Can Tesco take Clubcard personalisation to new heights?

Tim Mason spent 30 years at Tesco, and as chief marketing officer, was a key figure in the launch of its now all-powerful Clubcard (before spearheading the launch of Tesco’s doomed Fresh & Easy chain in the US).

This week it emerged that Mason, now CEO of Technology company Eagle Eye, is joining forces with his old employer again, on a new venture which they hope will take personalisation of the loyalty scheme to a new level.

But is this the start of a revolution in marketing, or AI hype?

On the London Stock Exchange, shares in Eagle Eye surged on Monday, after it was revealed it had won a one-year contract with the supermarket to enable AI-powered “hyper-personalised” Clubcard offers.

Three million loyalty card holders have been invited to take part in a new campaign billed Clubcard Challenges, kicking off on 20 May.

They will get a chance to collect up to £50 in loyalty points, which can go even further if exchanged for Clubcard rewards. The challenges vary from such things as spending £20 on Tesco’s summer BBQ range over six weeks, to £10 on plant-based meals.

With a potential maximum budget of £150m, customers are guinea pigs in what Tesco hopes will be a dramatic acceleration of its loyalty programme.

The rise of Tesco tech

In the past year alone Tesco has issued 289 million personalised digital Clubcard coupons, to almost eight million customers.

Its Spotify-style Clubcard Unpackaged shopper insight campaign has almost doubled in that time to 17 million customers, whilst 1,800 screens have sprung up in stores tailored to shoppers according to location.

It’s not quite Minority Report (yet) but Tesco has been investing heavily in talent, currently recruiting for no less than 500 roles in its tech and online teams.

It says Clubcard Challenges, which will rope in a range of own-brand and branded products selected based on customer shopping habits, comes amid growing appetite for personalised offers.

Eagle Eye’s loyalty and promotions software is already used by retailers including Asda, Morrisons, Waitrose and John Lewis & Partners, as well as Tesco itself, on a range of programmes including coupon schemes.

Read more:

• Tesco offers up to £50 in loyalty points in Clubcard Challenges campaign

• Is Tesco’s Clubcard Prices rebrand enough to prevent another Lidl trademark battle?

• How to move shoppers from deal loyalty to real loyalty

• Morrisons launches personalised loyalty card rewards for customers’ favourite brands

But Miya Knights, former head of industry insight at Eagle Eye, now turned tech publisher, believes Tesco’s move marks a significant new chapter.

“There’s a lot of buzz around AI and has been for a long time,” she says.

“Machine learning algorithms have been employed across retail functions for 30 years and have been increasing in their sophistication, and also on the supply chain side in terms of matching customers [to promotions].

“Think about the early days of Amazon’s marketing, all of that was machine learning-based algorithms.

“But now we have the ability to take on board a lot more information.

“Whereas before the information would have been based on your location, your browsing and purchasing history, now they can bear in mind other contextual things such as the time of year, the time of day, whether they can start to better match the availability of products based on individual personalised data.

“The other major development this enables is research to tailor not just who gets which offer but also who gets the best offers.”

Knights points to the demise of Waitrose’s pioneering Pick Your Own Offers scheme, launched under CEO Mark Price in 2015 and wound up just three years later, as a sign of how far tech has come.

“Sources close to the project found it was very difficult to scale and maintain, especially when it first launched. They weren’t able to launch it across the full range. It was ringfenced to a certain number of products, which made it quite confusing.

“It shows the limitation of the tech underlying it at the time. Now the likes of Tesco and Morrisons can actually do that across a wider range of products to give a much better choice.

“They have more data, and the systems exist to do the matching at scale [and using] so many different parameters.

“Knowing which brands to involve not only allows them to offer people deals on the right brands, but also enables them to avoid offering people discounts on certain brands.”

Supplier campaigns

Of course, for suppliers, the move by Tesco and other retailers also offers new ways to target customers.

“Tesco’s scheme will allow a variety of commercial deals from brand-funded ad campaigns to launch campaigns,” says Knight. “As an example, we could see all Colgate users targeted with a new toothpaste.

“Then it could also be Tesco’s own label products they want to push. It could be end of life, an efficient way of handling markdowns, if they have oversupplied or have slow-moving stock.”

Eagle Eye offers what is termed as an “adjudication engine”. After Dunnhumby and Tesco’s other internal loyalty teams have done their work, it comes up with personalised rewards to fit any transaction, without offering any two customers the same combination of offers.

In 2018, the company inked a deal with Canadian retail giant Loblaw to dynamically match offers to customers based on parameters including purchase history, propensity to buy, and other factors that Price at Waitrose could have only dreamt of.

As for any privacy concerns, Tesco says “minimal” personal data is being used to create the Clubcard Challenges scheme, and none will be sold to Eagle Eye or any other third party at any point.

Tesco is not the first to launch “hyper-personalised” loyalty schemes in the UK. Earlier this month, Morrisons got in first with its ‘My Points Boosters’. The new feature being trialled on the More Card app offers customers hyper-personalised challenges based on their shopping patterns.

It also uses AI to examine customers’ past shopping behaviour, purchase history and frequency, to determine their likelihood to make future purchases and reward their incremental behaviour – albeit the main reward is the less than futuristic Morrisons Fivers.

Morrisons says the benefits include engaging and incentivising customers, adding value, and increasing its active customer base.

Boosting sales

Ultimately, of course, there is only one metric that really counts: increasing sales.

None will know that better than Mason, whose long history at Tesco, working alongside the supermarket’s former CEO Terry Leahy, has provided experience well beyond technology.

Mason claims creating a new relationship with customers can take even Tesco’s loyalty scheme to a new level.

Clubcard’s success, he says, lies in “being able to communicate and target offers”.

It will be 30 years next year since Clubcard launched. It is 12 years since Mason left Tesco, and eight since he was appointed Eagle Eye CEO.

On the company’s YouTube channel, he remembers “being invited to a very posh breakfast in London to talk on the subject of ‘Is loyalty dead, are loyalty schemes old hat?’ To be honest, technology is a new version of that conversation. It’s about the what and the how; but actually what matters is the why.

“Most businesses will be more successful if they know the truth… who their customers are, and their most loyal customers. All these things completely change the way you run a customer-facing business.”

As AI becomes an ever greater feature in grocery retail, it is inevitable other retailers will look to see how they can join the club.