Tesco: the Customer Relationship Champion

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Tesco: The Customer Relationship Management Champion
This case was written by Mukund A, ICMR Center for Management Research (ICMR). It was compiled from published sources, and is intended to be used as a basis for class discussion rather than to illustrate either effective or ineffective handling of a management situation. 2003, ICMR Center for Management Research

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ICMR Center for Management Research

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Tesco: The Customer Relationship
Management Champion
“Our mission is to earn and grow the lifetime loyalty of our customers.”

“They (Tesco) know more than any firm I have ever dealt with how their customers actually think, what will impress and upset them, and how they feel about grocery shopping.”1 - Jim Barnes, Executive Vice President of Bristol Group, a Canada-based Marketing Communications and Information firm, and a CRM expert.

“The whole philosophy is in balancing the business in favor of the customer. That comes down to a mixture of company culture and customer insight.”2
- Crawford Davidson, Director (Clubcard Loyalty Program), Tesco.

A MASTER AT CRM
Every three months, millions of people in the United Kingdom (UK) receive a magazine from the country‟s number one retailing company, Tesco. Nothing exceptional about the concept – almost all leading retailing companies across the world send out mailers/magazines to their customers. These initiatives promote the store‟s products, introduce promotional schemes and contain discount coupons. However, what set Tesco apart from such run-of-the-mill initiatives was the fact that it mass-customized these magazines.

Every magazine had a unique combination of articles, advertisements related to Tesco‟s offerings, and third-party advertisements. Tesco ensured that all its customers received magazines that contained material suited to their lifestyles. The company had worked out a mechanism for determining the advertisements and promotional coupons that would go in each of the over 150,000 variants of the magazine. This had been made possible by its world-renowned customer relationship management (CRM) strategy framework (Refer Exhibit I for a brief note on CRM). The loyalty card3 scheme (launched in 1995) laid the foundations of a CRM framework that made Tesco post growth figures in an industry that had been stagnating for a long time. The data collected through these cards formed the basis for formulating strategies that offered customers personalized services in a cost-effective manner. Each and every one of the over 8 million 1

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„How a Supermarket can be a Corner Shop,‟ www.crmguru.com, January 23, 2003. „How a Supermarket can be a Corner Shop,‟ www.crmguru.com, January 23, 2003. Loyalty cards are a part of „loyalty programs,‟ which fall under the domain of customer retention strategies. These cards reward customers when they make purchases from the company in the form of points that accumulate over time. These points can later on be redeemed for cash/gifts/discounts. Thus, they provide incentives to customers for remaining a particular company‟s customers.

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Purchased for use on the IEP: Marketing, at Instituto de Empresa. Taught by Claire Bastien, from 30-Oct-2012 to 28-Apr-2013. Order ref 136698. Usage permitted only within these parameters otherwise contact ecch@ecch.com

- Sir Terry Leahy, Chief Executive Officer...
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