University of Arkansas System
Type of paper: Thesis/Dissertation Chapter
Contemporary issues in marketing
Contemporary issues in marketing
Tesco is a UK-based international grocery and general merchandising retail chain. In the recent past, Tesco has undertaken an array of marketing activities to benefit its marketing strategies and corporate social responsibility. The company has invested in a range of own-label products, in-depth market research with customers, established such in-store facilities as bakeries and meat counters and baby change roofs, as launched first-class training program to enable its staff to offer service to customers the best way possible (Chaffey & Smith 2008, p.55). This focus on customer-centric culture has been signified by the positive impacts of the Tesco Club Card and Tesco Direct.
Tesco Club Card
Use of customer loyalty programs has become increasingly pronounced in many industries, the retail sector being no exception. Retailers are increasingly adopting customer club cards to encourage customer loyalty by providing value to them. This tapping into customer loyalty for mutual benefit is a basic technique of relationship marketing which also involves other variables of trust, commitment, satisfaction, and value (Palmer 2005, p.125). Compared to its major competitors, Tesco has the most successful customer loyalty program known as Tesco Club Card. This has given Tesco competitive advantage as the competition has only succeeded in creating false loyalty. Whilst other companies have designed good loyalty programs, they have failed to create value to their brands in the eye of the consumer leading to customer dissatisfaction.
The Tesco Club card scheme, launched in 1995, has direct benefits to card-holding customers who receive a point for £1 spent at Tesco stores or at Tesco’s website, as well as double points right71755on special offers by the supermarket. The points are stored and accumulated and the card holder is awarded with vouchers for the value of points they have built up at four times a year (Gummesson 2008, p.55). These vouches can then be used for shopping in store or on Club card Deals where their value is quadrupled. In addition, Club Card holders qualify for free access to a number of Club card clubs by Tesco such as healthy food, baby and toddler, food and Christmas clubs. Tesco card-holding customers also benefit from the convenience of purchasing air miles using their club card points following Tesco’s partnership with Virgin Atlantic.
The Tesco Club card system also benefits customers by rewarding “green points” to them when they contribute to environment sustainability measures through bringing their own carrier bags during shopping. This is part of Tesco’s 10-point Community Plan intended to increase “greenness” at all Tesco stores and improve the chain’s positing within the community (Charlesworth 2009, p.85). The plan also entails Tesco’s efforts to introduce thicker and degradable bags. Through this plan, Tesco customers are able to adopt environmentally friendly behavior and significantly contribute to sustainability.
Similarly, Tesco itself substantially benefits from the Tesco Club Card scheme. The benefits afforded to the customers allows Tesco to understand consumer behavior and micro-segment them in terms of lifestyle habits. Data obtained from this enables Tesco to target the customers with more personalized promotions along with other marketing programmes (Gummesson 2008, p.86). Tesco is able to gather detailed data about individual customers’ buying habits while at the same time maintaining feedback channels by which the stores communicate directly with their customers and build loyalty. The wealth of information obtained from the Tesco Club Card system, which is constantly updated and refreshed, has significantly contributed to the supermarket chain’s knowledge of its customer base, increased sales and commitment from customers. In addition, Tesco enjoys such operational benefits as refined stock selection, display as well as staffing levels (Humby 2008, p.47).
Tesco Company has also revolutionized its use of personalized club card data through online marketing strategy. Considerable changes have been made to the company’s website, Tesco.com. Club card has been turned digital, where data about individual consumer habits are correlated with other sources of data such as mobile phone data, social networking data, payment methods to enable delivery of even more personalized offers to customers (Hart 2003, p.203). As such, value offers flash up to its most price-sensitive customers whilst finest products are the core of personalized messages to the more “up-market” club card holders.
Tesco’s Home Delivery Service
Tesco.com, previously known as Tesco Direct, has attracted a huge loyal customer base as a result of the company’s excellent home grocery delivery service. It was initially targeted at time-precious consumers needing to buy Tesco products online. This was done with the understanding that only a particular subset of the customers wanted to buy online. As such, Tesco adopted a user-friendly operating system together to produce a flexible home delivery system carefully tailored to meet the needs and expectations of the target market (Hart 2003, p.206). Tesco,com has grown to become a strong business model complimented by Tesco’s Club card loyalty programme, and helped the leading supermarket chain with identifying, segmenting and incentivizing the most potential customer for less than $250 a head (Humby et al. 2008,, p.221).
