Loyalty Program Helps UK Supermarket Chain Tesco Recover

British supermarket chain Tesco has been hard hit by the recession. After its October 2007 peak, the grocer suffered a swift descent as rivals capitalized on consumer demand for thrift.

But happy days are here again for Tesco, thanks to improved benefits offered by its Clubcard loyalty program. After doubling the points accrued by members, the chain watched its sales growth rate climb 4.7%, and their growth in market share increase by 4.4%.

The retooling of the Clubcard program doesn’t just benefit consumers; Tesco uses the program to collect detailed data about shopper’s habits and preferences. Tesco expects more rewards from the Clubcard program in the coming weeks, as shoppers receive vouchers in the mail in time for the holiday season.

During this downturn, loyalty programs have become more effective. Consumers respond to the opportunity to earn savings and appreciate businesses extending deals. Kelly Hlavinka, partner at COLLOQUY, a loyalty marketing concern, told brandchannel's Barry Silverstein in April:

From the results of our clients’ programs, loyalty programs are indeed effective at increasing visit frequency, increasing the amount spent annually and retaining customers. The current economic environment may heighten the importance of a company’s loyalty program. For the consumer, participating in a loyalty program can help them stretch their limited budget a little bit further. For the company, retaining your best customers that have enrolled in your loyalty program is more important than ever.

Tesco’s sales from the loyalty program have restored their momentum, but the competition continues to gain and is not satisfied with second place. Waitrose and Sainsbury’s have both made impressive gains during the same period.