Tesco clubbed over Clubcard cuts
The grocer needs to find a way to update the spectacularly successful scheme while keeping its members on board
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Your support makes all the difference.It’s not the worst corporate PR cock up ever seen, but Tesco’s latest attempt to cut the benefits offered through its Clubcard scheme was still handled with an impressive degree of ineptitude.
As the market has evolved, the Clubcard, has started to offer better and better benefits, including up to four times the face value of the vouchers you get through shopping with it at Tesco to spend on eating out, travel, day trips, and more besides (Clubcard Boost!).
The egg all over its corporate face came as a result of Tesco trying to cut that to three times at the drop of a hat, provoking outrage from the more vocal among the 16m members of the scheme.
The grocer added insult to injury with its communications. An email to members explained that no one would lose out because some benefits that offered only two times the vouchers’ value would also be increased to three times. It was all just about making things simpler for customers. See, aren’t we good to you?
That didn't wash. Customers naturally responded by saying, “do you really think we’re that stupid”. It’s never a good idea to make your customers think like that. Cue a rapid, if temporary, retreat.
As well as providing a little light relief on the financial pages, which have been dominated by the collapse of Carillion, the affair has served to highlight the problems with the Clubcard concept, which is now showing its age.
It initially proved to be a huge success, even though at first it didn’t offer all that much. The limited rewards paid for themselves many times over by discouraging customers from shopping elsewhere, while the cards served as a massive data mining system that helped Tesco get to know them.
This helped the grocer to tailor its overall offer while providing personalised offers to Clubcard holders likely to appeal to them, further boosting the value of the thing to them and to the business.
The problem is that there are now better ways of mining data, and better ways of enticing customers with offers.
Grocers’ margins have also basically halved (or more) from when the scheme was launched, making the benefits more expensive to provide
Tesco has therefore, to some extent, become a victim of the scheme’s success.
The concept is not dead. Just imagine the anger from those customers were Tesco to attempt to kill it off. But the grocer could do with finding a way to develop it so it works better for both customers and the business. If that looks like a tricky proposition, consider the success of Amazon Prime - a loyalty scheme that customers actually pay for. Some of Tesco's bosses might be among them. They probably turn green with envy every time they use it.
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