Scoring Points: How Tesco Is Winning Customer Loyalty

FROM THE PUBLISHER

Launched in 1995, Tesco Clubcard is the world's most successful retail loyalty scheme. Since then, Tesco has transformed its relationship with its customers. Today, it is not only the United Kingdom's number one retailer, but also the world's most successful Internet supermarket, one of Europe's fastest growing financial service companies and arguably one of the world's most successful exponents of Customer Relationship Management (CRM). Scoring Points is the dramatic, previously untold story of how Clubcard was conceived, launched and developed. Clive Humby and Terry Hunt, two major influences behind Tesco's spectacular transformation, and Tim Phillips, a leading business writer and broadcaster, bring us a compelling behind-the-scenes account of Clubcard: the successes, the failures and the invaluable lessons learnt.

The authors show how Tesco made customer loyalty marketing work when almost every other loyalty programme failed. They give a vivid insight into why Clubcard enjoys unparalleled success and the benefits for Tesco and more importantly its customers. Scoring Points is one of the seminal marketing stories of the last decade. A fascinating tale of what can be achieved through vision, a strong team ethic and a company-wide commitment to customer satisfaction. It is an inspirational read for anyone in business.

SYNOPSIS

This case study chronicles the initiatives undertaken by the British grocery chain Tesco to create customer loyalty through a club card system and use the data collected to continuously improve and expand its services offered. The authors are marketing consultants who helped steer Tesco strategies. Distributed by Stylus Publishing. Annotation ©2004 Book News, Inc., Portland, OR

FROM THE CRITICS

Soundview Executive Book Summaries

Launched in 1995, Tesco Clubcard is the world's most successful retail loyalty program. Since then, Tesco has transformed its relationship with its customers. Today, Tesco is the United Kingdom's most successful retailer and the world's most successful Internet supermarket. It is also a leader in the financial services market and perhaps the best retailer in the world at managing customer relations.

In Scoring Points, marketing experts Clive Humby and Terry Hunt, as well as journalist Tim Phillips, describe how Tesco went from being just one of three grocery chains in Great Britain, fighting for its share of customers and their wallets, to the undisputed leader. You will see the action behind the scenes as Tesco begins to learn exactly why customers shop at Tesco and what they want from the retailer. By creating the world's leading customer relationship management program, Tesco has learned a lot about what it takes to retain those customers and induce them to spend more. Through its innovative Clubcard, Tesco has learned that rewarding good customers is great for business. What Tesco has learned from its program can serve as inspiration for others just now launching loyalty programs or trying to leverage the information theirs provides into sales.

Loyalty, in day-to-day life, implies monogamy: one choice above all others. Retail loyalty isn't like that. There isn't a customer alive who will consider using one shop for every need. When retailers look at winning and keeping loyal customers, the best they can hope for is a little extra goodwill, a slight margin of preference, and an incremental shift in buying behavior. Together, however, these benefits can add up to a massive contribution to a business' financial success.

Types of Loyalty
There are four types of loyalty on which retailers have come to rely. The first is "purge" loyalty in which the retailer slashes prices to make itself the preferred place to shop. The second is "pure" loyalty, which is dependent on a two-way dialogue between the retailer and customer. Next, "pull" loyalty depends on attracting customers by giving a related special offer with a purchase, such as a buy-one-get-one-free deal. It's an inducement to create sales by encouraging customers to buy new items. Finally, "push" loyalty means creating a program to encourage customers to use a way of shopping they haven't used before, such as offering a combined credit card and loyalty card or making prices cheaper on a Web site. Push loyalty is what loyalty programs are all about.

Creating Value
Loyalty programs produce positive results in six ways: Customers make purchases more often, having made a conscious choice to commit to your brand in exchange for a reward when they sign up. Loyalty programs give you the ability to mass-customize marketing communications. Using customer transaction data, you can individually target marketing. Loyalty program information is very valuable if it is analyzed. The data is exact and becomes a high-value asset itself. Loyalty programs let you track trends, giving you early warning of significant changes in how customers are shopping, what they are choosing and what they aren't doing. Loyalty programs minimize waste by targeting offers to those who are most likely to want them. Loyalty programs promote trust and open the way to an expanded relationship when it's time to add services and products to the marketing mix.

Making Loyalty Pay
Loyalty programs aren't cheap - they require a substantial investment in cash. For a large retailer, startup costs can run $30 million in the first year, and annual costs will run between $5 million and $10 million.

Loyalty programs also require a huge investment in time and IT resources. For example, Tesco employs nearly 100 people whose main job is to manage its Clubcard process.