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Extra info for Scoring Points: How Tesco Is Winning Customer Loyalty
34 ❙ This page intentionally left blank 3 Clubcard on trial ៑ The trials ៑ Tesco and loyalty in history ៑ Project Omega ៑ The DNA of loyalty ៑ Rediscovering the customer THE TRIALS In November 1993, the press began to report strange goings-on in the UK’s supermarkets. ‘Tesco has started a customer loyalty programme,’ reported Campaign magazine, the weekly journal for advertising and marketing: The company… has introduced electronic ‘swipecards’ in three outlets. Although Tesco is playing down the launch of a branded ‘ClubCard’ as ‘a test’, it has already had a 50 per cent take-up from customers in all stores applying to join the scheme.
The local butcher may be a family friend. All that a loyalty programme attempts to win is a slightly larger share of the customer’s spend than would otherwise be the case if the additional value of the scheme were not offered. It is no accident that Tesco has ‘Every little helps’ as its brand promise to customers. This slogan is based on the fact that regular yet modest improvements in Tesco’s offer and service are appreciated by customers and accumulate their goodwill, and that equally constant but small shifts in customer behaviour are enormously valuable to Tesco’s business.
Costs are about the same in the United States. Given large sales volumes, even programmes with modest rebates (up to 1 per cent) can cost a great deal of money. 20 ❙ Scoring Points: How Tesco is winning customer loyalty For Tesco, that is a £1 billion rebate to customers since 1995, at a time when falling grocery prices have squeezed margins on its core business. 0 per cent. 6 per cent. The cost of the rebate is only one overhead of a loyalty programme. McKinsey again: the costs of marketing and managing a programme – investment in systems, fulfilment support, and so forth – which normally run well into millions… Many retailers seriously underestimate the full cost of setting up and sustaining loyalty programmes, so even those that increase sales might actually be draining money.