A sample of whats inThe Loyalty Guide 5 _______________________________  Tesco & Dunnhumby       case study     Licensed e...
Whats in this sampler?This sample is intended simply to show you the level of detail andkind of materials covered in The L...
... the whole of customer loyalty, engagement & profitability        Volume 5Written by Peter Clark and Robin Clark of Wis...
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The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
The Loyalty Guide 5 - Tesco & dunnhumby case study
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The Loyalty Guide 5 - Tesco & dunnhumby case study

  1. 1. A sample of whats inThe Loyalty Guide 5 _______________________________ Tesco & Dunnhumby case study Licensed electronic document. Not for resale or unauthorised distribution. Copyright © 2012 Wise Research Ltd
  2. 2. Whats in this sampler?This sample is intended simply to show you the level of detail andkind of materials covered in The Loyalty Guide 5.This sample is not made up of complete chapters, and it does notstart at the beginning of a chapter. It is a selected example of thecontents of the full report.To help you see what else is covered in the report, we have alsoincluded the reports complete Executive Summary and Table ofContents at the end of this document.For current pricing and to order your electronic (PDF) edition ofthis report now, visit: http://www.theloyaltyguide.com/ordernow This entire document and all of its parts and accompanying materials are copyright 2000-2012 Wise Research Limited.
  3. 3. ... the whole of customer loyalty, engagement & profitability Volume 5Written by Peter Clark and Robin Clark of Wise Research Limited,publishers of The Wise Marketer (www.thewisemarketer.com)1st Edition PUBLISHERS NOTE ON CURRENCIES AND EXCHANGE RATES: All currency conversions in this report are approximate, and are intended for guidance only. All conversions were based on average exchange rates at the time of writing.COPYRIGHT WARNINGThis entire document is copyright © 2012 Wise Research Limited.The moral rights of the authors of this work have been asserted.This report is the product of extensive research work. It is protected underinternational copyright law. It may not be reproduced, archived, copied,transmitted, or stored, or made available, by any means or in any form withoutlicence and the prior written permission of Wise Research Limited.This publication has been designed to provide authoritative information inregard to the subject matter covered. While every effort has been taken toensure the accuracy of the information in this report, the publisher and authorsaccept no liability for the use or misuse of any information contained herein,regardless of its accuracy. Any forward-looking statements made are strictlyopinion, and should not be relied upon as fact. All company names andtrademarks are acknowledged. The report is sold with the understanding that thepublisher is not engaged in rendering legal, accounting, or other professionaladvice. We are normally willing to give permission for extracts, within reason, tobe quoted from our reports, provided that written permission is obtained inadvance and that both Wise Research Ltd and The Loyalty Guide are fully andclearly credited.You can contact Wise Research Ltd or its publication offices online at: Wise Research http://www.wiseresearch.co.uk The Loyalty Guide http://www.theloyaltyguide.com The Wise Marketer: http://www.thewisemarketer.com Or by e-mail: customer.services@wiseresearch.co.ukUK registered office: 1 Cornhill, Ilminster, Somerset TA19 0AD.UK courier/postal deliveries: 25 Shiremoor Hill, Merriott, Somerset TA16 5PH.UK company registration no. 5002062. UK VAT no. 827 0501 52
  4. 4. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 1 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTFrom chapter 20 - Supermarket & Grocery Loyalty20.2 Case studies20.2.1.7 Case study: Tesco & Dunnhumby (Clubcard)Tesco [www.tesco.com] launched its Clubcard nationally in 1995. It was the first major supermarket loyaltyprogramme in the UK, so it was a calculated risk. Up until the launch, Sainsburys had led Tesco in termsof UK market share. The month after the launch, Tesco passed Sainsburys, and has been ahead eversince. Tesco calculated that a sales uplift of 1.6% would cover the £10 million cost of launch and the costof issuing cards and reward vouchers. In fact, at first the uplift was more like 4%, settling at well over 2%.Some stores saw double-digit increases in like-for-like sales. So far, Tesco has handed out well over £1billion in Clubcard vouchers.In the book Scoring Points, the circumstances surrounding the inception, launch and later development ofthe Clubcard are discussed frankly and in detail. According to the books authors, the factors that led tothe success of the launch included: speed to market (the only option for competitors was to react); asimple uncomplicated message; trust in the team to act decisively; involvement of front-line staff; carefultesting; confidence; and commitment.A programme with some 16 million members generates a tremendous amount of data - enough tosignificantly slow down any useful analysis. Tesco overcame this by deciding not to try to answer everyquestion about every customer, but to answer some of the biggest questions about most customers.Marketing analysts, Dunnhumby [www.Dunnhumby.com], who had worked with Tesco on the Clubcardproject since 1994, came up with some innovative ideas that significantly reduced the amount of data thathad to be processed in order to make valid, useful decisions. Some of these are detailed in the bookScoring Points. (In May 2003, the US-based retail grocery chain, Kroger, partnered with Dunnhumby forthe analysis of its customer data. This analysis offers Kroger new insight into its customers needs, andimproves their shopping experience.)Clubcard holders can collect points across the entire Tesco group (1 point for every £1 they spend in-store, on petrol, or online at Tesco.com), and they can also collect points from Tesco Telecoms andTesco Personal Finance as well as Clubcard partners such as E.ON, Avis, and National Tyres, andthrough bonus point coupons and various special offers. Points are collected and sent to customers withtheir quarterly loyalty statements, in the form of Clubcard Vouchers. Customers can redeem theirVouchers in store at face value or they can exchange them for Clubcard Deals Tokens and get up to fourtimes their face value. Clubcard has signed up over 300 Deals partners including Eurotunnel, selectedhotels, magazines and holiday companies.Every quarter (13 weeks) Tesco sends a magazine to each of its Clubcard members. This containscoupons to the value of the reward earned over the three months - these can be used to pay for goods atthe checkout, can be used to buy Air Miles, or can be redeemed at a range of partners too extensive tolist, but including theme parks and restaurants, museums and other attractions, hotels, holidays and travel,motoring organisations, magazines and beauty consultations, sport and leisure, and flights. The magazinealso contains product specific discount vouchers, selected for each customer on the basis of previouspurchases. When the magazine is posted each quarter it is said to account for some 6% of the totalvolume of mail handled by the Royal Mail at that time (see also 2.3.13).Tesco signed up with Air Miles [www.avios.com] in March 2002; previously Sainsburys customers couldredeem their Reward Points for them. At the time of the change, Tesco.com saw a surge of 450% insearches for store maps as customers looked online for their nearest Tesco store, and enquiries abouthome shopping rose by 300%. The Royal Bank of Scotland Group, Tescos partner in the Tesco Personal
  5. 5. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 2 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTFinance arm was, at the time, already the biggest originator of Air Miles in the UK through its credit cardbusiness.In September 2002, after a trial in Wales, Tesco rolled out targeted electronic coupons at the checkout forits Clubcard members. At the time, a Tesco spokesman said that these coupons were not intended toreplace the mailings but to supplement them. The coupons are automatically printed by the tills at thetime of purchase. Unlike some similar systems, they are not triggered by the purchase of a specificproduct at the time but by the customers recent purchase history. One hundred different offers -changed every two weeks - are available at any one time. The system selects which of these offers aremost relevant to the customer in real time.In November 2002 Tesco added an "online Clubcard" - its online rewards scheme - to its web site,Tesco.com. Tesco had been under pressure from rival supermarket Sainsburys since the launch of theNectar programme in September (of which Sainsburys is a founding partner). Industry analysts,Datamonitor, called the move "clever marketing and deft online touch".Customers earn reward points that are converted into e-coupons and vouchers, which can then beredeemed online. All of the then 10 million existing customers were being encouraged to requestvouchers and log on to the web site to redeem their new points.Essentially, the new e-coupons and vouchers extended the existing Clubcard scheme into the Tesco.comvirtual store, which by then was handling some 85,000 visitors each day.The company made good use of the customer data gleaned from its Clubcard programme, allowing it totarget customers based on their known spending and shopping habits, offering an array of customisedmailshots highlighting different offers and advantages to well-segmented groups of consumers.When the Nectar programme was launched in September 2002, Tesco countered with a short-termprogramme offering its customers the chance to win £1 million. However, the customers first had severalhurdles to overcome. Shoppers were given a game card for every £25 they spent. Each card contained amultiple choice question, with four possible answers. Any Clubcard customer who answered four of thesegame card questions correctly could enter the draw for one of 200 seats for an exclusive filming of aspecial episode of the hit television show, Who Wants To Be a Millionaire?. There, they were given theoption to compete in a fastest finger first contest, the winners of which were invited to answer fifteenquestions for a million pound prize. According to Tesco marketing director, Tim Mason, the multiple-stage game approach was chosen because customers had previously indicated that "they want addedexcitement for their shopping trips as autumn closes in, before the run-up to Christmas." Five othershoppers won one million Air Miles each and another five won one million Clubcard points each.In March 2003, Tesco, bought out the online womens community, iVillage [www.ivillage.co.uk].Following the sale, iVillage became a wholly-owned subsidiary of Tesco, subject to a 20-year licensingagreement for content and intellectual property, including trademarks and copyrights.The deal followed Tescos launch of the MeTime womens reward category as part of its Clubcard loyaltyprogramme. Tescos MeTime programme is aimed at helping women to pamper themselves by usingClubcard points for luxury treats such as hair styling and make-overs.iVillage is an online community for women, with a variety of information and activities to take part in,including discussion groups, job seeking, health advice, and even a baby name chooser. The onlinecommunity focuses on issues that matter to women, and offers interactive services, expert advice, and asupport network.Other content channels include: diet and fitness, relationships, parenting, pregnancy, health, beauty, foodand drink, money, news and entertainment, work and careers, astrology, computers and the internet,shopping, games, and motoring.
