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Scoring Points


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Published in: Economy & Finance, Business

Scoring Points

  1. 2. 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
  2. 3. <ul><ul><li>The retail and food industry is a very competitive sector. </li></ul></ul><ul><ul><li>One way of gaining brand loyalty is through a customer loyalty program. </li></ul></ul><ul><ul><li>Scoring Points teaches you how to make customer loyalty schemes work. </li></ul></ul>THE BIG IDEA
  3. 4. Questions of Loyalty <ul><li>Types of Loyalty </li></ul><ul><ul><li>Purge Loyalty. </li></ul></ul><ul><ul><li>Pure Loyalty. </li></ul></ul><ul><ul><li>Pull Loyalty. </li></ul></ul><ul><ul><li>Push Loyalty. </li></ul></ul><ul><li>How Loyalty Schemes Create Value </li></ul><ul><ul><li>More purchases. </li></ul></ul><ul><ul><li>Provides the ability to mass-customize marketing communications. </li></ul></ul><ul><ul><li>Assets value of data. </li></ul></ul><ul><ul><li>Lets companies track customer trends. </li></ul></ul><ul><ul><li>Minimizes waste. </li></ul></ul><ul><ul><li>Helps promote trust. </li></ul></ul>
  4. 5. <ul><li>Secrets of Program Success </li></ul><ul><li>Love the program. Marketers, staff and managers should love the brand and be committed to the program that represents the brand. </li></ul><ul><li>2. Have a clear view of what loyalty means and how it can be used to expand customer good will. </li></ul>Questions of Loyalty
  5. 6. Making Loyalty Pay <ul><li>The Economics of Loyalty Marketing </li></ul><ul><ul><li>Investment in cash. </li></ul></ul><ul><ul><li>Investment in people. </li></ul></ul><ul><ul><li>Customer charter. </li></ul></ul><ul><ul><li>The cost of stopping. </li></ul></ul><ul><li>Foundations of a Loyalty Scheme </li></ul><ul><ul><li>Opt-in or automatic. </li></ul></ul><ul><ul><li>Anonymous or personalized. </li></ul></ul><ul><ul><li>Flat-rate or top-down. </li></ul></ul><ul><ul><li>Rewards on-demand or cumulative value. </li></ul></ul>
  6. 7. <ul><li>Loyalty Currencies </li></ul><ul><ul><li>1. Points encourage members to collect and spend their units of value. </li></ul></ul><ul><ul><li>2. Discounts gives members price cuts on selected items. </li></ul></ul><ul><ul><li>3. Information provides objective and useful facts to members. This deepens trust. </li></ul></ul><ul><ul><li>4. Privilege provides members with additional perks such as access to airport VIP lounges, free gifts, etc. </li></ul></ul>Making Loyalty Pay
  7. 8. <ul><li>The DNA of Loyalty </li></ul><ul><li>Brand values. It is the active expression of the brand’s value and personality - qualities that customers recognize and admire. </li></ul><ul><li>Business dynamics. The opportunities and constraints of the business should reflect on the construction of the loyalty program. </li></ul><ul><li>Customer behavior. The program should encourage profitable customer behavior. </li></ul><ul><li>A loyalty scheme gives you the chance to rediscover your customer and develop customer good will. </li></ul>Clubcard on Trial
  8. 9. <ul><li>The following factors made the launch a success: </li></ul><ul><ul><li>Momentum. </li></ul></ul><ul><ul><li>Simplicity. </li></ul></ul><ul><ul><li>Control. </li></ul></ul><ul><ul><li>Involvement. </li></ul></ul><ul><ul><li>Preparation. </li></ul></ul><ul><ul><li>Ambition. </li></ul></ul><ul><ul><li>Commitment. </li></ul></ul>Because We Can
  9. 10. <ul><li>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. </li></ul><ul><li>Maintaining Momentum </li></ul><ul><li>Tesco concentrated on maintaining momentum by: </li></ul><ul><ul><li>Offering exclusive events to members. </li></ul></ul><ul><ul><li>Attracting different segments with customized programs and schemes. </li></ul></ul><ul><ul><li>Offering gifts and rewards to shoppers who earn a certain number of points in a specified period. </li></ul></ul><ul><ul><li>Partnering with other retailers. </li></ul></ul><ul><ul><li>Offering extra incentives to members who extend their purchases in more departments in the store. </li></ul></ul>Every Little Thing Helped
  10. 11. <ul><li>Data derived from the loyalty program is relevant if you can transform it into meaningful information and translate it into knowledge. </li></ul><ul><li>Measuring Customer Loyalty </li></ul><ul><ul><li>Recency. A simple measurement of when a customer last shopped. </li></ul></ul><ul><ul><li>Frequency. Measures how often a customer shops. </li></ul></ul><ul><ul><li>3. Value. Measures how much “value” is placed on the brand, and how the retailer is seen to provide to a particular household </li></ul></ul>Data Lovely Data
