Case

Tesco Plc.
Cheshunt, England–When Wal-Mart Stores Inc. entered the British market in 1999 by
buying a chain of stores here, many expected it to dominate. Instead, Wal-Mart’s largest
non-American operation has been struggling recently, and its top local rival is thriving.

That rival is Tesco PLC, Britain’s largest retailer. Its big weapon is information about its
customers. Tesco has signed up 12 million Britons for its Clubcard program, giving
cardholders discounts in exchange for their name, address and other personal
information. The Clubcard has helped boost Tesco’s market share in groceries to 31%,
nearly double the 16% held by Wal-Mart’s Asda chain, according to market-research
firm Taylor Nelson Sofres.

In the following paragraph the strategic implications used by the Tesco PLC, that they launch
their clubcard programs to their customers and gives lots of discounts to their customers in
exchange for their name and personal information. At that time Tesco PLC played a right card
because with of help of our customer we can grow up a business rapidly, with the help of our
information, we are able to know the taste, interest, gender, class and other many
demographics of our customer. Fowling are the benefits which companies can get from
customer information

Create Brand Affinity

Provide Better Customer Service
Direct Channel to Customers
Develop Customer Loyalty
Launching New Products
By customer information we can create brand affinity, we can send mails or messages about our
new offerings or discounts. We can provide a better customer service by calling after sale and
ask about satisfaction or any improvements. We can also get in touch directly with customer.
We can test our new product on small scale by just offering to our customer base before rolling
it out in wider market

The data let Tesco tailor promotions to individual shoppers and figure out quickly how
new initiatives are working. After Tesco introduced Asian herbs, cooking oil and other
ethnic foods in neighborhoods with many Indians and Pakistanis, the data showed the
new products were also popular with affluent white customers. The company quickly
expanded the rollout.
Tesco’s computers often turn up counterintuitive results. Shoppers who buy diapers for
the first time at a Tesco store can expect to receive coupons by mail for baby wipes, toys
—and beer. Tesco’s analysis showed that new fathers tend to buy more beer because they
are home with the baby and can’t go to the pub.

The data-driven strategy puts Tesco at the vanguard in retailing as traditional advertising
loses effectiveness.
Procter & Gamble Co., Coca-Cola Co. and Kimberly- Clark Corp. are among the
consumer-products companies that buy analyses based on Tesco data.

In the following 4 paragraphs Tesco came to know that their data is working effectively
and they figure out how new initiatives are working effectively. They introduce the Asian
Herbs and after this they launch cooking oils and other Asian Ethnic food and the also
analyze from their data that Asians products were also popular in white customer, with
the help of this analysis company quickly expanded the rollout
In return computer quickly respond and sending coupons by e-mails to those who shops
for the first time- baby wipes, toys and beer, but fresh father tend to buy beer because
they are at home mostly they get this result by data.
In the end the Tesco have loses the effectiveness of traditional advertisement and
getting their customer through their customer data and offering new offers.

The British retailer is increasingly battling Wal-Mart around the globe. It plans to open a
chain of small stores on the West Coast of the U.S. next year, its first foray onto Wal-
Mart’s home turf. Wal-Mart wants to expand in Central Europe, where Tesco has a firm
foothold.

As the U.S. market becomes saturated, Wal-Mart is looking overseas for growth. It has
had some successes, including Mexico and Canada, but many of its overseas ventures are
hurting. Its Japanese unit has suffered losses. Last month, Wal-Mart abandoned an eight
year effort in South Korea by selling its 16 outlets thereto a local competitor for $872
million. Tesco says its 39 Korean stores are successful.

Asda in the U.K. accounts for about 10% of Wal-Mart’s overall business and 45% of its
international sales. The unit thrived under Wal-Mart’s ownership for several years but
Wal-Mart says sales were “slightly negative” last year and profits were “below plan.” (It
doesn’t report exact figures.)

Tesco has used its knowledge of shoppers to fight Wal-Mart’s core appeal: low prices.
After Wal-Mart bought Asda, Tesco searched its database and singled out shoppers who
buy the cheapest available item. They were most likely to be tempted by Asda, Tesco
figured.

