LOYALTY WARS IN THE UK

Presented By :
Mehul Jain ( 114 )
Vaibhav Singh ( 146 )
Nikit Tekriwal ( 155 )
Kshama Singhania ( 148 )
Sumit Saraogi ( 142 )
Rahul Awasthy ( 05 )
Why Case???
In 1995, TESCO launched Clubcard – the first
Loyalty Card in the UK Supermarkets
Questions to be answered?
 Should the chains, especially Sainsbury’s –
the market leader – react or just wait?
 If they react, should it be with traditional
pricing, merchandising, promotional and
service initiatives or with a loyalty
programme of their own?
UK Grocery Environment
During 1985 – 95, supermarkets were fed from
sales from new outlets
However, currently market saturation & static
sales
Thus, now had to increase sales from existing
stores & customers
Increased pressures on margins
Major Players
Store Sainsbury’sTesco Argyll / Asda
Sales £m 10,719 10,120 Safeway
6,218 5,683
Operating 859 589 383 251
Profit
Market£m
Share 12.6% 11.7% 7.8% 6.9%
(Dec 94) from 66%
Turnover 65% 56% 67%
Loyal
Share of own 53.4% 45.2% 41.2% 38.6%
customers
Brand
Sainsbury’s
No. 1 grocer in the UK Market
Public company since 1973 however managed
mainly by the family
Opened around 14 stores every year – 355 food
stores locations
Highest operating margin – 8.1%
Focus on stores rather than customers
Sainsbury’s
Measures taken to improvise
 Improved trolleys
 Reducing the checkout scanning speed
 Warm & friendly staff behavior
 Feedback systems
 Anonymous questionnaires
However, these improvements were not
communicated to the customers
TESCO
Second largest UK supermarket chain
Opened on an average 17 stores per year – 544
stores overall in UK
Lower sales per square foot per week (£17.00)
& operating margins (5.7%)
Introduced the campaign – ‘Every Little Helps’
Innovative store format – Tesco Metro,
standalone petrol forecourt
TESCO
Differentiation measures by TESCO
 No sweets at check out
 Multiple checkout points
 Newer convenient trolleys
 Baby changing facilities
 Widest choice of private labels
 Food Technology Centre – R&D
Tesco communicated measures to its
customers with its ‘Quality Guarantee’ label
Argyll / Safeway
Third largest player in UK with a market share
of 7.8%
Opened around 23 stores every year – 547
outlets by 1995
Focusing from other formats – Presto to
Safeway
‘Safeway Culture’
Argyll / Safeway
‘Safeway Culture’
 Value added approach
 In store post offices, dry cleaning services
 Consultation of customer panels
 Specialist departments- pharmacy, bakery, etc
 Photo processing
 Extra attention to families
 Self scanning system – forerunner in
technology
ASDA
Market share of 6.9% - fourth largest
Focus on Value for money with sharp pricing
Not much emphasis on opening new stores –
203 superstore outlets
Prices 5-7% below competitors
New services initiatives
 Diaper changing rooms
 Shopping Carts
 Extra checkout counters
 LOYALTY WARS IN THE UK

Part 2

After the implementation of Loyalty Club Cards by

TESCO
Facts & Figures of top four grocers in
UK 1995-1996
Store Sainsbury’s Tesco Argyll/ Asda
Safeway
Sales £m 12,037** 11,821 6,600 6,531
Operating profit £m 803** 677 418 317
Market Share Food & 12.6 % 13.6% 7.5 % NA
Toiletries
April 1996from Loyal
Turnover 66 % 65 % 58 % 62 %
Customers*,
w/e March 1996
Sources : Company Annual Reports , Institute of Grocery Distribution In
Watford , AGB Superpanel .

* Loyal Customers are here defined as customers who spend more than 70 %
of their total grocery budget at one store .

** Sainsbury ’ s sales and profits include revenues from non grocery

business units such as do - it - yourself and furniture outlets .
After effects of loyalty club
cards launch
•Tesco’s like- for –like sales increase in April was 8.9
percent whereas Sainsbury’s saw an increase of only 2.6 %
•
•For the first time in 22 years, Sainsbury’s had to
announce a fall in profits while Tesco’s rose by 14
percent.
•
•Asda’s like- for – like sales increased even more than
Tesco’s they were up 12 percent and their profits
increased 26 percent.
•
•Argyll/Safeway’s reported 7.8 percent growth in like –
for- like sales and 9 percent growth in profits.
Sainsbury’s Response
•Increased its distribution and offered more own brand
products and cheap regional pricing.
•
•Extended old saver card scheme to 50 % of the stores in
September 1995 instead of scheduled December 1995.
•
•Invested in communicating its customer service initiatives

•Alliance with British Airways to offer its customer Airmiles

in addition to discounts.

•Reward vouchers were handed at the check out counters

instead of mail to reduce administration costs and create
opportunity for customer contacts.
•
•From its loyalty programme, it had to raise turnover by 3 %
to breakeven.
Argyll/Safeway’s Response
•Focused on cutting costs, boosting productivity and attracting
more family shoppers.
•
•Its own brand range of baby consumable products and Kidwear
range.
•
•Introduced cartoons on in-store signs to send the message that
Safeway is the only superstore with human face.
•
•Introduced its own loyalty Cards
•
•Various redemption measures to provide more choices to the
customers : cash, gifts, in-store services or buying promotions
in and outside the stores (Madame Tussauds).
•
•Self Scanning for ABC card holders for quicker checkouts.
Best Competitor Response -
ASDA
Emphasis on Value for money – lower margins
Registered growth rate higher than TESCO
itself
Effective PR initiatives
Positioning as ‘Champion of Consumers’
Innovative activities – Singles shopping nights,
redeem competitors shopping vouchers
Not a firm believer of Loyalty cards
Sainsbury’s – Am I a ‘me-too’
Similar loyalty programs would perhaps attract
the ‘me-too’ tag
Due to higher saturation of market, need of
increasing the sales from existing customers
through increased loyalty
Also, after a period, when all others are
providing loyalty programs, such initiatives
become necessity for survival in the industry

Is it worth the efforts???
Loyalty programmes can be evaluated on two
basis:
 Cost Benefit Analysis
Monetary gains through increased sales
Cost of running loyalty programs
Intangible brand equity creation
 Opportunity Cost
Loss of sales to the competitors
Shifting loyalties of the customers
Late mover disadvantage
THANK YOU