Stuart Aitken utilizes customer loyalty to grow dunnhumbyUSA Featured

8:01pm EDT July 31, 2011
Stuart Aitken utilizes customer loyalty to grow dunnhumbyUSA

Stuart Aitken admits that he has an eclectic background in business. He has tried his hand at making a fortune in Silicon Valley, he’s been a vice president of marketing for the grocery chain Safeway, and he was chief marketing officer for the arts and crafts store Michaels. His background is what brought him to dunnhumbyUSA, a consumer data analytics company.

In 2009, Aitken was hired by dunnhumbyUSA as COO and was promoted to CEO of the $245 million company a year later. His experience with consumer data made him the logical choice to lead the company after former CEO Simon Hay was promoted to lead the London operations.

“If you look at my background, there is a lot of IT and a lot of loyalty marketing in my background largely with the work I did at Safeway for 10 years and the work I did at Michaels,” Aitken says. “For me, this was the perfect fit of bringing my technology background with my marketing background to a company that fundamentally believes in the data and the customer, and for me, I had admired dunnhumby for many years. In fact, I recall trying to emulate some of what they were doing. This was a fantastic opportunity to join a company I feel is on the forefront of customer understanding and customer behavior.”

Aitken has helped to further dunnhumbyUSA’s focus on customer loyalty and retention all while growing operations to better serve its clients. Here’s how he helps dunnhumbyUSA and clients like Coca-Cola, Procter & Gamble, Kroger Co. and Macy’s succeed through a focus on the loyal consumer.

Focus on customer retention

Everyone in business knows that gaining loyal customers and having a high customer retention rate is extremely valuable. However, not many companies aim to please loyal customers.

“We have a fundamental belief that companies, regardless of who you are from a company perspective, and it can be any organization, has a monomaniacal focus on the customer and understanding the customer and not just any customer, but loyal customers,” Aitken says. “We fundamentally believe that you have to focus on loyal shoppers to be successful. It sounds like a principle that most companies would adopt and adhere to. But what we’ve found is that very, very few do. You talk to companies and the vast majority of companies talk about bringing in new customers, new clients, etc. versus saying, ‘Who are my loyal customers, what’s my headroom with those customers and how do I reward those customers for being loyal to me, my retail organization and my brand?’ Whether you’re a (consumer packaged goods company) or a retailer, very few companies think about customers in that way. It’s a different philosophy and that’s what makes it successful.”

Not only does dunnhumbyUSA advise its clients to focus on loyal customers, but it also adheres to those same principles.

“Our business model is very different, too,” he says. “We are exclusive with the retailers we work with. Because we work with Kroger, we will not work with other grocers in the U.S. Because we work with Macy’s, we will not work with other department stores in the U.S. We are exclusive and therefore it means we’re trusted. We’re not like any of the other big consulting firms who can help with strategy with competing retailers. For us, we just do not go there.”

Aitken realizes that by focusing more on existing and loyal customers, companies are limiting the number of clients, but there’s a reason this method works.

“What’s interesting to me is that there are many, many white papers out there and educational institutions produce it all the time, that it costs X times more to bring in a new customer than it does to retain an existing customer,” he says. “It’s likely something like six or 10 times more. But very few companies do that and focus on that and I liken it to a bucket of customers. Most companies are focusing on trying to find another faucet to fill that bucket of customers and very, very few are focused on plugging the hole that is in the bucket.

“You would need to win 12 new customers on average, we’ve found, to replace one loyal shopper. What we’ve also found is that with loyal shoppers the headroom with them, even with your most loyal shopper, you’ll likely have a 50 percent share of wallet, which gives you enormous headroom with those customers.”

Weigh your options

Without full understanding of your customers, companies miss out on vital ways to reach core customers that can provide more revenue than new customers.

“The other thing with us is we believe in behavioral data,” Aitken says. “Attitudinal data is very helpful and insightful, but what people say and what people do are two very different things. Understanding behavior through data is what we do so well. Where the rubber really hits the road is taking that data, taking those insights and giving them to the decision-makers and disseminating all of that knowledge and insight to the decision-makers across the business such that we put the customer at the heart of all business decisions. So when people are making even the smallest decision, they’re doing it with the customer in mind and with the loyal customer at the heart of those decisions.”

Even with data to back up the logic of focusing on loyal customers, some companies continue to reach for new consumers. The leaders of those companies need to examine the pros and cons of their customer base.

“I would ask those individuals to create a list of all those activities you’re doing to bring in new customers and create a list of all those activities you’re doing to retain existing customers and your loyal customers,” Aitken says. “Compare those lists and those costs and the return that you’re getting on those two lists. At the bottom of those two lists write down the percent of revenue and profit you are getting from those two customers or segments. Then ask yourself is that where I should be investing my time, my energy, based off of what that ratio looks like. Nine times out of 10, you’ll find the ratio is swayed enormously toward bringing in new customers.”

