Company: Tesco

Objectives: improving the company’s image; increasing market share in Great Britain and becoming the sector leader.

Solution: total focus on customer in all company processes; Clubcard; improvements in distribution network and points of sale, optimization of layout and management by categories.

Result: Tesco is the leading supermarket chain in the country.

The British supermarket chain Tesco is a perfect example of the maxim that focusing on the customer can save a company from failure. The company’s poor service and lack of popularity with the public led, in the 1980’s, to using the expression “Doing a Tesco” as an equivalent to failure.

An image problem

Since 1947, when they opened the first British shop based on the American concept of “self-service”, the company had focused on optimizing their relationship with members and providers, improving their logistical processes at the cost of leaving the customer behind. Over time, this strategy wore on the organization, whose image among consumers was one of a cheap company with bad quality and poor customer service. At the beginning of the 1990’s, the firm went in a new direction, led by its then Marketing director and current CEO Terry Leahy. Leahy proposed a complete change in the Tesco culture in order to put the company back on its feet.

The company had three immediate objectives. First, fighting to distinguish themselves from the competition. To do that, it was essential to stop imitating the sales strategy of its main rival, Sainsbury’s. Secondly, they had to put the customer at the focal point of any decision taken from then on. Finally, and related to the last point, they would design a new sales offer based on consumer preferences.

Knowing the customers

A fundamental step in putting this system into action was providing customers with a means of expressing their opinions of the company. The simple use of suggestion boxes began to show the first important clues to improving Tesco supermarkets.

The company spent more time in getting to know their customers, going beyond what any of their competitors had done previously. One of the instruments that best served this task was the Clubcard. Introduced in 1995, it marked a before and after in the field of loyalty cards. Tesco gathered and analyzed all the information provided by the cards in order to build customer profiles. Knowing their purchasing habits, why and when they decided on some products and not others, which were their favorite brands and how often they went to the supermarket, they could offer proposals and personalized discounts in real time. Since then, more than 24 million customers use the Clubcard, and the savings created by it surpass 470 million euros.

This policy of focusing on the customer ingratiated the company with its customers, who regained their lost confidence thanks to information provided by the consumers. The company optimized its sales network distribution, and improved its management of stocks and shelf displays by using a better design for promotional offers: by adapting to their customer’s tastes, they were able to eliminate what the customers weren’t interested in, without the consumer perceiving fewer purchase opportunities.

Tesco currently has one of the most complex and complete management-by-category systems in the world. The company uses more than 16.000 segmentation models and their corresponding algorithm units and alarms to analyze its customers, establishing an advanced “need segments” model, by which it organizes its marketing and communications strategy. This way, the company has numerous versions of its brochures and promotional magazines, which it distributes to one segment or another based on its characteristics. In this manner, Tesco is able to anticipate their customer’s wishes and offer them what most suits their needs, saving large amounts of money.

In a short time, Tesco has come to be seen as synonymous with quality, maintaining a policy of competitive prices which has allowed other powerful international groups such as Wal-Mart or Carrefour to successfully face the entrance into the Anglo-Saxon market.