Tesco then identified 300 items that these price sensitive shoppers bought regularly. One
was Tesco Value Brand Margarine. Tesco lowered the price of the margarine, along with
other products with similar profiles. As a result, shoppers didn’t defect to Asda, says
Clive Humby, chairman of Dunnhumby, a British research firm that is majority-owned by
Tesco and analyzes customer data for the retailer. Tesco’s sales jumped 17% to $79
billion in the year ended Feb. 25, and net income rose 17% to $2.96 billion (see Exhibit
1)

In the last few paragraphs about the battle between the British business and USA
business. The British business want to set a war and want to open their store in the
home of Wal-Mart and Wal-Mart wants to expand in Central Europe, where Tesco has a
firm foothold.
As the Wal-Mart had some successful stories in Mexico, Canada but also had some
failure in Japan and South Korea. As Tesco came to know that Wal-Mart coming in
Europe, it decide to fight with the core appeal of the Wal-Mart: Low prices.
Tesco searched its database and singled out shoppers who buy the cheapest available
item. Tesco find out the 300 items and the available them at cheaper rates.
Now the Tesco apply the strategy of low prices. This strategic implication help a lot to
the Tesco and their Sales jumped to17%. In this the Tesco compete its competitor with
the same strategy used by Wal-Mart.

Founded in 1919 as a grocery stand in East London, Tesco grew into a supermarket chain
after World War II and opened its first superstore in 1968. The company’s name comes
from its first private-label product, Tesco Tea, which founder Jack Cohen named by
combining the initials of a tea supplier, T.E. Stockwell, with the first two letters of his
own last name.
In the following paragraph we come to know that the TESCO opened their first super
store in 1968. The company name selected by the first private label which was Tesco
Tea.

In the 1990s, as space for new big stores became scarcer, the retailer refined its strategy.
Today it operates 2,306 stores in Britain in four sizes: huge supercenters stocking
everything from lawn furniture to apples; large stores that have a limited range of
nonfood items; regular supermarkets; and “Tesco Express” convenience stores with
merchandise tailored to neighborhood tastes.
After the passage of time there is the need of new store, the retailer redefined their
strategies and now they have 2,306 stores in Britain, they the large range of A to Z
products.

Tesco’s size is raising antitrust concerns in the U.K. Last month, the British government
ordered an investigation into the power of the country’s four biggest supermarket chains.
Tesco Chief Executive Terry Leahy said the company isn’t doing anything improper to
block competition. He said Tesco is successful because “millions of ordinary consumers
vote with their feet when they go shopping.”

As Wal-Mart is increasingly doing in the U.S., Tesco tries to appeal to both affluent and
bargain shoppers. It has several private labels, ranging from the “Tesco Finest” line that
includes duck pâté and cashmere sweaters to the “Tesco Value” brand, which offers
baked beans and the like. The idea for the finest line came a few years ago when
Clubcard data showed that higher spending customers weren’t buying wine, cheese and
fruit from Tesco. The retailer upgraded its offerings in those categories.

In 1995, Tesco introduced the Clubcard under Mr. Leahy, then head of marketing. Today,
about 80% of Tesco shoppers are Clubcard members. They join by filling out an
application form at a store, which includes optional questions about the size of their
household, the ages of their children and dietary preferences.

I must say that the Tesco is surviving on the basis of just their Information and
information. They issue clubcards and get the information about their customer like their
size of house, children, their likes and dislikes etc.

Members receive a plastic card in the mail, which they use at the checkout to receive a
point for every pound they spend. (They must spend at least £150, about $280, to begin
getting points.) Each point is a penny off future purchases, or it can be converted into
miles in frequent flier programs. On top of the points, big spenders get discount coupons
every three months on particular products, keyed to their buying profile in Tesco’s
database.

After issuing the clubcards by mail. The come to know that the large spenders like to take
some groceries and fruits instead of the vine. So they fill their shelves with fruits and
their preferences accordingly. After the purchase of $280 the buyer get 1 point on the
spend of each dollar. And then the each point is equal to the 1 penny. This is the strategic
implication used by the Tesco to attract the customer to buy more and more and to shop
only from the Tesco.

Adele Fiala, a 36-year-old homemaker in London, recently used air miles earned from
her Clubcard for a weekend trip to Seville, Spain, with her husband. While she tosses
promotional mailings, “I always open the mail from Tesco,” she says. She recently
switched from powdered laundry detergent to liquid capsules after receiving a one-
pound-off coupon in the mail from Tesco.

To help analyze the mountains of data that Clubcard generates, Tesco turns to
consultancy Dunnhumby, named for its two founders—Mr. Humby and his wife, Edwina
Dunn. Dunnhumby is also active in the U.S. as an adviser to supermarket chain Kroger
Inc., analyzing customer data and running its loyalty-card program. Dunnhumby’s offices
in Ealing, just outside London, receive data on 15 million Tesco shopping baskets every
week.

