Hult International Business School

Tesco Returns to the Corner Shops of

England's Past
Business IT
Professor Mario Yanez
06/01/2011 Team 7
Bijeet Kumar
Chirin Khawatmi
Taruna Lachhwani
Varun Kurup
 Company Overview
 Tesco Established in the UK 1924 by Jack Cohen
 Third largest retailer in the world - 2,440 stores & employs over 4,00,000
people.
 www.Tesco.com is the world’s largest online grocer. Customer base 1 million &
more than 250,000 orders a week.
 Tesco expanded into clothes, consumer electronics, consumer financial services,
internet services & gas stations.
 As of March 2008, Tesco have a store in every postcode of the UK.

1960 1970 1980 1990 2000

Source: www.tescocorporate.com, http://en.wikipedia.org/wiki/Tesco 2

Business Model & Strategy of Tesco

 Customer: Providing them with healthy choices, good information & opportunities
to get involved in communities.

 Community: Works with local communities to provide opportunities, jobs &

services to their local.

 Finance: Everyday Low Pricing Strategy.

 Operation: Maximum Utilization of Resources.

Strategy is to be flexible, Act Local, Maintain focus, Multi-formats, Develop

capability and Build Brands

Source: http://www.tescoplc.com/annualreport09/businessreview/business_model/ 3
Competitors Analysis

Sales
ASDA owned by US corporation Wal-
Mart since 1999, is the only
5% supermarket with the potential to
7% become a thorn in the side for Tesco.
Tesco
43% Asda
22%
Sainsbury
Sainsbury was the UK's biggest
Somerfields grocer until 1995, but was recently
relegated to third position behind
23% Waitrose Tesco and Asda. Despite the fact
that company has been struggling
lately it is starting to get back on
track.

Source:TNS Worldpanel 4
 The Case: Tesco’s Return
 During deteriorating sales Tesco implemented a CRM (Customer Relationship
Management) system called the Tesco Club Card.
 The system enabled the collection of data and categorized customers based on
spending level and shopping tendencies.
 Tesco merged information on customer transactions with Tesco’s website and with
point of sale data to customize its product offerings and communications.
 Sends 80 different versions of its mailing to members and publishes four
versions of its club card magazine.
 Offers tailored cards to students, families, top customers, seniors, etc
 Aligned its offering closely with the specific members’ needs as opposed to giving
out general incentives e.g. Tesco’s Baby club.

The Result – SUCCESS !

 Now boasts 10 million active households
 Increase in sales by 52% five years after implementation
 Rapid growth and extension to the Web
Source: www.tescocorporate.com, www.tesco.com
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http://www.topwebsitetips.com/articles/customerrelationshipmanagement.aspx
 CRM at Work: Tesco
 CRM is a form of customer-driven action plan and personal marketing. It
involves thinking in a customer-centric way and is greatly enabled by technology
 Rather than marketing to masses, only market to targeted individuals
 Tesco is able to cater to the need of each segment by providing customised
recommendation, special tips and privileges for those individual segments like
allowing people holding baby club card to park nearer the store.
 Initially by providing these additional customised service they are able to retain
customers and increase loyalty.
 Through advertising and the customers’ positive word of mouth they are able to
also attract new customers .

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Dunnhumby – Invasion of Privacy?
 Tesco hired Dunnhumby: a marketing research firm
 Collects and analyzes customer data, sales data, and traditional marketing
research to reveal useful information - then provides customer driven action
plans thereby achieving greater customer intimacy.

Invasion of Customer Privacy

 Customers are asked to provide personal details
 Every time a club card is used a list of stores shopped in, product bought and
price paid of that customer are shown.
 Despite some voiced concerns there is no invasion of customer privacy since
customer have the choice to provide the details or purchase a club card. In
additional no personal data is ever sold or transferred externally.
 Tesco explains this information is used to better serve the customer and
provide appropriate promotions or other potentially interesting information.
Source: www.dunnhumby.com
http://en.wikipedia.org/wiki/Tesco_Clubcard#Privacy_concerns
http://news.bbc.co.uk/2/hi/technology/6763307.stm 7
 CRM as a Sustainable Competitive
Advantage
Market Share of the Top Four Supermarkets (%)
1998 1999 2000 2001 2003 2005 2006
Tesco 22.9 23.4 24.2 22.8 29.8 26 30.6
Sainsbury's 19.8 19.1 18.6 15.8 16.2 15.9 16.3
Asda 14.1 14.8 16.2 12.4 17 16.5 16.6
Safeway 10.2 10.0 10.1 9.3 10 - -
Morrisons - - - - 6 12.2 11.1

Although CRM increased the initial operating cost it does provide a sustainable
competitive advantage:

Increased the market share

Generated new customers through referrals
Customer retention and high level of loyalty
A wider customer database
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Questions?