Customer Relationship Management A Case Study Of Tesco Marketing Essay

Tesco, then the U.K.’s second-largest grocer by a large margin, first teamed up with dunnhumby in the mid 1990’s. Tesco had decided to implement a loyalty program, and had first settled on running it themselves in three stores. Unimpressive results followed, and dunnhumby was asked to join them in their efforts. The test and learn approach was used in 12 stores, and the Tesco Club Card program was born.

To help Tesco compete in the marketplace, dunnhumby proposed a throwback to 40 years prior, one that would focus on some of the same strategies of the corner grocers of England’s past. The two companies decided to work together to create a modern “corner store” by using the individual customer as their focus.

To do this, the definition of customer loyalty was turned on its head. There would be a move away from averages. “It is important to note,” said Steve to the audience, “that there is no longer any average customer.” Consumer insight has changed ways of thinking— both about the customer and about the business. The average/typical/trade margin/product-based approach is no longer sufficient. Instead, “All of us need to focus on a truly customer-based business; one that sees the customer as an individual through complex segmentation strategies that focus on share of spend, not just profit,” he said. “Furthermore, our goal should be changing the way they think about us.” Tesco’s explosive growth and success of the 1990’s was proof that they are one company that truly accomplished this. Tesco’s customers began to feel appreciated and receive relevant offers. The rest is history.

Tesco’s Chairman Sir Terry Leahy placed this mission statement in the center of one of the company’s annual reprts: “Continually increasing value for customers to earn their lifetime loyalty.” And that is exactly what they did.

Tesco’s Club card program boasts 10 million active households and captures 85% of weekly sales. It is also a symbol of Tesco’s commitment to their customers as individuals: multidimensional customer segmentation and tailored communications— as of last June, four million unique quarterly mailings— prove to Tesco’s customers that they can count on their “local grocer” to know them. Mailings are tailored to the needs, interests, and potential interests of Club Card members. Customers are segmented into cost conscious, mid-market, and up-market segments, which are in turn segmented into healthy, gourmet, convenient, family living, and so on. These sub segments are then segmented further and communications are tailored to each.

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Impressively, Club Card coupon redemption is in the 20%-40% range and cost per redemption decreased since the inception of the Club Card Program. By targeting in such a relevant way and treating customers according to their individual behaviors, needs, and desires, Tesco came to understand that a higher-value coupon is not needed when you’ve reached the right person in the right way with a tailored message.

In the five year period following the implementation of the Club Card program, sales have increased by 52% and still grow at a rate higher than the industry average. Store openings and expansions have increased Tesco’s floor space by 150%.

In the online space, tesco.com boasts 500,000 transactions weekly, totaling nearly two billion pounds in sales each year. The profitability, plus the size of the tesco.com business and the number of transactions it completes, makes tesco.com a truly unique online grocery store.

So how did Tesco do it? How did they go from distant second to the undisputed leading grocery chain in the U.K.?

As Steve explained to the audience, Tesco focused on the individual. To gain loyal customers, customers must be at the center of your CRM strategy (as well as the focus of the business itself). It’s not the technology, not customer profitability, not loyalty programs or cards; it’s the customers themselves— as individuals— that should truly be at the center of all that you do.

“The fact is,” began Steve, “that CRM is difficult to define. It’s somewhat misunderstood, largely misused, and in some cases abused…often by the very people who strive to define it.”

“The one thing we can all agree on is that the focus is on the customer.” Unfortunately, people often put too much emphasis on the components (such as the technology) of CRM instead of the basis (the customer). Once this customer-centric vision has truly been established, the individual customer can truly begin to be understood and valued, and loyalty can be earned.

For instance, Steve pointed out to the audience that often, U.S. based businesses focus their CRM programs too heavily on the communication; the “how and what do I communicate” portion of their CRM strategy. Instead, Steve proposes that more time be spent using CRM towards strategic business decisions.  While the communication or  “who-what-how-when” strategy is undoubtedly a very important component, Steve suggests companies “make sure they spend as much time thinking about the business decisions that should come out of CRM as they do about the communication and messages themselves.”

