TESCO 

How a CRM change an industry

Brief Tesco history:

The chain was founded by Jack Cohen in 1919. The brand first appeared after Cohen bought a shipment of tea from T.E. Stockwell and he used those initials and added the first two letters of his own surname. The first Tesco store was opened in 1929 in Burnt Oak, Edgware, Middlesex. During the 1950s and the 1960s Tesco grew organically, and also through acquisitions, until it owned more than 800 stores.

The Tesco Miracle began when after buying Dunnhumby (marketing data specialist) Tesco discovered that the top 100 costumers spend the same amount of money as the button 4000. They also discovered that the 25% of the bottom base only represented 2% of the total sales. With Dunnhumby, Tesco has able develop a huge CRM were it could study the value of each client, the frequency of buying, expenditure, where and what product the clients bought. Dunnhumby analyses the sales data from stores to enable it to construct complex marketing strategies and promotional campaigns. Within only a few months its impact was obvious. Research showed that customers spent 28% more at Tesco while cutting their spending at Sainsbury’s by 16%.

In 1995, period when retail stores competed “only” on price, it believed that all it needed to attract customers was low prices, Tesco was able to make a revolution in this market: customer-focused instead of “Always Low Prices” recognizing customer intelligence as a key factor of differentiation.

In this same year, Tesco launch the Club card, a loyal card where clients received points in which purchase. With this strategy, Tesco was able to collect data from their clients, and retained their clients. With this information, Tesco usually sent to its clients, vouchers with discount of the product that they like. To the best clients, the store manager, reserve a place to the top clients. Just to have an idea of the volume of the information collect in the first 3 month of trial, Dunnhumby collected 50 billion transactions.

The success of Tesco was so big (see the graph above) that the company has also sold its services to Kroger. It has helped Kroger to stage a recovery against Wal-Mart after a long period of losing ground.

Today, Tesco sells 97 full range of financial services with a partnership with Bank of Scotland, cars between others. Tesco identified 108 different segments which engage in different ways.

After the store success Tesco went online, becoming the leader in e-grocery and second e-retailer in the world after Amazon.com. 2008 Update on Tesco UK Online Market Share - share of UK visits in September 2008 was:

• Tesco 27.1%
• Asda 10.1%
• Aldi (which doesn't sell online) 9.5%
• Sainsburys 6.9%
• Waitrose / Ocado on 4.2%.

This is clearly a success story,

tbs