However, first impressions of the offer suggested that it was similar to the
Tesco Clubcard. Customers were offered one point for every £1 spent
above £5 and this could be redeemed for a voucher for £2.50, once they had
accumulated 250 points. The card also enabled customers to collect Air
Miles in a tie-up with British Airways. Each voucher entitled a customer to
40 Air Miles, which could also be exchanged for ferry tickets, holidays or
cinema tickets. This meant that an average family spending £60 a week
could earn a free individual flight to Paris every year.
With devastating timing, Tesco announced that the launch of Clubcard
Plus was to be 17 June 1996, causing Sainsbury to bring forward the launch
date of the Reward Card to the same week. Modelled on a scheme run by
Carrefour in France, Clubcard Plus allowed shoppers to deposit money
into an account by a monthly standing order, so that when customers
shopped at Tesco, the cost of groceries or petrol could be deducted from the
account. However, the real value to customers was the 5 per cent gross
interest paid on the account (if in credit). This was up to 20 times the inter-
est paid by some high street banks and building societies. The scheme also
allowed for an overdraft facility which charged 9 per cent APR (the cheap-
est agreed overdraft rate in the UK at the time of the launch) and a cash
withdrawal facility was available through the ATMs of the National
Westminster Bank, the retailer’s partner in the scheme, as well as at Tesco
checkouts. Clubcard points were accumulated in the same way as before,
building up points based on the amount of money spent and converted
into money-off coupons every three months.
Describing the arrangement as ‘own-label banking’, Chairman Sir Ian
McLaurin explained at the press conference that ‘since we launched
Clubcard last February we have been trying to find ways to make it more
user friendly; many of our customers wanted to be able to pay with
Clubcard. This system allows them to do so.’ A NatWest spokesman saw
the deal as a ‘co-branding’ opportunity and said it would quickly be fol-
lowed by a number of similar deals. ‘We do what we are good at; they do
what they are good at. What we do best is processing, administering
accounts and credit management.’
Some commentators saw this not only as an assault on other food retail-
ers but on financial institutions as well. Gill South, writing in the Daily
Telegraph, described the move as ‘the first time that customers are being
offered accounts, overdrafts and cash back at extremely competitive rates,
by a company that they trust more than their bank’. The move was
reported to have sent tremors through the banking industry as well as
other competitors in the grocery retailing sector. Conversely, some com-
mentators failed to see how Tesco could afford to pay 5 per cent on small
accounts, they also predicted some cannibalization of accounts for
National Westminster and were uneasy about the clash between what they
saw as two intrinsically different cultures. Despite these reservations, the
90 Relationship Marketing