Here at Incentivesmart, we love to get the lowdown on the most successful loyalty schemes in the B2C world. In fact, we’ve used Tesco’s hugely successful Clubcard scheme as a shining example of the power of points over pounds before. With more than a quarter of a century under its belt, many Brits would consider the scheme one of the most familiar out there – and, as self-professed loyalty incentive fans, we’d agree.

We talked a little about Tesco’s popularity among customers when we looked at Asda’s relatively new pounds-based reward scheme – which you can read more about here. Their scheme gives a great example of the power points hold to engage customers, maintain interest and, of course, create a solid foundation of loyalty. At present, more than 17 million people are signed up to the scheme – a whopping 25% of the UK population!

But all is not well, with Tesco announcing a major change to the redemption value of their points at rewards partners – from restaurants to theme parks, retailers to travel companies.

Here’s what you need to know.

Tesco Clubcard Points: A Brief History

Tesco launched the Clubcard in 1995, making it the first nationwide loyalty scheme in the UK. It was a bold move, at the time. While incentive programmes had been around for many decades already, none had embraced the (as-of-then unproven) benefits quite as much as Tesco.

One of the things that makes Tesco’s scheme so popular is its simplicity. Anyone with a Clubcard knows that each £1 spent (either in-store, online, in Tesco fuel stations or through surveys) gives the spender 1 point. Within the store, 1 point is worth 1p, and customers can choose when to convert those points into in-store vouchers.

Alternatively, those points can be redeemed against rewards partners – and, as a result, their value increases. The list of rewards partners is a long one, but includes big names like Pizza Express, Thorpe Park, Hotels.com, and Virgin Atlantic Flying Club.

All good, right?

But here is the issue. Once upon a time, Tesco Clubcard points were 4 times more valuable when used with these third parties. So, while 300 points held an in-store value of £3, they were worth £12 with rewards partners. At present, they are 3 times more valuable – not as good, but still a compelling reason to shop with Tesco as much as possible.

As of June this year, however, Tesco has announced that its Clubcard points will be worth just twice as much with rewards partners.

This is a significant downturn for the Clubcard, and customers are already voicing their frustrations with Tesco’s decision. It’s only natural that the reduced value of Clubcard Points would have customers second-guessing their loyalty but, fortunately for Tesco, their loyalty scheme remains one of the most generous (and worthwhile) the supermarket chains have to offer.

Here’s why.

The Power of the Point

Be honest – if you found a forgotten £1 in a coat pocket, would you run home to your piggybank and save it for a rainy day or, more likely, end up spending it on something inconsequential – a couple of hours’ parking, perhaps, or an on-the-go drink at the corner shop?

A small amount of money is nothing to get excited about. True, neither is a small number of points, but which of the two are you more lightly to stash away and save up for something more exciting than parking or bottled water?

Tesco points are easy to save. Their value is a little more abstract than cash in the pocket, and it’s just not worth the hassle of redeeming an inconsequential number of points, which means they’re primarily going to be used for memorable experiences and items.

The Trouble with Change

Tesco’s Clubcard scheme may still be strong, but this latest change will no doubt cause some damage.

We’ve written before about the elements that will maximise your loyalty programme’s impact. From vision to strong use of your marketing channels, everything needs to be firmly in place, or you’ll run into issues.

One of those elements is clarity and consistency, without which the programme is bound to suffer from frustration and mistrust. Tesco has done incredibly well when it comes to clarity (£1 = 1 point, 1 point = £0.01) – and, for the most part, they’ve done well with consistency.

The decreased value of the point with rewards partners is the most significant inconsistency in many years, and it’s only natural that shoppers are frustrated. Tesco will have anticipated this, of course – nobody likes anything they’ve earned to lose value. But they will know that the strength of their points-based scheme, as opposed to a cash-based alternative, will see them through this storm, and ensure continuing loyalty from many of their customers.