When companies put an emphasis on going after new customers, they are rewarding behavior that a company wouldn’t want from its own customers; they are advocating that customers leave and join a better company.

“Just think about any cable company or satellite company and the ads on TV saying, ‘Join now for the next 12 months and here’s an incredible deal for you,’” he says. “Then you’ve got somebody sitting watching that same ad who’s likely been loyal to that brand for six years or eight years, never moved and they’re basically being slapped in the face and would be better off moving to a different provider than staying with the existing provider. That’s a great example of not rewarding the behavior you seek but rewarding a behavior that is detrimental to your loyal customers.”

Aitken has continued dunnhumbyUSA’s practice-what-we-preach approach. The strategy has worked for the business and for clients of the firm.

“We’re telling our clients to reward the behavior you seek and make sure you go after your loyal customers,” he says. “In the same way, we need to do the same. We’re putting great talent on existing clients versus putting them on recruiting additional clients. Let’s put our great talent where it matters. Let’s make an impact on those businesses and the growth will come from that. That has been a big key.”

Change your thinking

When things are going well in business, companies tend to keep doing more of the same. However, it’s the companies that challenge the status quo that find ways to continue growing and overcome adversity.

“I feel we challenge the status quo and some of the myths in business,” Aitken says. “Whenever we hear, ‘That’s how we’ve always done it.’ That is a key red flag to say, ‘Well, is that the right way to do it? Is that good for customers?’ It’s always easier to do it the same way. If you want to fundamentally change the trajectory of your organization, if you want to truly start focusing on the customer and you know in your heart that you haven’t in the past, then you have to challenge all norms and beliefs. I think it was Darwin who said it’s only those who change and evolve who will survive. If you stick with your norms, are you changing and will you survive?”

Numbers don’t lie, and if you find that a change in your business operations will help your company survive, you have to commit to that change.

“In a downturn economy, that’s when companies realize they need to do something different,” he says. “They need a different strategy and a different perspective on things. When things are going incredibly well very few companies go, ‘Well maybe I need to change strategy or think about the future.’ So in a downturn that’s when you see companies going, ‘OK now I need to change and what does that change look like.’ Don’t get me wrong. We’ve had a couple of clients who were flying high and said, ‘Listen, we want to continue to fly high and in order to do so we need to look beyond the next two years and where our growth is going to come from in the future.’ Those are tremendously forward-looking individuals and organizations.”

Whether your company needs to consider a change or not, it is important that the change you implement doesn’t stray too far from what made the company successful.

“You can never forget what made you successful in the first place,” he says. “Make sure as you grow that your principles and your values never change. It’s always good to go back and double check that when you look at your strategies and your growth plans for the future that they very much have your core principles that made you successful in the first place still in place and the values that you look for from employees still in place.”

Oftentimes the hardest thing for leaders to grasp is that doing right by customers will ultimately prove successful for the business. You have to understand that what’s right for the business isn’t always good for customers.

“Results help drive customer satisfaction enormously,” Aitken says. “What’s interesting is when you challenge, when you push back, typically your satisfaction scores go down because you’re not doing exactly what the client wants but you’re doing what you believe is right for customers. Those two things don’t always align and you have to be courageous when you see those results. Are you doing the right thing for the client or are you doing the right thing for the customers? If you’re doing the right thing for the customers then the results will come and the satisfaction scores will turn.”

HOW TO REACH: dunnhumbyUSA, (513) 632-1020 or www.dunnhumby.com/us/

The Aitken File

Born: South Africa. He considers himself Scottish because he grew up in Scotland after moving there when he was 10.

Education: BA in information management, Queen Margaret College, Edinburgh; Masters, University of Strathclyde in Glasgow

What was your first job, and what did you take away from that experience?

I bent metal for gutters on industrial buildings. Because it was such a manual-labor-type job, I look back at how hard those guys work and what they put their bodies through for little pay and that drove me to make sure I got a further education to get the best job I could.

I was also paid to play rugby. I was a young man playing rugby and from a leadership standpoint that taught me about teamwork and that no person can do a job by themselves.

My position was flanker/wing forward. I played from when I was 6 until I was 34. In the process, I had a disc removed from my back, I broke my neck, I’ve broken multiple fingers and it is something that will be with me forever. I truly love the game. I was the youngest rugby captain of my team in Scotland. At age 19, they voted me as captain, so I was telling 20-, 30- and 40-year-old men what to do. I love the sport and love the camaraderie. It’s a very unique sport that relies on teamwork and team spirit and trust and all those things I love as part of business.

What’s something you miss from Scotland that you wish you had in Cincinnati?

Aside from friends and family, my answer would be haggis and fish and chips. However, Cincinnati has tremendous curry houses.