Scoring Points: How Tesco Is Winning Customer Loyalty

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* 10 million shoppers in Britain are active members of Tesco Clubcard, the world's most successful retail loyalty scheme

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Overview

* 10 million shoppers in Britain are active members of Tesco Clubcard, the world's most successful retail loyalty scheme

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Editorial Reviews

From the Publisher
"Want some pointers on how a well-run supermarket loyalty program should work? Then you might want to pick up a copy of Scoring Points: How Tesco is Winning Customer Loyalty, a new book by Clive Humby and Terry Hunt with Tim Phillilps. The book chronicles the development of the Tesco Clubcard, widely regarded as the world's most successful loyalty operation. Launched in 1995, the program has helped Tesco become the United Kingdom's No.1 retailer, as well as the world's most successful Internet supermarket, one of Europe's fastest-growing financial services companies, and arguably one of the globe's biggest exponents of customer relationship management. Dunnhumby, Humby's firm, developed the Tesco Clubcard and has opened an office in Cincinnati to help Kroger Co. improve its own customer loyalty program."—Richard Turcsik, Supermarket Grocery Business
Soundview Executive Book Summaries
Launched in 1995, Tesco Clubcard is the world's most successful retail loyalty program. Since then, Tesco has transformed its relationship with its customers. Today, Tesco is the United Kingdom's most successful retailer and the world's most successful Internet supermarket. It is also a leader in the financial services market and perhaps the best retailer in the world at managing customer relations.

In Scoring Points, marketing experts Clive Humby and Terry Hunt, as well as journalist Tim Phillips, describe how Tesco went from being just one of three grocery chains in Great Britain, fighting for its share of customers and their wallets, to the undisputed leader. You will see the action behind the scenes as Tesco begins to learn exactly why customers shop at Tesco and what they want from the retailer. By creating the world's leading customer relationship management program, Tesco has learned a lot about what it takes to retain those customers and induce them to spend more. Through its innovative Clubcard, Tesco has learned that rewarding good customers is great for business. What Tesco has learned from its program can serve as inspiration for others just now launching loyalty programs or trying to leverage the information theirs provides into sales.

Loyalty, in day-to-day life, implies monogamy: one choice above all others. Retail loyalty isn't like that. There isn't a customer alive who will consider using one shop for every need. When retailers look at winning and keeping loyal customers, the best they can hope for is a little extra goodwill, a slight margin of preference, and an incremental shift in buying behavior. Together, however, these benefits can add up to a massive contribution to a business' financial success.

Types of Loyalty
There are four types of loyalty on which retailers have come to rely. The first is "purge" loyalty in which the retailer slashes prices to make itself the preferred place to shop. The second is "pure" loyalty, which is dependent on a two-way dialogue between the retailer and customer. Next, "pull" loyalty depends on attracting customers by giving a related special offer with a purchase, such as a buy-one-get-one-free deal. It's an inducement to create sales by encouraging customers to buy new items. Finally, "push" loyalty means creating a program to encourage customers to use a way of shopping they haven't used before, such as offering a combined credit card and loyalty card or making prices cheaper on a Web site. Push loyalty is what loyalty programs are all about.

Creating Value
Loyalty programs produce positive results in six ways:

  1. Customers make purchases more often, having made a conscious choice to commit to your brand in exchange for a reward when they sign up.
  2. Loyalty programs give you the ability to mass-customize marketing communications. Using customer transaction data, you can individually target marketing.
  3. Loyalty program information is very valuable if it is analyzed. The data is exact and becomes a high-value asset itself.
  4. Loyalty programs let you track trends, giving you early warning of significant changes in how customers are shopping, what they are choosing and what they aren't doing.
  5. Loyalty programs minimize waste by targeting offers to those who are most likely to want them.
  6. Loyalty programs promote trust and open the way to an expanded relationship when it's time to add services and products to the marketing mix.


Making Loyalty Pay
Loyalty programs aren't cheap - they require a substantial investment in cash. For a large retailer, startup costs can run $30 million in the first year, and annual costs will run between $5 million and $10 million.

Loyalty programs also require a huge investment in time and IT resources. For example, Tesco employs nearly 100 people whose main job is to manage its Clubcard process.

And before you start, consider the cost of stopping. If you don't get it right and have to end the program, customers may perceive your actions as breaking the bargain. Once customers embrace a program, they are likely to be very reluctant to have it taken away. Copyright © 2004 Soundview Executive Book Summaries

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Product Details

  • ISBN-13: 9780749435783
  • Publisher: Kogan Page, Ltd.
  • Publication date: 3/28/2004
  • Pages: 276
  • Product dimensions: 6.46 (w) x 9.60 (h) x 0.99 (d)

Meet the Author

Clive Humby is the chief information architect behind Tesco Customer Management and its segmentation program and co-founder of leading marketing analysts dunnhumby. He is Visiting Professor, Integrated Marketing, at Northwestern University, Chicago and Industrial Fellow at Kingston University and co-author of Scoring Points, also published by Kogan Page.

Terry Hunt is chairman of EHS Brann, one of the largest direct marketing agencies in the world. His clients include Tesco, British Gas, The Economist, Cadbury's, National Savings, and Barclays.

