Tesco's Tablet Doesn't Have To Beat The iPad To Be A CRM Bonanza

Almost a month after unconfirmed reports surfaced that UK grocery giant Tesco was working on its own 7-inch tablet, that tablet has arrived—and it's not looking like nearly as dumb an idea as it seemed to most people at first. Tesco has wisely leveraged its loyalty program and hasn't cheaped out on the hardware, and also hasn't wasted effort trying to turn it into another Kindle—the tablet, dubbed Hudl, has the user interface of a generic Android tablet. This may yet be a really clever way for Tesco to extend its CRM tentacles a lot further into its customers' lives.

That, of course, is the real purpose of the Hudl. This isn't the consumer electronics equivalent of a can of Tesco-brand beans. It's more like a can of beans that phones home and continuously reports on everything in the cupboard. That's the big difference between actually controlling the tablet and simply pushing out iOS and Android apps for its loyalty program, streaming video service and the rest. The question is how effectively Tesco can leverage that capability. And before drawing any conclusions, remember: This is the chain that was smart enough to buy loyalty guru Dunnhumby.

The most obvious way Tesco has leveraged its loyalty program is the price. Nominally, the Hudl is £119 (about $190). But the chain is letting loyalty customers double their points to cut the Hudl's price by half. This means a lot of loyalty members are likely Hudl customers, if they have the loyalty points and no overwhelming desire for a Kindle or iPad.

Once Tesco gets the Hudl into loyalty customers' hands, what does the retailer get? Mostly we don't know. Of course those customers will get the built-in loyalty app, the streaming-video-service app, the online-shopping app. Tesco is presumably smart enough to have tuned those apps for Hudl, so as well as they should work on other tablets, they'll work perfectly on the Hudl.

And because they're built-in apps, there's no reason that users need to OK special permissions for the apps to phone home. That click-to-give-permissions routine usually comes when the app is installed. They're already installed, so there's no need to disturb customers with such details.

Again, we don't know if Tesco is doing that. But it's one of the advantages of being the tablet vendor—like Apple (NASDAQ:AAPL), Google (NASDAQ:GOOG) and Amazon (NASDAQ:AMZN), Tesco now gets control over its customers' experience.

Can Tesco find out what movies and TV shows a customer has watched on its streaming video service? OK, Tesco already knew that. What about any movies or TV shows from Google's Play store? Or e-books bought through the Kindle app? How about anything a customer buys through other retailers' websites or apps? Tesco could instrument the Hudl so it reported back all that CRM data.

But that's pretty extreme, even if it's well within the capabilities of Apple, Google and Amazon as well. Let's dial it back. Just knowing what apps a customer has installed can tell Tesco's CRM-sifting experts at Dunnhumby a lot about what customers are interested in. A Kindle app means books. A Hulu app means video. An Asda app means somebody isn't quite as loyal as Tesco would like.

Even seemingly innocuous details like how often the tablet is used, how much time is spent online, how fast downloads are (that's a good clue to broadband connection speed, which correlates with disposable income)—that's all grist for the CRM mill. And it's information that can't ever be collected by a standalone app on some other vendor's tablet, and certainly not at checkout time in a Tesco store.

Of course, the Hudl could turn out to be a flop, in which case Tesco might have to convert the whole production run into handheld POS devices for associates. Or Tesco might have gotten very scrupulous and decided it won't collect any data from the tablets at all. (That would actually be a bad thing for Hudl users, because some performance data is necessary to spot bugs and deal with other problems.)

But this is a natural window into Tesco's customers' lives. And Tesco doesn't have to turn into the NSA to turn the Hudl into a really valuable CRM tool. The only question is how valuable.