  6. 6. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 3 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTUnder the terms of the agreement, the iVillage online community will continue to operate under theiVillage UK name, and will continue to provide its 1.2 million visitors each month with information,articles, and offerings.The expansion of the relationship between the two companies also gives Tesco the ability to use iVillageto cross-market and interact with its other communication channels, including the Tesco.net internetservice provider (ISP) as well as its bricks-and-mortar stores.Although iVillage continues to operate under its own branding, the online entity is expected to receivesignificant marketing and promotional support from Tesco to help drive qualified traffic, and to promoteitself within the UK. The license agreement is structured so that the sites existing operator, iVillage UKLtd, receives either a set monthly fee or a percentage of gross revenue, whichever is greater.In March 2005, iVillage Inc. The Internet For Women, a womens media company and womens communityonline, announced that, through a subsidiary, the company has signed a definitive agreement to acquirethe iVillage.co.uk website and certain related assets from a subsidiary of Tesco Stores Limited. iVillageexpected to close the deal in May.In September, 2003, Tesco launched its new Tesco Mobile telephone service offering, beginning with arange of pay as you go handsets. Users earn two Tesco Clubcard points for each £2.00 spent on airtimetop-ups in-store, or one point for each £2.00 when topping up elsewhere.In November 2004, retail technology supplier Conchango observed that creating value for customers inorder to earn their lifetime loyalty is a strategic vision for Tesco, and two important elements of thatvision are customer-centricity and reducing queue times (both at the checkout and at in-store foodcounters). So, when the time came to upgrade the ageing weighing scale infrastructure, Tescos serviceproductivity team recognised the potential benefit of introducing a more intelligent weighing scaleapplication that would improve the customer experience at in-store food counters like the delicatessen,butcher, fish counter, bakery and hot chicken counter.Using Microsofts .NET technology, Tesco and Conchango developed a counter scale application thatnot only makes shopping easier, but also automates routines at the point of service, simplifies pricingintegrity, centralises system support and provides real-time purchase information to other systems andtimely summarised data to headquarters.Within twelve weeks, Tesco, Conchango and Herbert Retail (the scale supplier) were preparing the systemfor an in-store trial. This successful trial led to an extended trial in 17 stores. The system was thendeployed to all UK stores. As a result, transaction speeds increased by 42% and staff are able to answer awide range of enquiries with greater confidence, including an items country of origin, whether it isorganic or not, and provide suggestions for cooking methods and recipes.In August 2004, the signing of an exclusive 3-year agreement ago saw car rental company Avis Europe[www.avis-europe.com] establish itself as a Tesco Clubcard and Clubcard Deals partner. Clubcardcardholders earned points when renting a car with Avis and could pay for their Avis car rental byredeeming Clubcard vouchers at four times their face value.In February 2005, Tesco Ireland partnered with the points-based travel and leisure reward programmeBuy and Fly! to offer flights, travel and leisure rewards to its Clubcard loyalty programme members. Thepartnership extended only to Clubcard members in the Republic of Ireland, who could choose to havetheir Tesco Clubcard points automatically converted into Buy and Fly! points. These points were thenredeemable for a range of travel and leisure rewards including flights with eighteen airlines around theworld.At the same time, Tesco UK began its involvement with self-checkout technology, freeing up extra stafftime and improving customer satisfaction. Tesco installed 285 NCR [www.ncr.com] FastLane self-servicecheckout units, which enable customers to scan, bag and pay for their purchases themselves, in 96 TescoMetro (High Street stores), Superstores and Extra stores (hypermarkets) in England, Wales, Scotland andNorthern Ireland. Customers could scan, bag and pay for their purchases themselves. According to
  7. 7. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 4 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTTesco, shoppers of all ages took to the technology, scanning all sorts of goods ranging from food andclothes to pharmaceuticals and electronics. Self-checkout also enabled Tesco to free up more staff time tohelp other areas of the store or open more checkouts. According to NCR, Tescos experience with self-checkout was backed by research from IDC that showed that consumers see real value in the technology,and that UK consumers cited shorter queues (68%), faster check out times (68%), and having a choice ofhow to check out (66%) as the main benefits of self-checkout.By May 2005, an analysis of the UK supermarkets market share from TNS Superpanel [www.tns-global.com], revealed that a recovery in Sainsburys market was building (with its share lifting from 15.5%a year before to 15.9%, representing real turnover growth of 5%) - but the clear leader in the field was stillTesco, with an ever-widening lead. Indeed, Tesco had continued its recent run of double-digit turnovergrowth to post a share of 29.8% (up from 27.5% a year before). All told, the UK supermarket sharefigures from 2004 to 2005 showed that Tesco continued to build on its impressive market lead while itsclosest rivals, Asda and Sainsburys, continue to fight for second place. Against this competitivebackground, TNS said that Asda had suffered a small loss of share (from 16.6% to 16.5%), underliningthe fact that the EDLP supermarkets growth had slowed from the levels seen in 2004.But by the end of June 2005, Tesco reached its anticipated market share breakthrough, passing the 30%mark in the UK market, according to the June 2005 figures from TNS Superpanel. It had actually reachedan all-time UK record market share of 30.3% (up from 27.9% for the same period one year before). Thisrepresented annual growth of some 11%, continuing the supermarkets consistent double-digit growthnoted by TNS throughout 2005.According to the figures for the 12 weeks ending 19th June 2005, Sainsbury still held on to its share of15.9% (up from 15.6% one year before). Asda, which is part of the Wal-Mart family, remained flat with ashare of 16.4%, almost unchanged from the same time the year before. The combined Morrisons-Safewayshare, however, slipped to 11.7%, marking the groups first time below 12%. Somerfield continued itsstrong run with its share having increased from 3.5% one year before to 4.0% in June 2005. However thisshare gain is balanced by the loss at Kwik Save so that the combined Somerfield/Kwik Save share actuallyremained relatively unchanged. Waitrose enjoyed another period of strong year-on-year growth (up 20%),holding on to the share gains it made earlier in 2005.In August 2005, in the UK and Ireland, Tesco Diets [www.tescodiets.com] implemented e-mail marketingtechnology from e-marketing technology firm e-Dialog [www.e-dialog.com] to deliver customisedmessages to its community of subscribers. The e-Dialog Precision Central software platform helps TescoDiets to provide sound, relevant, and helpful advice to its members about maintaining a healthy weight.Among the platforms features that Tesco Diets is using are: custom publishing, live proofing, conversiontracking, management of unsubscribe templates, selection of audience lists from multiple sources, mailmetering management, spam reporting, and reporting and analytics.In February 2006, Tesco announced its intention to enter the US market through the development of anew convenience format, beginning with stores on the West Coast in 2007. The new C-store format wasdesigned for the American market, following extensive consumer research. The format was also modelledon Tescos existing Express concept which already operates in five countries (including the UK) with over800 stores serving around 8 million customers per week. Through the US operation, Tesco hoped tobuild up its position in the worlds largest markets. The expansion will bring the global population of thecompanys combined markets to some 2.1 billion people.The development of the business will be through organic growth, with initial planned capital expenditureof up to £250 million per year funded from existing resources. Break-even was expected by the end of thesecond full year of operation. Tesco then traded in 12 countries outside the UK (mainly in Asia andCentral Europe), and more than half of the companys selling space was outside the UK. But theannouncement of a US-based initiative represented a strategic move into a highly developed market,which followed the companys entry into the emerging Chinese market in July 2004.At the same time, Tesco announced that up to 49,000 of its UK staff would share in a multi-millionpound pay-out as two of its Save As You Earn (SAYE) share schemes matured. Under the SAYE scheme,