Tim Phillips has been a journalist for 20 years. He has written for publications such as The Wall Street Journal Europe and The Sunday Times. He writes the popular blog "Talk Normal" in an effort to combat the poor communication and corporate jargon in the workplace. He is the author of Knockoff and Fit to Bust and co-author of Scoring Points, all published by Kogan Page.

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Table of Contents

Foreword
Introduction 1
1 Questions of loyalty 7
2 Making loyalty pay 19
3 Clubcard on trial 35
4 Because we can 59
5 Every little helped 71
6 Data, lovely data 95
7 Four Christmases a year 113
8 The quarterly me 125
9 You are what you eat 133
10 Lifestyles become habits 151
11 Launching a bank 165
12 Babies, beauty and wine 183
13 A bigger deal 203
14 From mouse to house 225
15 Five challenges for the future 247
Acknowledgements 265
Index 267
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Sort by: Showing all of 2 Customer Reviews
  • Anonymous

    Posted January 28, 2005

    Sustaining a Relationship Marketing Idea: Insiders' story

    It's very seldom that you get to hear the real story behind a relationship-marketing programme. This book provides a brilliant insight into the real world of a successful loyalty programme at Tesco. It is a success story told by insiders (primarily the subcontractors). The focus is on the Clubcard, but it also contains an interesting chapter on their online shopping success that is created on the basis of many of the same competences that the loyalty card required. I'd like to put the book into perspective by playing devil's advocate. So what's the downside of a loyalty programme? Three problems usually hinder the success: big investment, internal culture clash, and privacy issues. 1) BIG INVESTMENT. It's expensive to develop the database - and even more expensive to maintain it. Especially the latter point is usually forgotten, while most people haven't yet tried to sustain a loyalty programme. The fact is namely that it eventually always risk running out of steam after the first breathtaking love affair for both the customer and the company. 'Scoring points' has devoted some attention to the development phase, where the Clubcard was 'skunk work' without much prestige in the big British retail operation. But I like the second part of maintaining the magic of the relationship even better (because this story is so rarely told). They explain how to keep the loyalty programme alive and kicking for the customers by micro-segmentation, adding financial services, creating multi-channel retailing including the web, and so on to keep the concept fresh. The book also spends a lot of time explaining how the customer data can be used to see trends and also get new understanding of the customers' behaviours that we haven't been able to before. 2) INTERNAL CULTURE CLASH. It's not easy to get everyone in the firm to be oriented towards relationship marketing and make use of the available information. Transaction marketing is usually much easier and less demanding of the organization than real relationship building. 'Scoring points' also covers these issues where the competition for resources from the top management is one issue and the relationship to the shop managers and shop assistants is another area. And it doesn't happen overnight - it usually takes several years with constant focus and commitment. The programme had testing phases, and needed many quick wins in several stores to obtain interest from other shop managers. Tesco's lesson in taking the time to make relationship marketing a part of an organization's culture is very valuable - and replicates my experience from other industries. 3) PRIVACY ISSUES. Maybe your customers don't want close relationships. Perhaps your customers even resent knowing that you have collected too much information about them. In 'Scoring points', they tell a story of a wife that complained about condoms that suddenly appeared on her personalized online shopping list, since her husband didn't use them. It turned out that he actually did, but not at home. His fault was that he bought the condoms in a Tesco shop with his loyalty card that was integrated to the web solution. That's how it was shown to his online-shopping wife. So much for privacy... That's an extreme - though real - example. And it's very illuminating for the sensitivity of data that we're dealing with - even when we think we're only selling groceries. Tesco's story should be required reading for everybody that would like to understand a long-term relationship marketing concept in depth. I find that the real strength of the book is the chapters on how to preserve the programme. This story is often untold. Peter Leerskov, MSc in International Business (Marketing & Management) and Graduate Diploma in E-business

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  • Anonymous

    Posted March 31, 2005

    Highly Recommended !

    Marketing experts Clive Humby and Terry Hunt and journalist Tim Phillips explain how British grocer Tesco collected, analyzed and used customer data to become a retail giant. Tesco paired its Clubcard loyalty scheme with jazzy information technology (IT) to set a new standard for knowing your customer. Humby and Hunt, as the collaborators behind Tesco's data-driven transformation, focus on praise, but they don't hide Tesco's early mistakes or skimp on its strategic hand-wringing. Though somewhat dryly written, the book compellingly discusses aspects of loyalty programs that don't get much ink outside the retail trade press. For example, it covers the way Tesco's accumulation of rich customer data forced some painful changes in its corporate culture. The authors also serve a sampling of delicious anecdotes and share Tesco's early difficulty with getting some customers - chiefly students - to join Clubcard. Tesco once gave students at a Q&A focus group some complimentary wine and cheese only to find that they 'swiftly drank so much wine that they made little sense to anyone still sober.' The book shines when discussing such early efforts by Tesco to micro-segment customers by lifestyle habits, including trying to glean individual personality traits from the contents of each grocery cart. We recommend this case study both as the story of Tesco's gutsy, groundbreaking experiment with IT and as a textbook example of how the Digital Age keeps making it possible for smart, daring businesspeople to rewrite the rules of commerce.

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