Customer Analysis

The report focuses on the relationship marketing strategy in the context of Tesco. It analyzes the external and internal environment of Tesco and provides recommendations for customer retention.

Running head: CUSTOMER ANALYSIS
Customer Analysis
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Executive Summary
The report focuses on the relationship marketing strategy in the context of Tesco. Extreme
competition in the retail industry is creating urgency among the firms to implement robust
business strategy. This is the most practical way, through which a strong position in the
market can be secured and thereby attain competitive advantage. Both the external and
internal environment of Tesco have been analysed in this paper. It has been observed that
strong presence throughout the world with comprehensive financial performance is the
greatest strength of Tesco. However, the degree of competition in retail industry is
accelerating in a drastic way. Thus, it has become the matter of utmost importance for Tesco
to accelerate their business strategy for the sake of building healthy and cordial relationship
with the customers, as they are the key asset of an organisation. Recommendations have been
provided for Tesco to retain wide range of customers, which is the fundamental factor of
acquiring desired success from business.
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Table of Contents
Introduction:...............................................................................................................................4
Analysis of the external business environment of Tesco:..........................................................4
Evaluation of the internal business environment:......................................................................7
Identifying the strategies of customer acquisition and retention:..............................................9
Conclusion and recommendation:............................................................................................13
References:...............................................................................................................................14
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Introduction:
With the intense competitive business environment in the contemporary times, the
corporate entities are putting consistent stress on accelerating their productivity. According o
Ansoff et al. (2018) this is the key of attaining competitive advantage and thus secure a
strong position in the highly volatile market. As the customers are the key asset of an
organisation, it has become the matter of utmost importance for the firms to provide high
quality to the customers and thus generate satisfaction among them. There lies the
significance of relationship marketing, which paves the way for the firms to build cordial
relationship with the buyers, which is the key of exploring their needs and requirement.
Chernev (2018) stated that being the giant in global retail market, Tesco takes puts
ample stress on improving their productivity and thereby strengthen the value of their
business among customers. Present report will put forth the discussion of relationship
marketing strategy in the context of Tesco. Both internal and external environment of the
firm will be evaluated. Customer acquisition and retention strategy will be discussed. Finally
recommendation will be provided to Tesco to enhance degree of loyalty among customers.
Evaluation of the external business environment of Tesco:
This section conducts a SWOT analysis of Tesco. Jack Cohen established this
company as a group of market stalls in 1919. Within just a span of few years, the business
reached a significant height of success. In a few years after the establishment, Tesco is
considered as the largest retailer in the United Kingdom and the second largest in the world.
Dave Lewis now holds the current CEO position in this company (Tesco.com 2019).
Strengths:
Tesco is the largest and most reputed retail brands in Great Britain. The company
enjoys sales and revenues far more than any other retail brands in the United Kingdom. The
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annual operating profits of Tesco rose by 28% as published in the 2018 annual report of
Tesco (Tescoplc.com 2019). Tesco enjoys the highest market shares and has recently
become the most popular supermarket brand in Ireland. Tesco has a wider geographical
presence as it has its existence in 14 different countries and has more than 6800 stores. Tesco
is successfully adding new stores with passing years. Tesco responded to diverse market
needs with its innovation to store formats. For example, Tesco has a variety of stores such as
Tesco Homeplus, Tesco Extra, Tesco Metro, One Stop and Tesco Superstores (Tescoplc.com
2019).
Product diversification strategy has paid off for Tesco. It offers home-ware items, music
downloads, clothing range, mobile phones, DVD rentals, financial and telecom services, and
school uniforms.
Tesco is largest employer in entire Europe as it offers more than 743K jobs
opportunities throughout the world. Tesco knows how to use superior technologies in a more
feasible way. Some of the technologies being adopted by Tesco are Mobile Payment App,
RFID-enabled barcode system and M-commerce (Tescoplc.com 2019). Nevertheless, Tesco
manages its supply chain operations excellently. It has an effective relationship with its
suppliers. The company efficiently implements waste management policies. An efficient and
reliable supply chain network has helped Tesco to reduce the incurring costs (Tescoplc.com
2019).
