City reacted favourably and the Tesco share price edged ahead to 303p, up
from its low in 1994 of 227p.
From beans to banking
This time reaction from competitors was swift. In October 1996 Sainsbury
announced that they were to launch a bank in partnership with the Bank
of Scotland. Going further than the Clubcard Plus debit scheme, the move
would make Sainsbury the first UK retailer to offer comprehensive
banking services. Sainsbury’s Bank, scheduled to open in the first quarter
of 1997, would offer customers fully fledged cheque accounts via a tele-
phone banking service, combined with in-store, multi-functional teller
machines. The service would not be tied in any way to Sainsbury stores, by
restricting the offer to loyalty card holders, but customers would be able to
use a Sainsbury Classic or Gold Visa card in the same way as any other Visa
card. One analyst saw this as an extension of Sainsbury’s own-label strat-
egy, ‘Bank of Scotland will manufacture the product, but it will be pack-
aged with the Sainsbury Bank label’. The joint venture, of which Sainsbury
will own 55 per cent, was seen to make sense for the Bank of Scotland as it
has weak market presence in England and Wales.
As a result of this move, Dino Adriano, the new Deputy CEO of
Sainsbury, signalled that the arrangement for the big four banks’ ATMs,
currently sited at Sainsbury stores, would be likely to be reconsidered
when the contracts, usually lasting three to five years, came up for renewal.
Any move to scrap the ATMs in favour of Sainsbury’s Bank machines
would be likely to be fiercely opposed by the banks. NatWest commented
that they were likely to be a target because of their relationship with Tesco,
‘Sainsbury’s will probably get rid of us which will leave us with fewer
supermarket ATMs.’
In the same week Sainsbury also announced an increase in the number
of points that it would award Reward Card holders. The scheme, based on
bulk purchases of around 200 selected products, meant that a customer
purchasing three 200g jars of Nescafé could earn 300 points, which previ-
ously would have required a spend of £300. This meant that, with selective
buying, a family spending £75 a week could earn enough points to get four
free flights to Paris in one month. Costs were split between Sainsbury and
their suppliers. At the launch, Kevin McCarten said that the scheme would
make all other loyalty cards seem pointless and that they were rewarding
their customers ‘better than any other retailer in the UK’.
This activity was accompanied by the announcement that the retailer
would also target one million ‘high value, promiscuous’ Reward Card cus-
tomers in Sainsbury’s first large-scale direct marketing campaign. A cata-
logue offering extra Reward benefits would be sent to families spending
The customer market domain: Managing relationships with buyers 91