Personalisation: does this mean more efficient marketing and the end of junk mail?

In 1973, British households were spellbound by a TV ad from Cadbury's. It featured a family of aliens, the Smash Martians, who laughed at the thought of Earth people preparing their own mashed potatoes rather than using convenience food Smash.

In a future world flooded with data, and customer-centric companies which shape strategy around consumer insights, there may be similar amusement at the way we do marketing now.

Imagine sending the same piece of mail to millions of customers when only 1 per cent will open it. Fancy broadcasting an identical ad to millions of TV viewers when most won't be interested in buying your product and the rest might not be watching.

Cast your mind back to a time when your local supermarket knew nothing about your shopping habits and treated you the same as everyone else.

KROGER'S HEALTH CHECK

In the US, Kroger is using data to protect its customers from potential health threats. Since 2008, the US retailer has been identifying and contacting customers who purchased products that were later recalled. Dozens of people have called Kroger to thank them, saying they feel grateful that their purchases are tracked to protect them.

The daughter of a Kroger customer had been hospitalised with an undiagnosed illness, with medical treatments making little progress. Then her mother's attention was called to a product recall message on her receipt by a Kroger cashier. Doctors quickly focused on treating a food-borne illness and the daughter recovered.

In the future, shopping trolleys could come complete with a small TV screen near the handle. These trolleys would make the shopping trip easier – helping customers navigate around the store, highlighting to them if they're buying products with saturated fat or fatty acids, or helping them shop to a budget. They could even broadcast a video of the shopper's children playing in the supermarket crèche.

A similar application could be downloaded on an iPhone or BlackBerry. Tesco.com's customers already store their shopping list online and can use it while they shop in store.

Similarly, Tesco collects detailed information on the sources of its ingredients and this information could be provided through the mobile application for shoppers wanting to know more about a particular product before purchase.

MAGIC MONEY

At the moment, retailers collect customer data on loyalty cards. These have evolved in time; both Tesco and Kroger also offers customers key fobs that conveniently slip on to their key ring, but developments in south-east Asia hint at how methods for payment and loyalty cards might evolve.

In technologically advanced markets such as Japan and South Korea, consumers are already able to pay for items using their mobile phones. Their mobile devices act in a similar way to the Oyster cards that London commuters use for travel. They can be loaded up with money and then used as payment tools.

In time consumers will be able to set up their loyalty card as a platform on their mobile, in the same way that they might set up an Oyster card application.

Of course this will have implications for the swell of customer data. It means that even impulse and convenience purchases – from chewing gum to a chocolate bar, can of drink or a newspaper – can also be tracked.

In late 2007 a consortium of companies including O2, Nokia, Visa and Transport for London began a six-month trial of mobile phones with built-in Oyster card functionality in the UK. Why bother carrying around different credit cards, debit cards, not to mention different loyalty cards, if one device could do it all?

And if it's not our mobile phone, it's likely that a similar Oyster card method will become more popular as a payment method. In the UK, Barclays Bank is already experimenting with contactless 'wave and pay' credit and debit cards. The Barclaycard OnePulse card can be used for purchases under £10, meaning consumers won't need to remember their PIN or dig around for small change, just wave their card over a device.

The 'wave and pay' method could revolutionise the way we shop. If products have RFID (radio frequency identification) price tags then a future shopper, who has opted in to this service, could wander around a store, collect their groceries and walk straight out, knowing that their bill will be debited automatically from their mobile phone or Oyster-style payment card.

BIOMETRICS REACH UNBANKED

US supermarket Piggly Wiggly has launched a loyalty card based on a customer's thumbprint. Meanwhile, in India, banks are examining whether biometric ATMs could help to reach the unbanked population in rural areas. Using thumbprint and voice would make it possible for illiterate citizens to join the banking system.

A likely scenario describes how consumers will choose the level of security they require for different payments.

For example, small purchases under £10 will simply require a 'wave and pay' from their mobile device, £10-£100 purchases will need a fingerprint scan, spending more than £100 might require the confirmation of identity through a digital photograph, while a very large purchase would need the strictest security checks such as a combination of PIN and biometrics.

ELECTRONIC FOOTPRINTS

We're only at the beginning of the process where everything we consume, whether it be goods, services, entertainment or finances, will create a digital trail. Once you've got a digital trail, you've got data. Once you've got data, you have the basis for insight.

A day in the life of an electronic footprint includes being traced by number-plate recognition cameras while driving to work. Speed cameras will spot you on busy roads, your location will be transmitted from your phone to your mobile network operator, purchases will be logged by your bank, internet searches, social network updating will all be providing data. And this is just the beginning.

SOCIAL LIVES

The rise of social networking through websites such as Facebook, MySpace and Bebo has caused some concern about the amount of personal information, young people, especially, broadcast to the worldwide web.

A report by the Information Commissioner's Office in 2007 warned young people against broadcasting too loudly. Its research discovered that 1 in 10 young people puts their home address on social networking sites and 60 per cent post their date of birth.

So what does the Facebook generation think about customer data? It's difficult to say, but it certainly seems as if they are willing to strike a contract with companies. In return for receiving 'something' of value, they are prepared to sacrifice personal information.

For example, Google's email users are prepared to tolerate targeted advertising surrounding their inbox in return for a free email service with unlimited memory space.

Similarly, the 16 to 24-year-old customers of Blyk, a new mobile network, are prepared to receive three to four personalised ads a day on their mobile in return for a free service. The ad-funded mobile network has more than 100,000 users and Blyk says its users don't find the ads irritating because they're so targeted.