Once a loyalty program is established, a company can move from old performance reporting to building a basic customer language to using the language to gain a detailed customer understanding.

If CRM is approached correctly and applied effectively, marketing spend can often be reduced— an outcome the entire organization can benefit from and appreciate. For Tesco, the media effectiveness of the Club Card Program has allowed them to save money on promotions and increase sales at the same time.

The path to customer loyalty can be difficult, however, when your customers don’t really care about their relationship with you. They may want to be recognized and appreciated, but they will never be “loyal” in the true sense of the word. They aren’t loyal to you as they may be to a partner, a team, a political party, or their employer. Just ask yourself: are you really “loyal” to your bank, your airline, your grocery store? Probably not. “No matter,” says Steve. “They still have to be the focus of your CRM strategy and your business.” Because, although your customers don’t want a “relationship” with you, they do want you to remember who they are. They want you to communicate to them that their business matters and they want you to do it in a relevant way.

“Your customers want to be treated better than the people that come and go and better than the people that haven’t even arrived yet— the ones that many companies spend most of their money trying to get.” “And,” says Steve, “Your customers know when you get it wrong. They know that you spend a lot of money and time elsewhere instead of on them. They may get your emails, but they’re not particularly relevant— and neither are most of the messages they are getting.”

Tesco’s Tech Support division which helps customers with any questions they may have when buying technology products online or from a Tesco store, has selected RightNow’s on-demand customer relationship management (CRM) solution to enable the retailer to give consistent responses to customers and to log customer interactions via phone, email and chat, giving them a 360-degree view of the customer.

Rod Brown, managing director, Tesco Tech Support, says the first users of the system will be contact centre agents in the digital division of Tesco’s Tech Support.

“RightNow will also provide customers and in-store customer service employees with the opportunity to self-serve via Tesco Direct, Tesco’s online catalogue, in order to find intuitive answers to their questions.

“Across all of its divisions, Tesco strives to offer great quality, range, price and service. Its customer care goal is to create value for customers to earn their lifetime loyalty,” said Brown.

According to Brown, once deployed, RightNow will support Tesco Tech Support’s customer care goal by giving them a single view of its customers enabling them to understand exactly why their customers contact them, helping them to respond accordingly.

“It will also empower agents and employees to respond to queries consistently and help customers to find answers to their questions via the web. As a result, RightNow will support a multi-channel approach to superb customer experiences.”

Brown said customer care was central to everything Tesco did and, “while a business of our size might want to cut down on calls and emails from customers; our aim is quite the opposite. We want our customers to get the support that they need at the time that they want it, and how they want it; for that, we feel RightNow is the partner of choice and supports our aim to ensure every customer has a superb experience with us, will recommend us to friends and ultimately purchase from us again.”

RightNow’s hosted CRM model was also a key deciding factor for selection by Tesco, Brown says, adding that “SaaS is the simplest and safest way to store the knowledge. We don’t need to reinvent the wheel, which would just generate more work and ultimately cost, for ourselves. We will leave the technology behind the solution to the experts, and get on with providing the best customer service to our customers.”

Emergence

CRM’s Evolution – what you need to know

Barter Beginnings

What is the history of CRM? Customer Relationship Management originated years before the start of the first millennium in Mesopotamia. Farmers who were eager to sell their surplus produce became the first initiators of the customer oriented processes

we are now familiar with.

With the passage of time and the first millennium an accurate record of transactions was kept by the merchants accounting for what was sold and whom it was sold to. This list of customers provided the first comprehensive customer oriented data and proved to be the beginning of customer oriented strategies. The advent of the 1990’s however saw a more refined customer oriented implementation taking place, laying the ground for the CRM strategy as we now know it.

How did this come about?