  8. 8. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 5 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTstaff can set aside a fixed sum between £5 and £50 from their salary every month for a three or five yearperiod. When the scheme matures they have the option to buy Tesco shares at a price set when theyjoined the scheme. Top savers, including checkout assistants, internet shopping delivery drivers, and storemanagers, stood to gain some £5,300 (a 59% return on their initial investment in company shares).In June 2006, the Lean Enterprise Institute [www.lean.org] reported that one of the many keys to the successof Tescos Clubcard loyalty programme is the retailers lean provision system that efficiently deliversexactly what customers really want, when they want it, and where they want it. According to JamesWomack, chairman of the non-profit Lean Enterprise Institute, the retailers lean provision system allowsit to respond rapidly to the wealth of data collected from its 12 million+ Clubcard users, givingappropriate discounts to loyal (frequent) shoppers.Tescos lean provision system combines point-of-sale data, cross-dock distribution centres, and frequentdeliveries to many stores along milk-runs to stock the right items in a range of retail formats, includingTesco Express convenience stores, Tesco Metro (small supermarkets), traditional Tesco supermarkets,Tesco Extra stores (big box superstores), and the Tesco.com online shop. The range of retail formats thecompany has established, combined with detailed knowledge about specific consumers and the rapidreplenishment of each store, allows Tesco to offer households convenient variety at a low total cost. Thestrategy has worked brilliantly, allowing Tesco to establish the lowest cost position among British retailers(including the Wal-Mart owned Asda chain) while posting progressively higher margins and steadilyincreasing its share in every format.In August 2006, Tesco offered Clubcard members special Green loyalty points for not using carrier bags,and bringing their own with them to the store instead. Consumers earn points for each carrier bag theybring in and reuse at the checkout, whether they are Tesco bags or those of competing supermarkets.Checkout staff ask customers how many bags they are reusing and agree the number of points to beawarded. Larger re-usable trolley bags may earn more than one point. Staff have received training but alsouse their discretion when awarding points.According to Tesco CEO, Sir Terry Leahy, "We had a team looking at carrier bags, trialling different ideasin our stores and talking to customers about what we could do to encourage them to use fewer bags andto recycle the ones they do use." The aim of the programme, according to Tesco, was to rewardcustomers for using fewer new bags. The company said at the time that it aimed to cut the number ofnew bags given out by 25% over the following two years - a potential saving of 1 billion bags per year.Tesco also introduced bigger, thicker bags in many of its stores so that customers can fit their shoppinginto fewer bags. All Tesco carrier bags have been bio-degradable since October 2006. Another smartmove for Tesco Clubcard members is that the company has issued coupons entitling members to a freereusable Bag for Life, making it easier to reuse and reduce bag consumption. All of Tescos staff alsoreceived personal letters introducing them to the scheme, providing them with coupons for Bags for Life.At the same time, ComScore Networks [www.comscore.com] reported that Tesco had become by far themost popular online grocery shopping web site in the UK, capturing some 66% of all online groceryorders nationwide. From January to July 2006, Tesco gathered an average of 30,000 orders per day,representing total online sales of some £2.5 million per day. Tesco.coms closest online competitor wasAsda, which captured 16% of all orders, followed by Sainsburys with 14%. Despite its third-placestanding in terms of order volume, Sainsburys customers actually spent the most when they ordered,averaging almost £90 compared to £80 for both Tesco and Asda. In addition, Asda and Sainsburyscustomers typically ordered more items, both averaging 69 units per order, compared to Tescos 58.ComScore also tracked the delivery costs charged by each, and found that Sainsburys online customersincurred the lowest delivery charges during the period (at just over £3 per delivery on average). Tescosonline customers paid over £4 per delivery, and Asdas online customers paid the most at nearly £5.50.In October 2006, Tesco launched a non-food direct retail operation called Tesco Direct, while at the sametime bringing order fulfilment in-house to improve customer service and supply chain control. TescoDirect is the retail web site that offers UK consumers a choice of over 8,000 non-food lines. Inconjunction with the existing Tesco.com food retail service, Tesco Direct means that customers can notonly do grocery shopping online but also buy a range of non-food goods such as furniture, kitchenware,gifts, toys and sporting goods. While the delivery of some lines was previously outsourced to logistics
  9. 9. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 6 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTpartners, Tesco has brought all fulfilment in-house with the aim of providing an improved service for itscustomers.In February 2007, Tesco announced its plans for a new chain of supermarkets in the US market. Tescosaid that its new chain of grocery stores in the US would be called Fresh & Easy Neighborhood Market.Tesco veteran marketer Tim Mason (who joined the company in 1982) was named as the US operationsCEO. The company initially focused on the Greater Phoenix area, Las Vegas, Los Angeles and SanDiego, with the first stores opening in late 2007. Tesco chose the Greater Phoenix area for its highpopulation growth and the strong potential of its expanding market. Each of the stores are roughly10,000 square feet in size, intentionally smaller than the usual supermarket in order to give customers afaster, easier shopping experience.The Fresh & Easy Neighborhood Market format was a result of extensive customer research in local USmarkets combined with the learning from Tescos existing Express format which it operates in more than1,000 stores in seven countries, serving approximately 10 million customers every week. At the time, TimMason said that he thought that the Clubcard programme would follow Tesco around the world, but thatit was really a question of timing.At the same time, a new partnership between the UKs Open University (OU) and Tesco allowed Clubcardmembers to pay for all or part of their OU courses using Clubcard vouchers. The OU was the firstuniversity to add the Clubcard scheme to its marketing activities. Members can swap vouchers forClubcard Deals and receive up to four times their value, so for every £10 worth of Clubcard vouchersshoppers can generate up to £40 toward the OU course of their choice.And, following its earlier Green promotion in which customers were rewarded for reusing plastic carrierbags, Clubcard members were again rewarded (with double Clubcard points) when they bought productsfrom the supermarket chains popular green and organic ranges. Those purchasing products such asorganic fruit and vegetables, energy-efficient light bulbs, and environment-friendly brands earned doublethe number of Clubcard points for an eight-week period from 15th February 2007. According to Tescosmarketing director, Ian Crook, the previous bag reuse scheme had already helped save some 300 millioncarrier bags by changing consumer behaviour.At the time, the bag re-use scheme had put Tesco well on track to meet its goal of cutting carrier bagsissued by 25% by 2008, and that some 4 million customers had already collected Green Clubcard pointsthrough the programme.Members can also earn Green Clubcard points for recycling their old mobile phone handsets and inkjetprinter cartridges. Customers collect 500 points or £5 to charity for each working phone recycled, and100 points or £1 to charity for non-working phones. For recycled inkjet printer cartridges, customersreceive 100 Clubcard Points or £1 to charity. Freepost envelopes are available in store for this.In March 2007, TNS Global [www.tnsglobal.com] identified Tesco as the UKs favourite retailer. Some15,000 TNS Worldpanel consumer panellists were asked to nominate their favourite retailer in each keyretail sector as well as their overall favourite. A significant 16.7% of respondents voted for Tesco as theiroverall favourite retailer, with Asda and Marks & Spencer (M&S) coming second and third respectively.At the same time, Tesco Direct announced that it would be installing up to 200 desks in stores across thecountry during 2007, allowing customers to order and collect non-food products from a store of theirchoice. The move followed positive feedback from customers who had used the desks at the handful ofpilot stores since the in-store service launched in August 2006. Shoppers said that they liked theconvenience of being able to collect or order products at the same time as they do their weekly shopping.According to a report in Retail Week magazine, Tesco does indeed plan to launch the Clubcard in everycountry where the company operates. Being such a powerful tool for gathering customer insight,Clubcard has already been introduced to the Republic of Ireland and South Korea. But other countriesare expected to follow soon, including the US.
