British retailer Tesco has launched an online video service that targets holders of its loyalty card with advertising as they watch free movies and TV shows.

The Clubcard TV service, free to the grocer's 16 million Clubcard holders in the UK, is consistent with Tesco's strategy to personalise its promotional and marketing activity, which the company said helped it to post its highest sales growth in three years over Christmas.

A TV service linked to the shopping loyalty card scheme would also be highly appealing to advertisers, who have been looking for ways to target different types of viewers more accurately than is possible through the more scatter-gun approach of traditional TV advertising.

"By using Clubcard, we can look at what customers buy from us, what things they like, and then make an effort to target adverts that are more relevant to them," said Scott Deutrom, Clubcard TV's managing director.

The popularity of on-demand TV services has grown hugely in recent years, helped by increasing broadband speeds across the country and driven by consumers who do not wish to pay for a full pay-TV package from the likes of BSkyB and Virgin Media.

Advertisers that have signed up for the Tesco launch include Kellogg, Johnson & Johnson, Colgate and Danone, while content groups such as Warner Bros, Daro Media and All3media are also on board.

It is the latest initiative in Tesco's turnaround plan for its home market after a profit warning in January 2012 prompted a strategic rethink.

Clubcard TV's content of films, documentaries, dramas and comedies will be aimed at families and children.

Reuters