CRM – The Tesco Way

Tesco is a global grocery and general merchandising retailer headquartered in Cheshunt, United Kingdom It is the third largest retailer in the world measured by revenues and the second largest measured by profits. It has stores in 14 countries across Asia, Europe and North America and is the grocery market leader in the UK (where it has a market share of around 30%), Malaysia and Thailand. The chain was founded by Jack Cohen in 1919

Tesco's efforts towards offering better services to its customers and meeting their needs can be traced back to the days when it positioned itself as a company that offered good quality products at extremely competitive prices. Tesco operates a grocery homeshopping service, as well as providing consumer goods, telecommunications and financial services online. In May 1984, in Gateshead, England, the world's first recorded online home shopper, Mrs Jane Snowball, purchased groceries from her local Tesco store in the world's first recorded online shopping transaction from the home.

Tesco has operated on the internet since 1994 and was the first retailer in the world to offer a robust home shopping service in Tesco.com was formally launched in It also has online operations in the Republic of Ireland and South Korea. Grocery sales are available within delivery range of selected stores, goods being hand-picked within each store, in contrast to the warehouse model followed by Ocado. In 2003, tesco.com's CEO at the time, John Browett, received the Wharton Infosys Business Transformation Award for the innovative processes he used to support this online grocery service.

Commenting on the way the data generated was used, sources said that the data allowed Tesco to target individual customers (the rifle shot approach), instead of targeting them as a group (the carpet bombing approach). Since the customers received coupons that matched their buying patterns, over 20% of Tesco's coupons were redeemed - as against the industry average of 0.5%. The number of loyal customers increased manifold since the loyalty card scheme was launched.

To sustain the growth achieved through the launch of Clubcards, Tesco decided to adopt a four pronged approach: launch better, bigger stores on a frequent basis; offer competitive prices (e.g. offering everyday low prices in the staples business); increase the number of products offered in the Value range; and focus on remote shopping services (this included the online shopping venture). To make sure that its prices were the lowest among all retailers, Tesco employed a dedicated team of employees, called 'price checkers.

Customers can collect two Clubcard points for every £1 (or one point for €1 in Ireland and Slovakia) they spend in a Tesco store, or Tesco.com, and 1 point per £1 in petrol station (not in Slovakia). Customers can also collect points by paying with a Tesco Credit Card, or by using Tesco Mobile, Tesco Homephone, Tesco Broadband, selected Tesco Personal Finance products or through Clubcard partners, E.ON and Avis.

However, according to reports, the average purchase per visit had not gone up as much as it would have liked to see. Analysts said that this was not a very positive sign. They also said that while it was true that Tesco was the market leader by a wide margin, it was also true that Asda and Morrison were growing rapidly.

Given the fact that the company was moving away from its core business within UK (thrust on non-food, utility services, online travel services) and was globalizing rapidly (reportedly, it was exploring the possibilities of entering China and Japan), industry observers were rather skeptical of its ability to maintain the growth it had been posting since the late-1900s. The Economist stated that the UK retailing industry seemed to have become saturated and that Tesco's growth could be sustained only if it ventured overseas...

Questions 1. Examine the customer service efforts undertaken by Tesco prior to the loyalty card scheme's launch. Why do you think the company felt the need to launch Clubcards? 2. With Tesco moving away from its core business of grocery retailing and focusing on globalization, what do you think is the future of Tesco in India?