By George Anderson
Asda in the U.K. offers the type of low prices that have enabled Wal-Mart to gain dominance in markets both inside and out of the U.S. The world's largest retailer has been able to gain this price advantage by cutting out all expenses it deems unnecessary, such as the cost of dealing with middle men, excess inventory, etc.
One area that is commonly brought up when discussing the Wal-Mart model is the chain's decision not to use loyalty cards. Many see this as another area where Wal-Mart has succeeded in keeping costs under control while its competitors with loyalty programs tinker around in the attempt to make them work properly.
The exception to the loyalty card rule brings us back to the U.K., where Tesco has used the information gleaned by its Clubcard program to increase its share of market to nearly double that of Asda's, according to research by Taylor Nelson Sofres.
According to a report in The Wall Street Journal, Tesco has used the data to not simply compile information on consumer expenditures (a common criticism of others use of loyalty cards) but to analyze the data to create new sales opportunities.
A case in point is that when Tesco introduced ethnic foods in neighborhoods with a large population of Indians and Pakistanis, it discovered that many of the same items were popular with upscale white consumers.
Another example is how Tesco has used the information from its Clubcard program to build business with fathers of infants and toddlers. In households where consumers buy diapers, Tesco discovered that fewer Dads were going down to the pub. Using this information, Tesco began sending out coupons for beer to customers that met the diaper purchasing criteria.
Karen Masek, a Tesco customer and mother of two, said of the retailer's Clubcard program, "They definitely know your shopping habits. They've never sent me anything totally off the mark."
Despite the success of the Tesco program, Asda remains unbowed.
"There clearly are benefits to having loyalty-card information but there are costs as well," says Jon Owen, head of research and pricing at Asda. "We prefer to give our customers the value in different ways."
Moderator's Comment: Why is Tesco's loyalty program different from so many other retailers'? What will it take (specifics appreciated) to make their programs successful to the same degree as Tesco's? - George Anderson - Moderator