Tesco’s Achievements

Tesco was instrumental in bringing this about. Dunnhumms collaboration with it due to the influence of Edwina Dunn and Clive proved to be the foundation for CRM. Since these two individuals had realized the importance of knowing and understanding their customers, they understood the supreme need for adopting the right customer approach.

Tesco the second largest grocer in the UK collaborated with Dunnhumm and implemented a customer loyalty program used in 12 of their stores. Known as the Tesco Club Card Program it focused entirely on the customer and implemented the necessary business activity changes with the customer in view. While doing this it assisted in the collation of the information about customer preferences and the net result was amazing.

Profits soared, competitors complained and Tesco reigned supreme. Its additional focus on customers proved to be the focal point of success.

Watching competitors realized that this was but the right approach to adopt and that it generated huge funds. They realized that customer retention and customer loyalty were but a natural by-product.

CRM’s Launch

Realization that this approach was the right one and its subsequent implementation by Tesco was CRM’s launch in the world wide market. From then on it was smooth sailing for CRM. Hailed as the customer strategy of the decade CRM was the new option for organizations.

The history of CRM states that initially CRM focused less on big industries and far more on small and medium industries. Since the revenue from large corporates was higher it was felt that these industries should be the focal point. With the passing of time this notion changed and the importance of focusing on medium and small industries was noted.

Today CRM solutions have turned CRM into a necessary commodity for medium to small businesses and are being implemented in a wide range of industries.Various vendor solutions have been improvised catering to a vast area.

CRM in Vogue

Proving absolutely rewarding the new trend of CRM -‘on hire basis’ has proven to be the new advantage. Initially, owning CRM was regarded as absolutely advantageous but with the passage of time it became imminently clear that CRM ownership is not as helpful to an organization as it could be. Owning a CRM solution was less beneficial than acquiring it on a hire basis. Clearly it is more practical from the cost covering aspect. With a hired model, phased implementation also becomes easier.

The history of CRM has yet another page added to it as CRM in the new millennium becomes a necessary tool for almost all industries aspiring to make their customers their focal point of success.

Literature review

Abstract

This investigation applies qualitative and quantitative methods to explore the relationship between business process re-engineering (BPR), organisational learning, relationship quality and organisational performance in context of the implementation of customer relationship management (CRM). BPR and organisational learning are the first steps in the construction of CRM. Relationship quality involves trust, satisfaction and commitment, which are intended to be increased by the CRM implementation. The balanced scorecard (BSC) approach is applied to the measurement of organisational performance. The results of cases and data analysis support the actual implementation of CRM, and the respondents believe that the contribution of BPR and organisational learning can improve relationship quality and organisational performance

CRM is the notion that businesses should focus on the customer and reinvent themselves to deliver personalized, service-driven sales and support. Some pundits will argue that the overall objectives of CRM are to drive productivity and measurable ROI while improving profitability and expanding market or wallet share. While these objectives are sometimes the result of a well executed CRM initiative, many CRM projects start more simply to help organizations achieve a specific objective such as improving customer satisfaction or retention.

Let us propose a ubiquitous goal that CRM will allow an entire organization to identify, acquire, foster and retain loyal, profitable customers. To accomplish this, organizations will usually require changes in the existing technology systems (and possibly the infrastructure), processes and culture (including perhaps compensation initiatives), and, undoubtedly, leadership priorities. While each area is a topic worth

discussing, the focus of this article is on technology – what is available and in use today, and what small to mid-sized businesses can expect to see three to five years from now.

3. The case describes the customer relationship management (CRM) initiatives undertaken by Tesco, the number one retailing company in the United Kingdom (UK), since the mid-1990s. The company’s growth and its numerous customer service efforts are discussed. The case then studies the loyalty card scheme launched by the company in 1995.

It examines how the data generated through this scheme was used to modify the company’s marketing strategies and explores the role played by the scheme in making Tesco the market leader. The case also takes a look at the various other ways in which Tesco tried to offer its customers the best possible service. Finally, the company’s future prospects are commented on in light of changing market dynamics, the company’s new strategic game plan, and criticism of loyalty card schemes.

