You need a loyalty programme - and its not why you think

February 9, 2021

I was rather taken aback, nearly twenty years ago, when Simon Uwins, then Marketing Director at Tesco told me that the purpose of Tesco’s Clubcard programme was not to drive loyalty.

The launch of Clubcard had helped propel Tesco from the UK’s number 2 grocery retailer to the far and away outright market leader and to a large extent this growth had come from existing customers becoming more loyal, so it seemed a surprising thing to say.

Uwins explained that the key driver of loyalty for any retailer, was the overall brand proposition and customer experience, the loyalty programme served a different purpose.

Tesco had encapsulated their brand and customer experience proposition in the phrase “every little helps” which was itself one of four marketing pillars alongside “everyone is welcome”, “build trust” and “say thank you” that helped Tesco deliver its core purpose of "earning and growing the lifetime loyalty of our customers".

The brand and experience proposition had, in turn, been broken out into component parts, forming 5 promises, each articulated from the point of view of the customer and each providing the whole organisation with clarity and focus on the things that mattered and the tasks that needed to be managed and measured :

“I can get what I want” , “the prices are good”, “the staff are helpful” , “the aisles are clear” , I don’t have to queue” which these days they might add "its safe to do so"

So, what is the purpose of the loyalty programme I asked ?

Uwins replied that it was 4 fold :

a) A way of saying thank you to customers

b) A way of knowing who customers are

c) A platform to help understand customers

d) A platform that could enable differentiated service and communications  

As we emerge from the lockdown I think many retailers will benefit not just from their existing loyalty programme - which from personal experience can sometimes deliver incremental sales by as much as 20% - but also from the clarity of purpose and customer centredness that are Tesco’s hallmarks.

In some businesses a tiny % of customers deliver 80-90% of the profits, in others certain groups have totally different shopping requirements to others.

The need to be able to provide differentiated services for certain customer groups is accelerating, as are the opportunities and expectations of customers from personalised communications and experiences. Any business that expects to survive and thrive needs a deep understanding of its disparate customers, as they are not the same and don't expect to treated equally.

These are the key reasons for retailers and others to consider a loyalty programme if they don’t have one already. Thanks to technology advances, set up and operations are simple and easy, and in addition to P&L benefits, a well designed programme can become a monetisable asset – sometimes worth many times more than the host brand itself - as airlines are currently discovering.

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