Tesco Cards Asda

Discussion
Jun 06, 2006
George Anderson

By George Anderson


Asda in the U.K. offers the type of low prices that have enabled Wal-Mart to gain dominance in markets both inside and out of the U.S. The world’s largest retailer has been able to gain this price advantage by cutting out all expenses it deems unnecessary, such as the cost of dealing with middle men, excess inventory, etc.


One area that is commonly brought up when discussing the Wal-Mart model is the chain’s decision not to use loyalty cards. Many see this as another area where Wal-Mart has succeeded in keeping costs under control while its competitors with loyalty programs tinker around in the attempt to make them work properly.


The exception to the loyalty card rule brings us back to the U.K., where Tesco has used the information gleaned by its Clubcard program to increase its share of market to nearly double that of Asda’s, according to research by Taylor Nelson Sofres.


According to a report in The Wall Street Journal, Tesco has used the data to not simply compile information on consumer expenditures (a common criticism of others use of loyalty cards) but to analyze the data to create new sales opportunities.


A case in point is that when Tesco introduced ethnic foods in neighborhoods with a large population of Indians and Pakistanis, it discovered that many of the same items were popular with upscale white consumers.


Another example is how Tesco has used the information from its Clubcard program to build business with fathers of infants and toddlers. In households where consumers buy diapers, Tesco discovered that fewer Dads were going down to the pub. Using this information, Tesco began sending out coupons for beer to customers that met the diaper purchasing criteria.


Karen Masek, a Tesco customer and mother of two, said of the retailer’s Clubcard program, “They definitely know your shopping habits. They’ve never sent me anything totally off the mark.”


Despite the success of the Tesco program, Asda remains unbowed.


“There clearly are benefits to having loyalty-card information but there are costs as well,” says Jon Owen, head of research and pricing at Asda. “We prefer to give our customers the value in different ways.” 


Moderator’s Comment: Why is Tesco’s loyalty program different from so many other retailers’? What will it take (specifics appreciated) to make their
programs successful to the same degree as Tesco’s?
– George Anderson
– Moderator

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11 Comments on "Tesco Cards Asda"


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Don Delzell
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Don Delzell
14 years 8 months ago
Tesco’s program demonstrates best practices in customer relationship management. CRM is a two way street. The customer provides data about their shopping behavior, and the retailer uses it to improve the overall shopping experience. Both sides benefit. Without information of this kind, POS technology can only tell the retailer what sells at the sku level at each store. It cannot tell why. Unless outside sources of data are secured, merchandising is almost a complete behavioral psychology model: react to stimuli without understanding of cause. Tesco has a relationship with its customers. The loyalty program, unlike those in the States, isn’t just another way of motivating specific item purchases through pricing. The US models do switch choice behavior for low brand loyal consumers, influence stocking behavior, and increase consumer satisfaction due to perceived savings. These are all relevant goals. Yet they scratch the surface of what a true CRM program can and should do. Grocery shopping is a destination choice. Often planned, although sometimes necessity driven, the behavior is clearly capable of being influenced. Why not… Read more »
Anna Murray
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Anna Murray
14 years 8 months ago

In the online space we see this phenomenon all the time: Marketers *want* data. And they are sure good at collecting it. But they aren’t so good when it comes to actually DOING anything with it. Tesco does use the data. They’re not doing anything SO hard to conceptualize. They are using data smartly to target consumers with offers meaningful to them. This seems like a basic strategy once you have data. If you take the example of email marketing, you see that despite mountains of data, marketers don’t do intelligent, customer-focused programs. Maybe they segment by gender or zip code. But that’s it. I have rarely seen an email piece where the offer actually reflects the last thing I bought. Similarly, I used my frequent shopper card at the grocery store all the time. And they have my email address. But I rarely receive any communication for offers based on my buying habits.

Mark Lilien
Guest
14 years 8 months ago

Which US grocers are customer-driven versus supply-driven? How many are using the same promotional methods (and the same promotions) they used 10 years ago? 20 years ago? How many use unique marketing techniques versus whatever is used by their competitors? Why expect outstanding results by copying mediocre players’ behavior? If you’re the fourth firm in your market to try something, why bother?