Abstract

Customer relationship management (CRM) technology has attracted significant attention from researchers and practitioners as a facilitator of organizational performance. Even though companies have made tremendous investments in CRM technology, empirical research offers inconsistent support that CRM technology enhances organizational performance. Given this equivocal effect and the increasing need for the generalization of CRM implementation research outside western context, the authors, using data from Korean companies, address the process concerning how CRM technology translates into business outcomes. The results highlight that marketing capability mediates the association between CRM technology use and performance. Moreover, a customer-centric organizational culture and management system facilitate CRM technology use. This study serves not only to clarify the mechanism between CRM technology use and organizational performance, but also to generalize the CRM results in the Korean context.

Companies are handling crm issue

How are companies using CRM solutions? The range of organizations using CRM systems today varies widely. While CRM was developed largely for service providers such as banks, hospitals, and universities, businesses small and large have found CRM to be beneficial to their bottom lines, regardless of size. Small businesses are finding CRM solutions save them time and money by organzing their client information, making it easier to provide quick and easy customer service without all the paperwork and staffing. Larger companies are using CRM to not only manage their clients, but also identify and retain new customers.

Below are a few customer stories about their experiences using CRM in different industries worldwide.

Alta Resources

Alta Resources is an outsourcer of customized sales and service applications such as call center management and customer data analysis applications. To keep up with increasing internet and global demands, Alta needed a CRM solution that integrates its clients’ business processes with its own applications to create mutual customized call center solutions for its clients. Alta Resources turned to PeopleSoft to help them create a unified, seamless CRM solution that resulted in their ability to expand their business, enter new markets, take on more clients, and increase revenue significantly within a relatively short period of time.

IBM

As a longstanding technology organization, IBM suffered from too many departments running on different platforms and applications that were no longer compatible, as some upgraded while others didn’t and new systems were introduced. IBM was already using Sieble’s CRM solution for it’s call centers and technical support, so when IBM needed help with it’s sales and marketing, they turned to Siebel once again to create a single integrated, company-wide CRM solution platform that supports IBM sales and marketing worldwide by providing a single source for customer and marketplace data, in several different languages and currencies.

Bedfordshire County Council

It’s not surprising that the public sector has turned to higher-tech CRM solutions in the past few years. Government and public agencies are responsible for interfacing with and servicing everyone from private citizens to public corporations and military agencies, and even small organizations can be overwhelmed with management issues. Bedforshire City Council in the U.K. was experiencing significant growth and a rapidly changing economy. SAP worked with the Council to create a CRM solution that makes the Council more efficient and enhances communications within its own department, with private companies, and with the general public. Bedfordshire County, and other communities worldwide, has realized that CRM has huge potential benefits to the efficiency of our government agencies, and can change the way government interacts with the public.

America OnLine

America Online, the world’s largest Internet Service Provider, turned to SalesForce.com to help it manage its extensive customer base and, on the IT end, their customer – server interactions. AOL also had an increasingly complex sales and marketing process that involved multiple external partners, and managing information across multiple groups and contracts. SalesForce.com provided AOL with a CRM solution that directs customers and employees through the fastest and most efficient channels when seeking information or solutions, increasing productivity for the entire organization.

Three Rivers Pharmeceuticals (3RP)

3RP is an example of a start-up company that implemented a CRM solution from the beginning in order to maximize its profits and efficiency during this most important growth period. 3RP had planned to do its CRM in-house, but after researching the amount of staff and financial resources it would take to do so, especially considering the FDA requirements they would be subject to, 3RP opted to outsource their software services to Oracle. Oracle quickly implemented an e-business solution that allows 3RP to focus on it’s research and business development while the Oracle solutions work to manage its contracts, business transactions, and helps to automate reports.

