TESCO Loyalty Card - Essay Example

? ­­Individual Written Assignment Contents Introduction Section 1. Introduction of TESCO 2. History of TESCO loyalty cardSection 2 1. How a loyalty card works 2. Problems faced by the launch of loyalty cards Section 3 1. Strategic Marketing Response Conclusion Reference list Introduction This case report provides an insight about the TESCO loyalty card venture of TESCO that started in 1993. Ever since then, the loyalty cards have gained popularity among consumers and have helped the company grow by leaps and bound. As promising as the situation seems, the reality nowadays is not so. With the emerging trends of online business dealings and the growing competition in the market, it is becoming difficult for TESCO to carry on with their ingenious plan anymore. These loyalty cards provided with the consumers with an opportunity to share their personal data with the company and at the same time enjoy financial benefits against the points they earned by shopping at TESCO. However, this sharing of information is being seen as a nuisance by the customers nowadays. This, along with the lack of enough funding is leading to major loss of revenue for the company. For this matter, there need to be strategic interventions as far as the future of TESCO loyalty cards is concerned. Section 1 Introduction of TESCO: TESCO is a Britain based multinational merchandise retailer which cover a wide berth on the product spectrum, ranging from groceries to general merchandise. It was founded by Jack Cohen in 1919 with an aim to do business on a small scale (Clark 2008). However soon the business spread and is now established in over 14 countries. The word TESCO takes its origin from an incident in 1924 when Mr. Cohen bought a shipment of tea from T.E. Stockwell, thus combining their initials to formulate a brand name Tes-Co (Clark 2008). With headquarters based in Chestnut, United Kingdom, TESCO has outlets and stores spread over a wide area on the globe. Coming next to Wal-Mart and Carrefour, TESCO ranks third in the world of retail industry (tescoplc.com 2012). History of TESCO loyalty card: TESCO has been running a number of programs in order to increase their consumer market and to make their business interactions more consumer-friendly. In 1993, the management at TESCO set out to explore a new area that led to the development of their loyalty card. Based on the idea put forward by Terry Leahy, a team of researchers was formulated who conducted a research regarding the potential of this new venture. Although a similar project had been going on by the name of Green Shield Stamps, TESCO did not enjoy much information regarding the customers. Therefore, in order to improve the state of affairs and take it up by a notch, the company introduced the loyalty cards a year later in 1994 which aimed to pay the customers back for their loyalty while at the same time having more insight into customer details (clubcardlocal.co.uk 2011). With the aid of such magnetic-stripe club cards, the organization could gain access to customer behavior. Over the course of time, the loyalty cards faced some setbacks as a result of blackmail. As the market increased, a few changes were made in the card design and the working of the card after which the cards were re-launched in 2005 by the creative team working at TESCO headed by Evans Hunt Scott. These new cards were sent to the customers all over the area through mail. They had key fobs and could be scanned at a checkout (clubcardlocal.co.uk 2011). Deemed correct by the organization, another change was made with a re-launch of these personalized cards yet again in 2008, this time to over a customer range of seven million members (clubcardlocal.co.uk 2011). Section 2 How a Loyalty Card Works: Over 10 million people benefit from the loyalty cards in United Kingdom alone. The first loyalty card was lunched in Malaysia and later the market grew to incorporate stores all over the involved countries. The management at TESCO takes this opportunity as a way of paying their regards to their customers and thanking them for their loyalty (tesco.ie 1997). The working of such cards is very simple. Whenever a customer avails a TESCO facility, i.e. shops at a TESCO store or uses TESCO services such as petrol pump, finance, etc., he earns one point for every pound he spends (or equivalent of one unit currency in corresponding countries like Ireland, etc.). These points are stored and the customer receives information regarding the points he has earned every three months (Wps.pearsoned.co.uk 1995). He also receives a voucher thus enabling him to spend these points while shopping with TESCO. So much so that nowadays, club card points earned by a customer could also be converted into flyer miles after collaboration of TESCO with Virgin Atlantic. In addition to these regular reminders, at times the customer becomes the recipient of surprise mailing as well. There are certain club card deals available where these points add up to four times their worth. In addition to shopping at the outlets, TESCO cards also provide the customer with the opportunity to shop online at collect points. Another deal is the launch of “green club card point” where a customer collects points against re-use of every carrier bag. On recycling old inkjet cartridges, TESCO offers a hundred points advantage too (tesco.com 