By Scott Logie, MD, Insight at REaD Group
Tesco have always been ahead of the game when it comes to loyalty schemes – introducing the Clubcard back in 1995 before any other supermarket. This has always stood them in good stead when it comes to loyalty and trust with consumers. Our Retail Trend Report in 2017 found that consumers trusted Tesco ahead of any other retailer (besides Amazon…) when it came to using their personal data.
84% of consumers are more likely to choose retailers that offer customer loyalty programs. Get with the program: Perspectives on Retail Loyalty Program Participation and Perks. Nielsen, [November 2016]
Loyalty at a price
This week they are once again breaking new ground for supermarkets by launching the ‘Clubcard Plus’ – an exclusive subscription offering perks such as discounted shopping – all for a monthly cost of £7.99. Only time will tell whether this move pays off. It would seem to be a direct response to Amazon’s Prime service (even the monthly cost is the same!) as Tesco makes a bid to increase its customer loyalty. Research in the US recently found that Prime members were 8 times less likely to shop elsewhere in a session – that’s impressive!
However, the actual benefits on offer do seem somewhat underwhelming to say the least. The 10% discount off two shops up to £200 sounds good in theory, but in practice in order to break even you would need to spend at least £80 on your groceries every month. Tesco Finest Croquembouche anyone? That said, Christmas is fast approaching and families especially are regularly spending more than usual on shopping in the lead-up. But will subscriptions carry over once the festivities have ended? The double data offering for Tesco Mobile users equally isn’t that appealing – there are many cheap pay-as-you-go deals available now offering a large data allowance for a small monthly fee.
Waste not want not
The assumption from Tesco’s perspective may be that by offering this service, consumers will feel more obliged to shop with them as they are paying for it and therefore don’t want to waste it. A similar mentality to many gym users the world over…though many of us still don’t go! It is a widely accepted stat that it is cheaper to retain customers than it is to acquire them, and as a strategy focusing on retention it makes perfect sense. The real question will be – is the incentive strong enough to increase loyalty?
The data that such loyalty schemes provide can be an immensely useful asset in itself. Knowing that an individual is more likely to buy pizzas from you on a certain night of the week or the type of chocolate they frequently buy could be invaluable from a marketing perspective. It’s Tuesday at 5pm, the hanger has hit, all thoughts of cooking are out the window – email from Tesco: Two ham and pineapple (this is purely theoretical) pizzas for £5 tonight! Job done.
Consumers now recognise the value of personalisation and appreciate receiving deals that have been intelligently tailored to their shopping habits. Retailers therefore need to ensure they are segmenting their customer data and analysing it to make sure they are building and engendering trust and anticipating customers’ needs.
Brands must demonstrate through these retail loyalty schemes that customers that consent to share their data stand to be rewarded for their loyalty and custom. And for those brands with long standing schemes already in place – now is not the time to abandon them! They’re a key means of understanding customer habits and maintaining valuable patrons.
Loyalty schemes have become an expected norm, and retailers are now feeling the need to differentiate and experiment. Where Tesco’s new loyalty subscription is concerned, as long as consumers feel adequately rewarded and incentivised to keep a running subscription – they might be on to a winner.