Sunday, 17 February 2013

Tesco ClubcardTV part of a new trend?

When it comes to innovative ways of going to market, airlines have traditionally been the bellwether.  From basically creating the modern day, database driven loyalty programme through to their innovative yield management for maximising profits, the airline industry typically sets the standard that all other industries follow.

So when someone like Jeff Katz, (Currently CEO of Nextag, a global digital shopping network and former VP at AA/CEO of Swissair/CEO of Orbitz) highlights another trend in the airline industry that's likely to cross-over into retail, it's worth paying attention.  

In a recent article for Fast Company entitled "Fasten Your Seatbelts: The Future of Shopping Looks a Lot Like Airline Travel", Jeff describes how over the last few years, airlines have basically deconstructed their product offering to provide the cheapest price for the base commodity - an airline seat.  All the value add elements such as luggage allowance, in-flight meals and seat selection have been stripped back and then re-purposed as benefits which can either be montised to those customers who value them, or used as recognition rewards for valuable customers like frequent flyers.

Discussing this, Jeff says:-

Airlines have taken a commodity (a seat on a plane) and caused us to change our view about what we’re buying and how we’re buying it. It’s no longer about buying a product at the cheapest price, it’s about selecting and paying for a package of services that we value most--from an aisle seat, to a faster security lines, in-flight meals, rewards for frequent patronage, or in-flight Wi-Fi connectivity

He then goes on to discuss how retail may actually start to follow this trend.  Deconstructing the retail experience and then rebuilding it with additional, value add options that customers can either buy into if they value them or be provided with for free if they are frequent shoppers.  

It's hard to imagine right now how this may look as you can't really see a clothing retailer "unbundling" their changing room or a supermarket "unbundling" their late night opening hours.  However, as technology improves and customers are able to shop using their own smart phones such as in the new Sainsbury's "Mobile Scan & Go" initiative, you can see how this suddenly changes the landscape.

Being able to scan goods and simply walk out of the store, bypassing tills is a real benefit.  Scanning products as you shop allows for personalised pricing, so elements of yield management can start to be introduced - scanning an item with a longer shelf life remaining could actually cost me more for example.  Tying this into the loyalty programme like the airlines do could allow for certain products or product ranges to only be available to loyalty card holders or to be bundled differently so that a "Silver Tier" customer gets a free bottle of wine with their ready-meal which a normal customer doesn't.

However this manifests itself, I agree with Jeff that this unbundling trend that airlines have started (and which Ryanair continues to push the boundaries on) will cross over into retail and some retailers are already putting a toe in the water today.

Online retailer Amazon for example is already doing something like this today with their Amazon Prime offering, providing customers with additional benefits, including free shipping, a free book rental per month and unlimited instant streaming of movies and TV shows.

In the UK, Tesco is trialling Clubcard TV, a service for its loyalty card holders which, like Prime, looks to provide free entertainment content in recognition of their customers continued loyalty.  The website describes it as:-

"Offer[ing] thousands of movies and TV shows for free. There are no schedules, no subscriptions, no fees – as long as you are a Tesco Clubcard customer and you have access to the internet, you’re free to enjoy Clubcard TV"

Also like Amazon Prime, Tesco "Delivery Saver" provides free delivery for online grocery orders for a single, upfront payment.

Whilst these offerings are more about bundling products to enhance the retail experience rather than unbundling them, it does demonstrate how the retail experience is being taken wider than the basic shopping experience.

It's clear that competition is increasing and retailers are always looking for more ways to deliver the right value to the right customers.  If unbundling/bundling can create a differentiated retail experience, catering to the price conscious consumer at one end and the convenience conscious consumer at the other, then it's a trend that's sure to continue.

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