Tesco to use `class' system for customer discounts

BRITAIN'S BIGGEST supermarket group is considering revamping its loyalty card programme in a bid to make the scheme more enticing to high-spending shoppers.

Tesco is looking at creating a three-tiered system that would rank shoppers according to how much they spend. The biggest rewards, whether they be money-off vouchers or special deals on holidays, would go to families which buy large amounts regularly.

Smaller spenders, such as people living alone or older people whose children have left home, would receive much smaller benefits.

Tesco would not comment officially on plans to upgrade its Clubcard system which already has more than 14 million members. "We are always looking at ways to improve the offer for Clubcard members," it said.

However, such a move could trigger similar actions by rival supermarkets and hasten the arrival of the next generation of loyalty cards as retailers try to grab, and keep, customers. Loyalty cards have proved one of the retail sector's most powerful marketing tools in the past few years after Tesco launched Clubcard in 1995.

There are now more 40 million supermarket loyalty cards in circulation, with millions of others available from companies such as Shell, Texaco, Boots and WH Smith.

Although promoted as a way of gaining discounts for shoppers, the level of discount is often as little as 1 per cent.

The main benefit of the cards is the information on shoppers' habits they provide to the retailers. From the database of information the cards yield, stores can determine how much shoppers spend, what they buy, where and when they buy it. They can then use this information to target special promotions and even modify store layouts.

According to Verdict, the retail consultant, a move to "grade" shoppers by their spending is a logical step. "In the beginning, loyalty cards were a way of giving discounts but making sure they did not go to everyone," said the managing director, Richard Hyman. "This segments it even more."

But he cautioned that a move to change the structure of the scheme could backfire if it was not handled correctly. A tiered system would mean that shoppers with smaller bills would be subsidising heavier spenders. "It could alienate some people if it is not handled well," Mr Hyman said.

Rival retailers said they are looking at new ways to use their loyalty cards to "get closer to customers". Safeway says it is testing palm-top computers at its store in Basingstoke. The computer checks the cardholder's shopping history before making "tailored" special offers available. Boots has been testing a similar system with in-store kiosks linked to its Advantage card.

However, Internet specialists point out that traditional high street retailers are still some way behind Internet retailers in "relationship marketing".

Companies such as Amazon.com, the Internet book retailer, already send e-mails to customers recommending certain titles if a shopper has shown a particular interest in a certain type of book.

HOW REWARDING ARE THE MAJOR LOYALTY CARDS?

TESCO

How does it work?

Tesco Clubcard

A point, worth a penny, for every pound spent over pounds 5. Customers receive money off at Tesco stores, petrol stations, coffee shops and chemists

Popularity

14m cardholders since launch in February 1995

How to redeem it

Customers are sent money-off vouchers to the value of the points they've earned

Added extras

Link-ups with other retailers such as B&Q. ClubCard Plus offers banking services and loans

Verdict

Still the most popular supermarket loyalty card but operates with a fiddly voucher system

SAFEWAY

ABC Card

Like Tesco, one point is earned for every full pound spent

10m customers since launch in October 1995

Immediate discounts in stores. Customers also receive a monthly catalogue of special offers

Annual creche pass and links to Odeon cinemas and BestWestern Hotels. New parents get 10 per cent off entire shopping bill

Simple to use with no vouchers. Just hand over the card and get money off your bill

SAINSBURY'S

Reward Card

A point for every pounds 1 spent at supermarkets and Savacentres. Customers receive vouchers worth pounds 2.50 when they have saved up 250 points

12m cardholders since launch in June 1996

Vouchers can be put towards shopping or other special offers

Can also be put towards BT bills, meals in Whitbread restaurants or Air Miles. Links with UCI cinemas and Alton Towers

Good links with other companies - but another fiddly voucher system

SHELL

Smart Card

Worth a penny for each pound spent at 25 participating companies incuding Shell, John Menzies, Avis and Hilton Hotels

4m cardholders since October 1994 launch

By using the card when making purchases at 25 participating companies

Members can also use the points for discounts at various sports arenas, travel firms, electrical stores and clothes shops

Wide range of participating companies

WH SMITH

Clubcard

One point for every 10p spent on purchases of more than pounds 1. Card holders also get a 2 per cent discount

4.5m members since launch in July 1997

Value on card redeemed against store products

New offers to be announced in next few months

High savings, simple procedure, but restricted to in-store products

BOOTS

Advantage Card

One point for every 25p spent. Each point is worth 1p towards more than 10,000 products

10m card holders since launch in September 1997

Points value deducted from shopping bill at till

Boots is testing kiosks that will recognise your card and give shoppers customised discounts

Simple redeeming procedure and big discount, but restricted to in-store products