Scoring Points | Clive Humby

Summary of: Scoring Points: How Tesco Continues to Win Customer Loyalty
By: Clive Humby

Introduction

Welcome to the fascinating world of ‘Scoring Points.’ In this book summary, you will discover how Tesco, an upstart British supermarket, revolutionized loyalty programs and used customer data to transform their business and the retail industry. While many retailers have struggled to make loyalty schemes profitable, Tesco’s Clubcard program has not only increased sales but has also changed the way they develop products, manage stores, and serve customers. The valuable insights gleaned from the Clubcard program have helped Tesco enter new markets and launch additional services such as Tesco Personal Finance and Tesco.com.

Data-Driven Loyalty: The Tesco Way

Tesco’s innovative use of customer data via its Clubcard loyalty program influenced its decision making, product development, store management, and customer service, resulting in increased sales and the creation of successful new businesses.

In today’s world, loyalty programs have become a staple for retailers looking to both gauge customer behavior and incentivize repeat business. Whether it’s frequent-buyer programs, frequent-flier programs, or frequent-dining coupons, the idea is all the same: more is good. This is because retailers are not only able to give more rewards to their customers, but they can also gather data that can be analyzed and transformed into profitable marketing knowledge.

But how well do these loyalty programs really work? The answer is not so well for many companies. Many executives complain that they are too expensive, and the customer data they reap is too plentiful to slice and dice into meaningful bits of marketing knowledge that can be transformed quickly into profits. Very few companies have managed to make loyalty card schemes profitable, even in a single location.

One company that stands out from the rest is Tesco. With more than 600 stores worldwide, it became one of the first mass retailers to use its loyalty program successfully not only to boost sales but also to transform the rules of business, retailing, and, in particular, the grocery industry. Using its loyalty program data called the Clubcard, Tesco changed the way it makes decisions, develops products, manages stores, and serves customers. Because of the specificity of Tesco’s customer knowledge-driven retail promotions, its shoppers spend more and buy more items over time.

Tesco’s innovative use of customer data via its Clubcard loyalty program influenced its decision making, product development, store management, and customer service, resulting in increased sales and the creation of successful new businesses. Tesco’s leadership believes that this data lets the chain enter new businesses with a higher likelihood of success and lower expenses. For instance, a Tesco executive who was analyzing Clubcard data originated the idea that the chain had an opportunity to provide financial services to millions. That same data helped Tesco Personal Finance know who was likeliest to sign up for its services. The company also used Clubcard data to inspire and develop Tesco.com, now the world’s largest grocery e-tailer. The best part? The knowledge Tesco has learned and continues to learn about its customers from Clubcard has enabled it to increase sales enough to pay for the program many times over.

In conclusion, the Tesco story is not merely about its success in market leadership, but more significantly, it is a lesson about how to make loyalty marketing work. Tesco proves that a retailer can mass-customize to suit the needs of consumers of every type, taste, income, and age. And instead of doing so based just on good hunches about its shoppers, Tesco actually knows what individual customers actively choose and prefer because it has empirical data. So, Tesco’s ability to transform customer data into profitable marketing knowledge not only made its loyalty program successful, but it also led to the development of successful new businesses.

Tesco’s Clubcard Success

In the 1990s, Tesco faced stiff competition in the grocery industry, threatened by more innovative and customer-oriented rivals. To revive its fortunes, Tesco hired Grant Harrison, who developed the Clubcard loyalty program. The program aimed to change customers’ behavior while appealing to their emotions. The launch of Clubcard was unprecedented, as no other British supermarket had a data-driven customer membership program. The program required high levels of customer interaction, and early experiments represented a clean break from Tesco’s cultural and fiscal past. The program was seen as a risky strategy, politically and culturally. However, the success of Clubcard is demonstrated by the over eight million significant variations of the mailing based on customer behavior. Clubcard was a significant factor in Tesco’s success, which saw Tesco rise from an also-ran in the grocery industry to market leader.

Tesco’s Successful Clubcard Experiment

Tesco’s introduction of Clubcard loyalty program, which analyzed customer data to provide insights into shopping behavior and offer personalized promotions, resulted in a surge in sales and allowed the company to become the UK’s top grocer.

Tesco’s Clubcard loyalty program was introduced after data analysis provided insight into customer behavior, revealing that a few customers accounted for a significant portion of the company’s profitability. Clubcard data allowed Tesco to break down purchases by spending and department, revealing that customers mainly patronized certain departments and that rivals in some areas were stealing customers and eroding sales.

In a trial run at 14 Tesco stores, personalized promotions offered through Clubcard showed exceptional results, with coupon redemption rates topping 70% and recipients’ spending rising 4%. The program allowed Tesco to engage with its customers on a personal level, with invitations to events and offers provided to specific groups based on their purchasing history.

The success of the Clubcard experiment led to its rollout nationally within 12 weeks. Clubcards were delivered to stores, with over 70% of sales being recorded and matched to Clubcard holders within days of launch. The program resulted in a 1.6% increase in sales, settling into a gain of more than 2%. The rollout encouraged some customers to spend 28% more at Tesco.

Tesco’s program remained ahead of its competitors, enabling it to keep innovating with new offers and refine its marketing strategies as more information was obtained from Clubcard data. The use of Clubcard data allowed Tesco to gain unique insights into customer behavior, and in some cases, know more about its customers in a few months than it did over 30 years of existence.

Clubcard ultimately led to a complete change in Tesco’s advertising strategy, replacing expensive TV campaigns with individually targeted, Clubcard communications. Tesco’s success with Clubcard allowed it to become the UK’s top grocer and cemented the importance of analyzing customer data to personalize promotions.

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