Case study of Tesco If you asked a customer of UK supermarket chain Tesco what the shopping experience therewas like in the early 1980s, "customer friendly" would probably not be the answer. Though itbegan upgrading its stores and product selection in 1983, Tesco continued to suffer from areputation as a "pile it high and sell it cheap" mass market retailer, lagging behind Sainsbury's,the more upscale market leader. To gain share against Sainsbury's, Tesco needed to reverse thepublic perception of its stores. It decided to improve the shopping experience and highlightimprovements with an image campaign to "lift us out of the mold in our particular sector," as its1989 agency brief put it. Between 1990 and 1992, Tesco launched 114 separate initiatives toimprove the quality of its stores, including adding baby-changing rooms, stocking specialtyitems such as French free-range chickens, and introducing a value-priced line of products. Itdeveloped a campaign entitled "Every Little Helps" to communicate these improvements with20 ads, each focused on a different aspect of its approach: "doing right by the customer." As aresult, between 1990 and 1995, Tesco attracted 1.3 million new customers, who helped increaserevenues and market share until Tesco surpassed Sainsbury's as the market leader in 1995.Tesco then introduced an initiative that would make it a world-class example of how to buildlasting relationships with customers: the Tesco Club card frequent-shopper program. The Clubcard not only offered discounts and special offers tailored to individual shoppers but also actedas a powerful data-gathering tool, enabling Tesco to understand the shopping patterns andpreferences of its customers better than any competitor could. Using Club card data, Tescocreated a unique "DNA profile" for each customer based on shopping habits. To build thisprofile, it classified each product purchased by a customer on a set of up to 40 dimensions,including price, size, brand, Eco friendliness, convenience, and healthiness. Based on their DNAprofile, Tesco shoppers received one of 4 million different variations of the quarterly Club cardstatement, which contained targeted special offers and other promotions. The company alsoinstalled kiosks in its stores where Club card shoppers could get customized coupons. The Clubcard data helped Tesco run its business more efficiently. Tracking Club card purchases helpeduncover each product's price elasticity and helped set promotional schedules, which saved Tescoover $500 million. Tesco used its customer data to determine the range of products and thenature of merchandising for each store, and even the location of new stores. Within 15 monthsof introduction, more than 8 million Club cards had been issued, of which 5 million were usedregularly. Tesco's customer focus strategies enhanced by the Club card helped propel Tesco toeven greater success than in the early 1990s. The company's market share in the UnitedKingdom rose to 15 percent by 1999, and that year other British companies voted TescoBritain's most admired company for the second year in a row. In the following years, Tescocontinued to apply its winning formula of using customer data to dominate the British retaillandscape. Tesco moved beyond supermarkets to "big box" retailing of general merchandise, ornonfood products. This strategic growth not only provided additional convenience to consumers who preferred shopping under one roof but also improved overall profitability. In 2003, theaverage profit margin was 9 percent for nonfood products versus 5 percent for food and nearly20 percent of Tesco's revenues came from nonfood items. That year, the company sold moreCDs than Virgin Megastores and its apparel line, Cherokee, was the fastest-growing brand in theUnited Kingdom. Tesco continued to conduct extensive customer research with telephone,written surveys, and customer panels to extend its lead in the grocery market. By 2005, thecompany had a 35 percent share of supermarket spending in the United Kingdom, almost twicethat of its nearest competitor, and a 14 percent share of total retail sales. Tesco sought growthoverseas in the mid-2000s and today, the company operates 4,300 stores in 14 countries, with astrong focus on high-growth markets in Asia. The company has used the samecustomer-centered strategies that worked in the United Kingdom to expand into these newmarkets. Tesco continues to diversify its product and service offerings in order to reach moreconsumers. In the late 1990s, Tesco launched its own ISP service, Tesco Broadband, to provideInternet access to homes and businesses. During the 2000s, the