Each product is scored on 50 dimensions such as price and the size of the package. The
computer looks for customers whose shopping baskets have similar combinations of
scores. Dunnhumby classifies shoppers in six segments. The “Finer Foods” segment, for
example, is made up of affluent, time-strapped shoppers who buy upscale products.
“Traditional” shoppers are homemakers with time to buy ingredients and cook a meal.

The Tesco collects the mountains of the data from its customer which is hard to maintain.
They consult with the data analyst Dunnhumby. Dunnhumby office is in Ealing. They
supposed to receive data of 15 million on weekly basis.
Dunnhumby classify the shoppers in to 6 segments. Which become easy to understand the
data.

Many retailers consider loyalty programs expensive to manage and think they slow down
the checkout line. Neither Wal-Mart nor its Asda unit has a frequent shopper card, though
Asda tried one for four years before dropping it in early 1999. Asda argues that it can get
nearly the same information for less money by combining Wal-Mart’s powerful sales-
tracking computers with targeted market research such as focus groups.

“There clearly are benefits to having loyalty-card information but there are costs as well,”
says Jon Owen, head of research and pricing at Asda. “We prefer to give our customers
the value in different ways.”

Asda executives believe Tesco’s databases have little to do with its success. Instead, they
say Asda fell behind because it failed to reach out to higher-end shoppers with products
such as better produce and gourmet
Ready-to-eat meals. It also lost its crown as the low price leader. Andy Bond, Asda’s
chief executive, said this March in a conference call with analysts that Tesco and other
supermarkets were matching Asda’s prices.
In the last previous 3 paragraphs, Wal Mart and Asda both are trying to get the data or
information about the customer, but the loyalty program are hard to do, they think that it
slow down the checkout line and consumes time. Asda want to combinr their computers
with Wal-mart computers to integrated the sales information about customer.
According to the Asda Collecting information through Loyalty program have the cost,
but they want to give benefit to the customer in some other way.

Asda chief believes that they are not enough to reach out the higher end shoppers.

Mr. Bond said last December that the unit is “operationally failing.” Mike Duke, the chief
executive of Wal-Mart’s international division, says: “We took our eye off the customer.”
Recently, Asda has upgraded its foods and, in a shift from Wal-Mart’s supercenter
strategy, opened small discount stores like those Tesco operates.

Tesco doesn’t disclose its investment in Clubcard but spokesman Jonathan Church says it
is “worth every penny.”

A typical quarterly coupon package Tesco sends to customers includes three coupons for
products they regularly buy and three for goods that they might like, or that Tesco wants
them to try. While industry adage says that only 1% or 2% of all coupons ever get
redeemed, about 15% to 20% of all Tesco coupons are redeemed.

In the last few paragraphs, Mr. Bond said that the last December their units are failing
operationally, and they take off eyes from their customer. But Asda upgraded its food and
operating like Tesco operates. A typical quarterly coupon package Tesco sends to
customers includes three coupons for products they regularly, industry adage says that
only 1% or 2% of all coupons ever get redeemed, about 15% to 20% of all Tesco
coupons are redeemed. Means that the Tesco want to build trust and wanna increase it
sale but building trust.

The package also includes vouchers through which Clubcard members can redeem their
accumulated points. If a member has spent £300, she will get a voucher for £3 off any
purchase. Tesco says 95% of these vouchers are redeemed, suggesting that they help
entice shoppers to return to the store.

After getting the points in cards the members are allow to redeem the points. The
member get the voucher of 3euro on the purchase of 300euro. Now to attract the
customer Tesco say’s that the 95% of the voucher can redeem. Now they use the strategic
implication to increase the sale to restrict the customer to purchasing of minimum of
300euro.
Tesco statements mailed to Karen Masek, an actor and mother of two in London, reflect
her preference for fresh produce, environment-friendly cleaning products and organic
meat. “They definitely know your shopping habits,” she says. “They’ve never sent me
anything totally off the mark.”

Recent mailings to Ms. Masek, 43, have included coupons for new vegetables, cooking
sauces, and nuts or seeds. Ms. Masek, who made sure her nanny had a Tesco loyalty card
as well, says she often redeems the coupons and uses Clubcard points to pay for video
rentals.

Martin Hayward, director of consumer strategy at Dunnhumby, says such cases show
why loyalty cards are worth the trouble. “You couldn’t do that just with data” from
checkout receipts, he says.

