1 Rewarding the behavior you seek by knowing

1 Rewarding the behavior you seek by knowing your customers, shoppers and consumers 13 th October 2010, Chicago, IL Presentation to: LEAD Conference © dunnhumby. USA 2010 | confidential

2 today’s agenda……… § introductions § who am I? § introduce you to dunnhumby § the burning platform § today’s choices § knowing and treating your customers § the root causes © dunnhumby. USA 2010 | confidential

3 dunnhumby mission is to drive brand value to help brands and organizations engage more completely and profitably with their customers by developing customer based action plans built on integrating “real-time” data insights, creativity and change capability thus delivering increased brand value to our clients © dunnhumby. USA 2010 | confidential

4 improving clients’ knowledge, thinking, action, and results across the globe © dunnhumby. USA 2010 | confidential 2010 (In Progress) Acquisition of KSS Retail Canadian Tire

5 our culture is connected and committed to our core values Passion – relentless in our positive enthusiasm to give our clients the best to make a dramatic difference to their business and ours Customer first – we are the voice of the customer, we start with the customer at all times and follow the customer to deliver genius insights and actions for our clients’ growth and ours Collaboration – working at our best together and communicating openly with respect and integrity, to build trust over time, for better results Curiosity – an endless appetite to understand, challenge, innovate and learn © dunnhumby. USA 2010 | confidential

6 The Customer © dunnhumby. USA 2010 | confidential

7 Offers are irrelevant to the customers who receive them due to poor targeting © dunnhumby. USA 2010 | confidential

8 Headroom among current customers is not seen or valued, and is ignored © dunnhumby. USA 2010 | confidential

9 There’s a focus on winning market share instead of winning over customers © dunnhumby. USA 2010 | confidential

10 The priority is almost exclusively on short-term results © dunnhumby. USA 2010 | confidential

11 Retailers and manufacturers are at odds over strategy and execution © dunnhumby. USA 2010 | confidential

12 Traditional measurements are applied even when superior new metrics are available © dunnhumby. USA 2010 | confidential

13 Creative and media choices reflect a one-size-fits-all strategy © dunnhumby. USA 2010 | confidential

14 Consumer marketing concepts are reapplied without tailoring to the customer framework © dunnhumby. USA 2010 | confidential

15 1. The wrong questions are being asked 2. The wrong data is driving decisions 3. Loyalty and acquisition are not balanced 4. There is little systematic improvement © dunnhumby. USA 2010 | confidential

16 1. The wrong questions are being asked © dunnhumby. USA 2010 | confidential

17 are you asking customer-centric questions? Area Brand- or Store-Centric Questions Shopper-Centric Questions Targeted Marketing Can we send a mailing to shoppers at the top 500 stores? Can we individualize communications to our top 2 MM shoppers? Loyalty How can I make shoppers more loyal to my brand? Am I focusing most of my efforts on my best shoppers? Growth Is our market share growing? Is our share of wallet growing? Efficiency / Effectiveness How can I simplify and standardize to achieve savings? How can we learn what our best shoppers want and give it to them? ROI What was the cost-per-thousand for the campaign? What was the ROI for the campaign over time? Winning How can we beat the competition? How can we win with our best shoppers? Shopping Experience How can we change how this category is shopped and drive more shoppers to our brand? How can we put our brand where our best shoppers will naturally expect to find it? Tracking Sales How much did we sell last week? Who bought what we were selling last week? © dunnhumby. USA 2010 | confidential

18 2. The wrong data is driving decisions © dunnhumby. USA 2010 | confidential

19 what research is used to shape your customer activity? 65%: Survey, focus groups, panel – thin 50%: Scanner data – average sample shoppers 50%: Primarily rely on “instinct and experience” 20%: Shopper Insights drive Shopper marketing Source: In Store Marketing Institute’s 2008 survey of consumer goods manufacturers © dunnhumby. USA 2010 | confidential

20 averages at the category level mask dramatic changes at shopper level Category Unit and Sales Change 9% 12% Dairy Category Beverage Category © dunnhumby. USA 2010 | confidential Unit Change for HHs decreasing units Unit Change Frozen category Breakfast Category Unit change for HHs increasing units Sales Change Category Shelf Stable Category Unit Growth by Household Behavior 6% -3% 92% -45% -52% z 77% 84% 5% -13% -45% -1% -2% -5% 64% 0% -44% 60% -46%

