In the words of one City analyst, Tesco Clubcard loyalty scheme is the supermarket's "most potent weapon in the ongoing battle for market share". Andrew Mann, marketing director of Clubcard, prefers to acknowledge it in rather more modest terms. "There's no rocket science involved with Clubcard - it's about educating, empowering and rewarding consumers."
Yet however it is described, Clubcard has been nothing short of a phenomenon since it was launched 12 years ago to the extent that it has inspired a best-selling business book, Scoring Points, charting how Clubcard was conceived, launched and developed. And the facts speak for themselves (see box, page 32).
But the question uppermost in people's minds is whether Mann, who came on board at Tesco three years ago and commands a team of 100 staff, can continue to push the boundaries of such a well-established scheme, maintain Clubcard's lead over its competitors and breathe new life into an age-old loyalty card formula.
It's a challenge Mann clearly believes he has risen to. He may, at first glance, appear to be mild-mannered, but his passion for the brand is certainly not in doubt. He is an avid supporter of the Tesco slogan, 'Every Little Helps', and believes that reaping rewards is not so much about innovating the scheme itself, but more about using the data gained from it in new ways.
"When I came on board, we needed to make the card more rewarding and simpler to use," he says.
Mann may have been below the radar since joining Tesco, compared with other big-name clients, but there is a good reason for this. He has worked closely with data analysis firm dunnhumby (which has worked on Clubcard since its early days) on a project he terms simply as 'customer view', a single database of the entire Clubcard membership that contains in excess of two billion records, including all data from the stores' tills. The project - thankfully, if Mann's expression of relief is anything to go by - is now close to completion.
"We've put the finishing touches to 'customer view' and it will offer us improved data and better tools so we can create more relevant and timely communications for our customers," he says.
New for old
His mantra is "our customers dictate to us how we market to them", an appropriate vision given the rapid rise of Web 2.0 and social media, where customers are now actively involved in creating or culling products and brands' reputations.
And for someone who describes himself as "analytical", Mann's background couldn't be more different. He spent 14 years at Cadbury Schweppes in various brand manager roles, where he launched drink brands Dr Pepper and Oasis in the UK, before fine-tuning his marketing skills at British Gas.
So what does Mann believe is his biggest achievement since taking the Clubcard helm? Ever modest, he says he's been striking a balance between making the scheme easier to use, but ensuring that people continue to value it. He prefers to describe Clubcard as a loyalty 'contract' between the customer and Tesco, rather than a 'scheme'. One of the initiatives he instigated was the Clubcard in a key fob format, launched in 2004 as a mini-version of the card that fits onto a key ring.
"Clubcard has a core proposition - to create value for customers and lifetime loyalty, and our quarterly statements are the heart of this," says Mann. "But we needed to make the card more rewarding and simpler to use. Our customers told us it was easy to forget to swipe a card, so we created a format that would overcome this - people use their house keys and car keys all the time."
Mann has created a step-change in the way the loyalty scheme has traditionally worked, helping to launch Clubcard Deals 4x, where members can exchange vouchers for four times their value for a range of offers from travel, insurance and restaurant partners. He's also been involved in technology innovation, last year introducing Smart Vouchers which replace paper vouchers with secure electronic equivalents. This has enabled members to redeem vouchers for deals online or in-store - if points are traded in by 3pm, members receive the offers the next day, giving Tesco the ability to respond to customer needs in real-time. It's a compelling proposition as Mann says that more than two million customers choose not to spend their vouchers in-store.
"Five years ago, research showed that our customers didn't find the vouchers they received particularly useful," says Mann. "As customers' needs change, we have to respond and adapt to this. We are using our data to identify precisely what they buy and to target relevant offers. For example, there's no point in offering vouchers for red wine if the customer predominantly drinks white, or promoting deals on French wine if they prefer Italian."
It's a simple idea that is paying dividends, echoing Tesco's famous strapline, 'Every Little Helps' as, according to Mann, between 35 and 40 per cent of vouchers are now redeemed by customers on a regular basis. Customer insight was the backbone to the launch of the retailer's Christmas Savers Club, where members receive their statements on a quarterly basis as usual, but Tesco holds back their vouchers until the November statement. Customers can also top up the amount of these vouchers by up to £360 each year by paying in at the till with cash, credit or debit card. The supermarket also issues bonus vouchers based on the top-ups customers have made, as an added incentive to save.
"Our data helped us to identify a group of customers who were not using vouchers regularly, but who were saving them and spending them in bulk in the run up to Christmas," says Mann. "The Savers Club means customers don't lose out if they have stored their vouchers over the year and, for example, have misplaced them."
Green issues
More recently, Mann has been pushing consumer concerns about the environment to the top of Clubcard's agenda. Analysis from the scheme's data has prompted Tesco to create a fixture in its larger stores dedicated to eco-friendly household products and, in August last year, Mann launched the Green Clubcard scheme, whereby Clubcard holders receive points for every carrier bag they don't use, even if they are not Tesco ones.
"Customers look to Tesco for leadership and Green Clubcard points is one of the ways we are addressing this," says Mann.
The campaign was promoted on prime-time television with a host of celebrities including Alan Titchmarsh, Ronnie Corbett and Frankie Dettori and, according to Mann, four million Clubcard members are now collecting green points alongside their existing ones.
