Relationship Marketing Analysis: Tesco's Strategies and Impact

This report provides a comprehensive analysis of Tesco's relationship marketing strategies. It begins with an introduction to relationship marketing and an overview of Tesco, followed by an examination of the development and implementation of relationship marketing techniques within the company, including the use of Club Cards and credit cards. The report explores the benefits of relationship marketing for both Tesco and its customers, and it analyzes the customer loyalty ladder. It delves into Tesco's aims and objectives, relationship marketing strategies (such as email marketing and loyalty rewards), and the contribution of relationship marketing to the business. The report further investigates methods of attracting and retaining customers, including advertising and the Tesco Club Card, and analyzes the effectiveness of these methods. It also includes a quality gap analysis, benchmarking against competitors, and recommendations for improving customer relationships. Finally, the report concludes with an overview of customer relationship management used in Tesco, highlighting its importance in fostering customer loyalty and driving business growth.

Business Studies
Relationship Marketing
Tesco

BUSINESS STUDIES 1
Table of Contents
Introduction................................................................................................................................2
Overview of Tesco.................................................................................................................2
Task 1.........................................................................................................................................2
P1 Development of Relationship Marketing in Tesco...........................................................2
Benefits of Relationship Marketing to Tesco.....................................................................3
Benefits Relationship Marketing to Customers.................................................................3
P2 Relationship Marketing.....................................................................................................4
Ladder of Customer loyalty...............................................................................................4
M1 Aim and Objective of Tesco............................................................................................5
Strategies of Relationship marketing.................................................................................6
D1 Contribution of Relationship Marketing..........................................................................6
Task 2.........................................................................................................................................7
P3 Methods of Attracting and Retaining Customers of Tesco’s Supermarket......................7
M2 Analysis of Effectiveness of the Methods of Retention and Attraction..........................8
Task 3.........................................................................................................................................8
Quality Gap Analysis.............................................................................................................8
P4 & M3 Quality Gap Analysis of Tesco..........................................................................9
Benchmarking..................................................................................................................10
D2 Recommendations for Improving Customer Relationship.............................................11
Task 4.......................................................................................................................................11
P5 Customer Relationship Management used in Tesco.......................................................11
Conclusion................................................................................................................................12
Bibliography.............................................................................................................................14

BUSINESS STUDIES 2
Introduction
An aspect of CRM (Customer Relationship Management) which concentrate on the long-term
engagement of customer and customer loyalty in place of short-term goals such as individual
sales and customer acquisition is known as Relationship marketing1. This report is being
prepared in order to perform a detailed analysis of the influence and impact of relationship
marketing and for this Tesco, Company has been selected. The concept of development and
implementation of relationship marketing in the company will be highlighted. Besides this,
various methods used for customer retention will be described. The identification of various
techniques used to recognize the quality gap will be done. Further, the use of customer
relationship management system in Tesco will be explained.
Overview of Tesco
Tesco is the general merchandise retailers with headquarter in England, United Kingdom. It
is known as the world’s ninth largest retailer by revenue and third largest retailer by profit. It
the company has its stores in approx. 12 countries along with this it has acquired the leading
position in UK, Thailand, Hungary, and Ireland2.
Task 1
P1 Development of Relationship Marketing in Tesco
Since 35 years company has grown its revenue to £62 billion by creating a strong brand,
global expansion, and acquisition. Along with this they have also enhanced their relationships
with their customers, driven sales growth, and aided in customer retention by a strategy of
1 Thorsten Hennig-Thurau and Ursula Hansen, Relationship Marketing: Gaining Competitive Advantage
Through Customer Satisfaction and Customer Retention (1st edn, Springer Science & Business Media 2013).
2 Tesco PLC, ‘About us’ (Tesco PLC, 2018) < https://www.tescoplc.com/about-us/> accessed 21 March 2018

