Tesco uses loyalty scheme to drive growth

07 October 2009

CHESHUNT: Tesco, the UK supermarket giant, is using its Clubcard loyalty scheme both to strengthen its position in the country's grocery sector, and as a tool through which to further develop its product portfolio.

Clubcard was first introduced 14 years ago, and now has an estimated 16 million members, equating to around three-quarters of the total number of people who shop at Tesco in Britain each week.

Having relaunched the programme earlier this year, the Cheshunt-based firm has since signed up an extra 1 million users, who are keen to take advantage of the discounts and special offers available via this initiative.

Every purchase made in its stores delivers 45 separate pieces of information to the company, based around factors ranging from price to whether a customer has opted for an own-label or branded product, and a “basic” or more unusual item.

Similarly, consumers are sorted into a variety of different demographics, such as if they have children or pets, or if they appear to make complex or simple meals.

Dunnhumby, the marketing firm that pioneered the Clubcard platform, and which is now owned by Tesco, assesses 100 transactions a second, or around 6 million shopping trips a day.

The information it generates helps Europe's biggest retailer decide which goods to stock, where promotional activity could boost sales, and even when it could expand its store brand range, as was the case with its Finest premium offering.

Edwina Dunn, co-founder of Dunnhumby, argued “customers love getting freebies. They want more promotions, more offers and rewards - either money off or just money.”

“Do Tesco's customers love them? Probably not. But there is a deal: you give us what we want and we will buy it,” she added.

Alongside offering Tesco an insight into the behaviour of its customers, major FMCG firms such as Coca-Cola, Nestlé and Unilever pay to access this data.

Carolyn Bradley, head of UK marketing for Tesco, said the Clubcard will also play a central role in encouraging people to switch to its financial services.

“Clubcard is a strong piece of glue and it will be a feature of our extension into other services,” she said.

Sainsbury's, one of Tesco's main rivals, launched a multi-million pound voucher scheme in an effort to attract money-conscious shoppers to its stores earlier this year.

However, Andy Bond, chief executive of Asda, said recently that “loyalty cards are somewhat mis-named. They just give money away. Trust cannot be bought by plastic points and money-off vouchers.”

Data sourced from Times Online; additional content by Warc staff