"Mann has been central to Tesco's green Clubcard initiatives, using the scheme to improve relationships with customers and the environment and helping them to make informed choices about what they buy and don't buy," says Matt Atkinson, chief executive at EHS Brann, one of Clubcard's agencies.
Plans are already afoot to extend the green concept by giving customers the ability to swipe their Clubcard at bottle banks and other recycling depots near Tesco stores. In January, the supermarket also announced a 'food miles' initiative, where it is seeking to introduce labels on its products, detailing their carbon footprint. The information, it said, would go beyond the mere question of food miles - how far the produce has been transported - to include indirect greenhouse emissions given off during food production and processing.
Mann remains coy about how this would work in practice, hinting only that food miles "are one of the areas we are committed to", but says it would not be dissimilar to the food labelling currently on Tesco products, which details the levels of calories, sugar, fat, saturates and salt.
It's not hard to imagine that data could be collected from the recycling scheme and from the food miles packaging, and used for new levels of segmentation to add to Clubcard's database of many thousands of strands. Existing segments range from the simple "diabetic" and "vegetarian", to the more complex "natural chefs", "cooking from scratch" or "posh wine buyers". Scoring Points reveals there were 1.2 million potential customers segments, but Mann won't give exact numbers away.
Analysing customer data and responding in real-time with relevant products is an area Mann is keen to push. "It's just as important to use the data to identify current trends quickly, easily and ahead of everyone else," he says, hinting that segmentation for segmentation's sake can become too crude and not deliver an obvious benefit.
"We've developed a range of 'ethnic' products covering food from countries such as Thailand and India. We analysed the data and found that it wasn't just groups of people from those countries who were buying the food, but people we classify as 'upmarket' and 'trendy', who perhaps had just returned from a holiday in those countries and wanted to extend the experience back home," says Mann.
Bigger and better
Mann's team helped to devise the launch of Tesco Direct last year, which offers a range of items such as beds and sofas, kitchenware, bicycles and golf clubs through a dedicated website and catalogue. With Tesco having expanded into non-food items, can Mann use the Clubcard brand to help build loyalty in these areas?
"He has worked hard to build bridges across the business with areas such as Tesco.com and Tesco Mobile, so that Clubcard customers benefit from the broader offering," says EHS Brann's Atkinson. And such is the trust engendered by Clubcard that, according to Mann, around one million members inform Tesco every year of a change of address when they move, providing the perfect opportunity to promote these non-food items.
"Our best-performing predictor is previous behaviour, but when members tell us they are moving house, it's the trigger for them to contact us, and for us to promote our non-food products," says Mann.
Tesco recently opened stores in the US, under the Fresh & Easy Neighborhood Market brand. Does Mann think the Clubcard formula can be replicated on the other side of the Pond? It's not an issue he will comment on, except to say that the US is "a totally different marketplace".
Mann, instead, is drawn to something closer to home. The original Tesco started life on a market stall in the East End in 1919, founded by Jack Cohen. It may be a well-known story from the past but it's one that Mann says sums up exactly what Clubcard stands for.
"Cohen knew his customers well and at Christmas he used to reward them and say thank you with a special treat that he knew they would like, so they would keep coming back for more. And this is the essence behind Clubcard."
POWER POINTS
- Mann has overhauled how Clubcard holders are rewarded
- Clubcard is now a key Tesco vehicle to drive awareness of the environment
- Mann has introduced technology to deliver rewards in real-time
MANN'S CV
1984-1987: Studied psychology at Durham University
1987-2001: Various roles at Cadbury Schweppes and The Coca-Cola Company after the latter's acquisition of Cadbury Schweppes, including global brand director
2001-2004: Head of marketing, British Gas Trading
2004-present: Marketing director, Tesco Clubcard
MANN ON ... NEW DM CHANNELS, THE ENVIRONMENT AND SEGMENTATION
New direct marketing channels: "It's about giving customers what they want and continuing to make our vouchers relevant. The key is to remain customer focused. We haven't branched out into using mobile marketing, for example, as our customers have said it's too personal and intrusive, and they wouldn't be interested in receiving offers this way."
The environment: "We have carried out quantitative research with customers which has shown that they view Tesco as a brand that cares about the environment. We are looking at Clubcard initiatives that will address this and reward customers at the same time. Customers look to Tesco for leadership and Green Clubcard points is one of the ways we are tackling this."
Segmentation: "Too much segmentation can over-complicate your view of the customer. I don't think we'll ever get to a position of true one-to-one marketing - it's more about communications that are relevant and timely."
Clubcard in the US: "The US marketplace is totally different to the UK's. But the concept has worked well abroad. Clubcard has been launched in Korea and Thailand."
Future challenges: "We need to keep listening to customers and ensure we are brave enough to introduce or change products, according to their needs. It's a risk we have to be prepared to take. Tesco is the UK's top supermarket retailer and with this position comes responsibility."
TESCO CLUBCARD: THE FACTS
- The loyalty card was launched in 1995
- Financial figures from 2006 show that the supermarket gave away more than £230m in Clubcard vouchers
- There are currently more than 13m Clubcard holders.
- Members receive quarterly mailings in eight million versions, which make up more than six per cent of the UK's annual post bag
- Within the scheme is a number of other clubs, including food, baby and toddler, wine and healthy living
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