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Is the Clubcard dead as a loyalty scheme?

By Retail Technology | Wednesday February 26 2014

Simon Towner, retail technology expert, questions whether the scheme, its format and its competitive value are costing Tesco more than it gains

Without doubt Tesco’s Clubcard loyalty scheme continues to be a loyalty scheme Tour de Force, with over 16 million active members in the UK, and some 40 million internationally, said Simon Towner, retail director of customer and point-of-sale (PoS) technology provider Omnico

The way Sir Terry Leahy and Tim Mason used the data to drive Tesco to a mighty 30% plus market share is well documented. But more recently Tesco has been stumbling – squeezed by Aldi and Lidl at the discount end, Waitrose at the high end and Sainsbury in their core market. Phillip Clarke, Tesco’s chief executive, has a significant challenge to protect market share.

Tesco’s ‘Every little bit helps’ has been a well-received message and Clubcard has supported this mantra with targeted discounts and money off vouchers, but Towner said the German discounters are offering great value quality products at significant price reductions to the competition. “Do Tesco’s shoppers want to wait for each quarter to get some vouchers when they can shop week-in week-out and get great value?” he asked.

System open to abuse

Also important is the risk of fraud associated with Tesco vouchers. These are posted to customers on a quarterly basis, which means they could be incepted somewhere in the journey from the point of production to the customer’s doormat. There is also risk for those customers who choose to access their accounts online and print off their vouchers, for example if an imposter hacks into their account (fraud that Towner said has been widely reported). Tesco responded in October 2013, making online access a requirement of  account entry with the customer’s Clubcard account number.

The retail technology expert said this brings to light two issues that other schemes now address: “Vouchers are either fully digital or print out on a till receipt, saving hundreds of thousands in direct mail and printing costs; and vouchers can only be redeemed with the loyalty card that those vouchers have been uniquely assigned too.”

As an example, Iceland recently revamped its Bonus Card scheme, deploying Omnico’s Engagement software to refresh the offer and delivery mechanism. The significant reduction in direct mail and printing costs has enabled them to re-direct those savings into better discounts and prices for their customer’s. The printing of personalised coupons on a till receipt adds a “surprise and delight” element to the shopping experience, said Towner. The results have been very promising with a significant increase in membership participation.

This ’surprise and delight’ element is also at the heart of the myWaitrose scheme – as well as a free hot drink, which of course is highly valued by their customers. For every £1 a customer spends they get entry into two prize draws: (i) each month in every store a myWaitrose member will win back the value of their whole month’s shopping, and (ii) one lucky member will win a year’s worth of shopping.

Using creative promotions

Retailers are also using more creative promotional schemes to build frequency and basket value with much success. Anglia Co-operative, now part of the newly formed Central England Co-operative, another Omnico customer, introduced a ‘frequency driver’ promotion on the run up to Christmas, rewarding their members with a high number of loyalty points if they spend above a given threshold in each week in December. The net result was an increase in membership like-for-like sales of 36%, propelling its overall like-for-like sales to an industry leading 9%. “Perhaps it is no surprise that Anglia Coop did the same promotion last Christmas as did most other UK grocery retailers,” he added.

Towner declared: “Retailers are likely to extend their loyalty schemes during 2014 by introducing those elements that make games such as Candy Crush so addictive. King, the makers of the game reckon they have 137 million active players in any month, all of which are highly engaged, with their typical player being a woman aged 25 to 45. Numbers such as these are drawing the attention of retailers as they strive to unlock the ‘magic’ these games have and that could be injected into their loyalty schemes and propel their customer engagement to the next level.”

With the resources available at Tesco, no one would bet against it being the first to respond, and yet again re-generate Clubcard to be at the forefront of loyalty schemes.

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