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Customer Relationship Management Schemes

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Question:

Discuss about customer relationship management schemes, multi-channel approach and consumers purchasing behaviour?

 

Answer:

Tesco was founded by Sir Jack Cohen in 1919. It is considered as the third most popular and largest retail chain stores in the world, Wal-Mart being at number one.

Customer relationship management schemes

With a ground-breaking Club-card based loyalty scheme and the improvement of a tactical CRM (Customer Relationship Management) plan, the company extended the foundation for true customer understanding and better brand commitment. In the year 1995, the Tesco club card scheme was announced to provide a better service to the consumers (Hallberg, 2004). The club card helped in providing necessary information regarding appraising, customer services, advertisings, customer purchase, media usefulness, customer transportation and shop exploration. During 1993-1994, ‘The First Class’ service was launched followed by ‘One on Front’ service to minimize the long waiting hours at the time of check-out (Jones, 2001). Again, in the year 2000, www.tesco.com was born that focussed on the business of e-commerce and the ‘Customer Championship’ and the ‘Learn Thinking’ concepts were introduced the following year.  In order to increase their availability to customers, the company even expanded the fixation of phone lines. Also ‘My Time’, exclusively for women, was developed giving out information related to beauty salon, discounted cosmetics, luxury spa, perfumes, multi-specialty gym and designer wears. The sole mission of Tesco was to expand the value for customers and earn their life-time loyalty.  The company is credited to have one of the best customer relationship management in the business having an insight into the knowledge of a customer’s thoughts and emotions about grocery shopping. Tesco also issues company magazines to give its products information to its loyal customers.

As a part of customer relationship management initiative, Tesco launched a loyalty card scheme which was based on Tesco club card. It promised the customers that they can earn one loyalty point for every £1 they spend in buying the company’s products in Tesco store or online at Tesco.com. These points can be easily redeemed when buying Tesco products in store or in places like inns, galleries, park reserve, tourist attractions, and eateries (Turner, & Wilson, 2006).. The club card scheme was far more than just a consumer reward scheme and its main aim was to generate data related to the habits and purchasing patterns of customers. This information helped the company to take decisions regarding the development of its new products, its pricing strategy, and management of the product range, marketing tools, and the customer procurement. The biggest reason for the success of the club card was that the customer felt valued and recognised owing to its mailing facilities.

There is no doubt that the club card proved to be triumph card for Tesco, being a major contributor in the business profit. However, despite its facilities it failed to keep up pace with the rapidly changing market environment. Currently the customer buying behaviour and the business environment has drastically changed from the time the club card was launched (Worksmart.org.uk, n.d.). Nowadays, more number of products is being sold on promotion in the global market and the mailing facility provided by the club card is no longer exclusivity as competitive coupon activity dominates the business. In such competitive market, loyalty schemes would be a costly way of sales promotions. Moreover, customers of today are more challenging as they are more conscious of the brand and tend to fall for the store’s discount offers.

 

The technologic environment of the market has also advanced with the rise of e-receipts. It is much easier now to generate a more comprehensive data regarding the customer buying behaviour than it used to be as the club card could only generate the data from one source.  The management team of Tesco is facing the challenge of managing customer relationship.

In such a competitive market that is full of discounters. Basically, there needs to be balance between the United Kingdom procedure and Tesco’s growth overseas.

Multi-channel approach

Tesco provides the multi-channel approach, the facility of both store channel and website/internet channel to its customers (Collins, & Burt, 1999). The consumers who buy groceries online tend to spend twice as money as they spend in the companies’ stores. Tesco is said to have invested a huge amount in order to develop and expand its multi-channel plans beyond the UK market place.

The recurrent schedule of grocery shopping for everyday merchandises creates important characteristic buying patterns that might be hard to amend. These behaviours comprise the aptitude to taste and scan foodstuffs and the chance to see associated stuffs that were not formerly on the supermarket run list. Online shopping might be seemed as a way to get freedom from an inauspicious chore. Therefore, dissimilar buyer groups show fluctuating attraction to online grocery shopping and divergent inclination to pay an exceptional fee for home delivery.

Merchandizing chains entails a large number of stores which are closely linked with their headquarters, especially in case of authorizing (Sparks, 1986). If the net is used to develop a new delivery network that bypasses stores, fights are probable to happen. Owing to the low revenue in online deals, the companies as well as its managing operation are careful not to needlessly separate or upset their delivery associates. There are a few advantages and disadvantages of both the channels.

Advantages of store channels include surfing, touching sensation, Reserved Facility, Cash and credit payment. The disadvantages of store-channels are that the growing of trades in stores is deteriorating and it requires a great deal of obligation for employing and training. Also, there is a difficulty in bestowing retail successfully in-store. In the UK market, Tesco introduced a home shopping service with the launch of Tesco.com website and on May 1984, in England, Mrs Snowball became the first online shopper (Humby, & Hunt, 2004). Tesco expanded its internet services beyond UK and in the year 1993, it became the first retail company in the world to offer home shopping service.

