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Ex-Tesco boss Sir Terry Leahy on consumer trust, loyalty and why businesses are struggling with data

As competition in the retail sector continues to intensify, poor loyalty building skills and a failure to keep pace with the proliferation of consumer data is preventing some retailers from reaching their full business potential, according to former Tesco chief executive Sir Terry Leahy.

Speaking at an event in London run by Purple Wifi last week Leahy said that “most” businesses are still struggling with data analysis because they haven’t educated senior leaders sufficiently and are failing to “ask the right questions” from the data they have on consumers.

“Organisations have not kept pace. They’ve not changed to reflect the way we’ve come to know about customers, and so they don’t make their decisions where the data is,” he said. “They don’t ensure that the data comes into the boardroom and into the marketing committees so that they are actually making objective decisions based on data.

“Also the skillsets of senior leaders have not kept pace… dare I say it we need a few less accountants and a few more data analysts. We always need to understand better how to ask the right questions of the data, so as much we need to be philosophers, as data analysts, in some ways it could be a second career for journalists because often they are good at asking the unexpected question and that’s how you’ve got to approach the data as well.”

Having been at the helm of Tesco when it introduced its customer loyalty scheme Clubcard in 1995, Leahy said the idea “completely shaped the industry” and was “the birth of big data” because the retailer finally knew who its shoppers were.

However, creating loyalty is not as simple as launching a card or a scheme. Organisations must change their businesses and what they offer consumers once they begin to understand shoppers through collected data, added Leahy.

“Loyalty is created when a business learns something about a person. On the basis of that knowledge they change their business and respond in a useful and relevant way with a better product, a better service, or some information that is useful for the consumer – that’s the basis for beginning to create a relationship of trust that then leads to loyalty and that’s the way to do it.”

“A loyal customer is the most valuable asset a business can have. By any level of profitability the highest return on investment is from the loyal customer. You don’t have to spend a fortune recruiting them, they stay, they are not that expensive to look after, they know how the whole thing works, they speak well of your staff and motivate them and they are the people who recruit new customers.”

Leahy added that the “great tragedy” is that the majority of marketing pounds are wasted chasing “promiscuous customers” because in most organisations the best deals are offered to new shoppers. “The loyal customer is the one that is not looked after and that’s a great shame,” he said.