Outlook: Tesco loyalty

LOYALTY CARDS may be a pain in the purse or wallet, given that research shows that most people have at least two of the things, but they are here to stay. Shoppers like them because they receive a (very small) discount on their purchases. Retailers love them because they can build up valuable databases of customers' shopping habits.

When Wal-Mart looked at its data a few years back it noticed a link between buying beer and nappies. It transpired that men were being asked to buy nappies on the way home from work and were treating themselves to a few beers at the same time. Wal Mart positioned six- packs next to the Pampers and sales soared.

Weapons like this are invaluable tools in the marketing managers' armoury and so it is no surprise that they are gradually being refined. The latest move is by Tesco, which is reportedly looking at upgrading its ClubCard scheme by moving towards a three-tier system under which the biggest shoppers will receive far greater rewards than those who simply buy a few items. Instead of rewards being proportional - say a penny for every pound spent, the heaviest shoppers will receive a disproportionate benefit.

Research shows that 80 per cent of sales are typically accounted for by just 20 per cent of customers. So why treat everyone the same? Pampering your biggest spenders is a logical extension of the system. But while this may all seem fair, there are potential pitfalls. Firstly it means that shoppers with smaller bills - say the elderly or students - are effectively subsidising big-spending families. Secondly it means size rather than loyalty becomes the issue. Given that today's poverty-stricken student is tomorrow's big spending family, discriminating against the former category may not be such a good idea after all.