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CEO Mel Edwards talks Tesco and Trust

Sir Terry Leahy’s comprehensive demolition of the tenure of Philip Clarke, his successor as chief executive of Tesco, on BBC’s Panorama last week made for fascinating if slightly uncomfortable viewing.

Given that Leahy is so inextricably linked to the success of Tesco, which he left in 2011 after more than 30 years’ service that saw him lead it to become the UK’s biggest retailer, there seemed to be a particularly personal dimension to the criticism.

Having damned Clarke with faint praise for “trying to do the right thing,” Leahy concluded that, among other shortcomings, there had been a failure of leadership that had led to Clarke losing his job: “When you’re the CEO, if it goes well, you get credit, if it doesn’t go well, you must take responsibility and Phil Clarke has taken that responsibility and paid the price with his job.”

In a statement in response to this criticism, Clarke said that when he took over from Leahy the business faced “a number of critical challenges that had been building for some time” (no guesses who he thought was to blame for that then) and that others who agreed with his management style would remain silent “out of loyalty.”

While there seems to be little love lost between the two protagonists – both of whom started their careers on the Tesco shop floor – there was one fundamental area that Leahy suggested that had gone amiss, beyond the clash of egos. And paradoxically enough, it’s also an area that Clarke identified with: loyalty.

Leahy said that Tesco had eroded some of the trust from its customers for having the best prices around by relying too much on short-term promotions at the expense of low prices. This, he argued, has led to people shopping around and therefore Tesco losing share to the likes of Asda (as well as the discounters Aldi and Lidl).

And now with Clarke’s successor Dave Lewis already taking a close look at Tesco’s operations – including the sale of its video streaming service and the closure of some stores – in an attempt to refocus on Tesco’s core business, it’s not beyond the realms of fantasy that a serious re-examination of its pioneering loyalty scheme could be in the cards.

Tesco has a history of being radical. In 1977, it scrapped the Green Shields savings stamps scheme that had then been the cornerstone of its rewards programme, replacing them with price cuts across the board. After becoming one of the pioneering retailers to introduce a Value range, in 1995 Tesco made an equally audacious move with the launch of its Clubcard scheme. This proved to be an instant hit and also provided the supermarket with unprecedented amounts of information on its customers.

However over the following twenty years other retailers have caught up with Tesco’s once-pioneering scheme, while Tesco itself does not seem to have evolved Clubcard much beyond from its simple ‘spend and reward’ early days. Whether it likes it or not, receiving a Clubcard statement or redeeming its points can seem a joyless and impersonal experience.

The optimum way to run a loyalty scheme requires a modern approach that uses more sophisticated customer information than just transactional sales data, and requires an on-going conversation to really engender trust and engagement.

By combining social and lifestyle data it is possible to provide truly personalised messaging to a more segmented audience. Equally, with over ninety per cent of consumers trusting peer recommendations it’s important to join these conversations with a content strategy that drives advocacy and engagement. Technology – such as mobile – has allowed a greater understanding of customers in real-time, while mobile offers can motivate incremental purchases through highly-targeted offers delivered at the right time and at the right place. And finally, it’s important to reward consumers for their behaviour not just the transaction – this shows how much they engage with the brand.

Ultimately, as Tesco is finding out, loyalty is sometimes hard won but can be easily lost.

For more information and to watch Sir Terry Leahy on the BBC, click here.