Scoring Points How Tesco is Winning Customer Loyalty AUTHOR: Clive Humby and Terry Hunt with Tim Philips PUBLISHER: Kogan Page Limited DATE OF PUBLICATION: 2004 NUMBER OF PAGES: 276 pages Book pic
The retail and food industry is a very competitive sector.
One way of gaining brand loyalty is through a customer loyalty program.
Scoring Points teaches you how to make customer loyalty schemes work.
THE BIG IDEA
Questions of Loyalty
Types of Loyalty
How Loyalty Schemes Create Value
Provides the ability to mass-customize marketing communications.
Assets value of data.
Lets companies track customer trends.
Helps promote trust.
Secrets of Program Success
Love the program. Marketers, staff and managers should love the brand and be committed to the program that represents the brand.
2. Have a clear view of what loyalty means and how it can be used to expand customer good will.
Questions of Loyalty
Making Loyalty Pay
The Economics of Loyalty Marketing
Investment in cash.
Investment in people.
The cost of stopping.
Foundations of a Loyalty Scheme
Opt-in or automatic.
Anonymous or personalized.
Flat-rate or top-down.
Rewards on-demand or cumulative value.
1. Points encourage members to collect and spend their units of value.
2. Discounts gives members price cuts on selected items.
3. Information provides objective and useful facts to members. This deepens trust.
4. Privilege provides members with additional perks such as access to airport VIP lounges, free gifts, etc.
Making Loyalty Pay
The DNA of Loyalty
Brand values. It is the active expression of the brand’s value and personality - qualities that customers recognize and admire.
Business dynamics. The opportunities and constraints of the business should reflect on the construction of the loyalty program.
Customer behavior. The program should encourage profitable customer behavior.
A loyalty scheme gives you the chance to rediscover your customer and develop customer good will.
Clubcard on Trial
The following factors made the launch a success:
Because We Can
Investment in the mailing program, although risky and costly, yielded positive results. It identified individual customers, built customer knowledge and enabled more relevant services to the customers.
Tesco concentrated on maintaining momentum by:
Offering exclusive events to members.
Attracting different segments with customized programs and schemes.
Offering gifts and rewards to shoppers who earn a certain number of points in a specified period.
Partnering with other retailers.
Offering extra incentives to members who extend their purchases in more departments in the store.
Every Little Thing Helped
Data derived from the loyalty program is relevant if you can transform it into meaningful information and translate it into knowledge.
Measuring Customer Loyalty
Recency. A simple measurement of when a customer last shopped.
Frequency. Measures how often a customer shops.
3. Value. Measures how much “value” is placed on the brand, and how the retailer is seen to provide to a particular household
Data Lovely Data
Problems with Data Warehouse
Format - what is the simplest way to give data a common denominator?
Time - how fast will the data be organized? How fast does it take to generate info?
Scale - what are the useful data?
Quality - what is the best balance between quality and quantity?
Cost - what is the program’s ROI?
Culture - how will data be managed?
Corporate ego - size is not everything. Know the company’s limitations.
Data Lovely Data
What Tesco Learned About Data
Pragmatism. Ask questions you can answer.
Progression. Build on each new discovery.
Learning. Knowing what works with the customers.
Defense. Use data to defend against competition.
Segmentation. The opportunity to target specific segments and customers
Data Lovely Data
What Tesco Learned About Mail
Talk, listen and learn. Direct mail gave Tesco the opportunity to communicate with members as well as the chance to learn, refine and improve.
Give people what they want.
Constantly experiment. Direct mail gave Tesco the opportunity to experiment on a new marketing approach at a scalable but discreet manner.
Measure. Gave Tesco the chance to gauge how and if a program works.
Review then predict.
Make it fun.
Four Christmases a Year
The company sends the magazines through the mail rather than getting it in the store. The advantages are:
It supports the “ thank you ” scheme and idea of the program.
It promotes featured items in the store and encourages members to spend their Clubcard vouchers in the featured products.
It is a medium to talk to customers. The magazine updates consumers on store improvements and new ranges.
Magazines can be customized according to target segments which leads to improvement of its customer base.
The Quarterly Me
Five Problems for the Data to Solve
Ranging for customers.
Discovering That You Are What You Eat (Reading and understanding data)
Shopping patterns reveal the different lifestyles customers have – hence, the various products purchased. By identifying a particular lifestyle segment, the management was able to think about helping people with their particular needs.
You Are What You Eat
Lifestyles Become Habits
For relevant and helpful data and for segments to work, it must be:
Identifiable. You must be able to allocate a segment for all your customers using the data collected through the loyalty program.
2. Viable. It has to be large enough to provide economic benefits to the company. In other words, it has to be large enough to make it economical as a business-generating tool.
3. Distinctive. Segments must be clearly different from one another.
4. One-to-one marketing.
Tesco also offered another loyalty program that combines the benefits of earning points, and the convenience of using the card as a temporary substitute for cash when shopping.
Instead of introducing a card with a fixed limit, Tesco offered a pre-paid card that lets the customers set their own limits.
Tesco Personal Finance (TPF), the brand’s banking service was created.
It also allowed the company to target the right financial service products to the right customers at the right time.
Launching a Bank
What Tesco Learned About “Sub-Clubs”
Identify real emotional needs.
Make a clear business case.
A sub-club is not just for Christmas.
Unconditional benefits are powerful.
Be a “chosen” not a “given”.
Special interest creates a general effect.
Babies, Beauty and Wine
One of the challenges facing Tesco is to prevent the current loyalty program from turning into a “ bore ” to the customers and its members.
Partner with various companies and offered attractive deals.
Partnerships and alliances made bigger deals possible.
A Bigger Deal
How Clubcard Helped Tesco.com
A single customer service.
A single customer view.
Lower customer acquisition cost.
Bringing new customers to Tesco.
Accelerating to non-food.
From Mouse to House
BusinessSummaries.com is a business book Summaries service. Every week, it sends out to subscribers a 9- to 12-page summary of a best-selling business book chosen from among the hundreds of books printed out in the United States. For more information, please go to http://www.bizsum.com. ABOUT BUSINESSSUMMARIES