The home delivery service strives to recreate as much as possible the experience of shopping at a local Tesco store. The home delivery model is a product of Tesco’s determination to know its customer more than rival supermarkets and other internet retailers. It has benefitted Tesco’s reputation of listening to customers and responding to their wishes accordingly (Chaffey & Smith 2008, p.98). Tesco has at least 3,200-strong fleet of light commercials that facilitate about 500,000 deliveries per week. The supermarket chain’s home delivery vehicles are in operation seven days a week for a maximum 16 hours daily, resulting in substantial positive effect on their customer service levels. Using a powerful satellite navigational system, Tesco drivers follow most efficient delivery routes that enable them to meet delivery schedules at all times. This is helped by the fact that the company has a team of high skilled pickers who take care of online orders.
Marketing Relationships Between Organization And Its Stakeholders
Tesco’s Relationship Marketing
The existence of a business depends on its ability to build relationships between employers, employees, investors, customers, suppliers and other stakeholders, and efforts done to attain success. Tesco builds marketing relationships with its stakeholders through listening to them: pursues partnership approach with suppliers, employees and suppliers due to its belief in open and constructive relationships (Thoenig & Waldman 2007, p.152). Similarly, Tesco listens and partners with communities in which they do business for the purpose of understanding local issues and needs. Tesco as a publicly trade limited company has diverse ownership, meaning that the investment community has greater degree of leverage over retailer strategy as well greater degree of freedom of the supermarket to promote sustainability even in instances where it is against short-term financial interests.
Considering that Tesco operates in a highly competitive marketplace where products, tastes, consumer buying behaviors and even store are constantly changing, it always have to devise proactive measures to deal with these changes. The company’s slogan, ‘Every Little helps’, describes its way of working with all its stakeholders.
Tesco has a history of appealing to both ‘up-graders’ and ‘down-graders’, which has helped the supermarket store to significantly broaden its demographic base. Tesco strives to fulfill its aims and objectives of creating value for its customers and gain their lifetime loyalty by promoting deals and sales of products via direct mail and emails to customers. The messages are tailored for individual customers depending on their history of purchases retrieved from Tesco’s customer database developed from information gathered by Tesco Club card (Humby 2008, p.87). Tesco builds strong relationships with customers by striving to understand them and be the first to meet their needs. Tesco customers constantly receive notifications about the latest new products in stores as well on Tesco.com website. The supermarket chain also offers deals and discounts on its products in line with the customers’ needs.
Tesco also makes use of relationship marketing on its website to market special offers to customers during such holiday seasons as Easter. The website carries a range of products and presents from which customers can pick from to purchase. Customers are also afforded the option to pre-order their deliveries, enabling customers to book in advance products they desire to purchase online and be home delivered.
Tesco’s Cause-Related Marketing (CRM)
Phrases such as ‘corporate reputation’ and ‘corporate citizenship’ have increasingly become common additions to marketing speak as brands recognize the need to be perceived as responsible players by customers and the society. Cause-related marketing refers to any partnership between an organization and a charity program which markets a product, service, or an image for mutual benefit (Hassan & Parves 2013, p.6). Tesco is at the top of an illustrious group of companies that have integrated major cause-related marketing programs into their marketing activities. This has been informed by Tesco’s understanding of the significance of CRM – substantial benefits to the organization and positive impact on the community at large. CRM programs have proved necessary due to changing expectations of stakeholders who increasingly demanding greater accountability and responsibilities from organizations.
CRM activities have positively benefitted Tesco’s communication and marketing power. For instance, the supermarket chain has utilized major advertising spending in supporting a number of community involvements e.g. “Computers for Schools” and “Sports for Schools and Clubs”. When customers spend in excess of £10 at Tesco stores or at Tesco’s website, they are awarded vouchers than can be given to schools and clubs (Thoenig & Waldman 2007, p.149).
Tesco has also build reputation as a “responsible business” due to proprietary involvement in healthy eating initiatives such as it inclusion of glycemia index on food-product labeling and a Gi guide lifestyle book for customers. CRM activities through Tesco club card and home delivery services have proved to be an intrinsic component of Tesco’s marketing strategy for enhancing its corporate reputation, brand equity, loyalty, sales, and corporate social responsibility (Thoenig & Waldman 2007, p.157). CRM has strength over more conventional forms of marketing in the sense that it provides both emotional and rational connection with the customer, thus building a much stronger and sustainable relationship between the organization and customer as a stakeholder.
