Coles and Woolworths collect a wealth of data on their customers
every day, pulling information from the FlyBuys and Woolworths
Rewards programs, their online stores, and partnerships with Qantas
and AGL. This gives them a massive database of Australians'
shopping habits to be sliced up, analysed, and used to target
individuals with personalised ads and deals. A recent report on
ABC's 7:30 program explored an innovative use for this data:
insurance and banking. As Penny Winn Woolworths Director of Group
Retail Services explained on the ABC:
'What we've been able to do is take our
insurer's car crash database and overlay it with our
Woolworth's Rewards database. I rarely see actuaries get
excited but they were very excited about what we found because it
was so statistically significant...'
'Because you see, customers who drink lots of
milk and eat lots of red meat are very, very, very good car
insurance risks versus those who eat lots of pasta and rice, fills
up their petrol at night, and drink spirits. What that means is
we're able to tailor an insurance offer that targets those
really good insurance risk customers and give them a good deal via
direct channels instead of above-the-line [advertising]. And it
helps to avoid the bad insurance risks.'
Applying the databases to finance opens a whole host of
possibilities. The data lets supermarkets filter out the safest
(perceived) customers and offer them insurance or credit cards,
while ignoring the high-risk – a potentially massive
competitive advantage. Traditional bank metrics like age, income
and credit history are useful but lack the depth of information
that someone's typical grocery spend or home energy usage might
The ACCC has highlighted the benefits to consumers –
personalised offers with potentially lower interest rates or
insurance premiums. Consumer rights groups such as Choice, on the
other hand, have flagged a range of privacy issues. How comfortable
would you feel if an unhealthy shopping list affected your ability
to obtain credit? Or if the purchase of, say, medicine or maternity
wear increased your insurance premium?
Richard Wormald, Coles' GM of Financial Services, told the
ABC's 7:30 Report that they don't yet change their
insurance premiums based on shopping habits, but noted '...as
technology changes, we will re-assess that'. But trends in
British supermarkets show that those technological changes will be
here sooner than you might think. The best example is Tesco, the
world's second-largest supermarket, and the undisputed champion
of innovative data use.
Through a frequent shopper program, online stores, and
partnerships with Coca-Cola and Macy's, Tesco collects
information on an estimated one billion shoppers, a database of
unprecedented scale. Tesco shoppers are categorised based on what
they buy, then sent
custom magazines full of targeted articles, ads and coupons.
The Economist noted that 'when a household starts buying
nappies, signalling the arrival of a new baby, Tesco usually sends
discount vouchers for beer, knowing that the new father will have
less opportunity to go to the pub.' Their petrol stations have
even introduced camera scanners that sense a customer's age and
gender, displaying the most effective ad on digital signs at the
Targeted marketing isn't new; KordaMentha Forensic has
helped companies apply data analytics to their customer retention
and pricing strategy, along with areas like fraud detection. What
is new are these supermarkets' data-driven forays into personal
finance. Through its subsidiaries like Tesco Bank, Tesco is
applying the same data-crunching ideas to personal insurance and
banking. For example, their 'Box' car insurance service
uses a telematic sensor installed in cars to assess customers'
driving ability, and adjusts premiums on renewal.
In May, marketing director Chris Pitt discussed Tesco's new
banking service on its corporate blog:
'Tesco serves tens of millions of customers every week. We
have 17 million Clubcard customers. We understand how people shop,
how they live, the pressures and the perks... Does that sound like
a good basis for a bank?'
And they're not slowing down – in April, Tesco
acquired data analytics and social media firm Sociomantic for an
estimated GBP 175 to 200 million. Meanwhile back in Australia,
Woolworths have purchased a 50% stake in local data firm Quantium
for AUD 20 million, suggesting the Australian giants are looking to
follow Tesco's lead. Watch this space!
The ramifications of Apple's mistake were relatively minor, but examples of the power of metadata may be far less trivial.
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