#LEAwards 2020 highlight: Tesco Malaysia's push to go beyond vouchers and coupons to retain loyalty

Repeat customers is of huge importance for any grocery retailer. For Tesco Malaysia though, where the spend from just one loyal customer can equate to that of six non-loyal individuals, encouraging shoppers to return on a regular basis is a commercial imperative.

For the retailer, vouchers and coupons are frequently used as a way to entice customers back into stores, but were largely utilised in relatively self-contained fashion. Generally, delivery of vouchers fell into one of two categories:

• Clubcard membership vouchers, issued to customers between eight and 10 times per year, and
  
  
• Ad-hoc and festive coupons, issued to customers around specific calendar dates such as Lunar New Year and Eid. (which was a large investment from Tesco)

As such, the brand embarked on a journey to rethink loyalty, which also landed it the bronze in the Best Use of Rewards & Incentives category at MARKETING-INTERACTIVE's Loyalty and Engagement Awards.

Challenge

While each of these approaches delivered some degree of success – Clubcard vouchers more so than the seasonal coupons – neither provided customers with a compelling reason to return to stores on a frequent, ongoing basis beyond standard shopping patterns.

Non-Clubcard members in particular had little incentive to go back after their initial visit.

These tactics also offered little in the way of competitive differentiation, with other grocery retailers issuing vouchers at a similar cadence and around the same seasonal moments.

Keen to challenge this status quo and create a programme of continuous engagement, Tesco enlisted the help of long-term partner, and customer data science company, dunnhumby. Working closely with Tesco, dunnhumby was tasked with creating a new strategy that would help to drive frequent, consistent footfall and position Tesco as the grocery retail brand of choice for loyal and non-loyal customers alike.

Strategy

Although the overarching goal was to increase store footfall and drive customer spend, any new strategy also needed to adhere to some key parameters outlined by Tesco. The first of these meant ensuring that – whichever approach was chosen – it would ultimately benefit end customers.

In the context of this particular challenge, that meant creating a campaign that would prompt customers to visit and spend in a way that reflected existing behaviours, rather than by encouraging an unsustainable change in their activity.

The other factor at play in the design of the strategy was that Tesco was eager to move ahead with the implementation on a nationwide basis as quickly as possible.

This ensured that any proposed approach not only had to fit within the grocer’s existing infrastructure, it needed to be simple enough to implement across the whole of Malaysia in as short a space of time as possible.

With these guiding principles outlined, dunnhumby set to work on creating a customer-first, replicable way of increasing footfall to Tesco stores. Voucher-based mechanics such as those used in the Clubcard scheme had already proven successful in increasing footfall in the past (albeit on a relatively small number of occasions each year).

In addition, a study into customer preferences revealed that not only did shoppers heavily associate Tesco with vouchers and coupons, they were also particularly fond of vouchers that allowed for rapid or instantaneous redemption.

The dunnhumby team began exploring ways to create a new voucher and coupon-based scheme that would deliver consistent results across the entire year. The goal here was twofold: to modify the existing voucher mechanism in a way that would drive up the frequency of customer visits, and ensure that this new approach would encourage loyalty – particularly by encouraging non-Clubcard members to sign up. The strategy presented to Tesco addressed both of those objectives head on.

Taking the form of a recurring cycle of rewards, the Clubcard Bonus Bulan-Bulan campaign recommended that Clubcard members should have the opportunity to utilise a new set of discount vouchers on a twice-per-month basis. These would be divided into two distinct categories:

• A basket-level discount voucher that can be redeemed against the customer’s next shop. This voucher is tiered around three different spend thresholds (low, medium, and high), with the applicable discount rising higher with each tier. The mechanics here switches between single and multiple tiers over seasonal and non-seasonal periods.
  
  
• A personalised “trade driver” discount coupon tailored to a customer’s individual spend. This coupon is issued only when a shopper meets a minimum spend threshold when redeeming the discount voucher highlighted above. Once activated, the coupon may be used against any subsequent transaction within a predefined period, and provides the customer with a percentage-based discount.

The "activation period" for both of these vouchers would reset on a four- to five-week cycle (season dependent), meaning that in order to receive the maximum possible discount on their shop, customers would need to visit a Tesco store a minimum of three times during this period.

This new approach to voucher issuance would help to address all of Tesco’s objectives for the campaign. It would:

• Encourage more visits and higher spends than would be possible through existing voucher mechanisms (three to four reasons to visit per month, compared to eight to 10 per year).
  
  
• Provide customers with a new level of value by offering higher discounts more frequently.
  
  
• Create continuous engagement with loyal customers, while also giving non-Clubcard members a compelling reason to return to Tesco stores and sign-up to the Clubcard loyalty programme.
  
  
• Avoid limiting customer spend by tying them to certain items, while still encouraging them to spend responsibly based on prior behaviour.
  
  
• Allow Tesco to tailor the campaign effectively based on date and expected footfall. Discounts can be raised for traditionally low-footfall periods such as festivals and holidays, for instance.
  
  
• Work within existing Tesco infrastructure and be easily communicated and replicated across the entire store portfolio.

A trial of the Bonus Bulan-Bulan campaign was rolled out which began in May 2019 and lasted for eight weeks. The trial proved to be highly successful, and Tesco went forward with a nationwide rollout of the new campaign shortly after its conclusion.

Execution

With the decision made to launch the Bonus Bulan-Bulan campaign in Tesco stores across peninsular Malaysia, a full communications campaign was developed to inform shoppers of the new scheme. Supporting the launch of the new programme was a widespread communications campaign that made use of Tesco’s extensive in-store POSM and own media platform (digital social, web and catalogue), print ads and direct marketing communications to all existing Clubcard members.

The new voucher scheme was communicated via an integrated media campaign that made use of in-store signage and point-of-sale display.

This communications activity, which continues to run and is refreshed at the start of each new cycle, has been integral to the success of the campaign. Not only has it helped to drive awareness of the incoming changes, it has provided clear guidance on eligibility and how customers would benefit from the new voucher scheme.

Since discount rates vary on a seasonal and non-seasonal basis, customers are kept constantly informed about changes to the scheme via new digital and in-store media content. This has proven to be a highly effective way of communicating the benefits of the scheme to loyal and new customers alike. Another key element of the execution was the decision to time voucher delivery around a specific moment each month.

To ensure that engagement was as high as possible, the first of the two vouchers (the basket-level discount) was issued towards the middle of each month – the period in which most shoppers receive their salaries.

Not only did this timing ensure that vouchers reached shoppers when they were already likely to be heading to a store, it also helped to create a new and easily recognisable routine through which customers quickly knew when to expect their latest discounts.

Timing as a whole is vital to the campaign’s success. With each voucher given a specific redemption period (within two weeks of the date of issue, for example), the Bonus Bulan-Bulan programme encouraged shoppers back to store both regularly and predictably.

With the voucher cycle resetting on a monthly basis, customers are also never too late to start enjoying the benefits of the campaign. Most importantly the rewards was "always-on".

Result

The campaign saw sales uplift and an increase in visitors to the stores. Customer participation is 3% higher than any previous campaign of this kind. Tesco loyal customers base has also increased. The execution, combined with the long-term loyalty benefit of the programme, has confirmed the project as a major success.

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