  10. 10. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 7 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTIn August 2007, marketing consultancy Dunnhumby announced the relaunch of Tesco TV, the in-storemedia system used in Tesco supermarkets, under the new name Tesco Screens. First installed in 2004,the network consists of 5,000 LCD and plasma screens spread throughout 100 Tesco Superstores andTesco Extra outlets. Advertising spots can be designed to fit within the stores own in-store promotionalformat or, for more product- and company-specific campaigns, brands can chose a new brand stingformat that uses Flash animations for eye-catching messages around the store. Tesco TV provedsuccessful at driving brand sales, with average sales uplift on new and promo campaigns of 5% to 8%,rising to 18% for seasonal activity. The new brand stings have already achieved sales increases of up to25%.In September 2007, Epsilon, the loyalty marketing arm of Alliance Data Systems [www.alliancedata.com],signed a multi-year agreement to provide permission-based email marketing solutions and services toTesco.com, an online business of Tesco. Tesco.com deployed Epsilons proprietary e-mailcommunications and campaign management platform, and Epsilon is providing additional professionalservices to help Tesco.com develop more highly targeted e-mail campaigns to acquire and retaincustomers and generate increased sales through up-selling and cross-selling.In November 2007, the first of the long-awaited Fresh & Easy Neighborhood Market stores opened its doorsin the US. In addition to offering a range of national brand name products at low prices, Fresh & Easyhas gone to great lengths to ensure all its own brand products contain no added trans-fats, artificialcolours or flavours, and only use preservatives where absolutely necessary. The stores also offer a rangeof prepared meals (made fresh in the companys own kitchens at Riverside, California). Food is sourcedlocally wherever possible and deliveries are made daily to each store to ensure all products are as fresh aspossible. A team of researchers spent time in the homes of US consumers looking at shopping andcooking patterns. They discovered shoppers wanted fresh, wholesome foods that were affordable andavailable in their local area.According to US CEO, Tim Mason, "We literally went into their kitchens and looked in theirrefrigerators. Based on our research, we are confident our stores will be a hit in every neighbourhood weopen in." Around 50 Fresh & Easy Neighborhood Market stores were expected to be opened byFebruary 2008 in all kinds of neighbourhoods, including those traditionally underserved by modern foodstores. The first six stores in California were closely followed by five in and around Las Vegas, Nevada.San Diego and Phoenix were also included in the store openings schedule by the end of 2007.As part of Fresh & Easys promise to be a good neighbour and a responsible company, it intends to keepall stores and car parks clean and tidy, and deliveries are scheduled to minimise noise and disruption.Each store will also help support local charities and projects. In addition, the company has committed tobuild LEED (Leadership in Energy and Environmental Design) certified buildings, recycle or reuse allshipping and display materials and use environmentally friendly trailers to transport food.Including the US, Tesco then operated stores in 12 markets outside the UK. Tescos portfolio spans 13countries (11 in Europe and Asia) making it the third largest retailer in the world. More than half thecompanys retailing space is outside the UK, and Tesco has been cited as the market leader within theUK, Ireland, Poland, Hungary, Slovakia and Thailand. Tesco operates over 3,400 stores worldwide,including over 670 in Europe (in the Czech Republic, Ireland, Hungary, Poland, Slovakia and Turkey) andover 700 in Asia (in China, Malaysia, Korea, Japan, and Thailand).In January 2008, Tesco decided to expand its price checking programme to include 2,000 lines sold atdiscount outlets such as Aldi and Lidl, and to offer more than 400 food and non-food items at half pricethroughout the month of January. Tesco reports that it is now focusing on the growing discount retailsector in a bid to ensure that customers do not have to compromise on quality or service to enjoy thelowest prices.In June 2008, Tesco announced a voucher collection scheme that offers schools and clubs a range of freeproducts. By merging its two existing voucher schemes (Computers for Schools and Sport for Schoolsand Clubs) into one catalogue, the supermarket is offering schools and clubs a wider choice as well as thefreedom to decide where their priorities lie. To give schools and clubs longer to save up for big ticketitems, Tesco offered the vouchers in-store for an extended period of 15 weeks. All equipment was
  11. 11. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 8 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTdelivered during the autumn term, getting the school year off to a good start. Computers for Schools waslaunched in 1992, and the supermarket gave 13,000 items to UK schools in that year alone. Sport forSchools and Clubs followed in 2005. By the end of 2009, Tesco had given away more than 3 million itemsof computing and sports equipment, with a value of over £150 million. Nearly 40,000 schools and clubstake part in these annual voucher collection schemes.In April 2009, Tesco announced the £150 million relaunch of the Clubcard programme in a bid tomaintain its leading market share. According to a press comment by chief executive Sir Terry Leahy, whileprice and value matter more to many customers in hard times, the company aimed to improve all aspectsof the shopping trip including service and product availability. Tesco Clubcard holders are now able todouble the value of their vouchers against a wide range of popular products in Tesco stores and online.Until then, customers could spend their Clubcard vouchers at face value in-store and online, or increasethe value by up to four times by trading them for a range of deals with Tesco Clubcard partners (rangingfrom restaurants and theme parks to Air Miles and driving lessons). New in-store features includeClubcard desks where customers can instantly exchange their vouchers for double the value inparticipating categories. The double-up vouchers must be spent in full in a single transaction in thechosen department, and they cant be exchanged in Tesco Express stores. Vouchers exchanged online aresent by post within five working days. Categories participating in the double up promotion include: · Clothing - including footwear, nightwear, underwear, accessories, and jewellery purchased in- store; · Baby and toddler - including nappies, wipes, clothing, nursery, feeding accessories, toys, food and baby toiletries, but excluding infant formula milk; · Toys - including all childrens toys, outdoor toys and childrens bikes, but excluding games consoles and software; · Cosmetics, skincare and fragrance - including skincare, sun cream, bath care, make-up and fragrances, but excluding all other toiletries; · Tesco Mobile network top ups - excluding other network top-ups; · Tesco instant travel and breakdown insurance; · Wine and Champagne - including wine, Champagne, and fortified wines (for a limited period only); · Flowers, plants and gardening - including fresh cut flowers, plants, gardening accessories, garden furniture and barbecue equipment.In May 2009, Tesco urged its customers to hunt through their wallets, bookshelves and kitchen drawersto dig out forgotten Clubcard vouchers because they were collectively missing out on £40 million everyyear. Each quarterly mailing provides vouchers worth approximately £100 million, and the companysdata showed that around 10% of this is never redeemed.In October 2009, Clubcard holders were offered double Clubcard points both in-store and online. Thisfollowed the successful Double Up promotion, which doubled the reward for customers on selectedcategories and which attracted almost half a million new Clubcard members in three months. In the sameperiod, more than 1.5 million customers doubled up their vouchers, with the most popular categoriesbeing clothing and wine.By January 2010, sales were increasing and the companys overseas businesses also saw continued growthover the Christmas and New Year period. Like-for-like sales in Asia, Europe and the US also continuedthe improving trend seen in Q3 2009. In the US, Fresh & Easy had a stronger Christmas and New Yearperiod in 2009 than in 2008, with a total sales growth of 35%. As a result of Double Clubcard Points andthe additional Clubcard voucher mailing in December, over the Christmas and New Year periodcustomers redeemed £34 million more Clubcard vouchers than in the same period in 2008.The statistics of the Clubcard programme are impressive, with 16 million members (at the end of 2009),and some £100 million being handed back to customers in vouchers every three months when around 9million different versions of the Clubcard quarterly statement are mailed out. Amazingly, 95% of the
  12. 12. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 9 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTvouchers issued are actually redeemed. Similarly, 35% of coupons issued by Tesco are redeemed, and10,000 customers per week take the trouble to advise Tesco that they are moving house.Since its launch in 1995, Clubcard has returned approximately £3 billion pounds to loyal customers. Sisterschemes operate in several of Tescos markets outside Britain. The programme operates as Familycard inKorea (3.8 million members), Membercard in China (3+ million), and Clubcard/Biz Clubcard in Malaysia(1+ million). Tesco also has trial schemes operating in Thailand and Turkey. The schemes differ instructure and benefits from market to market. For example, the Korean scheme includes opportunitiesfor customers to collect points when they shop at the retail tenants of malls owned by Tesco, as well as aKids Club and Baby Club operated under the programme. In Malaysia, Tesco recently launched the BizClubcard to cater for the needs of the small business customer. Biz Clubcard holders enjoy additionalservices such as special counters for bulk purchase, pay & reserve and phone/fax ordering facilities. Theyare served by a special team in every Tesco Extra store in the country.In February 2010, Tesco celebrated the 15th birthday of Clubcard with over £120 million worth ofrewards sent out to more than 14 million customers. It also announced that it would continue to givedouble points instore and online. More than one million new customers had signed up to Clubcard sinceits relaunch the previous year. Tesco had recently launched an iPhone app that turns the phone into anelectronic Clubcard. As well as the vouchers, the mailing sent out also included a range of special birthdayoffers including: cut price deals at Hilton hotels; free entry into theme parks and other Merlin attractions;half price on popular magazine subscriptions; and hundreds of pounds off Virgin Holidays. And in adraw, five Clubcard customers became ‘Clubcard millionaires worth £10,000 in shopping or up to£40,000 if used for other rewards from holidays to restaurants.At the time, Clubcard had more than 400 partners. In 2009, Tesco issued vouchers worth £529 million tocustomers. To ensure that customers receive relevant rewards, there were 9 million variations of theClubcard statement. No three customers got the same statement. At the time, Tesco had national loyaltycard schemes based on Clubcard in Ireland, Poland, Malaysia, South Korea and China and pilot schemesin Slovakia, Thailand and Turkey.In early 2010, Tesco Mobile launched the iPhone with what it claimed to be the shortest and cheapesttariffs in the market. Customers could choose Pay as you go or Pay monthly with a £20 a month 12month contract or a £60 a month 24 month contract with a free iPhone. Tesco Mobile iPhone customersalso benefited from double Clubcard points on handset purchase and triple Clubcard points on top ups orwith their monthly bill. Three iPhone apps have been launched by Tesco: Tesco Finder uses GPS to helpcustomers find their nearest Tesco and can provide the exact aisle and shelf location of any product in agiven store. Tesco Wine Finder uses advanced technology to recognise the labels on bottles of wine.Customers can take a photo of a bottle, and if Tesco stock it, they will be provided with tasting notes andthe opportunity to buy it from Tesco online. The Clubcard App turns an iPhone into a Clubcard. Allmembers do is open the app, type in their Clubcard number, and the app generates their Clubcardsbarcode on the phone. This can then be scanned at the checkout.In September 2010, Just Food [ www.just-food.com ] reported that Tesco was about to launch Clubcard inthe Czech Republic and expected to enrol some 1m households in the first year. In Poland and Slovakia,the Clubcard was launched the previous autumn and had 1.5m and 850,000 cardholders, respectively.In November 2010, Tesco announced a "double the value of your Clubcard vouchers", if they were spenton a range of non-food items in its supermarkets. The closing date for the exchange of vouchers into BigClubcard Vouchers was December 5th. Tesco expected that some £50 million in Clubcard voucherswould be doubled by shoppers into £100 million in value. Every £5 in Clubcard vouchers could beexchanged for a £10 rewards token to spend on toys; clothing; baby and toddler; opticians; selectedelectrical goods, beauty and fragrance; flowers and plants. Every £10 in Clubcard vouchers could beexchanged for a £20 rewards token to spend on: artificial Christmas trees and Christmas lights; Finestwine and Finest Champagne; beds, bedroom furniture and bedding; DIY; computers; phones andaccessories.However, in December 2010, This Is Money [www.thisismoney.co.uk] reported that thousands of peoplefaced long queues on the final day for conversion of Clubcard vouchers and both the Tesco website and
