In 1995, Tesco introduced a loyalty programme that would not only change the way Britain shops, but also redefine how retailers engage with their customers. The Tesco Clubcard was a pioneer in the retail loyalty space, offering consumers a simple but powerful incentive to keep coming back, spending and building brand love.
Thirty years later, as Tesco celebrates this milestone, it’s clear the Clubcard is more than just a rewards programme: it’s a blueprint for how loyalty can drive business success while creating lasting relationships with consumers.
When the Tesco Clubcard was launched, it marked a significant departure from traditional loyalty schemes. Rather than relying on stamps or punch cards, the Clubcard offered tangible rewards that could be used in-store or exchanged for other experiences.
The Clubcard community
For the first time, customers were given the power to track and earn rewards based on their shopping behaviour, creating a sense of “membership” in a retail community. This was more than just about saving money; it was about being part of something bigger.
What made Tesco’s approach so effective was its immediate value proposition. Shoppers were no longer passive participants in the transaction – they were actively engaged in an ecosystem that recognised their loyalty and rewarded them for it.
And Tesco wasn’t just offering discounts, it was innovating the very concept of loyalty. The Clubcard was one of the first major retail programmes to use customer data to personalise offers. By analysing customers’ purchasing habits, Tesco could offer tailored rewards and discounts based on the specific products and services that mattered most to each customer. This level of personalisation laid the groundwork for today’s data-driven retail strategies.
When Tesco celebrated its ‘100 years of great value’, it introduced exclusive discounts for Clubcard holders, boosting customer retention and acquisition. This strategy helped Tesco stand out in a competitive market, driving Clubcard membership to 23 million users today and 82% sales penetration through the Clubcard.
It’s this success that has opened the floodgates to new entrants exploring the retail media opportunity.
Invaluable insights
This unparalleled insight into Britain’s shopping habits – what products people buy, when and how often they shop, and which promotions they respond to – combined with consumer permission to be targeted with offers is incredibly valuable to its suppliers, who are often lacking in quality first-party data and the ability to measure success.
With this wealth of information, Tesco can predict trends, adapt pricing, identify customer needs, and most importantly for its suppliers, influence buying behaviours.
But building such a mature retail media offer doesn’t happen overnight. Retail media networks (RMNs) often do not achieve their full potential, mostly as a result of a lack of investment, little internal alignment between marketing, trading and media priorities, and a murky go-to-market strategy that drives engagement. Tesco has been able to create such an aggressive growth strategy because it learnt to address all three.
When the opportunity for incremental revenue is so great, it can often be a challenge to ensure the consumer remains at the heart, and striking that balance is incredibly important, as the bigger prize will always be its customers’ lifetime value. So Tesco will be continually monitoring its approach, ensuring it creates equilibrium between the customer, the supplier and its own revenue-generating ambitions.
Analytics and AI
As we look ahead, and compare Tesco’s approach to the strategic approach of the retail media giants in the US – some of whom are further down the maturation track especially from a revenue perspective – I would expect Tesco to further harness the power of AI and predictive analytics to refine the personalisation of offers across an ever-more connected and intelligent consumer experience.
Utilising AI’s power to analyse vast amounts of data in real time will enable Tesco to make more accurate predictions. And not just about what customers want, when they want it and how much they’re willing to pay, but also how much brands are willing to pay Tesco to access these consumers via dynamic pricing.
As Tesco’s Clubcard looks towards the next 30 years, it will undoubtedly continue to evolve, driven by new technologies, changing consumer behaviours, and huge demand from suppliers for retail media innovation and performance.
One thing is clear: Clubcard’s legacy as a pioneer in customer loyalty and insights will continue to shape the future of retail and retail media for years to come.
David Muldoon is the VP strategic advisory at MediaLink
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