‘Asda Rewards’ is being trialled in 16 stores. But how will the new scheme fare for a retailer that has always focused on everyday low pricing?
The relaunch of Tesco Clubcard last year is reaping rewards, and not just for shoppers. As Tesco announced soaring first-half sales earlier this month – with like for likes up 8.4% against pre-pandemic levels – it also revealed Clubcard penetration had gone from 57% to 70% across all stores year on year.
Meanwhile, Asda has continued beating the drum for EDLP (in conjunction with RollBack promos). In contrast not only with Tesco but Sainsbury’s (Nectar), Morrisons (My Morrisons), even Lidl (Lidl Plus) Asda has remained the last of the big four with no loyalty rewards scheme.
That changed last week with the launch of ‘Asda Rewards’, an app-based customer loyalty programme available to customers for the first time in 16 trial stores. So, for a business that has dabbled in loyalty previously but backed off in favour of everyday low pricing, what has finally prompted the change of heart? And can Asda Rewards make an impact?
It’s a move that has been a long time coming. “It made me laugh,” says Savvy Marketing CEO and founder Catherine Shuttleworth, who, while at Asda in the 1990s, worked on a trial loyalty scheme. “It was exactly the same. It was decided it didn’t have a place in an EDLP landscape.”
The landscape has changed, not only because the discounters do EDLP better but, more recently, because Sainsbury’s and Tesco’s Aldi Price Match campaigns are creating the desired impression of equivalence. “Why do I need to shop at Asda now?” says Shuttleworth.
“Range changes for all of the store sizes and categories – all of that is largely managed at Tesco through data. At Asda, it’s human decisions”
It is because Asda is now “free of its Arkansas shackles” in Walmart, says Shopfloor Insights founder Bryan Roberts, that it can finally treat loyalty as more than “an expensive distraction from EDLP”.
In new owners TDR Capital and Mohsin and Zuber Issa, the supermarket now has “a leadership team which is addressing the basics of retail”, says Sentinel Management Consultants CEO David Sables. “The Issa brothers are taking a business that never faced up to its realities and making it do it.”
The locations of Asda’s 16 trial stores provide insight into which rivals the new strategy is aimed at most. “The sites are primarily in close proximity to Tesco and Aldi,” says Charlotte King, senior consultant at location data specialist CACI.
Can it convert shoppers from those rivals? Experts doubt it.
Clubcard is a mature proposition, with benefits including deals with a range of partners from Eurotunnel to Pizza Express, discounts on mobile phone subscriptions and, with Clubcard Plus, savings of up to £40 a month on shopping.
Asda’s new rewards system is unsophisticated by comparison. Subscribers earn rewards when they buy ‘star’ products, including many core own-label lines and brands such as Cadbury, Heinz and Pampers. The rewards – for example £3 for buying 18 Moretti beers – go in a ‘cash pot’ in the app, which customers can redeem by converting into vouchers for money off their next shop.
Rewards are also earned for completing missions, such as buying five fruit & veg for £1 in the pot and spending £15 on pet products to get £3.
Later savings
A crucial point of difference, says Shuttleworth, is that the savings come later, while these days Tesco’s Clubcard Prices mean discounts for subscribers instantly. Against a backdrop of food price inflation, many shoppers “won’t want to pay more now for rewards later”, says Shuttleworth. “And the discounters will be holding their prices as much as possible. That’s the thing about EDLP: you get the benefit today.”
Where Rewards may be more effective is in discouraging more of Asda’s existing customers from switching, Sables argues. “Anyone collecting points now by doing something they previously did anyway is going to be happy about it.”
The scheme also doesn’t yet support personalised rewards. These are to be added later, once Asda has collected the data needed to tailor them to customers’ favoured buys.
It is in this data that the true benefit lies, experts agree, with customer loyalty – if there is such a thing – secondary. As Shuttleworth says: “If you want loyalty, get a dog.”
Asda is at a data disadvantage, says Sables, in having no loyalty scheme: it is less well-informed on everything from which products to promote or keep at EDLP, to which ones it should sell at all.
“Range changes for all of the store sizes and categories – all of that is largely managed at Tesco through data,” says Sables. “At Asda, it’s human decisions. You need the loyalty card and the data if you want to be a player in the long term.”
It is a view supported by Asda’s announcement this week of data partner Quantium, which has also worked with Walmart. It would help decision-making across product development, range, price and promotions, Asda said.
Loyalty can be good news for suppliers, too, according to Sables. While Asda’s star brands are likely to have paid an entry fee, the customer rewards stand to drive volumes. It’s also another thing to negotiate over. “And the more things you can shove on to the negotiating table the better”.
Joining the party so late, Asda clearly has a mountain to climb. The 16 trial stores have a combined reach of 820,000 people, according to CACI; Tesco Clubcard has over 20 million members.
As an app-based scheme there’s also a danger it will “not play to Asda’s typical customer demographics”, adds retail analyst Nick Bubb.
But Shuttleworth contends app-based is “exactly the way to go” for a more seamless experience and data collection. Either way, building it into something meaningful will require “huge investment”, she acknowledges.
The good news for Asda, says Sables, is that it appears now to have owners willing to make said investment.
Meanwhile, in the immediate term, it stands to “stem the flow of customers away” from the trial stores, Sables adds. “You have to start somewhere and this is a good start – a very good one.”
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