CRM CASE STUDY EMBA 2015-2016 SOHAM PRADHAN (UEMF15027)

TESCO : CASE STUDY

Introduction :

Tesco is United Kingdoms (UK) largest retail industry (2003) in terms of market share as well as

in number of stores. It was setup in the year 1919 by Mr Jack Cohen as a grocery business in

London and by 2003 it was spreaded across 10 countries with 2291 stores and employing 2,

96,000 employees across these countries.

By understanding and adhering to its core purpose Creating value for customers, to earn their

lifetime loyalty, TESCO has proved itself as a pioneer in segmentation, targeting and positioning of

the customer need. Customer focussed approach in all its value systems is a key enabler in sustaining

its growing business.

Strategies adopted by Tesco:

1. Low Price Strategy : pile it high and sell it cheap

In order to reduce internal operation cost , TESCO in the year 1948 opened its first self-

service store in St Albans.

In 1960s due to Retail Price Maintenance (RPM) system, TESCO was unable to reduce the

price of products. Hence, in order to sustain its low price strategy, it started issuing Trading

stamps to customers which can be later redeemed in terms of discount or gifts.

In 1979, company successfully launched a price cutting campaign named Checkout at

Tesco.

Tesco, employed a dedicated team of employees, called Price Checkers, who

continuously review the market fluctuation in prices and provide inputs for every week

Pricing strategy. Comparative dynamic pricing gave a competitive edge.

2. Diversification strategy:

In 1974, Tesco has started operating petrol pumps.

In 1995, formed a joint venture with the Royal Bank of Scotland as Tesco Personal Finance

(TPF) ,that offered customers a wide variety of personal finance services.

In 1998, after the utilities business was deregulated in the UK, Tesco began offering electricity and telecommunications products and services.

3. Focussed Market Strategy :

In 1990, Tesco came with three new formats stores based on location and product variety

requirements.

o Tesco Metro: To serve local community of region,

o Tesco Express: Combination of petrol pump & convenience store,

o Tesco Extra Store: Hypermarket focused equally on food and non-food merchandise.

Tesco realized that by identifying top customers ( Frequent buyers and amount spent ) and

targeting them will help in gaining more profit and customer loyalty. Hence to support this

initiative, it collaborated with Dunnhumby as a marketing consultant in 1994.

o With the help of data mining they analyzed the data and classified the customers into

four broad categories: Premium, Standard, Potential and Uncommitted.

CRM CASE STUDY EMBA 2015-2016 SOHAM PRADHAN (UEMF15027)

o On the basis of type of products purchased customers were categorized along

dimensions such as, value, convenience, frozen, healthy eating, fresh and kids.

4. Customer Relationship Management Strategy:

Following are the various CRM initiatives undertaken by Tesco:

Training internal staff

o In 1993-94, Tesco launched the First Class Service. Under this initiative, the company gave customer service training to over 90,000 store staff.

o The company has distributed over 140,000 educational videos about the Club loyalty scheme at various stores , inorder to make them the understand the purpose and out expected out of it.

o Impelemented Every Customer Offered Help (ECOH), inorder to have a standardized

support staff experience.

The segmentation helped in understanding the customer need and mass-customise the

magazine with reference to each group taste and references. This led to development of

around 1,50,000 variants of magazines with unique combination of articles, advertisements

related to its offerings, third party advertisements and tailored promotional coupons.

In 1994, company launched the One on Front scheme to reduce the time of customers at

check-out counters. Tesco store personnel ensure that if there was more than one person

at any counter will lead to open for the person second in line.

In 1995, Tesco launched the Clubcard Loyalty scheme. Through it company was able to

create its own customer database which became the primary data source for consumer

analysis.

Tesco began giving many special privileges, such as Valet parking and personal attention

from store managers to customers.

Special cards were created for students and mothers.

Special attention given to expectant mothers in the form of personal shopping assistants.

Tesco adopted the policy of offering its service to customers in innovative ways.

Instance: Tescooters (scooters) were purchased by the thailand customer and it was

delivered to their home.

In 2000, company tied up with a Safeway Inc to launch an online grocery shopping services

In 2003,Tesco launched a new initiative targeted at its women customers name Me Time.

It was offered ladies free sessions at leading health spas, luxury gyms and beauty saloons

and discounts on designers clothes, perfumes and cosmetics.

Benefits gained from the strategies

Over 20% Tesco coupons were redeemed as against industry standard of 0.5%.

Due to the captive customer base and the cross-selling opportunity, the cost of acquiring

customers for its financial service was 50% less.

Due to the data Tesco was able to offer better services to the customers.

Tesco was ensured that the footfalls in its stores did not decline on account of competitive

pressures.

Tesco developed a totally new product rage, Tesco Finest for the high income bracket

who are attracted by rivals.

Tesco, removed the impulsive products like candies from off-shelf still company earned

profit.