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.