Sainsbury’s Bank

Sainsbury’s bank started trading in 1997 and is jointly owned by J Sainsbury plc and HBoS. The bank was the first to be opened by a major British supermarket and to date Sainsbury is still the only supermarket in the UK to hold a full banking licence.

When opening the bank Sainbury’s objective was to deliver a customer-focused banking service; exceptional customer service; value for money and flexibility other banks have failed to deliver. So far Sainsbury’s Bank has opened over 1.4 million customer accounts attracting deposits in excess of £2 billion.

The Issues

Sainbury’s Bank set specific targets to sell their products through the stores as the supermarket would with any of the grocery products sold. In order for the bank to fully realise the potential of the stores’ customers with regard to their specific financial products, they commissioned CACI to help set fair, potential driven targets. The individual store targets had to be set to reflect the top-line target levels put in place by Sainsbury's Bank.

The Solution

The solution delivered consists of datasets already in use by Sainsbury's Bank and applies techniques already widely used by CACI within a range of markets. The model is based on a detailed understanding of the true types of people who purchase each of the Sainsbury's Bank products and recognises that store potential is driven by the size of each store catchment. With the majority of recruitment taking-place in store, this gives a realistic assessment of the sales potential using the following valid assumptions:

	Larger stores have larger catchments
	More attractive fascias have larger catchments
	Catchment size is impacted by the size, location and catchment strength of all competing supermarkets

Catchments were built using a customised version of the 'ProVision' gravity methodology, currently used within Sainsbury's Supermarkets, providing a simple and transparent methodology that can be easily explained and sold into store management. ProVision defines catchments for large grocery stores (supermarkets, superstores and hypermarkets). A key input into ProVision is the Retail Locations database, for this project CACI replaced the Retail Locations data with Sainsbury's latest store locations and sales footage data. The model was then updated in CACI's Spatial Modeller software. The catchment model, built in CACI's Spatial Modeller software allocates the postcode sector demand to every supermarket in Great Britain over 3,000 sq ft (plus Sainsbury's Locals below this level).

Once the gravity model had been built, CACI built ACORN profiles for each of the products offered by Sainsbury's Bank in order to understand who is buying what of the Bank's key products. Using these profiles the percentage of the GB population for each ACORN Type that purchase each the Bank’s products is identified creating a penetration index.

These penetration levels are applied to the corresponding segment mix of each postcode sector in Great Britain. This provides a postcode sector level 'Market Potential' figure for each product that reflects the number of people resident in each postcode sector that are likely to purchase each Sainsbury's Bank product.

The postcode sector market potentials for each product were then accumulated to store level using the catchment model. This provided raw estimates of store level market potential. As ProVision allocates potential based on competing retailers the model is then calibrated the figures at store level are initially below the level of observed customer data. This is due to the fact that a proportion of the demand will be allocated to competing supermarkets retailers. To overcome this, CACI adjusted the raw targets to ensure that they sum to the UK level targets set by Sainsbury’s Bank. The adjustments were made by scaling each store's target proportionally in line with the raw target predictions.

Results

By comparing the targets against observed sales for the last financial year made further fine-tuning. This illustrated that, whilst footage does have a positive relationship with Sainsbury's Bank product sales, it is not as strong a driver of performance as it is for predicting grocery store performance; the purpose for which the ProVision model was built.

Sainsbury’s Bank said,

“By using CACI’s unique expertise in this area it has highlighted that the drivers for grocery performance are different to the predicting our specific financial products. This has enabled us to ensure that no store has targets set that are already below observed performance providing challenging yet realisable targets.”