company partnered withexisting telecoms to create Tesco Mobile and Tesco Home Phone, a service now used by over 2million UK residents. Recently, Tesco joined forces with the Royal Bank of Scotland to create abanking division, Tesco Bank. In addition, Tesco offers insurance policies, dental plans, musicdownloads, and financial services. One Citigroup analyst said the chain had, "pulled off a trickthat I'm not aware of any other retailer achieving. That is to appeal to all segments of themarket." Tesco has accomplished this feat by creating three distinctive Tesco-branded priceranges in order to appeal to everyone: "Finest," "Mid-range," and "Value." In addition, Tesco hascategorized its stores into six different formats, depending on where they are located and whomthey are targeting. From largest to smallest, these stores include Tesco Extra, Tesco Superstores,Tesco Metro, Tesco Express, One Stop, and Tesco Home plus. Throughout Tesco's massiveexpansion, both globally and through its product and service offerings, Tesco has stayed true tothe importance of its Club card loyalty program. Consumers can now earn points on their Clubcard every time they shop at a Tesco store, use one of Tesco's services (Tesco Mobile, TescoHome Phone, Tesco Broadband, Tesco Credit Card, or Tesco Financial), or use one of Tesco'spartners' services. During the recent worldwide recession, Tesco helped trigger spending throughspecial loyalty promotions such as double reward points. During a double points promotion,consumers receive 2 points for every £1 spent. For every 100 points, consumers receive a £1voucher good for any Tesco product or service. In 2009, Tesco's profits reached £3 billion, whichresulted in £59 billion in revenues. Today, it is the largest British retailer measured by both salesand market share (30 percent). Based on profit, it is the second largest retailer in the worldafter Walmart.Questions1. What's next for Tesco? Where and how can it grow? Who will it target?2. How can Tesco take its customer loyalty programs to the next level?3. Discuss whether their current strategy is fruitful and successful for them or not? Also, suggestthem a strategy for next 3 years keeping the pandemic situation in mind.

Question

Case study of Tesco If you asked a customer of UK supermarket chain Tesco what the shopping experience therewas like in the early 1980s, &#34;customer friendly&#34; would probably not be the answer. Though itbegan upgrading its stores and product selection in 1983, Tesco continued to suffer from areputation as a &#34;pile it high and sell it cheap&#34; mass market retailer, lagging behind Sainsbury's,the more upscale market leader. To gain share against Sainsbury's, Tesco needed to reverse thepublic perception of its stores. It decided to improve the shopping experience and highlightimprovements with an image campaign to &#34;lift us out of the mold in our particular sector,&#34; as its1989 agency brief put it. Between 1990 and 1992, Tesco launched 114 separate initiatives toimprove the quality of its stores, including adding baby-changing rooms, stocking specialtyitems such as French free-range chickens, and introducing a value-priced line of products. Itdeveloped a campaign entitled &#34;Every Little Helps&#34; to communicate these improvements with20 ads, each focused on a different aspect of its approach: &#34;doing right by the customer.&#34; As aresult, between 1990 and 1995, Tesco attracted 1.3 million new customers, who helped increaserevenues and market share until Tesco surpassed Sainsbury's as the market leader in 1995.Tesco then introduced an initiative that would make it a world-class example of how to buildlasting relationships with customers: the Tesco Club card frequent-shopper program. The Clubcard not only offered discounts and special offers tailored to individual shoppers but also actedas a powerful data-gathering tool, enabling Tesco to understand the shopping patterns andpreferences of its customers better than any competitor could. Using Club card data, Tescocreated a unique &#34;DNA profile&#34; for each customer based on shopping habits. To build thisprofile, it classified each product purchased by a customer on a set of up to 40 dimensions,including price, size, brand, Eco friendliness, convenience, and healthiness. Based on their DNAprofile, Tesco shoppers received one of 4 million different variations of the quarterly Club cardstatement, which contained targeted special offers and other promotions. The company alsoinstalled kiosks in its stores where Club card shoppers could get customized coupons. The Clubcard data helped Tesco run its business more