Tesco Information Exchange (TIE)
Tesco has also made significant efforts to boost its previously confrontational relationships with its suppliers as a result of the company’s competing on price with its supplier brands through use of copycat store brands (Thoenig & Waldman 2007, p.150). Since 1997, Tesco has been partnering with its suppliers to jointly develop a differentiated marketing approach – the Tesco Information Exchange (TIE). Through TIE, Tesco supplies its supplies with real-time information pertaining to store sales of their products. This would help in marketing analysis together with logistical planning. This arrangement enables Tesco’s supplier to give input that contributes to the improvement of Tesco’s marketing efficacy.
Furthermore, the Tesco-suppliers partnership extends into development of certain products for their customers, undertaking store-specific promotions or incorporation the vendor’s offer to the company’s customers at the store-specific level. The result of this relationship has been its suppliers’ general perception of Tesco as professional, fair, consistent, and committed to its customers (Thoenig & Waldman 2007, p.151).
Role of Customer Relationship Management (CRM)
In recent years, Customer Relationship Management (CRM) has become a powerful marketing tool that has led to massive increase in sales and profit maximization in the retail sector (Stair & Reynolds 2010, p.47). This has especially been the case due to the increasingly competitive modern marketplace in which customers continue to gain vigour, translating that business have to focus more on their customers in order to retain them and attract more others. Customer Relationship Management refers to any initiative or application developed to help a firm optimize its interactions with customers, suppliers, or protests through one or more touch points such as a salesperson, distributor, call center, store, branch office, e-mail, Web etc for the purpose of acquiring, retaining and cross-selling customers (Hassan & Parves 2013, p.2).
CRM is designed to develop and continuously improve an organization’s relationship with its customers in their real-time transactions, with the greater help of information technology. CRM utilizes such tools as databases, personalized engines, targeted marketing, response function analysis, online preference surveys, and programs designed to track and analyze customer behavior (Hassan & Parves 2013, p.3). It builds on conventional marketing principles and much emphasis is on recognizing and defining what customers perceive as value and strive to deliver it. CRM goes beyond marketing as it involves a range of business practices designed to put the organization into closer touch with its customers so as to learn more about one another, where the overall objective is to make each other more valuable to the firm. Retailers greatly rely on the implementation of CRM policy approaches and frameworks to ensure their business success (Hassan & Parves 2013, p.5).
Tesco adopted CRM in the early 1990s when the supermarket chain started working with a marketing services firm, Dunnhumby, leading to the launch of the preliminary test of loyalty card scheme in its six stores in 1994. In relation to the Tesco Clubcard, CRM can be best termed to as initiatives designed to improve the supermarket chain’s performance at every point of contact with their customers, to make them happier while making the company richer at the same time. The main motivation behind the Tesco Clubcard was to gain insight into the shopping habits of Tesco’s customers as well as give something back to them. This scheme established a new point-of-sale (POS) technology at Tesco along with a call centre dedicated to handle customer queries. Generally, Tesco has utilized CRM in its processes to create, maintain, and expand relationships with its customers. Tesco’s CRM initiatives involve loyalty cards, home delivery services, company service desk, mobile shopper and Point of Sale (POS) till.
To a larger extent, success of CRM in creating value and benefits for all concerned is dependent on both the supplier and consumers of products or services. However, with the rapid technologies changes, leading companies like Tesco have been able to utilize CRM as a strategic approach best placed to improve the value of its shareholders by achieving proper relationship with key customer bases or customer bases. This is especially because the implementation and affectivity of Customer Relationship Management are strongly dependent on the effective utilization of information technologies together with strategies of relationship marketing to deliver profitable goals in the longer term (Hassan & Parves 2013, p.8).
Strategies of CRM have greater potential of delivering value for the business organization and its stakeholders because they are exclusively customer oriented. Through CRM, Tesco’s business practices have enabled it to appeal to its existing and potential customers more closely, creating an opportunity for mutual understanding and offering better worth to each other. At the end every three month, more than 150,000 loyal Tesco customers are delivered with magazine from the supermarket chain highlighting the latest and exclusive offers of the company’s products and services, while more than 8 million Tesco shoppers are reached by the CRM tools.