  13. 13. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 10 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTthe telephone call centre were clogged. Tesco later said that it was "doing everything we can at ourcustomer service centres to help those customers affected."Also in December 2010, Tesco Direct announced the launch of its new mobile website, designed tofacilitate easy shopping for non-food and household items, directly from mobile phones. This launch wasthe first step in Tescos strategy to expand and develop mobile websites for core Tesco sites, with othersset to follow. It followed closely on the heels of the Tescos grocery app launch, featuring barcodescanning for iPhone - the first ever by a UK supermarket.Using the new site, Tesco Direct customers can search and buy everything from televisions to tables totoys using any smartphone. The initiative forms part of a wider commitment to make Tesco Directavailable to everyone, anywhere, at anytime - whether that be through the Tesco Direct catalogue, in-store, online, or by phone. Traffic to the Tesco Direct website via mobile telephones has grown steadily,with a 300% growth in mobile visitors between 2009 and 2010. At that stage, over half a million visitors amonth were using their mobile phones to search and shop on the website.In April 2011, according to an article in Computer Weekly [www.computerweekly.com] Sir Terry Leahy tolddelegates at Teradatas user conference that collecting, analysing and acting on the insights revealed bycustomer behaviour, both at the till and online, allowed Tesco to find the truth. He said that customerswere the best guide. "They have no axe to grind. You have to follow the customers, but learn from thecompetition, preferably before they do." According to Leahy, businesses change slowly, but customerschange quickly. He said a better understanding of customer data helped Tesco to improve theproductivity of its promotional budget tenfold, and its budget for retaining wavering customers three-fold.In April 2011, online travel retailer, Redspottedhanky.com, began accepting Tesco Clubcard points, withthe result that households could simultaneously receive Clubcard discounts on their train tickets, and earnloyalty points from redspottedhanky.com to put toward future travel. A return journey by train toLondon from Birmingham for a family of four could cost up to £203.50 if booked on the day of travel.But if booked in advance through redspottedhanky.com for an advance fare, the cost could be 93% less.In May 2011, in the UK, power and gas company E.ON and Tesco began piloting an initiative that allowsE.ON customers to use Tesco Clubcard vouchers toward paying their energy bills. To reward customersfor being with E.ON and Tesco, 50% is added to the face value of any Tesco Clubcard vouchers used.(For every £10 worth of Clubcard vouchers exchanged, £15 is deducted from the customers energy bill).This follows a 13-year partnership between E.ON and Tesco Clubcard that already allowed eligible E.ONcustomers to earn Tesco Clubcard points for money spent on energy. The smallest amount redeemable is£5 worth of Clubcard vouchers which equates to £7.50 off an E.ON energy bill. The trial scheme was torun until 5 August.In June 2011, Tesco Clubcards web site began allowing members to exchange their Clubcard vouchersfor limited-time offers or limited-availability goods for up to three times the face-value. Tesco workedwith multi-channel firm IVIS Group, which built and implemented the technology running the new flashsales promotions, through which a simple count-down shows customers how long an offer has to run, orhow many products there are left to claim. Customers can see stock levels counting down in real-time asthe products are being sold. This helps to create a me too effect, with others rushing to take advantageof the special deals. At the time, Clubcard had some 32 million active Clubcard holders globally in ninemarkets, with over 16 million of those being in the UK itself. It has more than 600 reward partnersoffering deals on a range of days out, experiences and other essentials.Also in June 2011, the UKs The Financial Times [www.ft.com] reported that Tesco was to trial a loyaltycard called the Friends of Fresh & Easy card, based on the UKs Clubcard, at its 176 US Fresh & Easystores. According to Fresh & Easys CEO, Tim Mason, the card could replace the coupons that Fresh &Easy has been using to help drive sales. It will be able to personalise offers and distribute them cheaplyvia e-mail.In August 2011, Malaysian newspaper, The Star Online [http://biz.thestar.com.my] reported that Tescowas launching Clubcard in Malaysia. Dunnhumby Malaysia general manager, Michael Hawkins, says that
  14. 14. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 11 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTthe average shopper spends about RM80 on a wide range of products on every visit - but there is nosuch thing as an average customer. All customers are unique in their own buying patterns, and Tescosmost loyal customers constitute about 6% of its local customer base but represent nearly 30-35% of itstotal sales combined. He says that one loyal customer is equal to 12 newly acquired customers. TescoMalaysia sends about a million cash vouchers and product coupons to its two million-strong membershipbase, of which 455,000 different unique combinations of coupons are used, with 55% of the customersgetting a completely unique set of rewards.In October 2011, following a successful trial of the Friends of Fresh & Easy card in the US, Tescodecided to roll it out nationwide. Membership of the pre-existing Friends of Fresh & Easy emailprogramme had more than doubled soon after the card was introduced. Friends of Fresh & Easy is adigital points-based programme through which customers can earn 1 point for every US$1 they spendwith Fresh & Easy. Members (Friends) can then exchange their points for cash-back rewards, and theyalso receive personalised bi-weekly emails containing targeted bonus point coupons and real-time updateson points earned so far.In January 2012, Tesco launched its online grocery shopping service for customers in Prague, the first inits Central European business. The service offers Czech customers over 20,000 lines of fresh and frozenfood and groceries, as well as non-food items such as toys, stationery and accessories. The launchfollowed a successful trial with customers and staff in November and is part of Tesco Group strategy tobe an outstanding international retailer in-store and online. Tesco had entered the Czech Republic in 1996through the purchase of K-Mart stores, and operates some 210 stores there.20.2.1.7.1 Case study: DunnhumbyDunnhumbys [www.dunnhumby.com] role in Tescos success is significant, as it carries out the dataprocessing and analysis for the entire group. In April 2006, Dunnhumby expanded its operations inIreland with the opening of a new office in central Dublin, aimed at better serving the Irish market.Dunnhumby has been working with a number of FMCG brands such as Colgate Palmolive, Unilever,P&G, Masterfoods and Coca Cola to help develop their brands in the Irish market. This work hasincluded customer insight and marketing programmes (including collaborative marketing with Tesco).The Dublin office is expected to expand to house thirty staff within two years. The Irish office will be ledby Carla Brooks (commercial director), who was initially based at Dunnhumbys head office in London.In August 2006, Dunnhumby announced that it was also taking responsibility for Tesco TV. At the sametime, Tesco and JC Decaux (which previously managed Tesco TV) said they were in full agreement overthe future of the in-store channel, and JC Decauxs existing ten-year partnership with Tesco remainsunaffected. Dunnhumby said it would provide information to advertisers about the effectiveness of in-store TV through detailed analysis of customer purchasing behaviour, with the ultimate aim of enhancingthe customer experience and using that information to help drive brand awareness. Tesco believes that itsin-store TV channel is a good way for brand owners to reach and influence shoppers at the point ofdecision, and that the partnership with Dunnhumby would allow the channel to "shift to a new level" aspart of its overall media offering.In June 2007, Dunnhumby USA [www.us.dunnhumby.com] established a new office in Atlanta, Georgia, toserve its retail and manufacturing clients in the region, and plans to further expand its client base there.Within weeks, a staff of 10 were based there and, by late summer, this grew into a team of 25 and officespace more than doubled. A number of employees relocated from the companys Cincinnati office toAtlanta, with remaining staff for the new office being newly recruited. In addition to the new hires for theAtlanta office, Dunnhumby USA planned to add 35 more staff at its Cincinnati headquarters during 2007,bringing the total there to 215. The company employs more than 700 people worldwide in nine countries.Dunnhumby USAs Atlanta and Southeast-based clients include The Home Depot, The Kroger Companyand Coca Cola.In April 2008, Tesco and Dunnhumby extended their customer insight and analysis to almost all of thecountries in which Tesco operates, including (in some areas) the Clubcard programmes data. Analystsfrom Dunnhumby now work locally with Tesco in South Korea, China, Turkey, Malaysia, Thailand,Slovakia, the Czech Republic, Poland and Hungary. Using data that customers voluntarily share with
  15. 15. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 12 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTTesco about their shopping habits, or anonymous data gathered at the point of sale, Dunnhumbyprovides Tesco with insights to help it continue offering optimum product ranges, prices and services forlocal markets.20.2.1.7.1.1 Who is Dunnhumby?Editors note: This case study of Dunnhumbys development, operations and involvement with Tesco was specially preparedfor The Loyalty Guide by Dunnhumby. The authors of this report thank the team for providing so much insight.Dunnhumby is the global loyalty expert behind the Tesco Clubcard. Dunnhumby is now based in 24countries around the world impacting over 350 million customers worldwide. If you wondered where thename came from the company was started by Edwina Dunn and Clive Humby. We started working withTesco in 1995 just after the Clubcard was launched.When Clive and Edwina presented the first results to the Tesco board, the then chairman Sir (now Lord)Ian MacLaurin remarked that we had found out more about Tesco customers in 3 months than he haddiscovered in 30 years. Then we recognised how the data would be useful to suppliers and we partneredwith companies like P&G and Nestle.We then took our model to other international retailers like Kroger in the USA and Casino in France.Now as Tesco grows internationally we follow them everywhere they go, weve just announced that wewill support the Tesco Fresh & Easy business in America.Dunnhumby partners with several other leading retailers outside of the UK - including Kroger in theUSA, Casino in France and Brazil and Metro in Canada. Dunnhumby supports Tesco in every one of itsinternational markets and works with global manufacturers like Coca-Cola, Heinz, P&G, Unilever andKelloggs, using insight from the retail environment to better understand customer loyalty towards brands.It is, however, the work with Tesco that Dunnhumby is most famous for and this case study will explorethis special relationship a bit further.20.2.1.7.1.2 About TescoTesco is one of the worlds largest retailers with operations in 14 countries, employing over 492,000people and serving millions of customers every week. Since the company first used the trading name ofTesco, in the mid 1920s, the group has expanded into different markets, different formats and differentsectors. Jack Cohen opened the first Tesco store in 1929 in Burnt Oak North London. He was a retailinnovator, introducing ideas of central headquarters and distribution and own label products - the firstwas Tesco tea. Tesco floated on the Stock Exchange in 1947 and now has 5,380 stores worldwide, 2,715are in the UK.Back in Jacks day the shopping experience was a very personal one. No doubt he knew his regularcustomers by name, what they purchased and the preferences of their children and grandchildren. Thecustomer might try something new on Jacks recommendation, Jack might give them a discount on theirregular items.Cultivating this personal, intimate engagement with customers was something a good business would do.As supermarket chains have grown you could argue that this personalisation of the shopping experiencehas disappeared but actually this is where data can help. By starting with the data, large retailers andbrands are now able to look into their customers shopping baskets and understand what drives theirbehaviour.Data-driven insights are shifting how businesses see their future and therefore, how they understand andcommunicate with their customers. Knowing how, when and where to communicate with customers anddelivering a personalised experience is now a priority. To put it simply, smart businesses, empowered withgranular sophistication, are working their way back to the customer relationship of the corner store.
