Harvard Business Review
April 2004

Retaining customers is cheaper than acquiring new ones; unfortunately, it's almost as difficult. Tesco, which parlayed its loyalty card to become Britain's largest grocer, is the rare success in a landscape littered with failed customer-relationship programs. Tesco's edge is that it doesn't really expect loyalty from cardholders. The company assumes that customers also hold rivals' cards, and it consistently meets the low prices of its Wal-Mart-owned competitor. The Tesco card adds value chiefly by lowering marketing costs, say the authors. When a competitor's store opens nearby, the company can quickly spot who has defected because of the drop-off in card activity and send them customised promotions. And Tesco doesn't suffocate beneath the mountain of data the card generates. Instead, it uses a combination of approximation and focused questions to drill straight to the usable insights.