2009 meaning that the initial purchase decision is increasingly being pulled away from the retailer - and with it the customer relationship.

Relationships are key to long term, profitable success and if you don't know who your customers are and/or simply let someone else build up a stronger relationship with them then you end up losing the balance of power.

This doesn't mean taking the Tesco approach and looking to service literally all their needs, but it does mean adding value to the product or service you sell. Recognising and interacting with the customer before, during and after purchase so you remain front of mind and squeeze out the middle man.

Failing that, build your dedicated customer community quite literally as Tesco seem to be doing and cut out the middle man. However I suspect it will be quicker and easier to simply build better relationships rather than build new housing estates.