Loyalty will play an even more important role for Tesco this year, with the UK’s largest supermarket ready to “activate Clubcard in a way it hasn’t done for a while”.
Speaking at Tesco’s full-year results this morning (10 April), boss Dave Lewis downplayed speculation that Tesco is revamping its Clubcard loyalty scheme in a similar way to Amazon Prime. However, he did say Tesco is interested in how to add “more value and connectivity” across its grocery, bank and mobile businesses and that the digitisation of Clubcard means Tesco “can now do more things with it”.
“You’ll see more of us in the loyalty space, it’s a very important part,” Lewis said. “Where the [Sunday Times] comment comes from is when we talk to customers about Tesco, the whole Tesco, those customers that have a grocery relationship with us but also have a mobile relationship with us, also have financial services, are among our most loyal and indeed have a greater lifetime value to Tesco.
“One of the things we’re interested in is how we can add more value and connectivity across [the business]. That’s what you’re going to see from us, you’ll see us investing in Clubcard.”
Last year, Lewis highlighted synergies between Clubcard and Pay+, Tesco’s mobile payments app, which now has more than 500,000 users across the Tesco business.
Since the 24-year-old Clubcard loyalty scheme relaunched in 2017, Tesco has seen a 34% increase in activity and there have been 1.2 million downloads of the app to date, so there are clear opportunities to integrate its offerings.
Brand recovery and effectiveness
Elsewhere, Lewis said brand health is at the highest level Tesco has seen since 2011, with quality perceptions up 10 points and value perceptions up seven points.
This has been largely attributed to customer satisfaction in-store, as well as the effectiveness of Tesco’s ‘Food Love Stories’ campaign, which has won an effectiveness award at Cannes Lions.
“Food Love Stories is winning lots of creative awards, which is good because it shows customers find it engaging, but the interesting thing is that it’s winning effectiveness awards,” Lewis said. “The idea of return on marketing investment is very important to us and there’s something in the way we’re managing the brand which is differential to others and we’re seeing that.”
Tesco will be looking to replicate this branding success in the other markets it is in, including central Europe and Asia, with a key focus on building group capability.
“If you look at the brand work Alessandra [Bellini, chief customer officer] has led [in the UK] and you were to walk into any of the other markets today, you would see the same thinking and execution around design, brand architecture,” Lewis said.
“That gives us great leverage. If we can get the marketing right and leverage it across 10 markets then so much the better.”
Why the job of recovery is ‘not done’
Tesco’s profits were up 28% year on year for the full year to 28 February, with the company on track to meet the “vast majority” of the turnaround goals set when Lewis joined four years ago.
Tesco has described its performance as “strong”, with full-year pre-tax profits at £1.7bn and UK same store sales rising 1.7%. Group sales were up 11.5% to £56.9bn.
“After four years we have met, or are about to meet, the vast majority of our turnaround goals. I’m very confident that we will complete the journey in 2019/2020,” Lewis said. “I’m delighted with the broad-based improvement across the business.”
But Lewis said the “job is not done” and that it will continue to look at “untapped value opportunities” throughout the year around improving its offer for customers, reducing costs and focusing on cash.