The data are also useful for consumer-product makers. Five years ago, Kimberly-Clark
introduced a premium version of its Andrex toilet paper in Britain infused with aloe vera.
Clubcard records helped the Irving, Texas, company track who was buying the toilet
paper and whether shoppers stayed loyal to it. Dunnhumby also found that regular buyers
of Andrex Aloe Vera were also big buyers of skin-care products. Kimberly-Clark then
sent direct mail to 500,000 customers, offering them free beauty treatments if they could
show that they bought the toilet paper twice.

In the upper paragraph the Dunnhumby found in the data that the buyers who buy toilet
paper are also supposed to buy a skin care products. On this point Dunnhumby use his
mind and make a strategy to increase the sale. He mailed to the 500,000 customers that
they will get a free beauty treatments if they bought they bought the toilet paper twice

Tesco’s recent rollout of an ethnic food line called “World Foods” shows how customer
data can shape decision-making at almost every step of the way. The idea got its start
when Clubcard records showed shoppers at a small store in the town of Slough weren’t
buying full meals. Many people in the town have South Asian or Arab roots.

In the para the Tesco introduced the food related to the different ethnic of the groups.
The idea got its start when Clubcard records showed shoppers at a small store in the
town of Slough weren’t buying full meals. Because many of the people are from the
different ethnic groups like south Asian or Arab Roots

Tesco decided to replace the store with a supercenter. Focus groups confirmed that
people in Slough were buying some products at Tesco but turning to smaller markets for
many staples—large stacks of rice, big canisters of cooking oil and Asian brands. Many
criticized the small plastic packages of herbs at Tesco and said they wanted loose
bunches that they could touch and smell.

When Tesco decided to build a supercenter. They focused on the peoples who buy some
products from the Tesco and then turn to the smaller maker to buy stock of rice, big
packs of cooking oil and for other Asian brands. . Many customers criticized the small
plastic packages of herbs at Tesco and said they wanted loose bunches that they could
touch and smell. Just like pickle, seeds, sugar, spices

When the new Slough store opened in August 2005, it offered more than 800 foreign
products, up from 150 in the previous store. It has a large halal butcher shop, the latest
movies from India, newspapers in Arabic, Urdu, Punjabi and Bengali, and a jewelry
counter with bangles in yellow 22-karat gold popular in India. The shopping carts are
lower and flatter to fi t big sacks of rice and flour.

When the new supercenter started in 2005, there were a lot of foreign products to satisfy
the diffract ethnics groups. There were large hilal butchers so that Muslims can get meal
from here. Latest Indian movies, newspapers of different languages, jewelry counter. And
for the ease of customer they design flat shopping’s carts to carry sacks of rice or sugar
bags and flour. Now here is the strategic implication to serve the all of the ethnics groups
under on shed. With the help of this they can increase the revenues, they can defeat the
competitor, and have a strong relationships with customers.

Tesco wanted to know if the strategy was working, so it turned to Dunnhumby. The
analysis found that 36% of Slough shoppers were buying goods from the World Foods
line. That figure roughly matched the proportion of Slough’s nonwhite population.

Dunnhumby then checked addresses of World Foods buyers against government census
data that identify immigrant neighborhoods. It turned out that more than a quarter of the
World Foods customers were coming from largely white neighborhoods. By examining
the shopping baskets of these customers, Dunnhumby concluded that upscale white
shoppers with an interest in non-European food were responsible for some of the success
of the World Food line.

After the Strategy success the analysis shows that the white people use the world food
line to examine the shopping baskets of these customers. Dunnhumby concluded that
white shoppers are responsible for the success of world food line ,because of showing
intrest in non-European food
In the following days, executives huddled over big maps showing Britain’s ethnic
makeup. They outlined a plan to roll out the World Foods line to 300 stores in immigrant
areas as well as to 25 stores in mostly white parts of the country.

After show such behavior of white customers Tesco outlined the World food line products
to the 300 stores in immigrant areas as well to 25 stores in mostly white part of country.
Just to facilitates the customer either they come to main store and buy things, they can
purchase it through their corner shops

A few weeks later, Tesco stores in places like Holland Park, a leafy part of west London,
and Bar Hill, an affluent town near Cambridge, were stocking fragrant herbs and frozen
samosas. Tesco says the Bar Hill store is selling World Foods better than any of its other
stores. Dunnhumby is running numbers to get the details.

Source: Cecilie Rohwedder, “No.1 Retailer in Britain Uses

‘Clubcard’ to Thwart Wal-Mart,” The Wall Street Journal, June 6,
2006, A1, A16. Reprinted by permission of The Wall Street Journal,
Copyright © 2006 Dow Jones & Company, Inc. All Rights
Reserved Worldwide. License number 1674400826205.