BUSINESS STUDIES 3
customer relationship management. The methods that Tesco use for relationship marketing
are credit card, Tesco online, and club card. The company makes use of these basics to gather
the customer's information, history of customer’s purchase, get personal information, on
which type of product they spend more money, and their buying behaviour. In 1995, the club
card of Tesco was launched which provided them a lot of consumer trend's information and it
offered the consumer a reason to shop at Tesco. It allows Tesco to advertise its products with
the information of customers which is based on habits of buying, place and time they shop.
Recently a credit card was introduced by Tesco. The credit card allows the company to have
a look at the buying habits of the customers more largely across all services and products and
this offers extra information about the customer’s preferences3. In 1997, the company
introduced ‘Tesco Direct' and became the first supermarket in 2007 to provide the option of
home delivery. Tesco.com permits the company to interact with the customers and make a
strong relationship in order to retain and grow their business4.
Benefits of Relationship Marketing to Tesco
 Enhances customer loyalty 5
 Assists in identifying new customers
 Simplifies marketing and sales processes
 Effective internal communication
Benefits Relationship Marketing to Customers
 Customers receive enhanced services
 Customers receive various discounts, offers, coupons and club card facility.
3 Tesco Bank, ‘See how our credit cards could reward you’ (Tesco Bank, 2018) <
https://www.tescobank.com/credit-cards/> accessed 21 March 2018
4 Relationship Marketing, ‘History Of How Tesco Have Used Relationship Marketing Over The Past 35 Years’
(Relationship Marketing, 2018) < https://relationshipmarketingbg.weebly.com/history-of-tesco-relationship-
marketing.html> accessed 21 March 2018
5 Joseph Ruiz, ‘5 Benefits of a Relationship Marketing Strategy’ (Strategic Driven, 2012)
<http://www.strategicdriven.com/marketing-insights-blog/5-benefits-of-a-relationship-marketing-strategy/>
accessed 21 March 2018

BUSINESS STUDIES 4
 Products at low prices
 Improved quality of products 6
P2 Relationship Marketing
A marketing approach that concentrates on making a long-term relationship with the
customers is known as Relationship marketing. It is focused towards making and developing
strong customer networks and associations7.
Ladder of Customer loyalty
The loyalty ladder is a concept of relationship marketing that notices customers who slowly
moves upward by the levels of relationship, beginning from the lowest as a suspect and finish
up at the highest point as advocates8.
The Loyalty Ladder
Suspect At this stage, customer listens or sees the advertisements, brochures of
the company's product.
Prospect The customers are said to be a prospect because they have not yet
6 Supriya Biswas, Relationship Marketing: Concepts, Theories and Cases (2nd edn, PHI Learning Pvt. Ltd
2014).
7 Helen Peck, Martin Christopher, Moira Clark and Adrian Payne, Relationship marketing (4th edn, Taylor &
Francis 2013)
8 RAI, Customer Loyalty (McGraw Hill Education 2014).

BUSINESS STUDIES 5
purchased the product9.
Customer As soon the customer tries the product he/she became the customer.
Client If customer purchases the product repeatedly then he/she is said to be
a client because they are becoming loyal.
Advocate At the final stage, the consumer becomes the Advocate as he/she is
Brand Persistent.
Tesco Company makes use of Loyalty Ladder in order to retain its customers. The company
operates in the sequence of up and down because they think that new customers can make an
impression or lose it. Automated event messaging is used by Tesco to influence the customer
for repeat purchase. Every time customer registers themselves then they are said to be a
prospect and want motivation to purchase. After 2 days, he/she receives mail of registration
with £5 discount on initial purchase and then the journey starts. The customer regularly
receives weekly alerts and personalized offers. On the top of the procedure of mailing, the
company provides the scheme of club card to the customers who are dedicated to various
incentives. Now, these are customers who will do word of mouth due to which the brand
equity and company’s reputation will increase.
M1 Aim and Objective of Tesco
The aim of Tesco is to be the leader retail supermarket and offer good quality products and
services at low prices as compared to their competitors10.
9 Hitesh Bhasin, ‘Customer loyalty ladder and how to use it to target customers’ (Marketing 91, 2017)
<https://www.marketing91.com/customer-loyalty-ladder/> accessed 21 March 2018
10 Business Case, ‘Vision, values and business strategies’ (Business Case, 2018) <
http://businesscasestudies.co.uk/tesco/vision-values-and-business-strategies/vision-and-mission.html> accessed
21 March 2018