By and large, Tesco can be termed as the most excelled practitioner of CRM pertaining to its knowledge of the customer thoughts, their perception and feeling regarding grocery shopping. Using demographic data, lifestyle data, information on total dollars spent on food items, and customer response to offers and promotions facilitated by the Tesco Clubcard, Tesco has put much focus on customer satisfaction by developing customer needs segments to which personalized coupons are awarded to individual segments.
Tesco has also successfully applied CRM approaches to its home delivery services. They have contributed to creation of value for both the company and its customers in the sense that new technology applications (Microsoft-developed website) have resulted in reduced flexibility of delivery time and improved order-picking process. The company uses special software that manages the picking operations including routing and substitution (Stair & Reynolds 2010, p.47). Use of CRM has ensured greater availability of products most likely to be ordered by different customers given that each Tesco store’s server is equipped with each customer’s favourite product history. Also, Tesco stores add value by fine-tuning wholesale order and maintaining regional variation in terms of pricing for the benefit of the customer.
Value of extended marketing mix
As with all types of marketing activities, retail marketers need to developed concrete knowledge of their markets, needs of their customers and the competitive pressures they face in order to develop clear targeted market strategies and considered brand positioning. This requires that an organization devotes significant amount of attention to its marketing mix (Stair & Reynolds 2010, p.79). In the recent past, the traditional 4Ps marketing mix has expanded to extended services marketing mix to include additional 3Ps – physical evidence or in-store atmospheres, people, and processes.
The physical evidence element refers to the tangible elements or in-store atmosphere that customers can evaluate. The physical layout is crucial today as customers increasingly come into contact with products or services in retail stores they expect high standard of presentation (Charlesworth 2009, p.211). While Tesco has not committed large amounts of money in store-design relative to its competitors, its stores are reputed for their warmth and excellent layout of products. Tesco ensures a customer who enters their stores gets exceptional personal experience through adequate amount of lighting, proper sign boards and neatly dressed employees highly knowledgeable about the products on sale in the store. As such, Tesco customers can always expect find their way and locate products around the stores with exceptional ease. The products on the shelves are supplied with sufficient information relating to prices and manufacturing ingredients besides being clean. High quality physical layout of Tesco is evident at its virtual stores and websites which have simple design and are relatively user-friendly. In addition, Tesco has made effort to provide its customers with tangible evidence about of the quality of their products and services through brochures and magazines given after every three months.
The people element relates to the evaluation of personnel providing services in terms of their knowledge, competence, customer relations etc. According to Gummesson (1999), everyone in firm in the service industry is a “part-time marketer”, thus their every actions have great direct impact on the output received by customers. Thus, employees can be said to be the business and are a vital component of the marketing mix. In this regard, Tesco has strived to enrich its human resource by refining its recruitment methods, training, motivation and rewards schemes for its staff so that they can in turn give excellent service to customers. Tesco staff is divided in six specific groups with particular skills, knowledge and resources to execute their roles to the satisfaction of the customer.
мTesco is committed to its values that state “No one tries harder for customers” as well as “We treat people how we like to be treated.” The supermarket chain believes that by managing its people well, in a culture of respect and trust, employees will deliver their best to customers while customers will develop loyalty to the company (Tesco 2012, p.2).
Tesco has also worked hard to establish excellent buying processes for its customers by providing them with an option of visiting their brick-and-mortar stores in different locations or ordering online at Tesco.com. In Tesco stores, customers are presented with two efficient options of checking out their products: till payment or self-service. Tesco has made significant strides in improving the shopping experience of its online consumers by working to decrease the total amount of time spent on completing an order – from the previous one hour to about half an hour. The supermarket chain has also improved its home delivery service by increasing the number of delivery truck, personnel and the overall time it takes to make the deliveries.
The process element relates to the assessment of the entire experience as provided by the service (Charlesworth 2009, p.215). This is particularly crucial as most consumes increasingly perceive the process of shopping as important as the product they purchase, whether it be the calm efficiency of professionally-run department store or the overall excitement of the sale. An effective marketing process entails a variety of processes such as processes of identifying customer needs and demands, processes of handling customer complaints among others. Tesco is committed to its vision of satisfying customers with their products. In general, there are several rallying calls that attest to Tesco’s utilization of the processes element in its service marketing mix. They include: “we try to get it right first time”, “we deliver consistently everyday”, “we make our jobs easier to do”, and “we always save time and money”, and “we know how vital our jobs are”.
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