Dunnhumby: Time to Ditch the Demographic

Data King Says Marketers' Media Choices Should Be Based on Consumer-Purchase Behavior

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To much of the marketing-services industry, Dunnhumby may be an analytics firm with a funny-sounding name, but with "big data" on the rise, geeky is the new sexy in marketing. Nowhere is that more obvious than at Dunnhumby USA's minimalist digs in downtown Cincinnati, within walking distance of its big clients: Kroger, Macy's and Procter & Gamble Co.

Dunnhumby brass Barbara Connor, left, Stuart Aitkin and Caroline Pratt
Dunnhumby brass Barbara Connor, left, Stuart Aitkin and Caroline Pratt Credit: Photo by Jonathan Robert Willis for Ad Age

The 24-year-old firm is best known for helping U.K. retailer Tesco and Kroger use data-driven loyalty programs to defend themselves from Walmart, but Dunnhumby is increasingly managing shopper-marketing programs for the vast world of suppliers to those retailers, too. That's helped it to increase revenue sixfold the past five years to nearly $1 billion. The firm outgrew its current space in three years, then got $25 million in city and state incentives to put a building on a site that had been a parking lot as long as Dunnhumby has been in existence following a failed late 1980s development effort.

But even before ground was broken, Dunnhumby was in need of more space to expand its workforce to 1,200 from the current 675, as it expands in New York, Boston, Portland and Chicago.

That workforce will be necessary as the company increasingly takes on a new role: That of change agent, looking to leverage its vast trove of purchase data beyond shopper marketing to power broader media decisions and provide broader marketing services.

Ambitious? Yes, and Dunnhumby is hardly humble about it. It made a mission of fostering "organizational change" at clients by getting them to coordinate around consumer-data analytics. Now, the Dunnhumby executives working with brand marketers on comprehensive media planning and buying see a need for broader industry change -- getting the media and advertising industry to make decisions around purchase data rather than demographics.

For businesses outside the worlds of digital media or shopper marketing, where purchase-based targeting is common, that's a big shift. To that end, Dunnhumby formed a partnership with TRA Global to mash up TV set-top box data with its Kroger loyalty database. The idea is to find, say, premium-dog-food shoppers not just online but when they're watching TV, targeting programs that attract them disproportionately.

Of course, TV today is bought and sold based on demographics. Doing deals based on purchase behavior of audiences means no longer relying on Nielsen ratings as currency -- a potential Nielsen has hedged against through a joint venture with Catalina Marketing, which also has access to shopper-loyalty purchase data.

Such a change is long overdue and won't be easy, said Don Gloeckler, chief research officer of the Advertising Research Foundation, who as a Procter & Gamble Co. executive led an ultimately unsuccessful Apollo effort with Nielsen and Abriton to shift toward purchase-based targeting.

The integration of media and behavioral data "is a very valuable thing for the industry," Mr. Gloeckler said, though the analytical challenges are daunting. "We'll get there. I have trouble believing it won't change, because the technology is evolving so rapidly."

With marketing-analytics talent at a premium, and Dunnhumby USA expanding the range of its offerings, it's hiring more people with marketing-services backgrounds and with the right "curiosity" who can be trained in analytics, said Milen Mahedevan, senior VP-head of client solutions. At the same time, the company finds some in the industry advertising for "Dunnhumby-like" talent, by name.

Besides a host of hires from Nielsen, Catalina and SymphonyIRI, Dunnhumby has in recent years brought in such people as P&G's former VP-North American sales, Gary Cofer.

Wade Allen, president of Rockfish Interactive and an early employee of Dunnhumby, finds a lot more recognition of the name today than a decade ago. "People used to say "Dumb Humby? What's happening there?' By the time I left, it was well-respected."

That name, by the way, came from founders Edwina Dunn and Clive Humby (now retired) who merged their names while launching the British analytics firm in 1989. Their big break came in 1995 with the rollout of Tesco's loyalty program. Success there led to DunnhumbyUSA, a 50-50 venture with Kroger Co. formed in 2003, touting an inaugural client list that included P&G, PepsiCo, Kraft Foods and Kellogg Co.

In recent years, Dunnhumby has picked up Macy's, Panera and Home Depot to run more loyalty efforts and moved to leverage huge shopper databases to power moves into media and marketing services.

In 2011, DunnhumbyUSA formed the TRA partnership to help use shopper data on media outside the store. The same year, Dunnhumby bought buzz-marketing specialist BzzAgent, and the U.S. unit has begun mingling its data with results from campaigns using a million BzzAgents on word-of-mouth campaigns for CPG brands. It also mashed up data from the companies to create a dashboard a Unilever executive recently called the best he's seen.

Having long dealt primarily with the sales organizations of packaged-goods clients, Dunnhumby is now also working with the brand marketers, looking to end distinction where it often finds no difference. "It's a very arbitrary divide between what's happening outside the store and inside," said Dunnhumby's global CEO Simon Hay. "Increasingly we understand more about how these things fit together. Separating the brand world and trade world is a distinction that doesn't really make sense."

Of course, most CPG clients still organize that way. That's just one reason Dunnhumby pushes for "organizational change," something that became a mission and a department thanks to the Kroger partnership launched nearly 10 years ago, Mr. Hay said.

Brigitte King, senior VP-customer relationship management, digital and e-commerce for L'Oreal's luxury division, gives Dunnhumby high marks for aiding the "change management" that's been necessary as the company began a pilot with Macy's, its biggest prestige customer, more than two years ago.

L'Oreal began as a much more product-centric company focused on market share. Doing CRM programs at Macy's through Dunnhumby meant, "we started to talk not about market share, but customer-retention metrics." That required what Ms. King calls "socializing the data" or "sending the data up the line to senior-management teams and explaining it across the departments."

Dunnhumby has helped in the process, Ms. King said, being "incredibly flexible and open-minded. ... A lot of customer-data companies don't necessarily have the affinity to do what's required for change management. The data sits there and nobody knows what to do with it or how to organize around it."

Just how much Dunnhumby and the use of customer data to drive decisions have embedded themselves at Kroger is obvious during any investor meeting. On the retailer's last earnings call in November, Dunnhumby's came up five times -- all favorably. Consider, by contrast, how for all the marketer talk of "partnership" with ad agencies, their names rarely come up in investor presentations. With less frequency, Dunnhumby also gets mentions on investor calls for Macy's and Panera.

"With Dunnhumby we have a tremendous amount of insight in terms of what customers like and what they want to do," said Kroger Chairman-CEO David Dillon at an October investor conference, pointing to Dunnhumby helping Kroger choose whether digital, newspapers or mail work best depending on the individual customer.

As Dunnhumby increasingly moves in on media- and creative-agency turf, Mr. Hay expects the movement to work both ways. "I don't think you can be in the agency world and not be in the data and analytics space," he said, noting that while Unilever recently named Havas to lead global consumer-data strategy work that "we continue to have a very good relationship with Unilever."

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