The Tesco Case

IT generated competitive advantage

Tesco is an international retail chain, active primarily in the grocery sector. These days Tesco has also activities in sectors like consumer electronics, insurance, finance, telecom, clothing and internet services. Tesco’s long history is characterized by innovative initiatives serving stakeholders like consumers, suppliers, employees and the society as a whole.
Besides the computerization of the merchandise sold, Tesco made two very important moves as one of the first retailers in the world:


The customer loyalty program

In 1995, Tesco introduced a customer loyalty program with a club card. It was the first instrument combining personal data of customers with data from the store, like products bought, prices payed etc. This was a milestone in the history of retailing. For the first time, the retail chains got unique insight into shopping habits of their customers, increasing in the same time their loyalty through the points they could collect. It was the birth of customer relationship management with customized communication. Suddenly Tesco knew that a certain customer had a cat and could therefore send him the latest special offers in this category.


Tesco.com

Again as one of the first retailers, and only shortly after the introduction of the club card, Tesco started their internet presence with tesco.com and the possibility of online shopping. Unlike many competitors, Tesco didn’t realize a system with it’s own warehouses, but used the existing infrastructure to collect the online orders, basically by picking the products in the stores and delivering them within a few kilometers around the store. Doing this, the online service could rapidly be expanded and the investment therefore was low.
On it’s website, Tesco created virtual storefronts and additional services like price checks to attract customers. The service has even been made accessible for handicapped people.

Combining to two instruments, Tesco gets the maximum of information about its customers. Apparently Tesco creates 5000 customer “needs” segments with each segment receiving personalized messages and vouchers including 24 different varieties of the Tesco magazine. They strive for even more information with the rollout of Net Perceptions, to create a very personalized online experience.

Tesco knows its customers better than the competitors. Therefore, it can reach them better and provide them with relevant information, which leads to increased sales. Tesco seems to be an expert in defining segments and communicating with each of them, be it the handicapped online shopper who looks for home delivery or the demanding customer who looks for the luxury products in the store. Tesco is a perfectionist in CRM and an early mover concerning technological innovations.

MENEAME.NET

Meneame.net is a so called social news aggregator site. People can put stories they read somewhere else and rate them. Stories with very good ratings get to the front page. Meneame.net has currently a page rank in Spain of 309 and an average of 4.8 page views per user daily (www.alexa.com) . Both numbers are quite high – especially the second number, which means that users of this site are very faithful and active.
The most valuable asset a website can offer is user attention, as we can see with the google business model. As soon as you have the attention, there comes the money. If your website is able to create a lot of traffic, there will be companies willing to buy space on your site to put ads.
The site meneame.net started as a leisure project of a couple of friends, basically copying the code of the American example. The site hits different online trends: user created content, user moderation and social tagging.

If I were hired as a business development manager, I would do the following:
Before working on enlarging the business, I would minimize the risks of the failure of the site. This doesn’t sound spectacular, but I think there are some major risks, which could rapidly lower the page traffic and therefore threaten the business. Basically you have to make sure that your users trust you. If they start to think you manipulate the ratings and therefore the position of the articles, they will stop using your site. Digg suffered this criticism.
I wouldn’t change anything on the existing business model. Once users are familiar with basic functions, they hardly want to change their behavior.
On way of expanding could be into new markets. Today already over 6% of the page views of meneame.net com from Mexico (www.alexa.com).
The best way to get a higher return is through increased traffic. If we take a look at the site today, there are already banners and google ads integrated. We could increase the traffic through public relation activities for our own site.
Another, less obvious way came into my mind clicking on the links. The site takes you directly to the site of the information provider. Instead of going directly to this site, the site could open in a frame in the meneame site itself, so that we still have the attention on our site and we can show some google ads relating to the topic of the information. This evaluation would have to be well tested for consumer acceptance.
In the end we have valuable information of our registered users, including their interests. Using this information commercially is very risky. Do users fear we sell their profiles, they will stop using our site.