BUSINESS STUDIES 6
The objective of Tesco is to maintain loyal customers, keep them happy, gain profits, and
expand the business11.
Strategies of Relationship marketing
Methods Description
Email
Marketing
Retention of the data of customer help company sent emails regularly
at the time of new product launching, clarification regarding some
issues, exchange offers, exclusive offers, etc. Tesco sent proper emails
to its prospect customer in order to convert them into customer and
increase its sales12.
Loyalty
Rewards
Every customer love when they receive anything in reward, therefore
rewarding loyal customers helps in retaining them in the organization.
Listen to
customers
Customers feel important when their opinions and wants are
considered by the business. At the moment they feel valued they will
provide correct feedback which will help the company in improving
its processes13.
D1 Contribution of Relationship Marketing
The business of retailing directly interacts with the customers thus the customer relationship
marketing is very significant for that business who deals directly with their consumer.
According to a survey the top 5% of the Tesco’s customer provides 20% of the sales. The
relationship marketing of Tesco is very famous and various stores in the area working hard to
11 Tesco PLC, ‘Core Purpose and Values’ (Teco PLC, 2018) <https://www.tescoplc.com/about-us/core-purpose-
and-values/> accessed 21 March 2018
12 EDUCBA, ‘8 Amazing Relationship Marketing Strategies (Resourceful)’ (EDUCBA, 2016) <
https://www.educba.com/what-is-relationship-marketing-its-strategies/> accessed 21 March 2018
13 Power Objects, ‘9 Relationship Marketing Strategies and Tools’ (Power Objects, 2018)
<https://www.powerobjects.com/2015/07/16/9-relationship-marketing-strategies-and-tools/> accessed 21 March
2018

BUSINESS STUDIES 7
match the techniques and standards of Tesco involved in their CRM. Company’s relationship
marketing programs are best and include segregation of the consumers as per their spending
in the store. This supports Tesco in arranging the customers on the basis of the business they
offer to the store14.
Task 2
P3 Methods of Attracting and Retaining Customers of Tesco’s Supermarket
The simplest method of attracting a customer is Advertisement it can be done by the
newspaper, radio, and T.V.
Tesco retains its customers with the help of its club card which is the simplest method that
allows the customers to get points with every purchase; all these points are used in various
ways. The club card permits the company to identify what and how much their customers
buy. Tesco may convert this data or information into graphs so a trend of customer spending
can be noted, with the help of this information Tesco can use strategy to advertise some
products.
Another method that is used by Tesco to retain and attract customers is that they just
endorsed their own credit card. This was considered as a big success as the best form of
technology they could use their club card. They examined the purchase of each club card
holder and evaluated their average spending at every time they visit Tesco. This was done by
the company with the purpose of targeting suitable customer.
14 ICMR, ‘TESCO - The Customer Relationship Management Champion’ (ICMR, 2018) <
http://www.icmrindia.org/casestudies/catalogue/Marketing/Tesco-Marketing.htm> accessed 21 March 2018

BUSINESS STUDIES 8
Retaining and Attracting customers can be hard if there is no continuous contact among the
customers and business. It is important for Tesco to show their customers a motive for
coming back and to new ones to be the part of Tesco15.
M2 Analysis of Effectiveness of the Methods of Retention and Attraction
The retaining and attracting method of Tesco is the pillar of the strategy of the business and
supported it in relating its strategic direction and thinking. The company always try to add
value to their offerings. The information of the customer permits the company to make
strategy approaches for managing customers. Loyalty scheme of Tesco reflects that it can
only provide constant influence on the bottom line but when it started it changed the dynamic
culture of the company.
Task 3
Quality Gap Analysis
A strategic management tool that permits managers to measure gaps that may be present
between the anticipated quality level and the definite quality level is known as a Quality gap
analysis. The concept of quality can be all, ranging from service, to a product, to internal
processes. There are five gaps that every management of the company should evaluate,
manage, and reduce:
Gap 1 – It reflects the distance between the expectations of the customer and understanding,
thinking of managers.
Gap 2- It is the distance between the perception of the management and the definite
requirement of the customer experience.
Gap 3- It is the gap between the experience requirements and transfer of the experience.
15 Sandra Business, ‘Attracting and Retaining Customers’ (Sandra Business, 2006) <
http://sandrasbusiness.blogspot.in/2006/06/attracting-and-retaining-customers.html> accessed 21 March 2018

