Is Tesco’s Clubcard Loyalty Scheme Too Good to be True?

The current cost of living crisis has been felt in full force across the UK over the past year.

No less than a year ago, in October 2022, the inflation rate in the UK hit an all-time high of 11.1%, far above the government’s target of 2%, causing the price of everyday household shopping to skyrocket. Whilst the rate has been steadily decreasing, the aftereffects are still being felt by shoppers across the country. I’m sure many remember the £3 meal deal, a staple of many lunches, but those days are no more, with a Tesco meal deal costing £3.90, a whopping 30% increase. However, there is a saving grace- the Tesco Clubcard.

With a Clubcard, which was a scheme first introduced by Tesco in 1995 the UK’s largest supermarket, programs and subsequently adopted by many other competitors, customers can receive discounted prices on a range of products – including the aforementioned meal deal, bringing the Tesco price down to £3.40, which is a much more agreeable price when the inevitability of inflation is taken into account.

Some products bought without a Clubcard are much more severely affected, being twice the price of a non-Clubcard price. A Clubcard isn’t exclusive, and anyone can use one, and so it seems like a detriment not to have one, and so why don’t supermarkets just offer the lower price to anyone? The answer can be summarised in one word – data.

How and Why Clubcard Schemes Exist

When you sign up for a store’s Clubcard scheme, you need to input your personal details such as your name and email address in exchange for the Clubcard and the associated benefits. The Clubcard is scanned at the end of your shop, and the discounts are applied, which seems simple and innocuous.

What lies beneath, however, is a significant benefit to the supermarket that now can link the shopping you do to you as a customer. This is an upgrade to traditional systems, where the supermarkets track the products that are bought, but without the aforementioned associated data about the customer. The type of data collected, aside from your personal details, allows the supermarkets to form ‘segments’ of customers, which can offer insights into the buying habits of groups of shoppers, which can be invaluable.

An example of this is a supply-chain benefit; by determining how often groups of customers purchase a genre of product, they can adapt the range and supply of these products to satisfy and maximise demand, reducing the number of products that go unsold or potentially identifying areas for expansion.

A customer-side benefit is personalised offers that can be offered to customers, for example, a group that primarily purchases organic products may receive offers for these products, which would perhaps not be as useful for other customers. Such strategies encourage customer loyalty, driving them away from the competition and offering cheaper prices for the shoppers, a seemingly win-win situation.

Recommendation systems based on shopping data are so powerful, in fact, that they were able to determine that a woman was pregnant before she knew herself, which is a testament to how powerful and important this kind of shopping data is.

The extra factors associated with Clubcard schemes

The phrase “there’s no such thing as a free lunch” springs to mind when considering Clubcard schemes, due to the seemingly great benefit of having one as a customer- better prices, personalised offers, etc., but of course, the main reason they truly exist is to benefit the supermarkets, all of which exist as profit-maximising businesses. Other business-related objectives such as market control also play a part, attempting to draw customers away from competitors, but ultimately it’s mostly about getting more data.

Anything involving data carries extra considerations, such as GDPR, and naturally, supermarkets are required to have strict data privacy and protection measures in place, however even with the assumption these measures are enforced, there is still a high chance of data breaches, which could put customers’ personal data at risk, which a customer could circumvent by not using the Clubcard schemes.

Some Clubcard schemes have also come under fire for misleading customers, as usually a shopper would see a discounted price and assume they are getting a good deal, where in fact it could be better value per unit buying a non-discounted product, indicating just how much value the supermarkets place on encouraging customers to use the Clubcard in order to gather data. A further tactic which has existed before Clubcard became so prevalent (and is in fact banned) involves increasing pricing and then offering a discount, in a similar vein to the previous method whereby shoppers assume a discount is a good deal.

The same strategy is applied with Clubcard deals, such that shoppers actually get the same price with a Clubcard as they would have without one at an earlier point in time, and providing a significant price rise for non-Clubcard users, although this is more likely in the name of gathering data rather than simply trying to deceive customers and receive more income.

Conclusion

Clubcard deals offer a trade-off between your data and your money. Due to the rising popularity of Clubcard deals, it becomes harder to avoid regular pricing, and coupled with the increased cost of living, Clubcards almost become a necessity.

Those customers who don’t want to, in essence, sell their data, are faced with higher pricing, simply due to supermarkets identifying the power of harnessing and using data to maximise their profits. Whether or not this is worth it is a personal decision, but ultimately the weighting of cheaper products far outweighs the cost of a shopper’s data, if the shopper is even aware of the behind-the-scenes actions of the supermarkets using their data.

Interested in joining our diverse team? Find out more about the Rockborne graduate programme here.