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
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
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
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
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-
‘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
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
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
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,’