BUSINESS STUDIES 9
Gap 4- It is the distance between what is supplied to the customer and what was promised or
communicated to them.
Gap 5- It is the distance between the perception of the customer and their expectations of the
service.
P4 & M3 Quality Gap Analysis of Tesco
Current State Future State Action/Proposal
Expensive as
compared to
Morrison’s, Lidl, and
Aldi.
The company needs to be
more competitive and
consumers see the price of
the products of Tesco.
Advertise more discounts
like buying one get one free,
improving the cost of their
products, and price matching
on some products.
The quality of the
products of Tesco is
low as compared to
Marks, Spencer’s and
Waitrose.
The aim of the company is to
represent their product
quality as equal as their
competitors such as Marks,
Spencer’s and Waitrose in
the eyes of customers.
Customer relationship
marketing data can be used
by the company to recognize
customer for targeting with a
campaign representing
Tesco’s Finest products.
Lack of maintenance
staff in the
supermarket
The staffs are required for
guiding the customer to
purchase products that suits
their requirement and
maintaining the store
properly.
Suppliers can be used for
training the staff to become
more experienced,
knowledgeable. Besides this
company can provide the
details of its products online.

BUSINESS STUDIES 10
Benchmarking
Benchmarking is a significant strategic tool of TQM (Total Quality Management). It helps in
improving performance and transparency after penetrating the public domain. It must be a
reference or evaluation standard for contrasting; a performance evaluation that is the
excellence standard for a definite business, and an assessable, best in class attainment16.
Source [http://www.powerretail.com.au/news/global-retailers-rise-2014-deloittes-top-
retailers-revealed/]
From the above table, it can be seen that Tesco PLC is in the 2nd position after Wal-Mart
Stores which reflects that the Tesco is lacking in offering the customers what they are
expecting. The quality of the product that Tesco is providing has declined which affects the
loyalty of its customers. Wal-Mart is providing excellent quality of the products which sets
the benchmark for Tesco to improve its quality and match with Wal-Mart in order to increase
the customer base and revenue.
Tesco should ask customers to provide their feedbacks online about the product’s quality and
their expectations. Along with this, the product range which Tesco is providing should
16 Faiza Sajjad and Shehla Amjad, ‘Role of Benchmarking in Total Quality Management’ (2012) 1 Business
Management Dynamics 34.

BUSINESS STUDIES 11
include healthy and qualitative products so to attract customers. Further, Tesco should do a
regular quality check of their products in order to identify the areas where they are lacking.
D2 Recommendations for Improving Customer Relationship
Even though the customer relationship marketing efforts of Tesco have provided positive
results in increasing market share, and financial performance, the company need to consider
its standards of customer service. Tesco has given a lot of time in enhancing the look of their
stores, processes of their service, the product range that might be overlooked the influence of
their staff which can impress customers by their behaviour and company needs to consider
this aspect. Tesco must start an initiative such as ‘Every Customer offered Help’ (ECOH). In
this, every employee should be provided clear commands about the specific procedure that
should be followed to deal with the customers. For example, at the check-out counters
employees should be instructed to be specific about welcoming the customer, greeting them,
providing help and finally, wishing a good day to the customer. The manager of the store
should be authorized for making the initiative ECOH effective, and they must contribute
enthusiastically in the scheme.
Task 4
P5 Customer Relationship Management used in Tesco
Customer relationship management was introduced in Tesco in order to increase its revenue.
As per the analysis, the club card program of Tesco has increased the 10 million active
households and holds weekly sales of 85% in the period of five years ensuring the execution
of the Club card program. Sales of the company have improved by 52% and still growing at a
higher rate than the average of the industry. Opening and expansion of the stores have
increased the floor space of Tesco by 150%. Club card has provided Tesco a direction to
reflect its appreciation to the customers. The designing of the club card was not done just to

