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

Blog Posts

Why you can’t afford to fail at CX in 2019

In 1976 Apple launched. The business would go on to change the game, setting the bar for customer experience (CX). Seamless customer experience and intuitive designs gave customers exactly what they wanted, making other service experiences pale in comparison.

Damian Kernahan

Founder and CEO, Proto Partners

Natural born leaders

Many business and marketing managers progressing to leadership positions face evolving their focus from operational matters to strategic decision making and planning.

Jean-Luc Ambrosi

Author, marketer

Using artificial intelligence to surprise your customers

​We have expected artificial intelligence (AI) will become part of our everyday lives for quite some time.

Katja Forbes

Founder and chief, sfyte

Just printed out this Brad Howarth screed to read tomorrow. I need a good laugh once in a while. Or maybe shed some manly-man tears at th...

Larry A Singleton

What a diversity agenda has done for Kellogg's staff and innovation engagement

Read more

Morons. PC Nazis infiltrating and subverting every level in our lives.These scum have destroyed our education system.Read FrontPage Magaz...

Larry A Singleton

What a diversity agenda has done for Kellogg's staff and innovation engagement

Read more

It is an accepted fact that in the present times the mass makes use of digital marketing more often and are more and more enlightened wit...

Digital Marketing Course in Ja

Why RMIT is partnering with Adobe for digital marketing learning

Read more

If men were really the dominating brutes that feminist make them out to be ,then women really would be second class citizens. Without th...

aaron

Analysis: Gillette's latest ad only proves why brands standing for positive change is vital

Read more

In 2019 Augmented Reality plays a vital role in marketing campaign its new way to engaged user with digital content. Try Augmented Realit...

hill william

Predictions: 9 digital marketing trends for 2019

Read more

Latest Podcast

More podcasts

Sign in