Saturday 5 December 2009

ASDA - Loyalty rejecters?

asda-350ASDA CEO Andy Bond reportedly said just a few weeks ago

"You can't buy loyalty with plastic points"

Going on to say about Tesco Clubcard “They're based on conditional selling and only reward people that spend the most. At ASDA we reward customers with the lowest-possible prices everyday. That's why more people than ever are choosing to shop at ASDA.”

On the first point he’s dead right, you can’t buy loyalty – plastic points or otherwise – you have to earn it.

On the second point I think he’s dead wrong and here’s why.

“Conditional Selling” – Unlike many US style grocery programmes which do actually have conditional selling - giving one price for card holders and one for none card holders - there is no tiering in the Clubcard model.  Everyone is equally rewarded and your reward is simply based on overall spend; assuming of course you join the programme

Obviously you have to spend enough to reach a minimum threshold for reward, but for a normal loyal customer this is not difficult.  In fact it is less about rewarding high spending customers and more about rewarding loyal customers – those who shop with you regularly.

“Lowest Possible Prices” – To fight on price you really have to be the cheapest.  I decided to try out ASDA by doing a monthly shop on ASDA online for exactly the same products (substituting where required) as my normal shop at Tesco.  At the end of it there was a few pence in it so hardly worth jumping up and down about – and I get Clubcard points at Tesco.

Maybe I’m not a typical ASDA customers and I’m also not a Tesco sycophant.  However I do believe that for a retailer like ASDA, understanding your customers is key – and interestingly so do ASDA to a point.

Reportedly gathering information from a pool of 18,000 shoppers that will be used to influence which products it sells and to drive the business around common themes that emerge – they are doing their level best to gain an understanding of their customers.

Whilst this may provide insight akin to what Tesco gets from Clubcard data, it will not allow for a feedback loop which would enable them to go back to individual customers to recognise, reward and influence. 

So are ASDA loyalty rejecters?

Well lowest prices do not reward or recognise customer loyalty – I get that price if it’s the first time I’ve shopped there or the 51st time.  What they will do however is maintain customer loyalty for that segment of customers who are price/promotionally sensitive – but only for as long as you have the best price.

However ASDA do have another trick up their sleeve and that’s transparency.  Andy states “My ambition for Asda is to actively involve customers in every aspect of the business, to lift the lid on how we do things, and enable our customers to help make decisions that have an impact on what we sell and how we sell it.”

It’s obviously early days for this initiative and whilst I’ve banged the drum for a while about it being less about the transaction and more about the interaction it remains to be seen how many customers will actually want to “lift the lid”.

Ultimately a good loyalty programme will allow you to have a two way dialogue with a customer about topics which are relevant and create a win-win for the customer and the retailer – in this respect ASDA are making positive moves with a non-points based mechanic.

Far from being loyalty rejecters I think ASDA are doing their best to embrace loyalty and to generate genuine customer engagement – the jury however is still out on how and whether this will actually work.