BUSINESS STUDIES 12
reflect customer loyalty, but more significantly to analyse the loyalty of Tesco to its
customers17.
Today just because of CRM Tesco is largest grocery store of U.K and world’s successful
internet supermarket. The statement of the Tesco’s club card is delivered every quarter to 10
million customers, listing the points customers earned from their purchases. Every statement
also includes additional vouchers and coupons which are used to reward and offer
motivations for spending behaviour. There are currently over 250,000 diverse targeting
variations. The plan is extremely sophisticated; however, it constantly attains sales uplift
results. Yet the club card application of shopper data is wider than the consumer reward
statement alone. The main advantage for Tesco and customer of the scheme is that the
analysis and data drive organization to make decisions about promotion, ranging of local
stores, and product category management18.
Conclusion
The above report has provided the detailed analysis of the Relationship marketing that Tesco
company use in order to increase its customer base and customer loyalty. The major CRM
strategy of Tesco is club card which helped it in improving its revenue and successfully
increased its market share. However, from the above analysis it has been identified that the
competitors of Tesco are offering a better quality of products to the customer which is
affecting their performance in the market. In order to improve its image in the market, the
company needs to follow the recommendations provided in the above case such as starting
‘Every Customer Offered Help' (ECOH), taking feedbacks from the customers about the
quality and their expectations.
17 Tesco, ‘What is Clubcard?’ (Tesco, 2017) < https://www.tesco.com.my/html/clubcard_about.aspx?
ID=6&PID=68&ULID=6,68> accessed 21 March 2018
18 Anhar Sharif Mollah, ‘The Impact of Relationship Marketing On Customer Loyalty At
Tesco Plc, UK’ (2014) 6 European Journal of Business and Management 21.

BUSINESS STUDIES 13

BUSINESS STUDIES 14
Bibliography
Bhasin, H, ‘Customer loyalty ladder and how to use it to target customers’ (Marketing 91,
2017) <https://www.marketing91.com/customer-loyalty-ladder/> accessed 21 March 2018
Biswas, S, Relationship Marketing: Concepts, Theories and Cases (2nd edn, PHI Learning
Pvt. Ltd 2014).
Business Case, ‘Vision, values and business strategies’ (Business Case, 2018) <
http://businesscasestudies.co.uk/tesco/vision-values-and-business-strategies/vision-and-
mission.html> accessed 21 March 2018
EDUCBA, ‘8 Amazing Relationship Marketing Strategies (Resourceful)’ (EDUCBA, 2016) <
https://www.educba.com/what-is-relationship-marketing-its-strategies/> accessed 21 March
2018
ICMR, ‘TESCO - The Customer Relationship Management Champion’ (ICMR, 2018) <
http://www.icmrindia.org/casestudies/catalogue/Marketing/Tesco-Marketing.htm> accessed
21 March 2018
Mollah, AS‘The Impact of Relationship Marketing On Customer Loyalty At Tesco Plc, UK’
(2014) 6 European Journal of Business and Management 21.
Peck, H and others, Relationship marketing (4th edn, Taylor & Francis 2013).
Power Objects, ‘9 Relationship Marketing Strategies and Tools’ (Power Objects, 2018)
<https://www.powerobjects.com/2015/07/16/9-relationship-marketing-strategies-and-tools/>
accessed 21 March 2018
RAI, Customer Loyalty (McGraw Hill Education 2014).

BUSINESS STUDIES 15
Relationship Marketing, ‘History Of How Tesco Have Used Relationship Marketing Over
The Past 35 Years’ (Relationship Marketing, 2018) <
https://relationshipmarketingbg.weebly.com/history-of-tesco-relationship-marketing.html>
accessed 21 March 2018
Ruiz, J, ‘5 Benefits of a Relationship Marketing Strategy’ (Strategic Driven, 2012)
<http://www.strategicdriven.com/marketing-insights-blog/5-benefits-of-a-relationship-
marketing-strategy/> accessed 21 March 2018
Sajjad, F and Amjad, S, ‘Role of Benchmarking in Total Quality Management’ (2012) 1
Business Management Dynamics 34.
Sandra Business, ‘Attracting and Retaining Customers’ (Sandra Business, 2006) <
http://sandrasbusiness.blogspot.in/2006/06/attracting-and-retaining-customers.html> accessed
21 March 2018
Tesco Bank, ‘See how our credit cards could reward you’ (Tesco Bank, 2018) <
https://www.tescobank.com/credit-cards/> accessed 21 March 2018
Tesco PLC, ‘About us’ (Tesco PLC, 2018) < https://www.tescoplc.com/about-us/> accessed
21 March 2018
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<https://www.tescoplc.com/about-us/core-purpose-and-values/> accessed 21 March 2018
Tesco, ‘What is Clubcard?’ (Tesco, 2017) <
https://www.tesco.com.my/html/clubcard_about.aspx?ID=6&PID=68&ULID=6,68>
accessed 21 March 2018