  16. 16. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 13 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT20.2.1.7.1.3 About Tesco ClubcardTesco has been working with Dunnhumby since the launch of Clubcard in 1995. The two companieshave been collaborating to put the customer at the heart of the business enabling Tesco to create a strongbrand identity and fulfil its core purpose: To create value for customers to earn their lifetime loyalty.Clubcard is often referred to as the ‘original loyalty scheme and is now one of the biggest in the world.There are more Clubcard members internationally than in the UK. Since Clubcard launched, the schemehas centred around rewarding customers, every Clubcard statement offers rewards that reflect what eachindividual, as a customer, wants to buy. Clubcard is Tescos way of saying thank you to customers for theirloyalty,In 16 years, this core objective has not changed. Tesco is continually looking at improving the Clubcardscheme for customers. For example, in the UK Clubcard now offers more than 600 Clubcard Rewardsfor customers to choose from which have helped broaden the choice and appeal of the scheme.20.2.1.7.1.4 Personalisation - the value of customer insightClubcard data enables the folks at Dunnhumby to understand current customer trends, the products thatare most important to Tesco customers and products that may appeal to them. Using this insight we canmake judgements as to which products customers would like to see in store and the kind of promotionsthat are most likely to benefit them.Over the years, the more data we have gained from Clubcard, the stronger the picture we get ofcustomers, which means we are getting better and better at helping Tesco personalise offers to customers.For example, if a customer purchases nappies we know that they might be interested in a coupon forbaby food.Tesco sends out millions of variations of the Clubcard statement to ensure customers get extra rewardsthat are relevant to them.Together, Dunnhumby and Tesco are using this insightful data to put customers at the heart of all ourbusiness decisions, from new product development to how we manage stores, and most importantly, howwe serve customers.Ultimately, the more we can give customers what they want, the more they will choose to shop at Tesco.This makes good customer service and good business sense.Our knowledge of customers has also enabled Tesco to expand their business in other areas. Forexample, their online offering could not have been developed without the knowledge gained fromClubcard and the introduction of Tesco premium label Tesco Finest was based on customer insight.Similarly, Clubcard fuelled the growth of Tescos non-food sector by identifying possible customers andcommunicating the new product areas through Clubcard mailings.In addition, despite being the longest running loyalty scheme around, Clubcard is up to date with thelatest technology. In a UK first, Tesco launched a smartphone app in 2010 that turns a mobile phone intoa Clubcard. In 2011 Tesco launched My Clubcard Account , which enables customers to make changes totheir account online such as personal details and also view their used and unused vouchers. Customerslove this - its a good way to keep track of vouchers and offers.In the UK, Clubcard goes from strength to strength. It is by far the most rewarding loyalty scheme in themarket and the number one reason customers prefer to shop at Tesco.
  17. 17. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 14 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT20.2.1.7.1.5 Tesco & Dunnhumby: the partnershipA greater understanding of customer behaviour enables Tesco to personalise the shopping experience andensures that Tesco can create a brand that consumers return to time and time again. In the currentclimate of shopping around for the best deals it is more important than ever that the customer believesTesco is worth a visit.The Dunnhumby strategy is similar to that at Tesco, assisting companies to put the customer at the centreof each business. In Figure 1.1 the additional layers that surround "customer" highlight how the businessmust change in order to accommodate for the consumer.In essence, Dunnhumby helps Tesco by analysing item-level data for over 15 million households in theUK. This helps Tesco to drive sales through specific promotions, save money through removingunnecessary advertising and identify trends in sales data. Both Dunnhumby and Tesco firmly believe thatby understanding the customer, the business can grow.Dunnhumby has four core beliefs and four core values depicted here. The four phrases in the central greyarea are Dunnhumbys core beliefs which form the foundation on which our work is based and underpinour ways of working with clients and retailers.. The coloured areas on the outside of the model depictour values which inform our approach to our work and our culture and make Dunnhumby a unique andgreat place to work! Values Curiosity: we have an endless appetite to understand, challenge, innovate and learn Passion: we are relentless in our positive enthusiasm Courage: we take the right route, not always the easy one Collaboration: we work best when we work together Beliefs Start with data: customers tell us the right thing to do through the data Our great people: great people are what sets us apart Genius of simplicity: true genius comes from making the complex simple Customer first: if youre loyal to customers, theyll be loyal to you20.2.1.7.1.6 Learning across bordersThrough working in partnership with major retailers around the world Dunnhumby is in the uniqueposition of being able to share learning and best practice to help grow the businesses of our major retailand manufacturer partners and to benefit customers everywhere.Following the success of the Loyal Customer Mailing (LCM) in the United States the principles of theLCM have been tested and now delivered to Tesco customers in the UK.
  18. 18. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 15 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT20.2.1.7.1.7 The Loyal Customer MailingIn the United States Dunnhumby works with Kroger, a giant supermarket chain, who has for severalyears sent a Loyal Customer Mailing (LCM) to its most loyal and therefore valued customers. Kroger saysthank you to these special and valuable customers by giving them money-off coupons on products thatthey frequently buy. Customers in the United States love the LCM, they appreciate the value of thecoupons and that Kroger takes the time and invests the resource to understand what they buy. This hashad a measurable impact on sales with an increase of 64% since its introduction.Since beginning its relationship with Dunnhumby in 2003, Kroger has seen 31 consecutive quarters ofsame store sales increases. Dave Dillon, CEO of Kroger often describes Dunnhumby as his secret weapon!Well we may not be that secret anymore but what we do really can change a business.In the UK in December 2011 2.5 million customers received money-off coupons for products theyalready buy from Tesco, plus extra or double points coupons. This was based on the level and frequencyof spend over the previous eight weeks, and it proved very popular. So just before Christmas the mostloyal Tesco customers received special offers relevant to them. Every Little Helps!Mark Wilmot, head of UK Communications and Media at Dunnhumby worked very closely with Krogerin developing the LCM several years ago. Now bringing this learning to the UK he says: "As we have learntfrom Kroger, this targeted approach and providing relevant offers drives customer loyalty to the retailer and brands.Customers are similar the world over so there is no reason why it wont work in the UK."20.2.1.7.1.8 Innovating to better serve customersAs part of our commitment to deliver measurable value for a billion people Dunnhumby is dedicated toputting the insight at the heart of business decisions. We were challenged by Tesco to make insightavailable and affordable to all types and sizes of suppliers. This is to enable all kinds of businesses not justthe big manufacturers like Unilever and P&G to really put the customer at the heart of their decisionmaking.In response to this challenge we launched a new solution the Shopper KPI report which is deliveredquarterly. Following an initial trial at the end of September, feedback from suppliers has been reallypositive. Simon Day from Winterbotham Darby, a supplier of continental meats & pate said: "The solutionis simple to use and gave us a really good understanding of the category we work in. We felt we were at a real advantagewhen going into our meetings with Tesco as we were able to talk in their customer language."We are also innovating in the challenging area of digital measurement - helping brands understand the realvalue of online loyalty schemes by tracking the behaviour of loyal customers in store. We can nowmeasure the effectiveness of a digital campaign by comparing the shopping behaviour of Tesco Clubcardcustomers who use brands online loyalty campaigns and those who do not.This means we can quantify the effect of online loyalty campaigns on brand trial, loyalty, sales uplifts andreturn on investment so that brands can improve the relationship between online and offline activity.Danones Activia and Actimel brands, Reckitt Benckisers Air Wick brand and Pfizers SMA baby milkbrand have all used the application to shape digital and in-store marketing.
