Asda's new loyalty programme - worth the wait ?

January 17, 2022

There's lots to like about Asda's new loyalty programme that was launched this week.

It's simple to join (via app download), fully digital, rewarding, personalisable and gives Asda a new way to understand and engage with its customers.

Its on test in about 10 stores in Yorkshire with the expectation that it will be rolled out to all stores in the New Year once they have proved out that everything works.

Asda have been disadvantaged by not having a loyalty programme ever since Tesco launched Clubcard in 1995 and Sainsburys launched Nectar in 2001 with Morrisons, Waitrose, Co-op and Iceland all launching programmes later in the decade. Lidl launched a program earlier this year and the Aldi programme is expected to launch next year.

What took Asda so long? The key reason was dogma from previous owners Walmart who still see loyalty programmes being at odds with an "every day low pricing" proposition.

Now under new ownership, management have demonstrated a break with that thinking which some observers believe strongly contributed to Asda's weak UK performance and Walmart's subsequent withdrawal from the market.

Its easy to forget that when they acquired Asda back in 1999 the expectation in the industry was that through the scale of their global buying power, logistics efficiencies and focus on low prices they would rapidly grow the business and challenge Tesco for market leadership.

But Tesco blunted Asda's pricing initiatives through smart use of their Clubcard data supported by targeted marketing. Tesco could see that only about 20% of customers were highly sensitive to price changes and concluded these customers - provided they lived near an Asda store - were vulnerable to switching. Basket analysis revealed the surprisingly few products that really mattered to this group. These products were then heavily discounted - initially only in the stores that competed with an Asda and subsequently to all stores. Price sensitive shoppers saw a significant reduction in the their weekly shop and very few switched to Asda.

Tesco saved many £ millions by not simply reducing the price of their top sellers (the typical supermarket response to price competition).

Asda also had to contend with the expansion of the hard discounters at one end of the market, Sainsburys and Waitrose improving their competitiveness at the premium end and Tesco and Morrisons in the middle.

Without a loyalty programme Asda were not able to benefit from the huge growth in brand funded personalised offers delivered via the Clubcard and Nectar teams and later Boots, Morrisons and Co-op (memo to Waitrose and Iceland - you are still missing out here) . Tesco and others printed these coupons at till, sent them through the post or delivered them into an app and generated 2-3% like for like growth throughout the early to mid 2000s. Procter & Gamble shut down their internal direct marketing operations and moved investment to those retailers who were able to deliver and measure targeted offers such was the improvement in ROI vs their own efforts which relied on emails, third party lists, social media likes or competition entries. Hundreds of millions of dollars were switched from mass to personalised marketing. Other suppliers, particularly in high sku value categories, followed suit. Asda never benefitted from any of this.

But they should be able to now and it looks as if their programme has been designed to enable ex dunnhumby star Matt McLellan to lead this.

Rather than give a set 1% reward to shoppers, as Tesco still do, Asda have chosen to reward "shopping missions" which might be be for a category (eg frozen), a meal occasion, a product or a discount off the entire shop. The reward value varies and is highly generous for early adopters - shop 4 times and spend a minimum £20 gets you £5 - that's a possible 6% saving. We can assume that their analytics tools will quickly learn which missions are the most motivating for shoppers and the programme will flex to deliver each customer a unique set of missions based on their shopping habits and product needs. Reward levels will adjust (downwards) to stretch basket spend and incentivise higher visit frequency.

We can expect Asda to launch "collaborative crm" (probably using a cloud portal based solution like @ciValue) and to inform their retail media offer with first party data (as recently announced by Kroger in the USA) gathered from the loyalty programme in order to boost the fees generated from advertisers (Morrisons and Boots heading down a similar path working with shopper agency Threefold).

In time Asda might also include missions with non competing third parties (such as travel, hotels, music, TV etc) that enable customers to grow their cashpot in a similar way to Quidco or Top Cashback whose regular members often rack up savings of £100's. Perhaps it will extend to reward purchases at EG forecourts (also owned by Asda's new owners) and their fast food partners (eg Greggs, Starbucks, KFC, Leon etc)

The Asda programme runs on the Eagle Eye platform and this cements Eagle Eye's position as the preeminent global loyalty and digital redemption solution for major supermarket chains given it is now used (to differing extents) by Tesco, Sainsbury, Waitrose in the UK, Loblaw in Canada, South Eastern Grocers in the USA, Woolworths in Australia and The Warehouse Group in New Zealand.

Ironically for Asda it has chosen the platform that is led by former Tesco CMO and co-architect of Clubcard Tim Mason and backed since it was a start up by ex Tesco CEO Sir Terry Leahy (Non Exec and substantial shareholder).

How could Asda improve on the programme? We would recommend the use of digital wallet passes from Fobi alongside the app (some customers will find the app fiddly to find and open when at the checkout whereas geofencable wallet passes will open automatically making it easier for customers to present their barcode and check their offers - Kaufland in Germany are leading the charge here) and when open banking variable recurring payments launch next year we would expect Asda to enable customers to pay (as well as earn and redeem) via barcode so that payments, earning and redemption all happen via a single scan . This will also enable Asda to save card payment and payment gateway fees of about 2% some of which will likely be shared with shoppers (perhaps using the Loyalize platform).

It took Asda a long time to get there but they could recover lost ground quite quickly and end 2022 with the leading UK supermarket loyalty programme helping them to grow market share through personalised marketing, collaborative CRM and data monetisation

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