  11. 12. <ul><li>Problems with Data Warehouse </li></ul><ul><li>Format - what is the simplest way to give data a common denominator? </li></ul><ul><li>Time - how fast will the data be organized? How fast does it take to generate info? </li></ul><ul><li>Scale - what are the useful data? </li></ul><ul><li>Quality - what is the best balance between quality and quantity? </li></ul><ul><li>Cost - what is the program’s ROI? </li></ul><ul><li>Culture - how will data be managed? </li></ul><ul><li>Corporate ego - size is not everything. Know the company’s limitations. </li></ul>Data Lovely Data
  12. 13. <ul><li>What Tesco Learned About Data </li></ul><ul><ul><li>Pragmatism. Ask questions you can answer. </li></ul></ul><ul><ul><li>Progression. Build on each new discovery. </li></ul></ul><ul><ul><li>Approximation. </li></ul></ul><ul><ul><li>Learning. Knowing what works with the customers. </li></ul></ul><ul><ul><li>Defense. Use data to defend against competition. </li></ul></ul><ul><ul><li>Segmentation. The opportunity to target specific segments and customers </li></ul></ul>Data Lovely Data
  13. 14. <ul><li>What Tesco Learned About Mail </li></ul><ul><li>Talk, listen and learn. Direct mail gave Tesco the opportunity to communicate with members as well as the chance to learn, refine and improve. </li></ul><ul><li>Give people what they want. </li></ul><ul><li>Constantly experiment. Direct mail gave Tesco the opportunity to experiment on a new marketing approach at a scalable but discreet manner. </li></ul><ul><li>Measure. Gave Tesco the chance to gauge how and if a program works. </li></ul><ul><li>Review then predict. </li></ul><ul><li>Make it fun. </li></ul>Four Christmases a Year
  14. 15. <ul><li>The company sends the magazines through the mail rather than getting it in the store. The advantages are: </li></ul><ul><ul><li>It supports the “ thank you ” scheme and idea of the program. </li></ul></ul><ul><ul><li>It promotes featured items in the store and encourages members to spend their Clubcard vouchers in the featured products. </li></ul></ul><ul><ul><li>It is a medium to talk to customers. The magazine updates consumers on store improvements and new ranges. </li></ul></ul><ul><ul><li>Magazines can be customized according to target segments which leads to improvement of its customer base. </li></ul></ul>The Quarterly Me
  15. 16. <ul><li>Five Problems for the Data to Solve </li></ul><ul><ul><li>Price sensitivity. </li></ul></ul><ul><ul><li>Ranging for customers. </li></ul></ul><ul><ul><li>Range creation. </li></ul></ul><ul><ul><li>Promotions. </li></ul></ul><ul><ul><li>Competitive attacks. </li></ul></ul><ul><li>Discovering That You Are What You Eat (Reading and understanding data) </li></ul><ul><li>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. </li></ul>You Are What You Eat
  16. 17. Lifestyles Become Habits <ul><li>For relevant and helpful data and for segments to work, it must be: </li></ul><ul><ul><ul><li>Identifiable. You must be able to allocate a segment for all your customers using the data collected through the loyalty program. </li></ul></ul></ul><ul><ul><ul><li>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. </li></ul></ul></ul><ul><ul><ul><li>3. Distinctive. Segments must be clearly different from one another. </li></ul></ul></ul><ul><ul><ul><li>4. One-to-one marketing. </li></ul></ul></ul>
  17. 18. <ul><ul><li>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. </li></ul></ul><ul><ul><li>Instead of introducing a card with a fixed limit, Tesco offered a pre-paid card that lets the customers set their own limits. </li></ul></ul><ul><ul><li>Tesco Personal Finance (TPF), the brand’s banking service was created. </li></ul></ul><ul><ul><li>It also allowed the company to target the right financial service products to the right customers at the right time. </li></ul></ul>Launching a Bank
  18. 19. <ul><li>What Tesco Learned About “Sub-Clubs” </li></ul><ul><li>Identify real emotional needs. </li></ul><ul><li>Make a clear business case. </li></ul><ul><li>A sub-club is not just for Christmas. </li></ul><ul><li>Unconditional benefits are powerful. </li></ul><ul><li>Be a “chosen” not a “given”. </li></ul><ul><li>Special interest creates a general effect. </li></ul>Babies, Beauty and Wine
  19. 20. <ul><li>One of the challenges facing Tesco is to prevent the current loyalty program from turning into a “ bore ” to the customers and its members. </li></ul><ul><li>Partner with various companies and offered attractive deals. </li></ul><ul><li>Partnerships and alliances made bigger deals possible. </li></ul>A Bigger Deal
  20. 21. <ul><li>How Clubcard Helped </li></ul><ul><li>A single customer service. </li></ul><ul><li>A single customer view. </li></ul><ul><li>Lower customer acquisition cost. </li></ul><ul><li>Bringing new customers to Tesco. </li></ul><ul><li>Minimizing cost. </li></ul><ul><li>Accelerating to non-food. </li></ul>From Mouse to House
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