Weakness:
It failed to save its operations in Japan and the United States of America. Tesco was
penalised for declaring false accounting figures and wrong presentation of profits (Kwok
2017). In the future, Tesco must ensure not to indulge in such activities. The focus should
rather be more on identifying the factors of challenges and on the possible way outs. This is
necessary to be recognised as an ethical business entity. Brexit Referendum has a negative
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impact on the operating profits of Tesco. As a result, it has resulted in falling share prices of
Tesco. Notably, Tesco receives 50% of its entire butter and cheese consumed in the United
Kingdom from the EU (Tescoplc.com 2019). Tesco should source materials from the locals
as followed upon by the German giants Aldi and Lidl (Safonovs and Upadhyay 2017). This
would not just help to deliver fresh foods and groceries but also save on money. A lack of
adequate marketing research has affected Tesco in certain countries.
Opportunities:
Tesco can see opportunity in the form of Jack, which is a new discount store of the
company. Jack has registered significant growth in recent times and can be a good option
against the low-cost rivals Aldi and Lidl (Tescoplc.com 2019). Tesco should now develop a
strategic partnership with potential business entities. This could be helpful in offering new
products and attract more customers that are new as well. Tesco should do joint venturing
with strategic partners in regions where the company is underperforming. There are growing
opportunities for online shopping. Tesco should target emerging countries like Turkey, South
Korea and Indonesia (Kotabe and Kothari 2016).
Threats:
One of the major threats for Tesco is a fact that Britain will no longer be in the
European Union. It is understandable as well as Tesco is hugely reliant on its suppliers
outside the United Kingdom in the EU. This will create a challenge for Tesco in terms of
keeping the operating costs low as before. There are growing threats from competitors like
Carrefour and Aldi. In addition, Wal-Mart is also growing to new heights since it has
acquired ASDA (News.sky.com 2019). Government trade policies, various other legislation
related to business, economic upheavals and credit crunches are also creating challenges for
Tesco. To be able to counter these threats, Tesco should have the capacity to resolve its
financial and legal matters. Moreover, there is a need to boost its marketing and advertising
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capability to brand their image in an effective manner and to give more reasons to customers
to buy from Tesco (DellaVigna et al. 2016).
Evaluation of the internal business environment:
Political:
Tesco is highly exposed towards various political factors like tax rates, political
instability, and current as well as emerging legislation, the economic state of the countries
where it operates and the unemployment rate. For example, import duty influences the entire
operating cost of Tesco as the company imports a portion of its inventory from China and
East Asia (Tescoplc.com 2019).
Economic:
Labour cost has always remained a concern for supermarkets in the United Kingdom.
Like other supermarket brands, Tesco feels the effect of labour cost in the United Kingdom.
For example, the UK Minimum Wage Rate in 2018 was boosted by 4.4% for people aging 25
or more (Tescoplc.com 2019). Tesco, as a result, had to pay an excess of millions of pounds
to its people. The cost of borrowing is increasing in the United Kingdom. This may affect the
Tesco’s reputation of being a cost-leader in the UK supermarket industry. In spite of having a
global presence, Tesco has its larger part of business as operating in the United Kingdom. In
the United Kingdom alone, Tesco holds a 27.7% market shares in the entire grocery market
(Tescoplc.com 2019).
Social:
Tesco meets consumer behaviour in the United Kingdom significantly. The UK
people due to their busy schedules need everything of their basic needs to be available under
one roof. Tesco effectively fulfills these needs. However, it needs to address the rising
concerns of consumers about their health. The demand for organic food is growing with
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increasing obesity cases in the United Kingdom (Agha and Agha 2017). According to a
report published by PWC, 65% of UK shoppers are considered loyal to their brands (Neupane
2015). The loyalty level for Tesco can be increased by tapping on the rising opportunity in
the form of growing demands for organic food.
Technological:
Tesco effectively adopted emerging technologies to smoothen the services and to
attain a competitive advantage. One of these was the adoption of RFID technology, which
enabled Tesco to automatically count the stock and manage it according to sales. Such
information proved important for the suppliers as well (Tescoplc.com 2019). PayQwid is an
app developed by Tesco that allowed its customers to pay online through their mobile
phones. On linking the app with the ‘NFC’ technology and ‘Clubcard’ customers will be
eligible for loyalty points. Shopping was made more convenient with the implementation of
"scan as you shop" checkpoints. This allowed customers shopping and tagging their products
on their own. It reduced the time and the labour cost as well (Tescoplc.com 2019).
Environmental:
Tesco inspires its customers to buy products from tesco.com. Tesco van drivers
follow shorter routes on their way to customer’ house to save on energy. Drivers also collect
unwanted plastic bags from customers to recycle them. Tesco is committed to generating
100% of its electricity from the renewable form of energy by 2030 (Tescoplc.com 2019). All
these initiatives are in response to the rising government pressure to address environmental
issues.
