Best Practices: Dunnhumby Shops For Marketing Insights
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What if, on your next visit to the supermarket, you found the store's selection of beer shelved side by side with boxes of baby diapers? You might think the store manager had gone mad. But would you begin to suspect that the store was putting into practice an advanced, data-driven approach to retail marketing?
Andrew Jordan Group head of data solutions, Dunnhumby
We call our approach "relevance marketing." It tracks and analyzes data on storefronts, products, and consumers to create actionable market intelligence, with an emphasis on proprietary marketing expertise and predictive behavior modeling that sets the strategy apart from traditional business intelligence or data-warehouse operations.
Dunnhumby first established itself in the grocery-retail market, where fractional gains in per-product revenue yield significant impact on the bottom line for retailers as well as for manufacturers of consumer packaged goods (CPG). Its customers include leading U.K. grocery chain Tesco and U.S. supermarket giant Kroger, which relies on Dunnhumby's services to generate intelligence from 2,181 U.S. storefronts and more than 42 million customer households.
For both Tesco and Kroger, the Dunnhumby approach begins with the individual purchase data harvested en masse from the loyalty cards that customers use to earn points or obtain in-store discounts on their purchases, as well as from point-of-sale terminal data. Each purchase is tracked for analysis, giving Dunnhumby a look into every bag of groceries that moves across one of its client's checkstands. In addition to this purchase data, the loyalty cards supply demographic household data. Geographic data on the neighborhoods served by each store is also tracked by Dunnhumby, as well as demographic consumer data for each geography.
Besides customer-centric information, there's data about the storefront itself: The layout of aisles, the arrangement of shelves and products, in-store marketing displays, and outbound coupon promotions all factor into Dunnhumby's intelligence.
At our data centers, this raw data combines with our marketing expertise through proprietary software and algorithms developed from years of constant analysis. Each week, more than 40 terabytes of data is generated per retailer and more than 5 billion pieces of information are processed. The output, marketing intelligence, is served to a Web portal we call "the Shop," which can be accessed by both retail clients and the CPG manufacturers. Additionally, our firm's staff of marketing analysts has real-time access to the data to generate custom reports and data slices as clients demand them.
The information Dunnhumby provides can be simply described as "who buys what, and when." But nothing is simple about the depth and breadth of the information our firm delivers, or its substantial impact on business operations for both retailers and CPG manufacturers. By synthesizing all of the data into actionable, market-driven intelligence, Dunnhumby gives retailers and manufacturers the tools to hone in, at a per-store level, on the inventory, layout, and product mix on each shelf; product-pricing strategies; and promotional opportunities.
Once generated, the information has a significant influence throughout the consumer-goods supply chain. Examples include:
- Government Analytics: Set Goals, Drive Accountability and Improve Outcomes
- 2012 IBM Chief Information Security Officer Assessment
Since its founding in 1989, Dunnhumby has brought considerable IT infrastructure to bear on its proprietary, data-driven marketing analyses. However, as we attracted more and more customers, the IT organization found its resources stretched to capacity, with several terabytes of data arriving daily from its network of customers and billions of pieces of information to process weekly. Moreover, sustaining the company's rate of growth is a high priority of management. In October 2005, as the company expanded into North America, it embarked on an ambitious project to migrate its data center to a next-generation framework. Top priorities included a scalable architecture, reliable performance, and cost-efficient capacity for growth.
Prior to migration, Dunnhumby had one data center in the United Kingdom, provisioned with DEC Alpha servers running Tru64 Unix. Scalability was a problem with the rigid Unix boxes, and continued forklift upgrades were hardly a desirable path. With a commitment to restructure its IT infrastructure using best-of-breed building blocks, the Dunnhumby team examined its options and quickly agreed on the combined performance, scalability, and price point afforded by server blades.
With the decision made, Dunnhumby migrated the data center to a foundation of Hewlett-Packard ProLiant BL25p dual-processor server blades running within HP BladeSystem p-Class enclosures. The HP blades, running Red Hat Enterprise Linux Version 4.0, let Dunnhumby add compute power at a granular level for cost-efficient scalability. They also scale out rapidly, without the need for a costly, high-end enterprise server, allowing us the flexibility to adapt to changing work flows quickly and efficiently.
Another important component of the new IT infrastructure was the PolyServe File Serving Utility for Linux, clustered storage software designed to maximize the performance and cost efficiencies of the x86-based servers and industry-standard networked storage. The software united the hardware within one cluster, establishing a robust NAS platform without performance bottlenecks or single points of failure.
With 128 HP blade servers, Dunnhumby's multitude of proprietary data retrieval and analysis processes operate with consistently high I/O performance. Most important for Dunnhumby, the platform permits the data center to seamlessly scale capacity based on workload requirements.
The results achieved from the revamped data center are significant for both Dunnhumby and its retail customers. In terms of pure performance, the data center can deliver complex proprietary analyses 12 to 25 times fasterdepending on the process being performedthan the previous infrastructure could manage. And with the timeliness of our insights absolutely essential to grocers, the new IT infrastructure turns around within 90 minutes requests for complex, customized data slices that would have taken five days with the previous technology.
The new data center aligns perfectly with our goals for growth. Presently, the company's IT organization is completing a build-out of two more data centers to the same platform specifications. Furthermore, new growth is being driven not only through the retail grocery channels where Dunnhumby has built its reputation, but through the robustness of its data center infrastructurewhich has supported Dunnhumby's entrance into other industries, including financial services and telecommunications, where the value of a data-driven, customer-centric marketing model strongly resonates. Andrew Jordan, group head of data solutions, Dunnhumby