 

Again, advantages of internet channel includes the option of wide spread,

Lesser Charge, Convenience, Wider Choice and 24*7 accessible. The disadvantages of internet channel are Absence of one-to-one communication, Lack of post-purchase provision, refunding disputes, not trace, sense and smell goods, Terror of scam, ID stealing and safety

External factors that affected the Tesco Retail Company on the recent years

Pest Factor

Political Factors

Tesco has its stores across the global and hence it is influenced to a great extent by the political environment of different countries. Different countries in United Kingdom, have been observed, focussing on their domestic companies’ interest more than the foreign firms’ interest. They make varied laws of duty and verifying policies for the domestic and non-domestic retail corporations. Again political unrest in some countries has an adverse effect on Tesco’s business.

Economic factors:

Economic factors affect the company in a big way. Growth in the economy of a country creates a demand and downfall in a country’s economy declines the demand. Economic inflation affects buyers’ purchasing power (Smith, & Sparks, 2004). Rise and fall in the exchange rate also affects the shares of the firms functioning in the global market.

Social/Cultural Factors

The customers, at present prefer going for one-stop or bulk shopping owing to the socio-cultural changes. Hence, Tesco has expanded its food and non-food items on sale. Moreover, customers now, have become more health conscious and demand products that are healthy and non-toxic. Tesco has taken initiatives to increase its organic products to meet the increasing demand of the consumers (Winterman, 2013).

Technological Factors

Technology is one of the major factor that has affected Tesco and the company’s products  in a big way. The advanced technologies has helped both the company and the customers as it has made shopping easier and more convenient for the customers and the manufacturing procedure effective for the company. The introduction of the Efficient Consumer Response (ECR), Electronic Funds Transfer Systems (EFTPoS) and electronic scanners have helped in the growth of the business.  

Supplier Issues

Suppliers can take the decision of raising the price of orders which could affect a company’s profit share. Again, a supplier’s consistency can affect the business because if raw materials arrive late, even the finished goods would be late in shipping to consumers. The credit terms, too, can be altered as per the supplier’s wish and they could decide whether a discount should be offered on the bulk order (Finch, 2004).

 

Tesco has been the highest shareholder in the UK grocery market for more than twenty five years. It has around three thousands stores in UK alone and comprises of twenty eight to thirty percent of market share. However, owing to its scandals and tough competition from its rivals, the market share and demand of Tesco food products have declined. The below chart shows the market share status of Tesco.

This year the scandal of Tesco’s accounting crisis is astonishing as there is shortfall of £250m in the company’s account which is equivalent to a quarter its predicted profit share (Palmer, 2005). It is deduced from this scandal that Supermarkets do not make instant payment to the suppliers. In fact, Tesco and its suppliers function mainly through credit accounts and its suppliers claim that Tesco is the most aggressive retail company to work with. Nonetheless, by regulating the relationship between the retailers and suppliers, the company can save itself from such scandals.

Again, in the year 2013, there has been a report of horsemeat in meat burgers scandal. Tesco confirmed that its findings have agreed with that of Irish government officials (Lindgreen, & Hingley, 2003). Hence, as a precautionary measure, the company fired one of its main suppliers, Silvercrest of ABP food groups so that the incident does not happen again. Tesco even started its own system of wide-ranging DNA testing.

This year, Tesco has faced yet another scandal known as ‘bullying of suppliers’ scandal. The company is accused of mistreating the suppliers, delaying their payments and braeching of Groceries Supply Code of Practice. Tesco’s account and profits are under investigation undertaken by the Groceries Code Adjudicator (GCA). To make sure justice is given to the suppliers.

Consumers Purchasing Behaviour 

Psychological:

Attitude- attitude is directly and indirectly associated with the marketing strategy of a company. The success or failure of the company’s promotion plans affects the customer’s attitude towards the company’s products. Attitudes of a customer are highly influenced by the family member or the closed ones (Rowley, 2005). No wonder, it is seen, that a lot of companies start a promotion or introductory offer on its products to influence the customer’s attitudes (Clark, 2014).

Learning- By learning, a customer becomes more aware than before and goes through changes that affect their buying behaviour. Information and experience helps them in deciding what to buy and where to buy it from? With every experience, the customer learns which gets modified into attitudes. For instance if a customer comes across a sale offer, he or she advises other reference groups to purchase the discounted product on sale. That is the reason, that new information and free samples should be given out to customers

Personal

Lifestyle of an individual plays a vital role in affecting his or her buying behaviour. At present, there is a preference and demand for healthy/organic foods.

Age and life-cycle-Age and life-cycle of a customer, again, an indicator of a customer’s buying behaviour. For instance older customer would buy things that would meet their physical and mental requirement. Children, on the other hand, buy products that attract them irrespective of its effect on his or her health (Dawson, 2006).

