Tesco has had a challenging week, with the departure of its chief executive (just shy of his 40th anniversary with the retailer) ahead of a profit warning. Shares in the company have fallen significantly as investors worry how the grocery chain can turn its fortunes around. Some have even started to voice the once unthinkable - it could be time to ditch the Clubcard loyalty scheme and plough its costs into new promotional activities and price cuts.
So is it time to redeem whatever points you may have accumulated and dump your Clubcard on the assumption that Tesco might wind up the programme? Here are three reasons to do so:
Competitors are cheaper - and don’t care who you are
Go to Aldi or Lidl (as may of Tesco’s customers have been doing) and you will not be asked for a loyalty card or postcode. They do not even accept credit cards. If data is being collected via EPOS, it is put to use to drive store location, product assortment and pricing, not to fuel a complex loyalty programme.
Clubcard is too complicated
While handing back hundreds of millions of pounds-worth of discounts, Clubcard still makes its customers work hard to extract the full benefit available to them. Tracking linked offers, points uplifts and points-multiplying opportunities requires attention and no little degree of skill. Filling your basket with products that you know are cheap does not.
It’s big, but it’s not always clever
Tesco clearly achieves customer retention through Clubcard which helps to fund its running costs, estimated between £400 million and £500 million. But it also charges brands to access cardholders and run promotions through the scheme. That’s why you get vouchers for frozen products, even if you only ever cook from fresh. The commercial imperative often over-rides the data perspective, something customers have started to notice.
For balance, here are some reasons why Tesco will not be ending its loyalty programme any time soon:
Clubcard isn’t broken, even if other things are
The fundamental value exchange of returning discounts in order to track shopping behaviour is still valid and clearly prized by Tesco customers. It may be that parts of the retailer’s business have fallen out of love with data or forgotten its value to them (which is why Tesco missed the switch in buying patterns away from the big weekly shop). Given the current explosion of interest and investment into data everywhere else, it is time for them to go on a refresher course.
Loyalty is still a thing
The desire for a relationship with brands is as strong as ever across all age groups. Even Millennials have Clubcards. What Tesco really needs to do is sort out its brand values and proposition, including its new content brands, to build that emotional investment. Clubcard can only support rational bonds, not emotional ones.
It may be that there are smarter (and cheaper) ways to achieve the same goals at Tesco which Clubcard was set up to meet twenty years ago. More aggressive management could decide that the time has come for something new and wield the axe. If so, customers would probably get over it within six months if the result was lower prices, better stores and well-trained staff - all areas on which Tesco has been under-performing.
My own view is that the retailer should be brave and innovate from scratch with a new scheme for the social and mobile worlds. But I suspect that conservatism will win out and Clubcard holders will continue to carry the card for a few years more.