  19. 19. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 16 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTHalla Ragi, Air Wicks senior brand manager, says the Dunnhumby data has been "invaluable" todeveloping its Air Wick Fresher Homes Club eCRM programme and optimising its targeting strategy todrive both online and offline loyalty to the brand.20.2.1.7.1.9 Where next for Clubcard?Since the launch of Clubcard, Tesco has evolved a customer contact strategy incorporating multi-channelsacross the various parts of the business as it has expanded. In addition to the core Clubcardcommunications of Statement and Loyal Customer Mailing, there are targeted customer mailings designedto drive sales and drive customers up the loyalty ladder at key trading periods through direct mail, e-mailand coupon at till in support of stores, online and Retail Services. Central to all activity is a consistentfocus on staying true to the brand and surprising and delighting customers through personalised offers.The focus of Clubcard remains the same - to reward customers. Tesco listens to customers about howthey are changing and looks at how their behaviours are changing so that it can give them what they want.The retailer will continue to bring more choice to customers and ensure that customers continue to find itexciting, rewarding and convenient.At a conference hosted for Tesco and manufacturers in 2011, Tescos UK CEO, Richard Brasher, endedon this note: "If you want to go fast go on your own. If you want to go far go together". Collaboration isat the heart of Dunnhumby and it is only when we work together with the retailer and the brands that canwe serve the customer best and, in doing so, be successful in the long term.NOTE:The Loyalty Guides numerous case studies are carefully constructed to provide fullbackground, history, and current-day detail, along with partnership developments, pointsstructures, redemption options, and the latest facts and figures concerning eachprogramme.For details and online ordering information, visit: www.theloyaltyguide.com
  20. 20. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 17 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT1 Executive Summary1.1 IntroductionThe Loyalty Guide 5 [www.theloyaltyguide.com] is the worlds only complete, comprehensive reportcovering every aspect of customer loyalty marketing, customer engagement, customer acquisition,customer retention, best customer marketing, customer relationship management (CRM), social mediamarketing, customer data-driven business intelligence (BI), loyalty metrics, measurement, reporting andpredictive analytics.The report provides not only detailed case studies, best practices, marketing theory, and all the latestresearch, but also the kind of practical know-how, up to date facts and figures, market trends, forecasts,best practices, expert opinions, practical advice, and sheer hard data that are needed for well informedand forward-looking business decisions.This summary provides an overview of The Loyalty Guide 5, and aims to help you quickly identify theaspects of loyalty marketing that are most relevant to you right now. Each section summarises the essenceof a complete chapter of the guide, making it simple to navigate the reports 1,300+ pages and its wealthof illustrations, charts, tables and graphs. We, the authors, welcome you to what has built up over the pastten years to become the worlds fullest and most complete report on marketing techniques, practices,strategies, measurement, management, and accountability.1.2 The Business Case for LoyaltyThere are two basic points of view to be considered when discussing the business case for introducing -or keeping - a customer loyalty programme: Some industry observers have argued that a loyaltyprogramme is often unnecessary because its just a way of spending money rewarding customers whowould probably have been loyal anyway.Others, however, have recognised that the real benefit of a loyaltyprogramme is not necessarily felt first by the customer, and that it is themerchant that gains the necessary insight (from detailed analysis of itsloyalty programme and transactional data, for example) to be able toimprove the way it communicates with and deals with its customers. Thecustomer is actually the secondary (but still the most important) recipientof the benefits of a true loyalty programme.To say that a loyalty programme is not useful, or is a waste of marketing budget, is to have misunderstoodthe real purpose of the programme. Rather than offering a simplistic discount or rebate programme, a realloyalty programme offers the customer any number of incentives to allow the programme operator tocollect accurate and useful data about their lifestyle, purchase choices, motivations, interests,circumstances, and in many cases even about their household and immediate family.The reason for gathering this data is not - as a very small minority of consumers seem to fear - to createsome kind of Big Brother database of peoples personal habits, but to gain practical insights into ways inwhich the merchant could serve each customer more effectively, more easily, and more satisfyingly.The best reasons for having a customer loyalty strategy...In this chapter we explain in detail the different reasons, benefits, strategies and factors driving customer
  21. 21. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 18 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTloyalty, including ideas about how to set up a new loyalty programme, what will be involved, and pointersfor the financial and operational implications of launching your own loyalty iniative, including: · The business benefits of a loyalty strategy · How customer loyalty pays back, both short term and long term · Factors affecting and driving customer loyalty · How a loyalty initiative grows and improves your customer base · Financial and operational aspects of a loyalty strategy · What you need to know to run a successful loyalty programme · Viable alternatives to traditional loyalty offerings1.3 Loyalty CoalitionsThere are two main types of multi-partner programmes: true coalition programmes, and single operatorprogrammes that include other partners.For example, Air Miles and Nectar are true coalition programmes. The programme management isindependent of any of the partners. The partners have contracts with the operators of the programme toissue and/or redeem the currency of the programme, and only have access to data harvested by theprogramme through its operator. Individual partners dont have direct access to other partners data heldin the programme, although the operators of the programme will usually market to other partnerscustomers on behalf of another member. For example, a supermarket member could ask for mailings tobe sent to the customers (or just certain segments of the customers) of a fuel retailer partner in an areawhere a new supermarket is being opened.Tescos Clubcard is an example of a single operator programme that involvesother partners. The programme is owned and run by Tesco. However,Clubcard holders can collect points when buying from various partners inthe programme, such as Alders, Beefeater, Marriott, and National Tyres.Vidal Sassoon is an example of a redemption partner.The best reasons for coalition-based loyalty initiatives...This chapter examines the many essential goals that any coalition programme must achieve if its going tosucceed, and why theyre so important. Examples of these goals include: 1. Rapid market penetration 2. Delivery of attractive rewards 3. Being the first in the market 4. Building communication channelsThe key benefits of joining a coalition programme...Supported by statistics, illustrations and expert opinions, the advantages, disadvantages and structuralneeds of coalition programmes (compared to, say, a non-partnered loyalty programme) are detailed,covering critical factors such as: · Greater interest in the programme · Lower costs of development · Members have fewer cards to carry · Database run by professionals · Members earn points more quickly · Sector exclusivity · A greater variety of rewards · Coalition marketing campaigns · Concentrated, coherent promotions · Higher penetration rates · Time saved in development · Real cost benefits of coalition
  22. 22. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 19 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTDetailed case studies of major coalition programmes...This chapter also provides details and comprehensive case studies of the worlds major coalition loyaltyprogrammes, including: 1. Avios, UK (aka Air Miles) 9. Fly Buys, New Zealand 2. Air Miles, Canada 10. FlyBuys, Australia 3. Air Miles, Spain (aka Travel Club) 11. iPoints & Maximiles, UK & Europe 4. Air Miles, Netherlands 12. Malina, Russia 5. Air Miles, Middle East 13. Nectar & Nectar Business, UK 6. Aeroplan, Canada 14. Nectar Italia, Italy 7. BonusLink, Malaysia 15. PayBack, Germany & Poland 8. eBucks, South Africa 16. PayBack India (aka i-Mint)Other key topics covered in this chapter include: · Why a coalition? · The essentials of a coalition · The advantages of a coalition · The challenges of a coalition · Typical application areas · Expanding into a coalition1.4 Loyalty Rewards & IncentivesThe reward is a vital part of any loyalty programme. It is the bait on the end of the line: the bit thatactually convinces the customer to sign up. It is also a complex part of the programme and usuallypresents a delicate juggling act: it must be worth enough to be attractive to the customer but not costenough to make the programme unprofitable. It must appeal to consumers of the right profile and it mustcater for wide variations in taste and desires among those customers.All in all, the reward has many functions that we examine in detail in thischapter. We also examine the properties of a good reward, and which ofthese consumers think are the most important. We also look at the manytypes of reward that can be offered: Discounts (both targeted anduntargeted), points-driven programmes, hard and soft rewards. Which docustomers prefer, and why?We also look at how, in the eyes of an expert, one should go about planning a successful and appealingreward catalogue - quite often a component that lets a reward programme down. And finally, we examinesome recent research into what motivates consumers when they are faced with a choice of rewards.Reward drives behaviour. Experiments have revealed that, while a bigger reward reinforced the desiredbehaviour better than a small reward, when the rewards were discontinued, those who had received thebig rewards were more likely to return to the unwanted pattern of behaviour than the group who hadreceived the small reward. So the warning is there. Never let your best customers feel that you arewithdrawing privileges from them, and try to ensure that customers become loyal to the product orservice, and not simply to the reward.But, to have any effect at all, the reward must be desirable enough to actually stimulate a change inbehaviour among customers. It also has to be affordable, and balancing the two sides of thedesirability/affordability equation is tricky.
