Tesco Clubcard: #customerloyalty is dead! It’s all about membership! #clubcard #tesco #loyalty #data #datamining #algorithms

(First things first, four months since my last post…. apologies, just a lot of things going on.)

The “rona” has done a lot of things to retail, it’s also done an awful lot of things to the economy. The UK furlough scheme reduced incomes and made customers very very very price sensitive. And today is the last day of the original furlough scheme as it stands, the next few months will be sadly even more worrying for some.

For Tesco it was also being forced from the likes of Lidl and Aldi on certain produce, fresh fruit and vegetable prices dropped in a wave of trying to keep up with the new kids in town. Consumers obviously liked it and certainly needed it.

All the while during the Covid pandemic, customer loyalty was going through it’s own problems.

For me, having worked in customer loyalty data mining, recommendation systems and other loyalty card related work (yes, I can bore you to tears with this stuff, oddly enough it’s still one of the most requested topics I’m asked to talk about). The loyalty shift was quick and dramatic, but we first need to see where we were before the lockdowns began.

Four Christmases a Year

This was the mantra of DunnHumby/Tesco since the Clubcard was introduced in 1995, while the world was generally losing it’s knickers over algorithms, Tesco have been calmly doing it for 25 years and we gave them permission to do it. Each quarter was when you got your Clubcard statement through with the vouchers that reflected your points accrual.

If you bought specific items that Tesco wanted you to buy, then you got more points. It was a trade off, if you want money off and better deals then you have to tow the line. And oh boy we did. It was a behavioural science playbook and it was executed perfectly most of the time.

It was a task and a half to get these coupons to households, a full security operation too with secured vehicles and secondary dummy vehicles and so on. Your loyalty was guarded better than some bad’uns who were locked up. Why? Because coupons have a monetary value, albeit very small, it’s still currency and it’s accountable.

The reason for the quarterly coupon drop, well that’s how long it took to mine the data back in the day. When you’re dealing with a firehose of basket data, well it takes a bit of time to get through it all. Back in 1995 it was only 10% of the baskets that were measured this gave out some really wobbly recommendations and money off coupons to customers….. so once the scale was there, they did everything they could.

And I LOVED that concept, I still do. I’ve been down a customer loyalty data rabbit hole ever since. For it be my happy place…..

While the cube is a simple concept, the practicalities of wading through the data efficiently and the computational nature of each customer (which segments get which offers) is not. It takes time and the figuring out who should get what, it also costs money (computing power and so on) to do so the payoff for the retailer has to be worth it.

I Wish It Could Be Christmas Everyday

(Everything from here is basically opinion, if I’m wrong then please tell me).

Once lockdown restrictions started to ease and we weren’t kettled through the supermarket one way system (and the joy of going around in circles to get back to where the vinegar was because you walked past it), the Clubcard sprouted a new set of wings. Discounts in store.

 

“Clubcard Prices”, or one price for the “regular” customer and a discounted price for Clubcard holders. This shifts the whole concept of what the Clubcard is and what it actually stood for, which was loyalty. Now it stands for, in my eyes, membership. Just by holding the card now means that you are entitled to discounts on certain items when passed through the checkout. Well that’s how it could be perceived but more on that in a moment.

Now it’s no secret that Tesco need to save money and have some serious competition from the likes of Aldi and Lidl. Store visits would have gone down, getting delivery slots during Covid was increasingly difficult depending on where you lived and choice was drastically reduced. The perceived value of holding the card then starts to decrease. Add to that the costs Tesco encounter of processing Clubcard data, it is now pretty expensive, between data centres, software licensing costs and salaries it’s an expensive operation to maintain.

So, discounting at source, no longer caring what you’re really buying, that’s the future of the Clubcard. Well that’s partly true, there’s no emphasis on buying certain items or attempting to boost your points balance, the nudge unit has stepped back. As there’s little in the way of physical coupons (unless it’s a promotion with another brand) then there’s little going on in the nudge department either. Remember the Clubcard was about changing behaviour, getting you to buy items you may not have considered.

Linking point of sale (POS) data to your basket and card number (and social/economic data by postcode), that continues as it’s a good earner for Tesco on the supplier side of the equation. Those reports are gold dust still for brands. For the customer though, the emphasis on eagerly waiting for coupons to arrive every three months, well that’s gone now. The Clubcard serves as a means to get perceived discounts and, in my opinion, little else.

And no, I think it has nothing to do with GDPR. We agreed to a contract, points and behaviour for money off and offers. We ticked the boxes and have to be responsible for our actions and the consequences thereon.

So, What’s the Endgame?

Bums on seats…. so to speak. It’s about attention.

From where I’m sat, Tesco are in a mad race to get more customer to signup to the Clubcard, the enticement is staring you in the face in-store, discounts. And some of them are quite compelling especially if you like your spirits.

 

Do you want to save 35.9% on a bottle of whiskey (yeah I know, the e in whiskey… sue me 🙂 ), you’d be a fool not to be tempted by such a deal and signup to the Clubcard to get it, especially with a Covid Christmas approaching at velocity.

Now, as far as I’m concerned, nothing is ever straightforward working on the theory of “no such thing as a free lunch”. Where there’s a discount on one side there’s a price increase on the other. And when you have 45,000 line items you can easily ramp up 1 or 2p per line item and preserve the bottom line.

There’s always a trade off and think Tesco have done the right thing here. My only thought is that this may really signal the end of the what the Clubcard really stood for, and that was loyalty.