Tesco Case

1. Examine the customer service efforts undertaken by Tesco prior to the loyalty card scheme's launch. Why do you think the company felt the need to launch Clubcards?

Ans. The various customer service efforts undertaken by Tesco were:

• Trading Stamps: Because of the RPM system Tesco was not able to offer its products at a price lower than the other stores. Therefore to differentiate itself and to enhance the customer service it came up with the idea of trading stamps (1960s). Customers were given trading stamps in exchange of making purchases at the Tesco stores. Customers were allowed to collect these trading stamps and once they have collected a specific number of trading stamps and they could exchange them in return for cash or gifts. This made them very popular during the period of RPM.

• Pile it high and sell it cheap: After RTM Tesco followed this strategy to increase its sales. They offered products which were priced lower than any of the other competitors and gave a variety of options by piling up luxury items too which were priced lower than the competitors.

• Checkout at Tesco: Tesco gave customers the option to compare the prices with the competitors and make sure that there products are priced lower than the competitors.

• Healthy Eating: Tesco started conveying the nutritional value of the company's merchandise to the customers.

• First Class Service: under this initiative Tesco gave customer service training to over 9000 store employees. They gave behavioural service training and also involved the store managers. Employees were asked participate and work out the right approach for their training needs. Based on the above approach, Tesco made work teams to carry out regular training programs focusing on customer service improvement.

• One in Front: it was launched to reduce the time customers had to spend waiting at the counters. Tesco store personals were empowered to open a new counter if there is more than one person at a counter. But it was impossible to manage at peak times. This scheme considerably reduced the time which the customer used to spend while waiting at the counters.

Tesco felt that loyalty cards scheme will allow them to serve their customers in a more efficient and better manner. Also these kinds of schemes were becoming popular in other parts of the world. This way they would be able to give customised service to the customers. They also discovered that the top 5% of the customers accounted for 20% of the sales, the bottom 25% accounted for only 2%. So by using this program they would be able to concentrate on the top 5% of the customers. They would also be able to customise their product offerings as per the demands of these customers.

2. Analyze Tesco's Clubcard scheme in depth and comment on the various customer segmentation