2011). These are few of the benefits TESCO provide to their loyal customers. Problems Faced by the Launch of Loyalty Cards: As much as the loyalty card helped TESCO improve its business and broaden the horizon for further progress, it has become difficult to carry on with this scheme without enough funding. Moreover there has been a rapid increase in competitive counterparts in business and the effectiveness of TESCO club card is deteriorating badly. Over the years, there have been questions on part of the customers when it comes to the extent of personal information the company has access to ,through these cards. But none of them were as detrimental as in the current situation. Benady (2012) explains in his article several reasons that have led to the demise of this once miraculous leap by TESCO. The new online mechanisms have made Club card scheme a comparatively expensive one to run. As opposed to this increased monetary demand, there is a considerable lack of funding. As the consumers became more educated regarding their rights, they became restless with the delay between points earning and getting to avail benefits against them. They want instantaneous benefits (Benady 2012). At the same time, this business competition is not so well-established in the United Kingdom which poses another major threat to the future of club card marketing. Even if it were, a loyalty program needs efficient security system to succeed in the present da business world and incorporation of such a system adds to the financial burden even more. Zentes and Morschett (2011) are of the belief that the competitors lack the presence of effective market penetration and thus are unable to maintain a successful loyalty program. Section 3 Strategic Marketing Response: As much as the future of loyal cards seems gloomy now, experts are of the opinion that this wave will eventually pass and TESCO loyalty cards would gain their fame back again. But for that to happen, some changes need to be brought inside the company as well. As the retail modifies itself to meet the ever increasing demands of the customers, it needs to broaden its service spectrum within the UK. Moreover, it is important that the retail adopt their early attitude of lending an ear to every query their customers have. In this way, through an even friendlier approach, they can win back their customers and regain the former popularity and fanfare. Lastly, there need to be a slight change in the way funds are being allocated at present with a better management of affairs as far as the loyalty cards are concerned. Conclusion TESCO loyal cards, was a scheme launched in 1993 by TESCO in order to attract more customers and also to expand their sales. Over the years, this plan led the company to mounting success. With attractive packages and bonuses the loyal cards offered, the business grew and so did the sales. With TESCO operating in 14 countries now, it has taken a lot of revenue to keep the business going. However due to certain internal as well as external factors, the company is now facing major problems where the future of loyalty cards is concerned. To continue this project financial input is required on a large scale but since the cost and expenditure do not match so the loyalty cards are seeing a downfall. In order to keep this project going, TESCO needs to implement some changes in the overall state of affairs, and to expand their business in the United Kingdom as well. Reference List: Baker, R., 2012. Tesco and Asda ramp up vouchers. MarketingWeek, [online]. [Accessed 24 October 2012]. Clark T (2008) A history of Tesco: The rise of Britain's biggest supermarket - Telegraph. [online] Available at: http://www.telegraph.co.uk/finance/markets/2788089/A-history-of-Tesco-The-rise-of-Britains-biggest-supermarket.html [Accessed: 7 Dec 2012]. Clubcardlocal.co.uk (2011) Clubcard History : Clubcardlocal.co.uk. [online] Available at: http://clubcardlocal.co.uk/?page_id=161 [Accessed: 7 Dec 2012]. Humby, C., Hunt, T., & Phillips, T. (2008). Scoring Points How Tesco Continues to Win Customer Loyalty. London, Kogan Page. TESCO. (2012). Available at: WWW.TESCO.com[ accessed Nov 2012] TESCO. (2012). Case Study: Tesco Available at: http://wps.pearsoned.co.uk/emaukhekotlereuromm1/126/32286/8265276.cw/content/index.html [accessed Nov 2012] TESCO. (2012). Company Videos . Available at: http://businesscasestudies.co.uk/tesco/#axzz2DE4iNRS5 [accessed Nov 2012] Tesco.com (2011) Green Clubcard points | Tesco Greener Living. [online] Available at: http://www.tesco.com/greenerliving/go_greener/green_money_savers/collect_green_clubcard Tesco.ie (1997) Talking Tesco - Clubcard - History. [online] Available at: http://www.tesco.ie/clubcard/history.htm [Accessed: 7 Dec 2012]. Tescoplc.com (2012) Tesco PLC. [online] Available at: http://www.tescoplc.com/ [Accessed: 7 Dec 2012] Unknown. (2012) [online] Available at: http://www.customerthink.com/interview/clive_humby_tesco_shines_at_loyalty Wps.pearsoned.co.uk (1995) Case Study: Tesco. [online] Available at: http://wps.pearsoned.co.uk/ema_uk_he_kotler_euromm_1/126/32286/8265276.cw/content/index.html [Accessed: 7 Dec 2012]. [Accessed: 7 Dec 2012]. _points.page [Accessed: 7 Dec 2012]. Benady D (2012) Tesco must find a new role for Clubcard | PR & public relations news | PRWeek. [online] Available at: http://www.prweek.com/uk/news/1116808/ [Accessed: 7 Dec 2012]. Read More