Tomorrow marks the 30th anniversary of the Tesco Clubcard, which is arguably one of the greatest examples of business model innovation.
Chris Allinson, Partner at Yonder Consulting, offers his assessment of the scheme’s impact:
Tesco is justifiably lauded as the great reinventor of the loyalty programme with the Clubcard, even though the scheme has now been in operation for 30 years. Since its inception, the Clubcard has evolved, adopting new technologies from points to payments – and the launch of Clubcard Prices in 2020 – but, fundamentally, nothing about the programme has significantly changed. There’s been no great reinvention for 30 years, and its age is starting to show.
Tesco arguably still leads the way in a crowded market, but while penetration of loyalty programmes is at an all-time high, satisfaction is at an all-time low. As we’ve seen with Tesco’s rolling out of Clubcard Prices and many retailers following suit, price-driven loyalty incentives are flooding the market. But is it worth it?
Looking at performance, the answer seems to be yes. The transformative innovation occurring in the market now is ‘behind the card’. With the traction of technology and business model disruption from converging competitors, retailers are having to rethink their offering in an offline and online world, requiring them to shift from a product to a service mindset – from engaging with customers every time they shop in-store to every time they think about the category. In this world, retailers are working to enable a new customer engagement model and, in turn, a new business model.
This is where loyalty steps in. Loyalty programmes like Tesco’s Clubcard have enabled entirely new business models, from shopper insights, retail media and financial services. Loyalty remains the source of the greatest margin for today’s retailers. Tesco’s success illustrates that loyalty programmes aren’t simply a promotion mechanic; they are a critical enabler of business model innovation and transformation. Many retailers may see them as a threat to profitability, but the Clubcard proves that they are the key to securing tomorrow’s business.
NAM Implications:
- This all boils down to ensuring a willing repeat purchase…
- …by a shopper that has received more than it says on the tin.
- And even tells a friend…
- Simples!
