Customer loyalty is crucial to the success of any business, and loyalty programs are a proven way to drive repeat purchases and increase customer retention. Tesco Clubcard is one of the most popular loyalty programs in the world, and to find out what's behind its great success, we spoke with Szymon Dziura, former Customer Engagement Loyalty Manager at Tesco Clubcard.
In this article, we'll explore Szymon Dziura's insights and strategies to help companies develop an effective loyalty program strategy for their existing customers.
About Szymon Dziura
Szymon Dziura a manager passionate about loyalty and has allowed retail companies to reap the benefits of loyalty programs throughout his career. Szymon Dziura has seven years of experience in various roles, including at Tesco Poland and Tesco Central Europe, where he created the Clubcard program, delivered personalization, and crafted the business proposition to engage customers. He's also Omnichannel Manager at E. Leclerc Polska, building the Bonus loyalty program from the ground up.
About the Tesco Clubcard
Tesco Clubcard is a loyalty program offered by Tesco, one of the largest supermarket chains in the world. The loyalty program operates in numerous countries, including the United Kingdom, Ireland, the Czech Republic, Slovakia, Hungary, and others. In 2017, the number of users in the UK alone reached over 17 million.
The program allows customers to earn loyalty points for every purchase they make at Tesco, both in-store and online. These points can then be redeemed for various rewards, including money for future purchases, discounts on selected products, and vouchers for a range of activities and experiences. The Clubcard itself offers additional benefits, such as access to exclusive offers and events, as well as personalized deals based on the customer's shopping habits.
With millions of members worldwide, Tesco Clubcard has become an essential part of the company's customer retention strategy and a popular way to save money on groceries and other purchases.
How has your career as a loyalty expert evolve over time?
Before I became a loyalty manager, I was a massage therapist working at a spa, but I wasn't delighted with my work. Thanks to the experience I gained in various jobs during my studies, I met the criteria to get a job as a local marketing specialist. During my 7-year career at Tesco, I became the Central Europe Proposition Manager for Clubcard.
My first contact with loyalty at Tesco was while working as a Local Marketing Specialist. At that time, I prepared, sent, and evaluated paper Clubcard mailings sent to our customers in individual stores. This was my first time preparing paper mailings with personalized offers to customer segments. The critical element here was not only the SCR (sales-to-cost ratio) of such mailings but the general effort to change the shopping behavior of our customers and get them segmented accurately.
The main targets were related to more frequent purchases or higher spending, and during this time, I discovered that loyalty could be a great tool to generate sales and achieve business goals. After sending out many mailings, I knew that with a simple card, I could help shoppers spend less, and my company could gain loyal customers. Dunnhumby and I worked hard to understand the different customer segments, correctly estimate costs, and finally evaluate each campaign.
What was your role at Tesco?
During my time as the Central Europe Loyalty, Membership & Digital Proposition Manager Lead at Clubcard, I focused on two topics:
- Preparing, managing, and delivering customer growth information using the framework and tools we had at the time.
- Digitalizing the development of our Clubcard application and acting as the product manager for the most important tool at the time.
Part of the digitization plan to exclude paper mailing was to develop new features and tools to engage our customers and get them to use the app more often.
Together with Dunnhumby consultants, we worked hard to prepare personalized offers on everyday products for our customers and engage them to spend more money or come to our stores more often. All the work during this time was very intense — I was responsible for the entire campaign proposal, not only for the offer and its design but also for collaborating with the marketing, sales, legal, operations, and other teams.
As a loyalty manager, I had to administer the backlog and develop the team, so I believe a person in this position must have extensive knowledge of the company and excellent communication skills to manage tasks well and adequately execute the customer loyalty program strategy.
How does the Tesco Clubcard loyalty program work?
The Tesco Clubcard customer loyalty program is a typical points program, where four times a year, loyalty points are converted into money that can be spent on purchases.
Since Tesco had many stores, as many as three loyalty cards were handed out to customers, two of which were small plastic cards that could be used as keychains. I must admit that repeat customers used them on a daily basis.
When signing up for the program, the participant had to provide some basic data such as name and surname, date of birth, and home address, because, at that time, they received vouchers in the paper version sent by post. Customers knew that each scan of the voucher would give them a refund in the future. On top of that, there was also a sign-up bonus, a birthday bonus, and some extra points vouchers. These tools helped customers get a minimum value from the mailings.
The UK version of the program had additional coupon boosters that allowed participants to really save a lot while shopping. I remember scanning all the coupons I got during one shopping trip and ended up with 30% off on my receipt. I really felt like I was saving money! Plus, the coupons were personalized, and most of the coupons were for products I bought and liked, which was the program's biggest strength.
What are some qualities of a good loyalty program strategy?
A good loyalty program strategy is, first and foremost, a relevant and well-thought-out proposition. It's easy to say that you want to make customers loyal and make them spend more with your brand. Nevertheless, competitors also have compelling product offerings, and they can snatch up your audience at any time if you don't stand out consistently.
