Tesco chief: loyalty crucial, not price

Tesco boss Philip Clarke has reaffirmed the retailer’s commitment to the Clubcard scheme, maintaining that boosting customer loyalty – and not constantly slashing prices to match Aldi and Lidl – is key to the business turnaround strategy.
The move comes despite repeated calls from some in the City to divert Clubcard funding into price cuts and growing criticism of Clarke’s record, for which he countered: “We are not short of people telling us how to run our business.”
Revealing another drop in profits – group trading profit plunged 6% to £3.3bn, although UK sales dipped just 1.3% – Clarke said constant price cuts were futile, as whenever the big four drop their prices, the discount stores cut them further.
At an investor briefing this morning, Clarke said: “Everything we do is designed to retain customers and attract new ones and to get them to shop across our brands. Loyalty has always been important to Tesco; it is a KPI we focus heavily on.
“The more of our services customers take, the more they spend; for instance, customers who stream movies spend 13% extra at Tesco.”
He then bigged up the retailer’s FuelSave scheme, which offers up to 20p off a litre of fuel when customers collect Clubcard points, saying it had resulted in 22% more Clubcard sign-ups.
Clarke also hailed the trial of a digital coupon app in Plymouth as Tesco moves towards the much-hyped “digital wallet”.
However, when asked why customers are not able to use instore voucher online, he said the problem will finally be resolved later this year. And in a side-swipe to predecessor Sir Terry Leahy he added: “It has not been as easy as someone might have told you a few years ago.”
In addition, Tesco Bank will finally launch its current account, offering Clubcard points on purchases. “It will strengthen loyalty and engagement with Tesco and it will be terrific,” said Clarke. “And call centre staff will not be rewarded on the number of accounts they get, but the quality of service they provide.”
Further confirmation of Tesco’s commitment to loyalty was revealed in the results statement, which said: “Clubcard remains an important part of our brand and has enabled us to deliver more value to our customers with almost 60 million highly-personalised mailings sent out this year.”

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