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Tesco Revamps Loyalty Program

One of the world’s most successful loyalty programs has a home across the pond, where Tesco PLC – the world’s third-largest retailer – is celebrating the 15th anniversary of its ubiquitous Clubcard.

The U.K. supermarket giant is extending 2-for-1 rewards offers and celebrating with a variety of “birthday presents” that include goodies at restaurants, hotels and popular vacation attractions.

The Clubcard program has proven a hit with customers, who regularly take advantage of a wide array of benefits spanning groceries, DVDs, books, petrol, cell phone “top-ups” (that’s Brit-speak for purchasing additional minutes), flights, movies, health-club memberships, tickets to Disneyland-Paris and earning bonus points for purchases through the retailer’s Tesco Direct affiliate.  Members can even donate their points to help the British Red Cross aid  victims of recent flooding in Pakistan.

The program has evolved since its inception in the mid-1990s, and most recently was relaunched in 2008 with issuance of key fobs and newly design POS scan-cards to some 10 million members.  The loyalty cards not only track customer preferences and promote new purchases, a new test program even sponsors participation in a ride-sharing program to Tesco and other stores in North London.

“Fans and critics alike cite the advanced data collection, customer loyalty software and marketing techniques of Tesco’s Clubcard loyalty program as the reason for their competitive edge,” raves a recent HubPages article.”

Tesco has built its massive Crucible database to parlay the collection of seemingly innocuous demographic information – starting with simple name, age and address – into a powerhouse operation that leverages state-of-the-art CRM software, Zodiac Profiles.

“(This) better brand of customer loyalty software allows Tesco to better understand regional differences and make decisions regarding store locations, type of coupon or promotions much more accurately,” the article continues.  “It also allows them to see markets and products where they might be under-performing, which will allow them to focus their efforts in a precise manner.”

Tesco treads softly, in deference to the sensibilities of those who view as “Orwellian” the retailer’s linking of customer data with credit reports, loan applications, electoral roles, government statistics and real estate databases.

“Tesco has developed their database carefully to avoid conflicts with the Data Protection Act, but this has not stopped lawsuits and court challenges from various newspapers and consumer groups,” HubPages points out. “Privacy conscious consumers have started websites like cardexchange.org that encourage customers to swap loyalty cards to thwart businesses from tracking their shopping habits.”

Still, Tesco’s efforts have enabled it to weave loyalty marketing into the very fabric of its existence.  In 2005, Steve Goodroe, CEO of Tesco’s dunnhumby USA affiliate, summed up the challenge of creating synergy in a vast, faceless retail world:

“Your customers know when you get it wrong. They know that you spend a lot of money and time elsewhere instead of on them. They may get your emails, but they re not particularly relevant – and neither are most of the messages they are getting.”

In order to keep loyalty efforts relevant, he said, ensure that data:

  • Becomes a part of the company’s culture
  • Solves real problems, not just those associated with your marketing strategy
  • Is not there  just for data’s sake

And, Goodroe stressed the importance of retaining the personal touch: “The worst, and very common example of losing sight of the importance of customer data is the phone call that never reaches a human voice.”

(To learn more about how Tesco leveraged the Clubcard program to transform itself into a winning brand, read Scoring Points: How Tesco Continues to Win Customer Loyalty, available from Amazon and other major booksellers.)

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