Tesco Case Study

Synopsis

Tesco Plc. was established in 1919 as a "small grocery stand in East London." (Rohwedder 2006) The company was created by Jack Cohen, who invented the name by joining his "tea supplier's initials, T.E. Stockwell, with the first two letters of his own last name." (Rohwedder 2006) Post World War II, Tesco evolved from a tiny "grocery stand" to a grocery store, and in 1968, Tesco revealed its original superstore.

The availability of new stores became harder to come by in the 1990. As a result, Tesco revamped its stratagem and now operates with four different sizes: "huge supercenters stocking everything from lawn furniture to apples; large stores that have a limited range of nonfood items; regular supermarkets; and "Tesco Express" convenience stores with merchandise tailored to neighborhood tastes." (Rohwedder 2006)

Believed to be the golden key to Tesco's success is The Clubcard. The Clubcard was launched in 1995, with Mr. Leahy, Marketing chief. The process for consumers to obtain The Clubcard is the swap of the consumers' information for store discounts. When consumers desire to obtain The Clubcard "perks", they simply fill out an application inside Tesco stores, answering questions such as: "the size of their household, the ages of their children, and dietary preferences." (Rohwedder 2006) After consumers have filled out the application, they receive a card, similar to a debit card, in the mail. These cards are swiped when the consumers are paying for the groceries, which add points to their card. These points are not achieved unless the shoppers have spent 150 pounds [approximately $280]. Each point obtained on the card is equivalent to "one penny off of future purchases, or it can be converted into miles in frequent flier programs." (Rohwedder 2006) In addition to pennies off, consumers receive coupons every quarter, relative to their purchasing habits, which is kept in Tesco's database. (Rohwedder 2006)

The success achieved by Tesco has put major competitors in danger of failing, if they have not already failed. In Cheshunt, England, Tesco is flourishing while Wal-Mart is struggling. Several people expected that Wal-Mart would succeed after purchasing a series of stores, but this is not the case. Instead, Tesco is running the show. The same is true for other out of country markets, such as Japan. In 2006, Wal-Mart disposed of 16 stores, selling them to a rival for $872 million. Tesco, on the other hand, has 39 supermarkets in Korea which are very prosperous. (Rohwedder 2006)

Asda's, which was bought by Wal-Mart in 1999 (Watch 2004) does not feel that Tesco's database is to credit for Tesco's success and Asda's failure. Rather, they believe that Asda did not properly target the higher-end consumers with goods like "better produce and gourmet ready-to-eat meals." (Rohwedder 2006) "Andy Bond, Asda's chief executive" also believes that Asda's trouble came when Tesco as well as other competitors would set their cost equivalent to Asda's. (Rohwedder 2009) Although Tesco does not reveal the price they pay for The Clubcard, "spokesman Jonathan Church says, it is "worth every penny."" (Rohwedder 2006) Despite the negative viewpoint of competitors in regard to The Clubcard, it did raise "Tesco's market share in groceries to 31%, nearly double the 16% held by Wal-Mart's Asda chain, according to market-research firm Taylor Nelson Sofres." (Rohwedder 2006)

Tesco's size is raising antitrust concerns in the U.K. Last month, the British government ordered an investigation into the power of the country's four biggest supermarket chains. Tesco Chief Executive Terry Leahy said the company isn't doing anything improper to block competition. He said Tesco is successful because "millions of ordinary consumers vote with their feet when they go shopping. (Rohwedder 2006)

After years of success in the U.K., Tesco plans to venture off into new markets, one being the United States of America. Tesco is implementing a design to enter the West Coast of the U.S. in 2007.The competition may become more fierce for Tesco, while America's playing field is dominated by Wal-Mart. (Rohwedder 2006)

Tesco's Database

Customer Relationship Management can be highly maintained with the proper placement of Database Marketing. Obtaining information about consumers, captured by extensive study and implemented rewards programs, such as The ClubCard, by Tesco, is functional for developing consumer segments, account management, and acquiring potential consumers. (Cravens 2009) Any database that is designed around Customer Relationship Management knowledge must include information