However, most social networkers are arguably not aware of the commercial undercurrent of peer-to-peer websites such as Facebook, which are under increasing pressure to generate revenues. This became clear in 2007 when Facebook launched a controversial ad system called Beacon that broadcast its users' web behaviour to his or her 'friends' even when they were outside the social network. Privacy groups and Facebook users were outraged and the social network was forced to climb down.

In the future, businesses will be expected to be transparent about the way they use their customer data.

TALK TO TALK

Customer data has never before reached such a revolutionary, step-changing scale. Today, dunnhumby analyses the shopping behaviour of 200 million households, a huge number that is swiftly heading towards half a billion homes.

However, although your local supermarket might know what's in your shopping basket, your bank knows what you buy, your mobile company knows where you are and who you speak to, and your favourite search engine knows what sort of holiday you're researching, none of this data is linked together.

In the future, companies might start exchanging data to get a fuller picture of their customers' lives. Imagine if a supermarket linked its shopping information with viewing habits from satellite TV or an internet search engine. This could obviously only happen with the permission of customers, but could lead to enormous benefits for consumers and business.

Closing the loop of understanding around media and shopping habits would enable advertisers to see if their TV ads had actually led to a purchase in a supermarket. In turn, this could enable them to beam relevant ads into people's living rooms.

Whoever is making sense of customer data is also in the position to manage marketing messages. The accumulation of data from different companies would enable a trusted customer gateway to send targeted, personalised, relevant messages to a mass audience for the first time, achieving what could be thought of as intention of 'mass intimacy'.

If Coca-Cola wanted to talk to its customers, personalised advertising could be sent to tens of millions of Coke drinkers – good, responsible mass marketing. Customers would be grateful too because it could spell the end of being bombarded by irrelevant advertising.

A future scenario has consumers logging into a 'preference centre' to signal what they are prepared to accept in terms of communications. For example, they might indicate that they like TV advertising, hate direct mail, like humour, want vouchers to be emailed and would prefer a text reminder to their mobile before the vouchers expire. This preference centre enables consumers to edit what information they might receive, while ensuring brands are targeting consumers in the way they want.

After all, if advertising is done well, it becomes relevant information. Indeed, our market research asks a panel of Tesco customers what they think about the advertising on the website, and most say, 'What advertising?' All they can see is relevant offers and promotions. This is the power of personalisation.

WHY IS THIS GOOD FOR CUSTOMERS?

Although the spectre of privacy concerns looms above predictions of what customer data might look like in the future, it's a two-sided story. Yes, of course it's good news for companies – it means they can take the guesswork out of marketing and start offering customers what they really want. But it also has benefits for customers.

It means:

• more relevance – tailored products, services and advertising for customers
• more rewards – being reimbursed and thanked by companies for sharing data
• more sustainability – less wasted advertising and direct mail
• more customer focus – more companies putting customers at the heart of their strategy, because being customer-centric makes good business sense.

Companies such as Tesco, Kroger and Casino understand the importance of forming an honourable contract with their customers. They are data pioneers who are getting it right. They appreciate that they must offer something to say thank you for sharing your information with them.

This will become a sticking-point for consumers. They will not be prepared to share their valuable data with companies they do not trust and which do not give something back in return. And why should they?

THE CUSTOMER CONTRACT

In future, customers will begin to make new value equations around their data. Some will be prepared to share their data and/or attention in exchange for something else of value. Others will not.

They will also have more control over their data. An opt-in model such as the preference centre would enable consumers to alert car manufacturers, for instance, that they want to buy a new car. They would then receive a series of relevant ads until they had made their purchase and indicated that the ads were no longer needed.

Already a number of emerging business models are experimenting with exchanging free services for media attention. Digital TV businesses such as BT Vision and Sky are debating how to manage the way viewers fast-forward the ads on their digital box. There might be different pricing models. A premium TV service has no advertising, whereas a basic service would require the viewer to watch a handful of relevant ads.

This raises larger questions around the way the media makes money from stealing our attention. Should we be paying for our newspaper if the paper is making money by selling our attention to an advertiser such as P&G? In the future, should consumers get a cut of this money too?

If individuals don't see the benefits of sharing their data with organisations, they will not be prepared to co-operate with them. The onus is on all of us to ensure companies forge a responsible contract with their customers, one that thanks you for your data.

GOLDEN AGE OF MARKETING?

Tesco, Kroger, Casino, Macy's, Best Buy, Gruppo Pam and The Home Depot are pioneers in the world of customer data. By balancing a respectful responsibility for their customers' privacy, along with a desire to reward them for their data, these companies are forging a new contract.

If other companies follow we could witness a golden age in marketing, where every commercial message sent to customers is personal, targeted, and relevant, always offering them something they want to hear: an age where irrelevant junk mail would be banished for good.

It would be an age where companies listen to what their customers want and overhaul organisational structures to encourage their staff to put them first. An era of customer-friendly corporate culture, where any business problem can be described in terms of customers as well as revenues.

ABOUT THE AUTHOR

Martin Hayivard was until recently director of strategy and futures for dunnhumby.

[email protected]

Fig1: Retailers like Tesco could inform customers through mobile applications

Fig2: ABOVE Transport for London's Oyster card. RIGHT Barclaycard's OnePulse combines Oyster, credit and contactless card functions