Ken Wyker
Guest
14 years 8 months ago
A few thoughts: 1> The biggest difference between Tesco and other retailers’ loyalty programs is the level to which Tesco analyzes their data. Through dunnhumby, they have been able to evaluate the loyalty card data and extract meaningful insights. For most retailers, it’s a challenge just to warehouse all of the customer data that the programs generate. Tesco has invested in the analytics and customer communication side of the program, which is where many retailers drop the ball. 2> Conventional wisdom has gotten so caught up in the Wal-Mart phenomenon that loyalty card programs are considered misguided and EDLP is touted as the smartest retail format. One of the key points from the Journal article is that Tesco’s customer-specific information from their card program is something that Wal-Mart’s Asda cannot compete against. As more retailers follow the path of Tesco, I believe conventional wisdom will slowly shift toward recognizing loyalty programs as a powerful tool to compete effectively against Wal-Mart. 3> As Anna Murray mentioned, targeted emails with offers based on the customer’s purchase history… Read more »
M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 8 months ago
Books will be written about the clash between the ultimate loyalty retailer (Tesco) and the ultimate cost-control retailer (WM Asda). Legendary, and it’s cool that this conflict is taking place in the good vs. evil land of King Arthur and Camelot. Except, King Arthur and Camelot did not exist. Nor does a “perfect storm” of loyalty vs. price exist among UK retailers. For starters, which “good” and which is “evil?” Shoppers want what they want, and use every advantage they can find. Thus, UK shoppers cross-shop Asda and Tesco. There are no “my customers” and “their customers.” Like shoppers everywhere, Brits balance their purchases between price and value — with the “value equation” being as unique as snowflakes from shopper to shopper. The advantages of the Dunnhumby-supplied Tesco loyalty program have been addressed ad infinitum. The true issue is commitment. Dunnhumby has joint-ventured with Kroger on a similar program for years, but we have yet to see a Tesco-type commitment from that chain. Loyalty vs. price will continue to confound us because shoppers want a… Read more »
W. Frank Dell II
Guest
14 years 8 months ago

Point 1, here is another example of where price does not rule the retail world. Point 2, Tesco’s frequent shopper program is light years ahead of anything I have seen in the USA. They have clearly defined their target market (5 groups). They don’t just send promotional flyers, they engage the target consumer. Product selection, pricing and promotion are all coordinated. Tesco frequently communicates with their target consumers. In the USA, most retailers with frequent shopper programs have not given up or reduced their crutch of newspaper advertisement for direct communication; with this they have mostly just added costs.

Robert Antall
Guest
Robert Antall
14 years 8 months ago

I don’t have enough room in my wallet or on my keychain for all of the loyalty cards I own. Not one of these retailers does anything specific to me or my shopping habits. Today, the rule is to collect and report information internally, but little or no meaningful action is occurring. Yet every retailer I see is talking about loyalty and CRM programs as the holy grail. Give me everyday low prices and forget the overhead of these cards.

Bernice Hurst
Guest
14 years 8 months ago

As most everyone has said, it ain’t rocket science. Once you’ve got the data, USE it. That’s essentially what Tesco does differently and better but with one additional feature – they think laterally. I love the beer offers to new fathers. Don’t try to promote only what has been purchased previously (but of course don’t neglect it), add onto that anything that seems relevant using the data you’ve been so freely given. THINK ABOUT IT. Ooops. Think? Retailers? Oxymoron or what?

Mary Beth Rymers
Guest
Mary Beth Rymers
14 years 8 months ago

I think one of the biggest differences between the Tesco loyalty program and those in the U.S. is Tesco truly rewards customers for their loyalty after they have proven their loyalty a la the airline model while in the U.S. there is immediate gratification and no real loyalty is required to get the goods!

Linda Jennings
Guest
Linda Jennings
14 years 8 months ago

Winco, a West Coast grocery retailer is the low cost leader without the ‘loyalty cards!’ I would be interested to see if the dollars per sq. ft of Winco beats that of Wal-Mart in food.

ADEDOTUN ADEGBEYE
Guest
ADEDOTUN ADEGBEYE
13 years 5 months ago

Thanks for the opportunity to contribute. This is actually a big and creative way for Tesco to gain more customers over Asda. I have been won over from Asda to Tesco because of the card, since their prices are almost the same.

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