MARKETING FOCUS: Does Tesco hold all the cards?

It began as a quest for loyalty, but the success of Clubcard has caused upheaval in marketing thinking at Tesco and its retailing rivals. Julian Lee reports

It began as a quest for loyalty, but the success of Clubcard has caused

upheaval in marketing thinking at Tesco and its retailing rivals. Julian

Lee reports



One year on from Clubcard’s launch and Tesco marketing director Tim

Mason has every reason to believe he has trumped his rivals.



What was once dismissed by Sainsbury’s chairman David Sainsbury as

little more than ‘electronic green-shield stamps’ has helped push the

store chain’s market share up by a clear two points to 21.2% (AGB

Superpanel), knocking arch-rival Sainsbury off the top slot.



Clubcard has even been credited with encouraging Tesco customers to part

with an extra pounds 3 each shopping trip, taking the average spend to

pounds 26. More than 30% of the UK’s 20 million households have a

Clubcard.



It was 1993 when Mason first thought of the idea of the card. ‘We were

trying to understand what was meant by the term loyalty,’ reflects

Mason. ‘What we discovered was that it is purely an industry term, not a

customer concept.’



His analysis is backed up by other marketers who have worked in the

field:‘People think that as soon as you put a scheme in place the

customers are suddenly loyal - it doesn’t work like that it develops

over time,’ says one.



The card was first trialled in 14 stores for just over a year and the

response was outstanding. The high level of coupon redemptions and

customer response demonstrated to Tesco that Clubcard could work on

several levels.



Although it was always intended as a loyalty device first and foremost,

it could also be used as a promotional tool. Mason says the response to

mailings and in-store offers far exceeded his expectations.



Invitations to in-store customer evenings with celebrity hairdresser

Nicky Clarke or cookery demonstrations with attendant recipe offers were

readily snapped up.



On top of this, the company exceeded the 1.5% to 2% boost in like-for-

like sales needed to make the scheme pay for itself, even though

industry estimates put the annual cost of running Clubcard at between

pounds 60m and pounds 70m.



The trials were so convincing that nine weeks after they were completed,

Clubcard was launched nationally.



According to the company, customers are still signing up for more cards

and redemption of the vouchers is running at around 95%. Brand owners,

who have part-funded the promotions, are so far pleased with Clubcard’s

progress - if somewhat frustrated by claims that they are not given

access to the database.



Evidence of Tesco’s faith in the card can be found in its decision to

shift the focus of its pounds 30m marketing spend from above- to below-

the-line.



‘It has played a large but by no means exclusive part. It is a logical

extension in our improving customer service both in the stores and

behind our promotional activity,’ says Mason.



It is against a background of customer-focused initiatives - under the

banner ‘Every Little Helps’ - introduced by Tesco in the late 80s and

90s, that Clubcard’s full impact can be assessed. These initiatives

included: a First Class customer service programme, where staff were

encouraged to go that little bit further in helping customers; Value

Lines to cater for the price-minded shopper; and new store formats, such

as Metro and Express, which redefined the term convenience for shoppers

and retailers.



Clubcard was the coda to all those changes; the culmination of a long-

term strategy to become more customer-focused. Positioned as a ‘Thank

You’ rather than as a true generator of discounts, the card was the

proverbial icing on the value-added cake.



‘Clubcard helped us bring about all that, says Mason. ‘It literally

encouraged all of us to think of customers as individuals rather than

averages.’



But a card alone isn’t going to change shopping habits, points out one

retail marketer who has worked in this field. ‘It’s a long term meeting

of needs - a subscription if you will. Customers recognise they identify

with the brand. Somewhere in their minds they are saying to themselves

‘I am loyal to you because I think what you are offering is important to

my needs’ and suddenly they recognise it,’ he says.



As Tesco continues to mine the rich source of information buried in its

database its impact will be felt most at local level. All of its 524

stores will become their own marketing units which get to know their

customers and bring to life the old retailing adage: ‘my brand is my

shop’. The change of culture towards micro-marketing will be at the

forefront of Tesco’s future strategy.



It’s already at the stage where it knows who shops where and what they

buy. The next step is to fill in the other pieces of the jigsaw such as

who isn’t shopping at Tesco and why not?



Mason says there will be more segmentation of Clubcard’s customer base,

allowing specific targeting. For example, the next mailout of vouchers,

due in a fortnight, caters to the varying tastes of pensioners and

students, of whom there are one million and 200,000 respectively.



The real test, however, will come over the next two to three years.

Tesco has had a valuable headstart, but Safeway, which launched its ABC

scheme last October, is hot on its heels. It has 3.5 million active

cardholders and is in a strong position to build up relationships.



Because of Safeway’s one point per pounds 1 spent - as opposed to

Tesco’s one point for every pounds 10 - it has much more detailed and

frequent data on its customers. Where Tesco is limited to its quarterly

mailing, Safeway, which allows cardholders to redeem for either a cash

or gift at point of purchase, is free to talk to its customers at any

time.



Safeway relationship marketing controller Stephen Taylor says: ‘We will

be talking to our customers about a range of services. We are not

limited to any one period, but can talk to them when we want to. We have

the beauty of flexibility and detailed data.’



Observers say this is just the beginning. Stores may increasingly focus

on the most profitable customers and actively discourage bargain-

hunters. Or as one insider so graphically puts it: ‘Turning off the

cherry-pickers and choking them so they go to another store.’



Product ranges could be tailored to suit a particular type of customer

who shops in the store at that time of day. Similarly, rewards will be

made appropriate to the recipient. A pensioned widower is unlikely to be

interested in a 40% discount off a Club 18-30 holiday.



Tesco took the brave step of rolling out Clubcard and launching it in

style. Sainsbury has so far shown itself to be uncommitted to such a

scheme, though it is rumoured to be responding with its own version

later on this year. Save for a few trials Asda has, to date, stayed out

of the fray. The question is whether Tesco can exploit the lead it has

established over its rivals before they snatch it back. The major food

multiples are already planning to take loyalty one step further by

launching credit or debit cards.



‘This is no short-term thing. We are in this for the long run and it

takes time to really take hold, but so far it has more than paid off,’

says Mason.



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