market share gains, saying it was the fact that it was pleasing its customers
that really counted.
Reaction from competitors was mixed. Safeway increased the number of
stores participating in its ABC scheme from 25 to 106, to fend off direct
competition from Tesco at vulnerable sites. They also began to develop the
ABC card data capture capabilities so that, although points were redeemed
in-store, they could still accumulate customer information. Sainsbury,
although widening availability of the Saver card, initially resisted any
further reaction. It still saw the Clubcard as a margin-slashing initiative
and as having little effect on its own performance. Their results for the year
ending May 1995 appeared to justify this stance: pre-tax profits were up by
10 per cent to £808 million and yearly sales of £12 billion were the highest
for any UK-based retailer. David Sainsbury, when asked about Clubcard,
said that it had been launched at substantial cost, ‘We are still not con-
vinced of the benefits to customers but we are not against cards per se.
Indeed, our own scheme rewards customers at the point of sale, which is
far less costly to operate than theirs.’
Early days for Clubcard
After the enormous success of the launch and as customers became used to
using the card, Tesco began to realize the full implications of running a
nationwide loyalty scheme. Communication was proving to be a two-way
process, hundreds of letters and up to 30,000 calls being received every
week from customers keen to find out more or comment on the Clubcard
service. It became clear that refinements would be needed, many in direct
response to customer requests. One of the first of these was the introduc-
tion of a second card to enable another family member in the same house-
hold to have their own card, which proved to be more convenient for the
two shoppers in the household. Another was to lower the minimum spend
required for pensioners to £5, since many had complained that they were
unlikely to achieve the £10 amount to qualify for points, as they were living
alone and did not buy large volumes. It emerged from early Clubcard data
that pensioners shopped very frequently but filled smaller baskets. This
was also later applied to students through the introduction of a Student
Clubcard with a lower spending threshold.
The scheme also allowed Tesco to form alliances with other brands. One
of the earliest was with Thomson Holidays, who allowed points to be
redeemed for holiday discounts, and also B&Q, where Clubcard holders
could earn points by spending on any product within their stores and accu-
mulate Clubcard points to be redeemed in Tesco stores.
However, one of the most successful refinements was the introduction of
points for petrol purchases. At the time of its introduction many of the
The customer market domain: Managing relationships with buyers 85