Blue Cross Blue Shield

Blue Cross Blue Shield worked with Pegasystems to organize and implement a CRM system to provide accurate information via one application that could do several functions, as opposed to several, disconnected information centers. BCBS saw the time it took to train new employees diminish significantly because of less time spent teaching system navigation – only having to teach them to navigate one or two screens instead of six or eight – and more time focusing on quality customer-service interactions. Employees now have more time to focus on customers instead of searching for information from several sources. The CRM solution also allows them to automate processes such as updating an address or requesting a member card, saving company time. Not only that, but the amount of technical support now needed to maintain the system is decreased.

American Airlines

American Airlines wanted to better understand its growing customer base, specifically the members of its AAdvantage Travel Awards program. AA worked with Epiphany to create a unique system that helps recognize customer differences through company-wide sources of data. Using this system, the airline and it’s individual employees can offer personalized services to its most loyal customers – frequent fliers – and potentially greatly increase their profitability by retaining customers in an increasingly dynamic and competitive industry.

Boehringer Ingelheim

In 2003, Boehringer Ingelheim (BI), a pharmaceutical company, implemented the Siebel ePharma customer relationship management (CRM) suite to create a new way of approaching the company’s markets and to standardize information. As a global company, BI needed to standardize its sales and marketing practices worldwide. The Siebel system allows BI to compile and track product and client information in order for it to be deployed at any time, to any client, worldwide. The CRM solution, combined with other factors, optimized the company’s effectiveness in such a way that BI saw their revenues double in a two-year period.

conclusion

The principle of CRM is that the more information a company has about its customers, the better. It involves managing the customer relationship across all its interfaces with the company as one entire process According to Cook, S, 2002:

“The Strategic process of identifying desirable customers segements, micro-segments or individual customers on a one-to one basis and developing integrated programmes that maximum both value to the customer and the lifetime value of customers to the organisation through targeted customer acquisition, profit enhancing activities and retention”

From an application perspective, CRM is often talked about in terms of sales force automation (SFA), marketing automation, customer services and support. However, CRM really encompasses all business processes that impact the customer experience. Essentially the goal of CRM is to:

” Increase the lifetime value of a company’s relationship with target customers. Optimize the effectiveness of marketing, selling and servicing of target customers and maximise the value of customer expenditures for mutual company/customer gain” (Marcouse & Gillespie, 1999, p121)

The above three goals seem to be very apparent in the retail supermarket sector as CRM is required as a operating model and to understand how it affects the customer experience. Eventually, it will permeate and impact all company initiatives. It must translate into effective business change in terms of insight, processes, systems and behavior that result in measurable return. Hill and O’Sullivan(2001) have identified The 10 Key principles of CRM:

Value Segmentation. Segmentation is based in customer needs, preferences, behaviors and economic potential, which provides the basis for resource allocation decisions in marketing, sales and service.

Institutional Memory: When the customer interacts with us, everyone in the enterprise is aware of prior inter actions, outstanding issues and pending opporotunities.

Collaboration. Customers are involved in the specification, design and/or delivery ala desired result.

Touch-point Alignment Customers are able to do business With you through multiple channels, which are aligned with your customer r needs and, their value to your business

One & Done. Customer needs are solved during the first contact.

Real-time information manager. Your employees have real-time access to the right information in order to make customer-based decisions and resolve issue immediately.

Customer Scorecard: Employee performance requirements arid measures are designed to drive specific customer behaviors (e.g. share of spend, loyalty, average value of customer) that are measured explicitly.

Closed-Loop Processes. Integrated front and hack office systems ensure that information and workflow carry through the entire enterprise to their logical conclusion, closing the customer loop and enabling continuous knowledge capture.

Listening & Learning Posts: Forums facilitate information sharing and learning among your customers that help them do business with you, learn from each other and provide valuable input to your business processes and operations.

Customer Experience Management: You have mapped all “touch points” between you and your customers and are s to deliver a consistent, high quality experience that provides added value to the customer.”