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Omnichannel Retail: The five key learnings from traditional loyalty schemes

Seize Digital
Author: Miya Knights

Eagle Eye celebrated the publication of our CEO, Tim Mason’s new book, Omnichannel Retail: How to Build Winning Stores in a Digital World a couple of weeks ago, with a launch party that marked how far retailers have come.

Thinking back to the days when store managers knew most of their customers by name, this second blog serialising Chapter 2, Analogue Learnings, of Tim’s book explores how loyalty first developed in modern retail.

Drawing on Tim’s 30-year career and his experiences of launching Tesco Clubcard, as the world’s first major grocery loyalty scheme, five clear tenets emerged when capturing his memories and best practice.

The major theme underpinning Tim’s philosophy, as revealed at the beginning of Chapter 2, is the value of customer connection. Clubcard provided this for Tesco and supported 15 years of customer-centred growth.

 “…It was only in 1995, through the launch of Tesco Clubcard, that I saw marketing truly prove itself to be one of the key drivers of a business. Tesco discovered the power of customer connection and used the data it generated to drive insight and learnings that we used to foster business growth.” (Mason, T., Knights, M. Omnichannel Retail, p25, Kogan Page.)
 

Avoiding a zero-sum game

We also don’t just have Tim’s word to take on this. We also spoke to then Tesco CEO, Sir Terry Leahy about Clubcard’s launch, and specifically about management’s caution over being drawn into a zero-sum game.

In the end, the customer insight it could enable outweighed any hesitancy. Indeed, both Tim and Terry agreed that agreed that Clubcard was the apotheosis of Tesco’s “Every Little Helps” strategy.

This strategy was articulated by its mission, which was ‘To create value for customers to earn their lifetime loyalty,’ which is always earned. So, Tim reasons, that if you want to earn it, you’ve got to first measure it.

  “Sir Terry Leahy said: “‘With Clubcard, we had no toolkit to inherit. There was some new data. The first data that came in was barcode data [from the supply chain and EPOS] and that was terribly exciting. I mean, you previously had store deliveries. But that wasn’t really accurate, and people didn’t look at that data in that way. But, for the first time, we had item movements. Then, with Clubcard, we got shopper purchasing data.’ (Mason, T., Knights, M. Omnichannel Retail, p35, Kogan Page.)

Clubcard enabled Tesco to measure performance by offering a one-point-per-£1 scheme that connected Tesco’s view of who customers were with what they buy, using quarterly direct mail vouchers at checkout.

As the first to market Tesco also innately knew that, for customers to give Tesco their data, they would need to get something of sufficient value back from Tesco in exchange.

So, it never lost sight of its main aim, which was ‘to recognise customers and thank them for their custom,’ with points off a frequently bought item, for example, or an offer to try a new product and stretch their spend.
 

The value of customer connection

Tim’s experiences during this period taught him a number of key lessons:

1. Retailers are no strangers to using technology to connect to their stores, and track staff and inventory. But the most valuable connection of all for a retailer should be to its customers.

2. Loyalty schemes are still a great way of connecting up a retailers’ view of who their customers are with what they buy. But any ‘give to get’ value exchange can provide a valuable source of this data.

3. The data generated from connecting with customers should be used to drive insight which, in turn, prompts action that is designed to foster loyalty. This is the D.I.A.L. methodology.

4. Retailers too often fall into trap of trying to move straight from data to action, or confuse it with data, leading to insight, driving awareness and promoting only learning without any meaningful action.

5. Digital engagement means it has never been easier or more cost-effective to know who your customers are and what they buy. But be sure to use this knowledge to iteratively improve what you’re offering.

Despite Clubcard being nearly 25 years old, its founding tenets are still as relevant, if not more so, today. So much so that, if you want to find out why loyalty is far from dead, be sure to read the next Chapter 3 blog.

Omnichannel Retail: How to Build Winning Stores in a Digital World by Tim Mason and Miya Knights, was published by Kogan Page on 3rd April 2019, and is priced £19.99.

Make sure you don’t miss the rest of this series. Subscribe here to receive the latest blog, previewing a chapter of Tim’s book each week, and be entered into a prize draw to win one of 12 signed copies!