Hay's data-mining gives Kroger tools to contest leading grocer Wal-Mart

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Kroger is out to retake its crown as the U.S.'s top grocer, and it's relying on a data-driven Brit to play a key role.

Simon Hay, on the other hand, can thank Kroger for giving him the opportunity to bring his company's customer-centric marketing skills across the pond.

It was the success Mr. Hay's company, DunnHumby, had with the loyalty-card program of British grocery giant Tesco that got the attention of David Ciancio, VP-customer relationship marketing at Kroger Stores, at a time when Wal-Mart had pushed Kroger from its No. 1 perch. Mr. Ciancio e-mailed DunnHumby, but his query languished in an inbox for months until Mr. Hay learned of it.

Now as CEO of DunnHumby's U.S. operation, Mr. Hay is helping Kroger use customer data more effectively. "Data is the new battleground of retail," he said.

Kroger already had a loyalty-card program when it first contacted DunnHumby in 2001, so a pilot project with the U.S. supermarket chain had this directive: "We don't know what we don't know. Use the data [from the loyalty program] to tell us what we don't know," Mr. Ciancio said.

Dunn Humby is a hybrid company that offering services as varied as pricing strategy consulting around the consumer shopping experience, direct mail management and what it defines as customer engagement.

Mr. Hay started up DunnHumby's U.S. operation in 2003 with three other employees from an "office" at a Starbucks in Cincinnati's Hyde Park neighborhood.

Today, the U.S. division has 170 staffers and has emerged not only as a data-mining resource but as a creative force in Kroger's marketing efforts, notably direct mail. Its U.S. clients include almost every consumer-package-goods marketer that does business with Kroger. Kroger remains its only U.S. retail account.

Mr. Ciancio described Mr. Hay as a "renaissance man with a diverse view and a diverse outlook on the possibilities in business."

That outlook stems in part from Mr. Hay's education as a geographer. He earned his B.A. in human geography from the University of Reading, where he began looking at the relationship between store location and shopping patterns. Mr. Hay started on the ground floor at DunnHumby in 1991 as its third employee. "My original job included putting the trash out," he recalled.

"The challenge was to prove we were not a one-hit wonder," he said, referring to DunnHumby's success with Tesco. In the U.S., that's where Kroger comes in, and the opponent again is Wal-Mart.

Although Wal-Mart doesn't have a loyalty-card program, Mr. Hay said "they have more data with the Wal-Mart credit card and can tie together credit-card transactions over time," and Wal-Mart "is fantastic at exploiting every asset."

As Wal-Mart begins segmenting stores among six formats, more retailers will begin getting serious about "exploiting their data assets,"he said.

Though Kroger hasn't regained its title as the U.S.'s No. 1 grocer, the chain is holding its ground-43 million households have Kroger cards. "We are really at mile one of a 26-mile marathon," said Mr. Hay, 42.

Mike Gervasio, director-retail strategy and category management of PepsiCo North America, said DunnHumby has an uncompromising focus on the consumer. "Their business was started around a model to focus not on what consumers say they do or where they live but what they actually do. They are maniacal about it," Mr. Gervasio said.

Just Asking

Simon Hay

DunnHumby

What can't you find in U.S. grocery stores? English bacon. It's not full of fat like the American stuff. It actually looks like a piece of meat.

What's an American saying that confounds you? Given my name, when I hear, "Hey, Simon," I have the temptation to say it's the other way around.

What's on your reading list? "Empire Falls" by Richard Russo
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