21 you can’t find the right customers based on demographics 30% 25% 20% 15% 10% 5% 0% Brand Increasers Brand Maintainers Brand Decreasers Household Income © dunnhumby. USA 2010 | confidential Under 15 K 15 -24 K 25 -34 K 35 -49 K 50 -74 K 75 -99 K 100 -124 K 125 -149 K 150 -174 K 175 -199 K 200 -249 K 250 K+

22 behavior-based segmentation is key Model – You are: AKA Real Consumer What you earn Demographics / Social class I spend very differently from my “peer. ” Where you live Geo- demographics I can’t eat at Jane’s house: No organics! What you say you are Lifestyle questionnaires I try to tell the truth … as best I recall it. What you do Bottom-up behaviorbased targeting OK … now you’ve got me! © dunnhumby. USA 2010 | confidential

23 develop multiple dimensions of behaviour lifestage profitability primary channel demographics, what they buy brand choice, packaging preference, weight of purchase preferred format (supermarket, express, gas station, online) lifestyles promotional promiscuity motivations behind shopping behaviour cherry picking deals, bulk buying to larder fill shopping habits share of shopping, recency & frequency “you are what you do” brand advocacy participation in extensions shopping trips missions understand each customer’s DNA to activate at the customer level © dunnhumby. USA 2010 | confidential

3. Loyalty and acquisition are not balanced © dunnhumby. USA 2010 | confidential 24

25 earning and growing loyalty generates profitable growth Brand “A” Candy Bar Loyalty Tiers Measures Champions Valuables Potentials Uncommitteds # Shoppers 6, 910 125, 755 314, 501 176, 797 Ctgry Trips / Shopper 76. 1 32. 6 33. 7 27. 4 15. 4% 7. 0% 2. 1% 0. 8% $171, 834 $718, 381 $612, 061 $123, 516 Brand $s/HH $24. 87 $5. 71 $1. 95 $0. 70 % of $s 10. 6% 44. 2% 37. 6% % Shoppers 1. 1% 20. 2% 50. 4% 28. 3% $ / Shopper Index (954) (219) (75) (27) SOR % Brand $s © dunnhumby. USA 2010 | confidential

26 focusing on acquisition over loyalty can be an expensive choice 10% lost 60% buying less © dunnhumby. USA 2010 | confidential

27 4. There is little systematic improvement © dunnhumby. USA 2010 | confidential

28 the feedback loop is much shorter but many are not taking advantage WAS Annual Marketing Planning Aug Sep Segment 1 Segment 2 IS Segment 3 Segment 4 © dunnhumby. USA 2010 | confidential Copy and Media Development Oct Nov Dec Launch Message / Media Jan Feb Mar Apr Evaluation May Jun Jul

29 persistent and systematic improvement creates breakthrough results % of HHs redeeming at least one coupon Phase 2 (178) index vs. Industry Avg. Phase 1 (139) index vs. Industry Avg. Phase 3 (265) index vs. Industry Avg. 49. 2% Phase 4 – Now a (389) index vs. industry avg. 42. 5% 35. 7% 33. 3% 27. 2% 22. 7% 18. 0% 16. 0% 15. 0% 16. 0% 17. 0% 22. 7% 18. 4% 20. 0% 28. 7% 21. 5% Industry Avg. (11. 8%) 1 2 3 Earliest © dunnhumby. USA 2010 | confidential 4 5 6 7 8 9 10 11 12 13 14 15 Most recent 16

30 make better business decisions by putting the customer at the center © dunnhumby.

31 % of basket /customer spend getting the right price program implemented Previous Program 1500 line program © dunnhumby. USA 2010 | confidential Customer Centric Program Based on ~500 lines important to PS customers

32 how customers engage with promotions © dunnhumby. USA 2010 | confidential

33 promotion escalation does… this to sales on deal… © dunnhumby. USA 2010 | confidential …this to customers… …this to value

35 cultural attributes will differentiate winners who will grow brand value Leading with customers, not with brands Being loyal to those who matter most, to earn and grow loyalty Getting measurement, rewards, talent aligned with desired outcomes Using insight to challenge embedded ways of thinking and working © dunnhumby. USA 2010 | confidential