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Best New Thinking Winner 2010

Scoring Points

Scoring Points – The Tesco Clubcard interviews

Interview with Clive Humby and Terry Hunt May 26/28 2004

Scoring Points was published in October of 2003 almost 9 years after Tesco launched the Clubcard. It is hard to credit that at the time Sainsburys was the established market leader. Clubcard was part of an assault that saw Tesco overtake Sainsburys and increase its lead year on year ever since. Terry Hunt and Clive Humby worked on the development and launch of Clubcard from the very beginning; leading the direct marketing and data analysis teams. Clive’s agency Dunn Humby even went into joint venture with Tesco. Scoring Points is their account of how Clubcard came about and why it has become one of the most successful customer communications programmes. Click on the arrows to listen to the interviews. Click here to read my review of Scoring Points. Or here to click through to Amazon to order your own copy.

Clive’s take

play How did the book come about? (1.2MB)

play Loyalty programmes have had a dreadful track record. What makes the Clubcard different? (635K)

play You haven’t used the loyalty word yet..(977K)

play One of the suprises of the book was just how little information you collected for each transaction at the start of Clubcard.(845K)

play But at a time when there were datawarehouse conferences every other week surely this was heresy.. (1MBK)

play Which was the biggest constraint processing capacity or budget? (681K)

playWhat has been the biggest surprise for you? (799K)

play But you’re still not personalising are you? It’s not one to one.(1.56MB)

play Doesn’t the singleminded focus on the basket ultimately limit the programme – there’s basic marketing data you don’t have: date of birth.. lifestage.. (1.5MB)

play You make a great case for using behavioural data as opposed to market research or shopper observation (884K)

play How many people demand to see the customer data Tesco hold on them? (102K)

play What is your biggest regret about Clubcard? (1.1MB)

play How much of the workload does supplier funded activity take now? (1.2MB)

play You must be one of the only agencies to have gone into joint venture with a client? Why do so few agencies do it? (1.6MB)

play But surely it means that you are getting closer to the clients business where creative agencies are at best staying where they are.. (1.9MB)

Terry’s take

play This must be one of the only books written by a creative and a data person. How did it come about? (1MB)

play Loyalty programmes have had a dismal history. What’s different about Clubcard? (1.7MB)

play What does loyalty mean in the context of Clubcard (917K)

play There’s a phrase that get’s used – the topping on the pizza. What’s that? (1.1MB)

play And there’s also an element of supplier funded communications.. (1.4MB)

play You described Tesco as a media owner – can you explain? (473K)

play I found it fascinating that Tesco chose to use such a simple approach at a time when datawarehousing was all the rage (962K)

play What differences does having all the different customer segments make to the creative task? (816K)

play Does the constant resorting to money off offers push the programme inexorably towards those who are promotionally responsive leaving the majority who don’t respond untouched? (1.3MB)

play So you’re saying the card motivates more than than discount seekers? (373K)

play What has been the biggest surprise for you since the launch of Clubcard? (1.3MB)

play Tesco sound very pragmatic and results driven. Can you give an example when Tesco has taken a longer term view? (1MB)

play How do you keep Clubcard fresh for the client as well as customers? (859K)

play So in the end how much of a role did luck play in the success of the programme? (1.3MB)

Review of Scoring Points by Clive Humby and Terry Hunt with Tim Phillips

The scale and success of Tesco in recent years ought to be enough to assure the success of this book. The key question any interviewer has to answer is how much substance the book has and whether gives a credible account of how Clubcard became the success that it is today. And the question is all the more pressing given the dismal history of customer loyalty programmes in the last 20 years. How did this one get away?

Scoring points tells the story of how the card came about. What makes it particularly interesting is the perspectives of the authors. Terry Hunt was already known as a DM creative guru when I worked at Evans Hunt Scott in the early 1990s. And Clive Humby likewise had attracted the guru tag on the data side long before the Clubcard had been thought of. They have no need to use the Clubcard to bolster their reputations so the book is mercifully free of mutual congratulation and backpatting. They are also compulsively engaged with why the programme works when so many others have failed. The book begins with an examination of what loyalty is and how loyalty schemes can be made to pay. This turns out to be essential when the resulting programme has to work at one level as an incentive scheme which attracts enought customers to be cost effective, has to promote enough additional business to be profitable, has to maintain the interest and egengagement of the vast majority of cardholders even those who are not primarily offer or discount driven. And the benefits of data driven marketing cannot be enjoyed until all of the preceding conditions have been met. Which is why the chapter on data analysis is almost halfway through the book.

Inevitably this was never going to be a warts and all account. And a number of skeletons are produced from the cupboards as evidence that things did not always go according to plan. Tesco required the programme to pay for itself within years of its inception and tested rigorously to make quite sure that it did. A student card, the Clubcar Plus payment card and a number of incipient clubs along the lines of the Wine Club and the Baby Club fell by the wayside because they didn’t meet the financial performance criteria of an ever pragmatic retailer.

This is an engaging account – because the Clucard swiftly evolved from being a way to boost short term sales to becoming a fundamental tool for determining ranging and pricing. It led the way for Tesco to enter whole new sectors including financial services, home delivery and latterly telecommunications. Above all, Clubcard is a mechanism which fulfils the promise of the Tesco brand Every little helps. The range of the programme has become colossal. What is fascinating is the accounts of the problem solving at each stage. Right at the start the data planner recognised that the current computing power wouldn’t allow them to analyse more than a small proportion of customers and to capture a small proportion of the data available. Each transaction captured 20 numbers and they analysis only 10% of the base. The planners had to derive lifestyle segmentations based purely on the analysis of shopping baskets. To this day there is no hard data on the age of Clubcard customers or on the number and age of children. It is all inferred. The book makes a brilliant case for marketers to adopt a behavioural view of the world free of discussion groups and mystery shopping – shoppers vote with their purses – it’s all a retailer needs to know – Right?

The power of the book comes from the pragmatism that runs right through it. It is a healthy antidote to the one to one manifestos with which the relationship and CRM marketing industry have been bamboozling marketers for years. The programme has been successful because it gave value to customers and created value for Tesco. Profitably. And it didn’t attempt to do anything else – like mass personalisation. Which would have been prohibitively expensive. I still think there was an element of luck. Clubcard’s glory years have been those when UK customers have been looking for value. There is no indication that anyone foresaw Ripoff Britain which convulsed the car market or the restructuring of the travel and holiday market brought about by the internet. Directly or indirectly Tesco has benefited from these market shifts as it has given its customers money back while nudging them spend more on premium products. and constantly expanding the range of services available. Today you don’t need to go to the store to purchase a significant proportion of Tescos products. Nor do they need to keep the stock instore. Most of the promotional cost of the programme is borne by suppliers who may regard it as a devil’s contractl but at least one which with measurable returns!

This is a great book – a classic case study – and a very useful way to think through which aspects of “loyalty” a programme needs to draw on to be successful. I once worked on a loyalty programme which had everything the client could think of addding. It failed. The lesson of Clubcard is to work out what is the minimum you need to do to obtain the result you’re after. Its probably the only way you will get it to work.

Click here to order your own copy of Scoring Points.

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