efficiently. Tracking Club card purchases helpeduncover each product's price elasticity and helped set promotional schedules, which saved Tescoover $500 million. Tesco used its customer data to determine the range of products and thenature of merchandising for each store, and even the location of new stores. Within 15 monthsof introduction, more than 8 million Club cards had been issued, of which 5 million were usedregularly. Tesco's customer focus strategies enhanced by the Club card helped propel Tesco toeven greater success than in the early 1990s. The company's market share in the UnitedKingdom rose to 15 percent by 1999, and that year other British companies voted TescoBritain's most admired company for the second year in a row. In the following years, Tescocontinued to apply its winning formula of using customer data to dominate the British retaillandscape. Tesco moved beyond supermarkets to &#34;big box&#34; retailing of general merchandise, ornonfood products. This strategic growth not only provided additional convenience to consumers who preferred shopping under one roof but also improved overall profitability. In 2003, theaverage profit margin was 9 percent for nonfood products versus 5 percent for food and nearly20 percent of Tesco's revenues came from nonfood items. That year, the company sold moreCDs than Virgin Megastores and its apparel line, Cherokee, was the fastest-growing brand in theUnited Kingdom. Tesco continued to conduct extensive customer research with telephone,written surveys, and customer panels to extend its lead in the grocery market. By 2005, thecompany had a 35 percent share of supermarket spending in the United Kingdom, almost twicethat of its nearest competitor, and a 14 percent share of total retail sales. Tesco sought growthoverseas in the mid-2000s and today, the company operates 4,300 stores in 14 countries, with astrong focus on high-growth markets in Asia. The company has used the samecustomer-centered strategies that worked in the United Kingdom to expand into these newmarkets. Tesco continues to diversify its product and service offerings in order to reach moreconsumers. In the late 1990s, Tesco launched its own ISP service, Tesco Broadband, to provideInternet access to homes and businesses. During the 2000s, the company partnered withexisting telecoms to create Tesco Mobile and Tesco Home Phone, a service now used by over 2million UK residents. Recently, Tesco joined forces with the Royal Bank of Scotland to create abanking division, Tesco Bank. In addition, Tesco offers insurance policies, dental plans, musicdownloads, and financial services. One Citigroup analyst said the chain had, &#34;pulled off a trickthat I'm not aware of any other retailer achieving. That is to appeal to all segments of themarket.&#34; Tesco has accomplished this feat by creating three distinctive Tesco-branded priceranges in order to appeal to everyone: &#34;Finest,&#34; &#34;Mid-range,&#34; and &#34;Value.&#34; In addition, Tesco hascategorized its stores into six different formats, depending on where they are located and whomthey are targeting. From largest to smallest, these stores include Tesco Extra, Tesco Superstores,Tesco Metro, Tesco Express, One Stop, and Tesco Home plus. Throughout Tesco's massiveexpansion, both globally and through its product and service offerings, Tesco has stayed true tothe importance of its Club card loyalty program. Consumers can now earn points on their Clubcard every time they shop at a Tesco store, use one of Tesco's services (Tesco Mobile, TescoHome Phone, Tesco Broadband, Tesco Credit Card, or Tesco Financial), or use one of Tesco'spartners' services. During the recent worldwide recession, Tesco helped trigger spending throughspecial loyalty promotions such as double reward points. During a double points promotion,consumers receive 2 points for every £1 spent. For every 100 points, consumers receive a £1voucher good for any Tesco product or service. In 2009, Tesco's profits reached £3 billion, whichresulted in £59 billion in revenues. Today, it is the largest British retailer measured by both salesand market share (30 percent). Based on profit, it is the second largest retailer in the worldafter Walmart.Questions1. What's next for Tesco? Where and how can it grow? Who will it target?2. How can Tesco take its customer loyalty programs to the next level?3. Discuss whether their current strategy is fruitful and successful for them or not? Also, suggestthem a strategy for next 3 years keeping the pandemic situation in mind.

Accepted Answer

Tesco is one of the successful market chains in the united kingdom which is the world's…