To create proper loyalty program strategies, let's start by identifying the customer. Find out their needs and problems and try to solve them with your loyalty program. You can't make a customer loyal unless you bring them the minimum value they're looking for. If you don't have it, customers will come to spend money in your establishment and never come back, even if you give them fabulous benefits. Or they'll come back for a while once you promise them an attractive advantage again.
To sum up, the customer loyalty strategy must be focused on audience groups, so the value proposition of the loyalty program is to benefit a specific segment.
What’s the loyalty program strategy behind Tesco’s Clubcard?
Based on the UK model, the Clubcard's loyalty strategy focused on the 1% getback scheme. Under this program, Tesco Clubcard participants earn 1 point for every £1 they spend in Tesco stores or online. These points can then be redeemed for rewards such as discounts on Tesco products, vouchers for restaurants and other retailers, or even trips.
One of the key benefits of the Tesco Clubcard "1% getback" program is the ability for cardholders to get more value out of their spending. For example, if a Clubcard participant spends £100 at Tesco, they would earn 100 points, which could then be redeemed for £1 in rewards. Over time, these rewards can add up and provide significant savings to frequent shoppers at Tesco. During my time at Tesco, this scheme had already been in place for many years in the UK, and has consequently been adapted to the Polish market, taking into account various budget and country-specific requirements.
In my opinion, the success of the loyalty strategy was based on three elements:
- Multiple offers for customers. One of the key features of the Tesco Clubcard program is the wide range of deals available to customers. These offers are tailored to individual shoppers based on their purchase history and preferences.
- The ability to save money. The Tesco Clubcard program is also popular because it gives customers a tangible way to save money on grocery bills. By earning points for every pound spent, customers can see the direct benefit of their loyalty and redeem these points for discounts or free products.
- Personalization. By analyzing purchase history and other data, Tesco can tailor offers and rewards to suit each customer's unique needs and preferences. This makes the program more appealing to customers and helps build stronger relationships between Tesco and its customer base by showing that the company values individual interests.
How have customer loyalty programs changed over time?
In my opinion, customers are… less loyal. We live in challenging times when money really matters, and your primary goal isn't solely to be loyal — all you want is to be smart! Simply put, it's not profitable to spend more on everyday purchases.
Customers are more likely to think twice, so any well-designed value proposition locks them in as brand ambassadors, which is exactly what you need and want as a company.
In addition, I see that the loyalty program applications and promotions used by market leaders help customers understand that the main purpose of these programs is to give them a better experience. People can spend less money, get a discount on "their products," and pay for it all with their privacy. In fact, each of us, as shoppers, is a bit torn when it comes to sharing data with companies. If you could, you wouldn't say a word about what you like and why, but on the other hand, it's good to get a tailored offer, right?
How do you see the future of loyalty programs in the next 2–3 years?
For one thing, I clearly see many challenges. The main ones center around data privacy. With ever-changing cookie laws, GDPR, Facebook's flaws, and Google's tracking, customers are no longer willing to provide information about their behavior.
Fortunately, there are many loyalty trends to tap into in the near future. Companies will create newer and more innovative loyalty programs, as it becomes more accessible to take advantage of such an investment in difficult times. In addition, loyalty will no longer focus solely on collecting points but on topics such as sustainability, being green, going paperless, and other meaningful areas to end users.
On top of that, there is a growing trend for different retailers to use a loyalty reward program or a partner program, but only if there's good data-sharing between companies.
Next, I believe there will be an even greater emphasis on personalization, as it's always the key to a successful loyalty strategy.
Finally, I expect to see further development of dedicated loyalty apps so that participants can manage and redeem rewards on their own at any time.
How to create a good loyalty program strategy?
First of all, start by answering the WHY question. Remember, the answer to this shouldn't be "because we want to understand our customers," but rather, what customer pain points you'd like to respond to with your loyalty program.
If you have some customer concerns to address, that's great! That means it's time for the next step — shaping the proposition. Building a business proposition is crucial because it'll shape what your customers will ultimately get. In many cases, this process has different stages, where you invite team after team to the project (for example, the marketing team, sales team, legal team, and not forgetting the budget owner). They all give you a lot of input to understand how you can work together in the future to deliver what customers need. After some shaping, you can engage a group of your customers to see if your hypotheses actually meet their requirements.
With a proposition prepared, you'll be faced with estimating costs and preparing KPIs. Try to answer the following questions:
- What is your potential?
- How will you grow as a loyalty program owner?
- How will you nurture your customers?
- What will be the action/promotion plan for your customers?
You can measure your program against loyalty measures and KPIs such as average basket size, repeat purchase rate, customer lifetime value, or redemption rate. Picking the most important ones to your business will prove that launching loyalty in your company is worth the investment. And if you can successfully demonstrate this, it's time for the final battle — approving the final budget.
Having your proposition and (hopefully!) a future budget, it's time to find a market solution that meets your needs. An additional part of the project is to work closely with the implementation team to get your loyalty strategy and project to market. But let's be real: if you've followed all the steps outlined above and are confident with the solution, the implementation will be the easiest part.
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To get some loyalty program inspiration, check out the Top 100 Loyalty Programs report, or peek into the future of the loyalty industry with our Loyalty Trends 2023 research.
