Script of the audio cast with the interview with Adrian Baker,

Communications Director,

Leader of Customer Intelligence Practice,

The Nielsen Company,

Dec 2, 2009

Natalia Ignatyeva (N.I.), Communications Manager, The Nielsen Company, Russia: On the 1^st of December Adrian Baker, Leader of Nielsen’s Customer Intelligence practice, presented at Russia and CEE Customer Loyalty Programmes Summit in Moscow. Adrian in your presentation you spoke about the role of customer intelligence, customer centricity and the key issues surrounding development of customer loyalty programmes. So, what is the role of customer intelligence in today’s economic environment? What does it really take to really know your consumers?

Adrian Baker (A.B.): Hi, Natalia. You know the use of customer data began quite a while ago and it’s really the mail catalogue businesses that started this. Today almost all businesses got some form of insight capability. Let me focus on your question, and for example look at the supermarket industry. Customer Intelligence is being used to build a better understanding of customers fundamentally because they want to drive growth. And growth is no longer only about opening new stores. Some markets have reached the point when they need to build profits only with their existing stores and they need to compete more strongly. So they are looking to build the lifetime values of their customers.

We are in Russia… We should just speak about Russian retailers. Even though the market is growing and new stores are still an opportunity, the effective performance of those businesses can be an issue. One of the measures we look at, for example, is revenue per square meter. And it’s often thought that the industry’s average figure of about nine thousand dollars per square meter would be about the minimum for a sustainable business. We are seeing some instances in Russia where retailers are below that—quite well below that, maybe six maybe even five thousand dollars per square meter. And in contrast, let’s have a look at a retailer like Tesco, which obviously has been working on this (customer analytics) for some while; they are achieving the figures more like twenty-four thousand dollars.

N.I.: Yes, that really shows what its means to really know your consumers…

A.B.: …So, if you are at a lower level, then you can improve. And the thing you really have got to do is to give your customers more of what they need. That’s obvious: it’s pretty much their choice to decide if they would spend some more money with you or not and it’s the customer intelligence that’s really the vital tool for that. And with Nielsen’s experience and the richness of the data we can provide, it is really making a difference to our clients.

N.I.: Loyalty programmes can result in growing efficiency. Are all the loyalty programmes equally useful?

A.B.: I think what really separates an outstanding programme in the crowd is actually about just how deeply the businesses are accessing this customer intelligence. How well they are following their customers’ needs. What I mean is how they apply this knowledge to change things right across their business. And maybe this is a good moment to ask the question of why a business needs a loyalty programme anyway.

Ultimately it’s a skin you put in place because you want to identify and gather information about customers. Some businesses already have that as a part of their operations—I mean, financial services, mobile operators—they already have this information, they don’t need a skin to do it. But many retailers, supermarkets included, don’t have that, and the loyalty programme gives you a reason to systematically collect information on your customers. And it means a lot of data, where you will need a scaled solution to manage it, which is something that Nielsen has seen as really important in helping their clients with. Anyway, having data, the next question is; what are we are doing with this? And the very first thing retailers will want to know is; who are my different customers, how different are they, what do they look like…

N.I.: And what are the most important customer intelligence facts that should be taken into account?

A.B.: You must work closely with clients to get the views of their customers. Segmentation techniques would be a way to have a look at that. Nielsen has quite a range of different views we are developing for our clients; each one of those has particular benefits and particular applications for the business…areas like range of products, the price, etc…

Let me give you some examples. If you want to follow your customers’ needs, then you really need to match the products you offer to your customers; that means the right products and only the right products are on the shelves. Or I mentioned pricing. Pricing effectively to make sure the prices you put in place will maximize the number of items customers are going to put into their basket. And it can actually bring in more customers.

Another example is sometimes it’s the sheer shopping experience that makes a difference for your customers. And I think there is a tremendous opportunity to develop new ways to create a more positive shopping experience for your customers. Let’s say you have a segment of customers who are really passionate about their health—looking for food that would fit their lifestyle choice. And a retailer has the opportunity to align all the different areas—products, merchandising, in-store lay-out, communication, POS-materials—and really make that come together to create the story that customers cannot possibly miss, which can drive business growth.

N.I.: And maybe that would mean that the definition of category management has to change…

A.B.: I think that’s right. And I think that is the essence of customer intelligence. That means instead of thinking about a category in isolation, you are now thinking what my customers want; how I can pull it all together for my business, am I to offer more categories in order to make that customers’ shopping experience really great. I think that’s the most exciting.

N.I.: Thank you for your comments, Adrian.