  23. 23. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 20 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NTStructuring your rewards for optimal redemptions and engagement...In this chapter we explain all the necessary attributes and practical planning of loyalty rewards, including: 1. The value of the rewards offered 2. The function of the rewards offered 3. The properties of an attractive loyalty reward 4. How to profit from reward redemptions 5. Lowering the fulfilment budget without risking loyalty 6. How to extract maximum value from your rewards 7. Setting reward levels and tiers 8. Using different rewards to change customer behaviours 9. Types of rewards (goods, discounts, experiences or other benefits?) 10. Timing of rewards (now, soon, or much later?) 11. Rewards that consumers actually want (and what they think they want) 12. Redemption strategies (i.e. internal or outsourced) 13. How to plan a compelling rewards catalogue 14. Strategies to drive both redemptions and engagement 15. Matching rewards with different point levels 16. Insights into loyalty rewards and their effectiveness 17. Using coupons and vouchers as rewards1.5 Customer Engagement and LoyaltyAs time passes and more loyalty programmes are launched, it is becoming increasingly difficult to actuallyengage the customer in the programme. Customers are now so used to handing over a card at the POSthat they feel little real involvement. If there is such a thing as a hot topic in loyalty, it is customerengagement. Handing over a card when transacting and receiving a quarterly statement within a pile ofother mail is not engagement. Engagement grows little by little, each time the customer has to activelythink about and make a decision about the programme.In fact, although nearly 90% of shoppers in the US participate in rewards programmes to earn points,discounts or prizes, loyalty programmes alone are not yet fostering the kind of emotional connection thatis needed to develop long term customer engagement. Engagement is something that can only be built upover time, and it usually stems from mutually beneficial relationships between customers and brands. Itcould be argued that engagement comes not a result of a marketing campaign but from the full range ofinteractions between the customer and the brand, as well as brand-related interactions between customersand their peers. The key to building a real sense of engagement is to provide the consumer withsomething of personal value that is timely, relevant, wanted, and preferably repeatable.Insights for true customer engagement...In this chapter we explain why customer engagement is now seen bymost marketing experts as the key to future survival, and how smartmarketers are already rethinking the idea of customer engagement.Among the key topics covered in detail: 1. Insights into consumer engagement and its benefits 2. How incentives can drive customer engagement 3. Customer engagement strategies 4. How to engage the individual customer (the new CRM) 5. Why engagement strategy goes way beyond CRM
  24. 24. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 21 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT 6. How to drive engagement with loyalty rewards 7. Why loyalty without engagement is a dangerous trap 8. How to engage loyalty programme members for life 9. How social media is reshaping customer engagement 10. How to building customer engagement the social way 11. Gamifications effect on consumer/brand engagement 12. How e-mail can create customer engagement - or not 13. Ways to capture and engage online customers 14. How digital rewards can increase both engagement & loyalty 15. How mobile can drive cross-channel engagement 16. Recent innovations in customer engagement technique1.6 Social Media and LoyaltySocial media marketing is a relatively new field, driven by the widespread popularisation amongconsumers of social networking web sites and services such as Facebook, Google+, Twitter, Foursquareand others. These services dont only hold true to the original vision of sites such as Facebook (i.e.connecting people in a safe and personal way) but they now also include other services and technologiesthat augment that goal, such as location-based services which allow people to check in just aboutanywhere - whether it be a popular club, restaurant, or their own home, or any other venue - usuallythanks to the GPS thats built into their mobile phone handset. This allows people to be seen in all theright places but, more importantly, it has important implications for brands that they choose to associatewith in their social network.One of the most common misconceptions among marketers is that socialmarketing is as easy as putting up a page on Facebook, or setting up a Twitteraccount. Of course those are the basic building blocks, but theres a wholeworld of detail that needs to be considered first. As in any other marketing oradvertising discipline, you first need to identify and clarify a host of factors,such as the brand identity, brand message, brand values, target audiences,value proposition, referral and advocacy benefits, social gaming elements,social commerce and currency, messaging strategy, creative elements andimagery, and how it links up with your loyalty programme.Turning social media into a loyalty driver, rather than a publicity risk...Among the many topics examined in detail, and the down-to-earth practical advice found in this chapter: 1. Types of social media and their uses 2. Social customer loyalty & engagement best practices 3. Other social media marketing best practices 4. Does the marketer really have to lose control? 5. Planning and setting up a social marketing strategy 6. How social media can drive customer loyalty 7. How social media supports your loyalty strategy 8. The impact of social media on loyalty schemes 9. The impact of social media on brand reputation 10. Maximising social medias brand marketing value 11. The link between social media and customer engagement 12. Building customer engagement the social way 13. Gathering insights from social network profiles 14. Social media as a customer loyalty channel 15. Social media as a customer service channel ... continued
  25. 25. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 22 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT 16. Integrating the social channel into the marketing mix 17. Social media as seen from the marketers side 18. Social media as seen from the consumers side 19. The adoption of social media into corporate strategy 20. How to find the true ROI of a social media initiative 21. Getting board level buy-in for social media marketing 22. Which markets & sectors lead in social media usage 23. How consumers use different social media platforms 24. How to turn social customers into social advocates 25. How social shopping has changed the retail landscape 26. How location-based marketing ties into customer loyalty 27. Bridging the real world/social media loyalty gap 28. Working with viral social marketing 29. The future of social & location-based marketing1.7 Loyalty & Marketing ToolsA customer loyalty programme, despite having all the right rewards and engagement strategies in place,can fail catastrophically if the tools and technologies that drive it are either insufficient for the task orinadequately integrated. How could a large coalition loyalty programme ever function if the rewardfulfilment function wasnt tightly integrated with the web site, or if the marketing team had to refer to anddeduplicate information from several siloed data sources? The technology, the tools, and every functionalback-end system must be not only scalable enough to cope with the future success of the loyaltyprogramme but also to be adapted to every market-driven change that affects the programmes goals anddirection.For example, the authors of this report conducted a survey of retail customer loyalty and commitmentstrategy, and found that while 93% of retailers run a loyalty programme for their web site, stores, orcatalogue customers, 74% reported partial to no tangible improvement in their programmes compared totheir competitors. This suggests a need to review current and future loyalty processes and solutions, andthat a wealth of very similar loyalty platforms may be the cause ofa degree of commoditisation of loyalty offerings.Another example of the more interesting - and potentially game-changing - technological developments has been that, in the US,the nationwide rollout of EMV smart chips on debit and creditcards has opened up a whole range of possibilities and opportunities for loyalty marketing via thepayment card platform. Particularly if combined with the mobile channel by means of smart phones andNFC technology, the possibilities for loyalty applications are endless.Independent advice about what matters most in a loyalty platform...This highly practical chapter provides details of loyalty tools, technologies and innovations currently inthe market, offering advice on the advantages and disadvantages of these approaches. Among thetechnologies and tools examined are: 1. Loyalty platforms & technologies 2. New loyalty card technologies & platforms 3. The potential for EMV-based loyalty 4. The rise of mobile & app-based loyalty technologies 5. Contactless loyalty technologies 6. The benefits of NFC & RFID technology 7. How mobile & NFC will impact loyalty strategy 8. Tools for loyalty metrics, analytics & insight 9. Loyalty platforms & technology innovations ... continued
  26. 26. ORDER & DOWNLOAD AT WWW.THELOYALTYGUIDE.COM 23 5 YOU MA Y NO T COPY OR REPRODUCE THIS LI CENSED DOCUME NT 10. Benefits of loyalty scheme-enabled self-checkouts 11. Augmenting Reality for greater engagement & loyalty 12. Linking loyalty points with prepaid cards 13. Linking loyalty points with mobile payments 14. Integrating loyalty into smartphones and apps 15. Cloud-based loyalty innovations & platforms 16. Benefits of a virtual loyalty currency 17. Data pattern-spotting for competitive advantage 18. Developments in Retail 3.0 and resulting consumer insights 19. The benefits of intelligence-based marketing 20. Differentiation using new retail technologies 21. Better customer service with kiosks & self-service 22. Case study: how Points.com changed the loyalty landscape1.8 Loyalty & Marketing OperationsThe theory of customer loyalty is quite plain: a business that retains its customers for longer usually makesmore money from them at lower cost than one that is constantly paying to acquire new customers.Actually doing that - the practice of customer loyalty - is not so straightforward. Its not a trick that can bequickly learned and performed; creating loyal customers depends fundamentally on following good andsound business and marketing practices right across the business all the time. Its a sad truth of businessthat customers are hard to win but easy to lose. A loyalty programme is not a quick fix that can simply bebolted on and produce measurable results immediately.That said, the principles are quite simple: know your customers, rewardthem for behaving in the way that you want, and dont reward them forbehaving in any other way. In order to know them, you need to collectdata and then use it intelligently to identify the valuable customers and toreward them for generating more profit. Of course, there are manyrefinements that can be made to this broadly stated principle. Enter theloyalty programme.But many of the so-called loyalty programmes in operation today are not really loyalty programmes at all.Perhaps frequent customer programme is a more accurate term. To be loyal to a business is one thing,but to use it frequently is another (for example, it could be a result of circumstances that there is simplyno other choice). Clearly, if another choice becomes available, then the distinction becomes critical. Thismeans that most prudent businesses aim to create loyal customers, not just frequent customers. Ofcourse, not all customers are potentially loyal customers, for a variety of reasons. So the ideal loyaltyprogramme would be one in which already loyal and potentially loyal customers benefited, but othercustomers didnt. This means that the customers have first to be sorted into groups, and differentapproaches have to be made to each group. Or, more likely, a programme has to be designed so that itwill appeal to the desired group more than to the other group.The 3 top reasons to have a loyalty programme...A good point at which to start is at the very beginning - when acquiring the customers. In many typicalbusinesses, as many as 45% of direct, new, one-off purchasers do not go on to purchase a second time. Inorder to grow and maintain a successful business, three simple rules should be followed: 1. Acquire customers that are likely to repurchase - even though this may be at the expense of initial raw response; 2. Recognise which customers are unlikely to repurchase and limit your marketing spend for this segment accordingly; 3. Focus the marketing budget on those who exhibit the same profile as existing repurchasers but have yet to buy a second time.

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