It's time for Captain Bligh to walk the plank

City & Business

JAMES ROSS's sensational decision to challenge Lord Young has all the drama of a modern-day Mutiny on the Bounty. Mr Ross is the latter- day Fletcher Christian, risking all to wrest control of Cable & Wireless from his boss. Lord Young makes a rather curious Captain Bligh - resented not for any cruelty to his crew, but for his insistence in pottering off into obscure backwaters to do deals with the natives instead of getting on with the voyage originally planned.

What will happen in the second reel? It's a difficult one to call. One thing is a stone cold certainty: the two protagonists won't both still be on board when the final credits roll. Some senior executives believe the current relationship can still be salvaged, so long as Lord Young is prepared to take more of a backseat role. I am not so sanguine. He is much more likely to view his colleagues' decision to complain to the non-executive directors as a terrible betrayal. To borrow a phrase from a different dispute, the relationship has now irretrievably broken down. Any trust has gone. There have to be departures.

Mr Ross is gathering allies among the executive directors and is probably marginally preferred among institutional investors (who, it has to be said, don't feel any great love for either of them).

Lord Young should not be underestimated. Most of the non-executives are his appointments. He and Win Bischoff, the non-exec likely to play a key role in any boardroom reshaping, go back a long way. "Everyone else brings me problems. David brings me solutions," was Mrs Thatcher's assessment of Lord Young. He could yet persuade the non-execs that the best "solution" is for Mr Ross to walk the plank. But if he is to quell the rebellion, he needs to move quickly - the dissent is growing.

More likely, however, is that it will be Lord Young who is thrown over the side. Much easier to dispose of a chairman who is going in 15 months anyway. The alternative is to risk losing an entire layer of executive directors. That would be messy, noisy, prolonged and deeply embarrassing. C&W is ripe for takeover. It is also trying to negotiate ultra-sensitive transcontinental alliances. It desperately needs a period of calm. That won't now occur until Lord Young has gone, and gone completely.

Supermarket split

IT'S hard to avoid the conclusion that either David Sainsbury or Sir Ian MacLaurin is making a serious error. The two supermarket chiefs are moving further and further apart on the best way to market their services.

As we report on page 3, Tesco's Sir Ian is scrapping the normal pounds 3m pre- Christmas TV advertising splurge in favour of a direct-marketing campaign centred on its loyalty card.

Sir Ian sees the card - he has so far recruited 7 million cardholders - as central to Tesco's future marketing strategy. Conventional TV advertising will not go completely, but will make up a smaller chunk of the total marketing spend.

Mr Sainsbury, meanwhile, takes a very different tack. In the past, he has dismissed loyalty cards as "electronic Green Shield Stamps". Later, he reluctantly agreed to experiment with them. But he has now decided that they don't really work, and Sainsbury is to phase out its Saver Card at the end of next month. The pounds 30m annual savings will go into increased customer service.

Could Sir Ian and Mr Sainsbury both be right? Possibly. Tesco's customers are younger and perhaps more amenable to promotions. Sainsbury's older customers are more likely to dismiss loyalty card schemes as gimmicks, preferring to see the money saved go into better service or keener prices.

But in the long run I reckon history will judge Sir Ian to be the bold pioneer and Mr Sainsbury as a bit of a Luddite, one who has seriously underestimated the opportunities offered by "database marketing" (as I'm afraid the bow-tie brigade insist on calling it).

The issue is not just one faced by supermarkets. It is not just of concern to marketing directors. It goes to the heart of how big consumer businesses are run. Should they they continue to view their customers as anonymous and treat them as one amorphous mass? Or should they try to exploit the huge advances in computer technology to exploit the differing needs and tastes of their millions of customers?

Companies have for generations built up mountains of information on their customers. Until now, they have failed to make very good use of it. At best they have used their databases as glorified address books, sending out impersonal junk mail willy-nilly.

Sir Ian has realised that powerful computers can now do two things relatively cheaply. First, they can store almost infinite amounts of information about the individual buying habits and preferences of Tesco's cardholders. Second, they can instantaneously identify particular types of customer by past spending habits and reach them with targeted mail-shots.

The opportunities this creates are limitless. At the press of a button, Tesco can identify any subgroup of its customers. Dogfood buyers. Customers in Bootle. Vegetarians. People who shop on Monday mornings.

The marketing opportunities such information gives are colossal. No need for blunderbuss advertising. Promotions can now be highly accurately targeted. Tesco so far hasn't gone much further than identifying its biggest spenders. But the scope is limitless. Supermarkets already know how profitable each of their product lines is. In theory therefore, they have all the information they need to calculate how profitable each of their customers is. When you know who your most profitable customers are, then you can really start to tailor marketing programmes to maximise profits.

Of course, all this is very expensive. Mr Sainsbury is right to look very hard at whether the costs outweigh the benefits. But in terms of sales growth, Tesco is certainly winning the argument, producing spectacular same-store increases since the scheme was started at the start of the year.

Sainsbury may yet have to think again.Think of it another way. Most of Mr Sainsbury's customers spend thousands of pounds a year in his stores. Yet the brutal truth is that without some kind of database marketing system, he doesn't even know their names and addresses. In a business that prides itself on customer service and communication, that has to be a serious weakness.