How Tesco's loyalty card transformed customer data tracking

The UK-based retailer was one of the pioneers to leverage loyalty cards to enhance industry performance

Tesco's former CEO Sir Terry Leahy talks customer data strategy at the Retail Tech X Conference
Tesco's former CEO Sir Terry Leahy talks customer data strategy at the Retail Tech X Conference

There were no Big Data systems in 1995. In fact the term wasn't even be discussed until more than a decade later. But that didn’t stop the UK-based retailer Tesco going ahead and building a Big Data capability.

Speaking at the Retail TECH X conference in Melbourne this week, former Tesco CEO, Sir Terry Leahy, discussed the company’s early foray into data-driven decision making. He credited it as a key reason why a retailer, who in the mid-1990s was ranked a distant third in its market, was able to surpass the performance of its two biggest rivals several times over two decades later.

Loyalty card revolutionises Tesco’s performance

Sir Terry joined the retailer as a marketing executive in 1979, and led the company from 1997 to 2011. He said the key for Tesco was Clubcard, a loyalty card introduced in 1995 that allowed the company to connect and respond to customers through data, rather than through more traditional methods.

“Data is absolutely priceless in transforming the relative position of a business,” Sir Terry said. “It was the first example of what is known today as Big Data.”

Before 1995, Sir Terry said computers were simply not powerful enough to hold information both on product movements and individual purchasing behaviour.

“It was absolutely transformational for the business,” he claimed. “We could treat customers as individuals. And we could learn what they were interested in, what their behaviours were, and we could tailor and target all of their marketing so that it was relevant to that individual consumer.”

Sir Terry said in the year before Tesco launched its ClubCard, Sainsbury’s was worth twice the value of Tesco. Within a year Tesco had overtaken Sainsbury’s .By the time he left the CEO role in 2011 Sir Terry said Tesco had outperformed its rivals tenfold.

“And it improved the productivity of our marketing, between 300 and 1000 per cent depending on the application,” he added. “We were able as a percentage of sales to spend less on our marketing going forward, it made it so effective.”

Understand the true nature of your business

Sir Terry’s formula from boosting the performance of Tesco started with building a true understanding of the true nature of the business.

“We all want the business to be doing well, but that may not be the truth of it,” Sir Terry said. “Today data plays an incredibly important role in bringing into the organisation from outside an accurate picture of how the business is perceived. And it is absolutely crucial that the organisation finds a way of bringing the voice of the customer into the business, because that’s the most reliable voice – that’s the one you should navigate the business by.

“It may be painful to hear, but if you are prepared to listen to what the customer is saying, and if you are prepared to change your business on the basis of that, then you’ll always be in business and stay connected to the customer.”

Performance monitoring through data

The company used data extensively to monitor changing customer preferences, leading to a series of industry innovations that served to transform its performance. Data also led Tesco to introduce the convenience format, going against industry wisdom that suggested that bigger was better.

“Customers were saying they were getting busier and busier, and needed a store that was handier and closer,” Sir Terry said. “So we miniaturised the supermarket into Tesco Express. In 1996 the first one opened, and today there are thousands all over the world, and most retailers no feel it is essential they have a convenience store format as part of the line-up.”

Tesco was also the first food retailer to sell online, and maintains the largest share of any food retailer in the world, holding close to 50 per cent in the UK.

Sir Terry said for an organisation to successfully implement a data strategy, it also required those who were working with data to take a leadership role within the organisation, as data can often lead to conclusions which run counter to conventional thinking.

“Knowing is not enough – you actually have to do something about what you know about customers,” he said. “You have to change the organisation. And it does need different decision-making structures actually to respond to data. It’s got to be actionable or it’s of no value at all, and that takes leadership.”

But despite the heavy investment in technology, Sir Terry said it would have all come to nought had the company lost its connection to its customers – something many consider has happened since he departed in 2011.

“Technology is just a tool,” Sir Terry said. “What matters in the end is the relationship between you and the consumer, and your ability to understand how their lives are changing.”

Follow CMO on Twitter: @CMOAustralia, take part in the CMO Australia conversation on LinkedIn: CMO Australia, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+: google.com/+CmoAu

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Show Comments

Latest Videos

More Videos

More Brand Posts

What are Chris Riddell's qualifications to talk about technology? What are the awards that Chris Riddell has won? I cannot seem to find ...

Tareq

Digital disruption isn’t disruption anymore: Why it’s time to refocus your business

Read more

Enterprisetalk

Mark

CMO's top 10 martech stories for the week - 9 June

Read more

Great e-commerce article!

Vadim Frost

CMO’s State of CX Leadership 2022 report finds the CX striving to align to business outcomes

Read more

Are you searching something related to Lottery and Lottery App then Agnito Technologies can be a help for you Agnito comes out as a true ...

jackson13

The Lottery Office CEO details journey into next-gen cross-channel campaign orchestration

Read more

Thorough testing and quality assurance are required for a bug-free Lottery Platform. I'm looking forward to dependability.

Ella Hall

The Lottery Office CEO details journey into next-gen cross-channel campaign orchestration

Read more

Blog Posts

Marketing prowess versus the enigma of the metaverse

Flash back to the classic film, Willy Wonka and the Chocolate Factory. Television-obsessed Mike insists on becoming the first person to be ‘sent by Wonkavision’, dematerialising on one end, pixel by pixel, and materialising in another space. His cinematic dreams are realised thanks to rash decisions as he is shrunken down to fit the digital universe, followed by a trip to the taffy puller to return to normal size.

Liz Miller

VP, Constellation Research

Why Excellent Leadership Begins with Vertical Growth

Why is it there is no shortage of leadership development materials, yet outstanding leadership is so rare? Despite having access to so many leadership principles, tools, systems and processes, why is it so hard to develop and improve as a leader?

Michael Bunting

Author, leadership expert

More than money talks in sports sponsorship

As a nation united by sport, brands are beginning to learn money alone won’t talk without aligned values and action. If recent events with major leagues and their players have shown us anything, it’s the next generation of athletes are standing by what they believe in – and they won’t let their values be superseded by money.

Simone Waugh

Managing Director, Publicis Queensland

Sign in