March 11, 2019
How Tesco harnessed data from their millions of Clubcard holders to enhance customer relationships, experiences and loyalty.
4 minute read
Take a look in the average person’s purse or wallet and it’s likely you’ll find at least a handful of branded loyalty cards. If so, it’s even more likely that one of them is a Tesco Clubcard. Since the scheme was launched in 1994, Tesco’s loyalty programme has become one of the most popular around, now with over 16.5 million active members.
This huge pool of Clubcard holders gives Tesco the ability to record comprehensive sales data on two-thirds of the shopping baskets it sells; a constantly-expanding supply of transactional information about the buying habits of its most regular shoppers.
Of course, this data must be analysed before it can reveal actionable insight, and Tesco has invested heavily in this area too. In 2004, it bought DunnHumby, the research company it had previously partnered with to dissect the data. Our former CEO, Nigel Gatehouse, was Strategy Director at DunnHumby from 1996 to 1999, and a key member of the Clubcard team. His first-hand experience rolling out the programme and developing many of the CRM and loyalty programme approaches still used around the world now, ensured a dedicated focus on consumer behaviour intelligence for Tesco at the time, just as it does for our clients today.
Like any well-devised loyalty scheme, the Clubcard programme generates data that helps Tesco better understand its customers, while also providing them with added value incentives and member perks. Among other use cases, Tesco is using this data to encourage its customers to shop and eat more healthily.
As Tesco knows only too well, the supermarket is prime territory for influencing what people buy and consume. According to research, 60 per cent of food purchasing decisions are unplanned and made on the shop floor, while a US-based report cited that 66 per cent of supermarket shoppers are looking for ways to boost their health and wellness. It makes sense then that if they know enough about what customers are in the habit of buying, supermarkets can, and should, suggest ways in which they could make healthier choices.
Data recorded by the Clubcard scheme lets Tesco do just that; each card is linked to an individual customer’s account and every time they use it at the checkout, data about what they’ve bought is added to a profile of their buying preferences over time. For regular shoppers (as most Clubcard holders are), it doesn’t take long for patterns and trends to emerge when datasets are examined alongside other sources of information, showing the extent to which a customer’s buying behaviour changes seasonally, in line with annual events and even according to the weather.
This enables Tesco to adapt their promotions and sales focus at particular times of the year, or with certain weather on the way, helping them become more efficient and effective in ways from reducing food wastage, optimising sales and minimising the amount of stock that was sat in their warehouses.
Through the development of algorithms trained to assess each item for its health credentials, it has given each basket or trolley-load a ‘health score’. This data wouldn’t tell Tesco anything granular about consumers on its own, but within the context of Clubcard, it can link each transaction back to a particular customer, enabling it to send them vouchers with easy health ‘swaps’ they could opt for next time they shop.
Tracking the products Clubcard holders buy, as well as those that could be healthier alternatives, also allows Tesco to plan its in-store product placement. Supermarket display planners can position items and their alternatives close together, market the healthy option more heavily or even highlight the benefits of swapping with point of sale marketing material.
The above, combined with the Clubcard vouchers which were offering customers savings on healthier products, gave them a financial incentive to eat more healthily as well as a physical reminder as they’re browsing the aisles.
Examining the relationship between products is another way Tesco seeks to boost sales of healthy produce, by arranging them close to each other or offering discounts. If Clubcard shoppers’ baskets reveal that many are buying picnic-type foods, paper plates and plastic cutlery, Tesco can try and add to those baskets with offers on bottled water over sugary soft drinks, or by creating a seasonal picnic-themed area of the store where all items can be found together.
Like many supermarkets these days, Tesco offers a range of free monthly magazines to pick up in-store, featuring seasonal trends, recipes, and lifestyle content that promotes the range of its products. What may be different about Tesco’s magazines is the extent to which they are informed by the vast amount of valuable Clubcard member data.
Years of customer behaviour data analysis has enabled it to devise around a dozen different core lifestyle classifications, segmenting its customer base into key groups depending on life stage, personal interest, buying preferences, shopping style and more. Magazine content reflects these classifications, down to the coupons they include and now, the recipes they showcase.
Not only are recipes healthier, Tesco has also included cards with barcodes which, when scanned with a device that has the Clubcard app, automatically downloads the recipe and enters the Clubcard holder into a draw to win a gift card. This gives Tesco a way to link online and offline behaviour, using data to reveal which recipes are best-received, on what day of the week and at time most downloads occur and made more effective. This information can then be used to deepen their understanding of customer eating habits, so ongoing health promotion can be further refined and made more effective.
The Tesco Clubcard scheme is a great example of what can be achieved with a loyalty programme; the healthy eating initiative is just one way Clubcard data is helping Tesco connect with its customers.
Loyalty programme design and strategy is a key skill here at Ikano Insight – we specialise in putting our data analysis expertise to work to create loyalty schemes that offer exceptional value for our clients’ target markets, as well as new levels of behavioural intelligence. For example, we helped national perfume retailer The Perfume Shop launch what was, at the time, the most generous loyalty programme in the UK. By gathering and analysing data about members’ perfume preferences, we were able to create personalised recommendations to boost sales and reward members with 5 percent return on purchases.
If you’d like to find out more about how we help our clients launch their own loyalty programmes, please get in touch with a member of the team, or discover our core range of products and tools including eCard solutions and our Customer Data Platform.