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Play Your Cards Right

Take up of retailer loyalty cards has increased significantly over the last ten years. Tesco Clubcard offers publishers a range of opportunities to target customers and grow sales through stores, and increasingly, online. David Stam examines the pros and cons.

By David Stam

In 1963, one of Tesco’s co-founders, Jack Cohen, introduced Green Shield Stamps to the fledgling grocery chain. For 14 years, loyal Tesco customers pasted and collected stamps and traded them via catalogues for a vast array of consumer goods. Green Shield Stamps were one of the factors which spurred Tesco’s growth in that period – but were dropped in 1977 in favour of heavier discounts in store.

Fast forward to 1995 for the introduction of the Tesco Clubcard. Over the last 12 years, this has grown into the largest and most powerful of all the UK retailer loyalty cards and has helped power Tesco to its market leading position. The statistics are impressive. Clubcard enjoys 13 million active users and four out of every ten UK households has one. Over 80% of transactional behaviour within Tesco is swiped through Clubcard which, given the demographic profile of the store group, gives a clear insight into overall UK shopping trends.

There is no doubt that this flexible friend provides a huge databank of consumer behaviour which allows Tesco and its suppliers to reward loyalty, grow sales through carefully targeted promotions and specifically target mailings and communications. So much so that Clubcard is actually administered by consumer data management specialists, dunnhumby – a business which is now 85% owned by Tesco. Combine the consumer story with lifestyle data and you have a really powerful marketing tool. Give suppliers a number of promotional opportunities and good reporting and you are on to a winner.

Quarterly statement

The focal point of Tesco’s Clubcard communication is the quarterly statement mailed to holders. As well as giving basic information regarding number of points earned, the statement mailing offers suppliers the chance to target coupons for additional points in a highly effective manner. Publisher coupons can be targeted to a combination of existing readers and purchasers of three competitive titles.

dunnhumby claim that Clubcard statement coupons create the opportunity to reward customer loyalty, increase frequency of purchase and gain trial. Director of strategy and futures, Martin Hayward, states the result is a massive seven million permutations and combinations of mailed coupons each quarter. The offers are "highly relevant" to each customer. Tesco Clubcard mailings are undoubtedly one of the most complex direct mailing jobs out there.

For newspaper and magazine publishers, redemption can be an impressive 10-15%. Reed Business Information’s Farmers Weekly ran a coupon on statements last August which carefully targeted 16,000 consumers. Tony Hill, RBI’s newstrade marketing manager, said redemption was 12% and the overall uplift in sales over the period within Tesco was 15%.

Coupon At Till

Inclusion in a Tesco Clubcard mailing has a lead time of 3-4 months – not necessarily immediate enough for the cut and thrust of newspaper and magazine marketing. A more immediate and simpler promotion is Coupon At Till or Clubcard Bonus.

Coupon At Till is exactly that. Again, customers are targeted as a mix of existing and potentially new – and when groceries are scanned and paid for and loyalty card swiped, a coupon is literally printed at the till. Tesco’s category manager, David Cooke, believes Coupon At Till is particularly effective for news and magazines and points to recent success with the Daily Mail and Telegraph. RBI have also used Coupon At Till, this time for New Scientist and achieved a very high 15% redemption. Tony Hill added that this promotion "really highlighted the potential for New Scientist within Tesco." Staff interaction is important, redemption rates seem to increase in stores where checkout staff go out of their way to highlight the coupon to the customer.

Tesco appear to have separated the management of Clubcard promotions from the day to day buying and ranging decision by effectively outsourcing to dunnhumby. But David Cooke stated that creative publishers can link the two by buying additional space in store at the time of coupon promotions. RBI’s Tony Hill pointed out that to be effective a title should already have good listings in Tesco but clearly positive results from a mailing or Coupon At Till doesn’t hurt when it comes to trying to increase this.

A huge plus for loyalty card promotions are their ability to spotlight those customers with buying potential. With high redemption rates, the level of coupon production can be relatively limited, potentially keeping costs low. For those publishers who have been bitten in the past by mis-redemption – each coupon is barcoded to ensure accurate cost allocation.

The costs

So what are the costs? The component parts are a set up or targeting fee, a cost per coupon printed and an optional reporting fee. RBI’s Tony Hill states that both the Farmers Weekly and New Scientist schemes were each around £5,000 and considered them to be cost effective. Costs will be pro-rata to the size of potential target market, so larger circulation publishers should expect larger bills.

However, one mainstream consumer publisher is more sceptical. They consider that there is a real danger that Clubcard promotions are "just about rewarding loyalty and not growing sales" and, like all too many magazine promotions, there is little or no post-promotion retention. But Tesco are resolute that loyalty is key, a clear rule being that 30% of coupons have to be targeted at existing consumers of the brand. A supplier has to buy into the need to reward loyalty, not just to entice customers from competitors. Having to pay for data, in some instances, at the conclusion of a promotion also causes concern.

Online targeting

As the popularity of online shopping increases, customer purchasing statistics and demographics will become increasingly important in the quest to identify the right consumer. Loyalty ID-type cards will not just be an add on, customer ID is essential for online service and delivery.

IPC Media have been at the forefront of this innovation with a programme of promotions on the site. Offers have included Woman & Home for £1, a saving of £1 on an array of Home Interest titles and half price offers on a number of men’s titles, including Nuts. Flagging the savings on the magazine’s home page, with a click through to, increases awareness and consequently success.

Marketforce’s director of circulation for IPC Media, Adrian Hughes, has developed the opportunity. "Results have exceeded our expectations – we are measuring promotional online sales in thousands not hundreds", he remarked. "It’s really important to get on the right part of the site – Top Offers or Grocery Home Page." Currently working with Tesco, IPC Media are rapidly developing their understanding of the online market which in turn they will utilise with other players.

Working with Tesco Online is relatively straightforward for major newstrade titles. Store deliveries are more often than not from a local store or from one pre designated regional store. Day to day online promotions should be able to be accommodated within normal copy management and major promotions supplying key stores.

Innovative publishers should take notice of the promotional opportunities out there with this leading store group. In a 1990s TV commercial, Tesco claimed that they did indeed "change the way Britain shops." Cards and clicks are the way forward and points may mean prizes for the publisher who has a go.