Culture

Since culture is the most important part of a consumer’s needs and actions, it is an important factor that affects consumer buying behaviour. Essentially culture is known to influence our lives through society, educational and family unit. An individual living in a society has to abide by its laws and regulations.

Social factors:

Reference Group:

Consumer behaviour is prejudiced by certain reference groups. Reference group consisting of class friends, family members, and friends, affect the buying pattern of a consumer the most as most of the day-to-day interactions are with them.

 

Family Group:

Family members of the buyer have strong effect on customer's activities. Children who stay in a joint family or with parents, give the family group the opportunity to influence their minds and take important decisions for them.

Recommendations:

New Product Development

In Switzerland, there is a high demand of food brand establishments. By concentrating on the Swiss market, Tesco could create a market of its own and develop new products as per the Swiss people’s preferences.

Market development

The development of market strategy would help Tesco to expand its company and it can start establishing itself in Switzerland for food and non-food retail businesses. After procuring the permission to get started there, the company can come up with new and innovative products targeting all age group. With efficient marketing strategy and efficient manufacturing planning could help Tesco grow.

Segmentation Strategy

Segmentation strategy should be initiated by Tesco for its successful functioning in Swiss lands (Dawson, 2006). Initially the company should start with the launch of small stores and aim to produce quality goods at a fair price to people as they are super conscious about the product’s quality.

Targeting Strategy

Tesco should aim to target all age groups of consumers. This targeting strategy will help the company recognise the business’ prospective. The company can offer a wide range of its products in a structured arrangement which would in turn help its revenue share.

Positioning strategy

In order to develop a marketing strategy, market positioning strategy is very important (Yoruk, & Radosevic, 2000). Positioning strategy adoption will help Tesco determine their status as accompany, and their standing in comparison to its rivals. Again, by positioning strategy, the company can keep a check on its products and similar products produced by other companies.

Somerfield

Other s

Sainsbury

Tesco

Morrisons

Asda

Waitrose

References

Rowley, J. (2005). Building brand webs: Customer relationship management through the Tesco Clubcard loyalty scheme. International Journal of Retail & Distribution Management, 33(3), 194-206.

Dawson, J. (2006). Retail trends in Europe. In Retailing in the 21st Century (pp. 41-58). Springer Berlin Heidelberg.

Palmer, M. (2005). Retail multinational learning: a case study of Tesco. International journal of retail & distribution management, 33(1), 23-48.

Clark, T. (2014). A history of Tesco: The rise of Britain's biggest supermarket. [online] Available at: https://www.telegraph.co.uk/finance/markets/2788089/A-history-of-Tesco-The-rise-of-Britains-biggest-supermarket.html [Accessed 12 Apr. 2015].

Winterman, D. (2013). Tesco: How one supermarket came to dominate. [online] BBC News. Available at: https://www.bbc.com/news/magazine-23988795 [Accessed 12 Apr. 2015].

Smith, D., & Sparks, L. (2004). Logistics in Tesco: past, present and future. Logistics and Retail Management, 2, 101-120.

Humby, C., & Hunt, T. (2004). Scoring points: How Tesco is winning customer loyalty. Kogan Page Publishers.

Sparks, L. (1986). The changing structure of distribution in retail companies: an example from the grocery trade. Transactions of the Institute of British Geographers, 147-154.

Collins, A., & Burt, S. (1999). Dependency in manufacturer-retailer relationships: the potential implications of retail internationalisation for indigenous food manufacturers. Journal of Marketing Management, 15(7), 673-693.

Finch, P. (2004). Supply chain risk management. Supply Chain Management: An International Journal, 9(2), 183-196.

Lindgreen, A., & Hingley, M. (2003). The impact of food safety and animal welfare policies on supply chain management: the case of the Tesco meat supply chain. British Food Journal, 105(6), 328-349.

Worksmart.org.uk, (n.d.). Your company: TESCO STORES LIMITED: company details - from workSMART.org.uk. [online] Available at: https://www.worksmart.org.uk/company/company.php?id=00519500 [Accessed 12 Apr. 2015].

Turner, J. J., & Wilson, K. (2006). Grocery loyalty: Tesco Clubcard and its impact on loyalty. British Food Journal, 108(11), 958-964

Hallberg, G. (2004). Is your loyalty programme really building loyalty? Why increasing emotional attachment, not just repeat buying, is key to maximising programme success. Journal of Targeting, Measurement and Analysis for Marketing, 12(3), 231-241.

Jones, D. T. (2001). Tesco.com: delivering home shopping. ECR Journal, 1(1), 37-43.

Yoruk, D. E., & Radosevic, S. (2000). International Expansion and Buyer Driven Commodity Chain: The case of Tesco. SSEES/UCL: The Emerging Industrial Architecture of the Wider Europe.

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