Tesco seeks to gain edge with Clubcard subscription service

Tesco has relaunched its Clubcard loyalty scheme with a subscription option, as the UK’s biggest supermarket group looks to gain an edge in the fiercely competitive sector.

Clubcard, launched in 1995, was pivotal in helping Tesco overtake J Sainsbury to become the UK’s largest supermarket group. It made millionaires out of Edwina Dunn and Clive Humby, the husband-and-wife team whose eponymous data analysis consultancy developed and implemented the technology.

From Friday customers can opt to pay £7.99 a month for Clubcard Plus in return for a range of discounts on Tesco products along with the group’s banking and mobile phone services. The company says potential savings add up to more than £400 a year.

The shift to an Amazon-style subscription offer contrasts with the traditional model of spending translating to points which can then be redeemed. The relaunch could mark a new era in how such programmes are used to collect data and increase customer spending, according to analysts.

James Anstead, European food retail analyst at Barclays, said the package should appeal to consumers despite the monthly fee, pointing to the early success of a similar scheme run by French supermarket group Casino.

Bruno Monteyne at Bernstein said the move should benefit Tesco’s larger stores, which have been the most adversely affected by the expansion of Aldi and Lidl.

Tesco is not alone in rethinking its approach to customer loyalty. Sainsbury’s has relaunched its Nectar scheme as an app, having taken full ownership of Nectar and its data in 2018. Pharmacy chain Boots has integrated its Advantage scheme with its existing app while Marks and Spencer is promising an overhaul of its Sparks card early next year.

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Steve Gray, who worked at Dunnhumby before founding consultancy SG Retail, said it was surprising how little innovation there had been before the recent relaunches. “Loyalty was still basically about stores, cards and vouchers,” he said.

He said the Tesco move looked smart. “Prime has been very effective for Amazon,” said Mr Gray. “People will pay for something that demonstrates value.”

He thinks integrating the regular bank cards or payment systems customers use with loyalty schemes could be the next frontier, especially for retailers that also have financial services businesses. “It feels like an idea whose time has come,” he said.

But many retailers — including Asda, Aldi and Lidl in food and Primark in fashion — have stayed away from loyalty schemes, regarding them as a distraction from their everyday low price model.

Rita Clifton, a former chief executive at consultancy Interbrand and a non-executive at Asos, pointed out that brands with a genuine fan base, such as Apple, had little need of such schemes. “There’s no getting away from the Darwinian fact that strong and loved brands have to give less away to keep customers than weaker, more commodified ones,” she said.

“Many ‘loyalty’ programmes are actually bribery programmes . . . you end up giving money away to people who either would have bought from you anyway, or those who only come in and out when there are offers,” she said.

Dave Lewis, Tesco’s chief executive, has said he is trying to do the reverse. “You get to a place where your promotional investment is much more targeted and you don’t have to give 50 per cent to 75 per cent of your promotional money to people that you didn’t really need to,” he told analysts earlier this month.

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But he freely admitted that Tesco was venturing into unknown territory by asking customers to pay for discounts. “We’ve got three or four different scenarios of what the reaction will be, but you never know until you go.”

The loyalty landscape

Tesco Clubcard/Clubcard Plus

Launched: 1995
The original model translated spending into points, which could be redeemed against purchases in stores or via offers with selected partners, and gave Tesco valuable information about what its customers were buying. The subscription plan runs alongside the existing scheme.

Sainsbury’s Nectar

Launched: 2002
Unlike Clubcard, Nectar’s 18m customers can earn and spend points at other participating retailers, including Debenhams and Topshop. Following the “New Nectar” app launch, they will also be offered the chance to earn bonus points based on what they buy frequently. There is no monthly fee, but the new plan requires more user engagement from users than Clubcard Plus.

Amazon Prime

Launched: 2007
For the same monthly price as Clubcard Plus, Amazon Prime members get unlimited next day delivery on orders and access to the Prime Video library. Fashion retailers such as Asos, Boohoo and Next offer a variation whereby customers pay a fixed annual fee for unlimited delivery and returns. Next reports that such customers return more items but the increased frequency of purchases more than cancels that out.

Boots Advantage

Launched: 1997
Boots shoppers amass points that can be redeemed against purchases in store, and get personalised offers based on their purchase history. It is widely considered to be the most generous scheme, but critics say that having 17m people who can “pay with points” has allowed Boots’ pricing to drift upwards to uncompetitive levels.

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Morrisons More

Launched: 2014
The late Ken Morrison, son of the group’s founder, once said that customers were interested in “pounds not points”. But the supermarket has become a convert to loyalty schemes, initially embracing a price-matching service whereby consumers got the difference back if their shopping was cheaper elsewhere. Now Morrisons operates a more conventional scheme where shoppers’ points are converted into £5 vouchers.


Launched: 2011
The main perks are free hot drinks and newspapers when shoppers spend over a certain amount. An earlier option allowing shoppers to pick items that qualified for a 20 per cent discount has been abandoned in favour of periodic mail-outs of vouchers based on shopping history. John Lewis Partnership, which owns Waitrose, is rolling out a scheme that works across both department stores and supermarkets, on the basis that its most loyal customers shop at both.

M&S Sparks

Launched: 2015
Marks and Spencer freely admits that despite its relatively recent launch, its loyalty scheme needs a rethink. Steve Rowe, chief executive, said consumers struggle to understand its “points for prizes” model and many have amassed millions of points that they cannot readily redeem. Converting these accrued points — often held by the group’s most loyal customers — into something usable in a new scheme could be a challenge.



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