Tesco's club card comes up trumps

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WALLETS are bulging with more and more plastic - credit cards, debit cards, charge cards and now, increasingly, loyalty cards. Tesco's revelation last week that it had recruited five million card-holders in the space of two months, helping to boost its underlying sales growth to twice the industry average, has renewed interest in the loyalty card as a marketing device.

These cards enable customers to get a little something back for all the money they have spent on petrol or groceries or duty-free goods. Usually they accumulate points on purchases, which may then be redeemed for discounts or gifts.

Not especially exciting stuff, you might think, but for an increasing number of retailers, the introduction of loyalty or club cards is proving effective in generating extra sales. It is also seen as a way of getting closer to customers, tracking their buying habits and, crucially, making sure they'll return to the outlet.

Purchase-related benefit schemes are, of course, nothing new, as Co-op stamps and gift coupons in cigarette packets testify. Smokers would rush out for the latest catalogue, pausing only to observe with incredulity that you would have to inhale 2.5 million cigarettes to qualify for a free car.

Although still in existence as marketing tools, these schemes are losing favour. Shoppers prefer the convenience of handing over a card to be swiped at the checkout to the fiddly business of licking stamps or collecting discount vouchers.

Petrol retailers, such as Mobil, have had customer-card discount systems in place for some time and, ever mindful of the need to generate income, British Airports Authority recently launched its BonusPoints card, aimed at business travellers.

Now other retailers, notably supermarkets, are getting in on the act. One success story appears to be the campaign by Tesco, whose Clubcard was launched two months ago. Customers earn points for every £10 they spend, entitling them to money-off vouchers redeemable in Tesco stores.

Tesco argues that above all, "the company listens to the needs of its customers". The card scheme was put on trial in 14 stores, customers liked it, and the decision was taken to launch it nationally.

Rival chains scoffed at the paltry sums involved in using the cards, arguing that the benefits would be vastly outweighed by the costs of setting up such a scheme. But they are now expected to follow with copycat schemes.

Andrew Coker, a spokesman for Tesco, accepts that the discounts are small, but he argued the company had "never said it was a great deal of money, rather it was a small thank-you to our customers".

While extending its thanks, Tesco is quietly building up a useful database on its card-holding customers. Every card-holder's bill is scanned to check which areas of the store have been visited - wines and spirits, meat counter, and so on - and a picture is built up of the shopper's preferences. Tesco then writes to these customers giving details of store promotions which reflect their own shopping routines.

For some, the loyalty card is becoming an essential accessory on every shopping trip. Once consumers start to acquire discount points, little will persuade them to switch to another retailer, even if a tin of beans or a bottle of wine is advertised as cheaper elsewhere.

This is the key to a scheme of the Tesco type. For the competition, it restricts the value of using price reductions in order to attract custom away from card-operating retailers.

But the problem comes when everyone offers loyalty cards. Then the marketers have to come up with a fresh gimmick.