Legal:
Tesco is required to conduct its operation in accordance with the strict code of
practice as designed by the Food Retailing Commission (FRC) (Britain 2018). Tesco needs to
be very careful with its accounting practices and relationship-management with investors.
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Tesco needs to avoid age and gender-based discrimination from happening in the workplace.
Moreover, they should ensure appropriate payment making for shifts that happen during the
nights, weekends and bank holidays.
Identifying the strategies of customer acquisition and retention:
The nature of retail industry of UK is changing in drastic manner. Brexit is one of the
major factors, which has made significant change in the retail industry of UK. As iscussed by
Hollebeek et al. (2016) the retail industry is under great pressure due to lowering demand and
rapidly rising cost. During the last six month of 2018, the buying behaviour among customers
towards retail industry has crumbled. Due to Brexit, the degree of uncertainty has also
increased. Brexit has resulted in global economic shut down, which is creating a negative
vive among the customers. During November 2018, the rate of wage has accelerated
drastically, which is making it difficult for the customers to frame their buying behaviour.
Channel shift is another major change in the retail market.
During the end of 2018, the rate of e-commerce was 20% of the entire retail sales.
This is making it difficult for the physical stores to remain profitable. The trend of online
shopping is increasing in a rapid manner, which is creating an imbalance in between
investment growth and sales profit (Deloitte United Kingdom. 2019).
With the rapid development of technology, the buying behaviour of the customers has
changed drastically. The customers are becoming prone toward online stores than visiting
stores physically. McDONALD (2016) highlighted by saying that this trend of online
shopping is creating difficult for the physical stores to run their business with utmost
profitability. Moreover, the customers are also becoming more demanding in the
contemporary times. It is the latest trend among them to give tangible added value to the
customers. Today, the customers visit shops just for unique and innovative products. This is
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putting extreme pressure on the retail stores to improve their products or services to keep the
customers happy and satisfied.
As the requirements and trend among the customers has changed rapidly, it is the
prime responsibility of the marketing segment of corporate entities to make effective process,
so that the customers can get necessary information regarding latest offerings. Kerr and Patti
(2015) put stress on the fact that there lies the significance of relationship marketing strategy.
Relationship marketing plays a major role for the firms to maintain long term relationship
with the customers and thus engage them for long time. Evidences are showing that, the
customers have become more prone towards online shopping than visiting stores physically.
CRM (Customer Relationship Management) is a major factor of relationship marketing. This
is the way of recording all the details of the customer such as buying and attitude and
personal information. Zhang et al. (2016) shaded light on the act that through this way,
healthy relationship with the customers by keeping them informed regarding the latest
offerings. Email marketing is also a major aspect of relationship marketing. With the passage
of time, the range of requirements among the customers is increasing rapidly. In addition,
they have also become more prone towards seeking information regarding the latest products
or service. There lies the significance of e-mail marketing, which is the one of the major
ways of maintaining long term relationship with the customers. Gummesson (2017) opined
that through the relationship marketing strategy, the companies are becoming able to provide
necessary information to the customers regarding the exclusive offer, exchange offer and new
product launch.
It is true that Tesco is highly committed towards maintaining long term relationship
with the customers. Verma et al. (2016) highlighted by saying that Customers are always
topmost priority for them. In order to build healthy relationship with the buyers, relationship
marketing strategy is being followed by them. Club card system and customer loyalty
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program have been launched by Tesco in order to build keep the customers informed and
thereby build long term relationship with them.
As a giant in the global retail giant Tesco puts ample stress on maintaining long term
relationship with the customers. Retail Loyalty Scheme has been launched by Tesco in order
to give utmost value to the customers. Gummerus et al. (2017) had observed the fact that a
loyalty card is being provided to each of the customers of Tesco, who have made 8 million
transaction. This system acts as a driving force among the customers to revisit the stores.
Thus, it can be said that loyalty scheme plays a major role for Tesco to accelerate their rate of
profitability and thus strengthen their financial basis.
Beck et al. (2015) commented that Tesco has revolutionised their marketing strategy
by introducing club card system. The fundamental aim of Tesco behind implementing this
system is to address the requirements of different segment of customer with utmost
efficiency. Club-card is basically membership scheme of Tesco, which enables the customers
to save money while shopping by availing price-off vouchers offered by the company. In the
club card system, a point is being credited to each of the customers for spending one pound in
every shopping. After reaching 150 points, the customers can avail club card and thus save
money at the time of shopping. As per the observation o Bruhn (2015) it can be said that this
is the greatest way, through which Tesco is becoming able to maintain cordial relationship
with the customers and thus generate sense of satisfaction among them. Credit card and
Tesco online are also the major aspect of the relationship marketing activities of Tesco. With
the assistance of these elements, Tesco compile the personal information and shopping
history of the customers and record them for future use.
Through comprehensive relationship marketing strategy, Tesco has become able to
serve the customers with necessary information regarding their buying habits at the time of
shopping. In addition, Sarmento et al. (2015) shaded light on the act that comprehensive
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relationship marketing strategy is also plying a major role for Tesco to get detailed
information regarding the buying behaviour as well as the preferences of customers. Tesco
online is playing a pivotal role in terms of maintaining strong communication with the
customers and thus retain them in the organisation. This is the key of promoting consistent
growth of business.
However, Hoppner et al. (2015) contended by saying that as the intensity of
competition is increasing in a quick way due to the existence of retail giants like ASDA,
Sainsbury, it is the prime responsibility of the marketing department of Tesco to strengthen
their relationship marketing strategy. This is the key of acquiring a strong base of customer
and thereby accelerate statistics of profitability. Thus, it is imperative for Tesco to strengthen
their relationship marketing strategy in terms of remaining productive and thereby attain
competitive advantage (Morgan et al. 2015). It is the prime responsibility of the marketing
department to ensure their strong web presence. This is the key of keep the customers
attracted. The Toll free number, in which the customers can place their issues and grievances
must be available all time. The official website of Tesco should be informative and
interactive in order to maintain healthy communication with the customers.
At the same time, the website must have chat option. At the same time, the website
must also be mobile friendly. Content marketing plays a major role in the contemporary
times, as it paves the way for the customers to get detailed knowledge regarding a product. It
is imperative to know in this context that content marketing is the great way of maintaining
long term relationship with the customers. Verma et al. (2016) suggested that with the
assistances of content marketing, Tesco can be able to offer the customers with valuable
content regarding their brand and this generate interest and loyalty among the customers,
which is the fundamental factor to attain desired success from business.
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Social media marketing is another major way of maintaining long term relationship
with the customers by aligning them with the brand. It is imperative for Tesco to post detailed
information regarding a brand, its exclusive offers at their official social media pages in order
to keep the customers informed. It is true that loyalty program has been developed by Tesco
with the intension of keeping the customers interested. Still, with the prompt development of
competition, shifting tendency among the customers is also increasing in drastic manner.
There lies the significance of loyalty program such as offering friends and family members.
Such comprehensive loyalty program will play a critical role for Tesco to generate attention
among the customers (McDONALD 2016). In addition, Tesco must ensure that their loyalty
program resembles with that of their sole business identity. Survey is another major factor of
relationship marketing through which, the companies can understand the main perceptions
among the customers. Thus, conduction of survey would help Tesco to understand the
behaviour of customers in an accurate manner. Through comprehensive survey session,
Tesco can respond to the issues and grievances among the customers.
Conclusion and recommendation:
To conclude, it can be said that it is imperative to give the customers with utmost
value, which is the fundamental factor of attaining long term success from business. As the
degree of uncertainty in the business environment is increasing in a rapid manner, it is
imperative to maintain healthy relationship with the customers, which is the key of gaining
immense popularity in the market. However, as the concentration of competition in the UK
retail industry is increasing in a drastic manner, it is imperative for the marketing department
of Tesco to make robust plan, which is the key of retaining wide range of customers. Initially,
it is imperative for Tesco to take special care towards giving the customers with utmost value.
This is the way, through which the customers can be kept attracted.
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It is recommended for Tesco to target the customers with their unique and innovative
products. With the assistance of CRM system, it is becoming easy for Tesco to have
knowledge regarding the purchase history and buying behaviour of the customers. Now, it is
imperative for Tesco to determine the product that will be most appealing for the customers.
Rewarding the most profitable customer is another vital way of retaining a strong base of
customers. Information from the CRM software will help Tesco to explore most profitable
customer. Thus, it is suggested for Tesco to make a list of such customer and start offering
them with rewards and incentive. This is also a great way, through which loyalty can be
generated among them.
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