Tesco Case Study Marketing

Background:

Tesco has over 660 million customers that pull in over US$500 billion worth of retail spending. As an international retailer, it has half a million employees working in 12 countries, serving about 75 million customers each week.

In Malaysia there are currently 50 Tesco retail stores and seven stores on the grocery home-shopping front and 1.2 million customers each week. In 2006, Tesco also launched the Club card in Malaysia. With Club card, it has 1.7 million customers who are active and swiping the card each day.

Online shopping is also a new arena the company ventured into last year for seven of its stores.

Aim/Objective:

When it first started its online grocery store, Tesco used mass-mailing as a key strategy for marketing. But after a year, the retailer was faced with issues such as bouncing of emails and invalid addresses. Meanwhile, on its loyalty front, it also saw a decline in shoppers.

“We know that one loyal customer is worth five times a newly acquired customer. Unfortunately, we had a problem where loyalty was in decline and we felt that we needed to find a way to thank our important, loyal customers,” said Vivian Yap, marketing director of Tesco Malaysia.

Tesco also wanted to go further and understand how consumers’ minds worked and how to be a priority brand in their purchase choices.

Strategy:

Tesco used data from Nielsen and other researchers focusing on customer satisfaction studies to receive information on about marketer trends, consumer behavior and combined it with the data from the Club card. This helped the retailer to put the customer into the center of its decisions.

“When customers shopped, we started to fill information as we tried to prove our understanding of the consumers as individuals. We started to look at how we catered our approach, personalised our offers and enablde Tesco to make viable business decisions. If we can speak to you as individuals, ultimately we can win your loyalty,” said Ben Smith, head of retail and media at Dunnhumby Malaysia which worked with Tesco on its loyalty initiative.

 

Simply understanding purchasing habits is important – but it is just one channel. Understanding customers and how they shop is just the start, he added.

Execution:

Tesco took a snapshot from the information it had from the Club card to see how consumers act as individuals and how they shop. This information was then further segmented into how often the consumer shops and how much they spend.

These segments then were further categorised into ‘existing loyal’, ‘previously loyal that has lapsed’ and ‘an opportunity customer’.

Tesco also designed a personalised promotion that came in the form of coupons. For example, if a family likes a particular brand of ice cream, they will be sent a promotion coupon on that particular brand of ice cream. And the customer will know that it is personalised to them.

“Data integrity is important. It will be quite a disaster if I sent someone who liked pasta, shampoo instead,” said Yap.

In each of its mailing lists, Tesco had almost a million customers that it mailed. This resulted in one customer receiving up to six personalised promotions. So the retailer went out to hunt for six million products that can be tailored to each individual.

“It’s just amazing how different people are – there are some commonalities – but there are interesting product choices that people make. We then drill into the data and match it to the customer. So that is what we did in this instance to reward loyal customers,” said Yap.

Meanwhile, to address the issue of mail bounces, Tesco launched a targeted CRM approach. This allowed the retailer to know the customer purchase history and their emailing habits.

For example, Tesco had a group of customers who registered with it but never shopped with the brand. It hence had to re-introduce itself to them. Another group of customers shopped only once but never came back – so a separate programme was designed just for them with incentives so that they could come back and shop.

Result:

The CRM email strategy resulted in about 3000 customers being re-activated. Loyalty retention was also on the rise with about 30% increase in customer loyalty.

“We still do mass-mailing – I’m not saying it’s wrong – but there is a combination you need to find for the best results,” said Yap. However the combination of coding data and Club card data and overlaying helps half Tesco’s marketing spend and bring back in store 700 customers in the period of four weeks.

Tesco Malaysia was part of the speaking line-up at last Friday’s Big Data 2014 conference at The Westin Kuala Lumpur, which also includes speakers from Citibank, Genting, F&N Dairies and more.

Here are some snapshots from the conference:

 

 

 

A case study showing how marketing helped this global retail brand move from struggling to surviving and prospering

Even the most successful brands occasionally face choppy waters. One wrong move, or more likely, a succession of poor moves as competitors 'up their game' can lead to decline. When this happens, not only is the brand's reputation threatened, but its bottom line as well.

The Tesco brand is synonymous with shopping in the UK. After questionable investment decisions and multiple scandals rocked the business in 2013 and 2014, the company began facing unprecedented quarterly losses. Consumer confidence in the brand plummeted and sales began to reflect that new reality.

Yet the commerce giant managed to turn things around and has been posting financial gains over the past year. How did it manage to do this? As it turns out, a lot of it had to do with improved marketing. Let's review one of the best case studies out there for salvaging brand reputation.

 

Tapping into relevant humour

The Tesco brand has historically had a very stable, recognizable, but corporate marketing strategy known by it's 'every little helps' strapline. It's success meant stagnation in engagement and lack of agility to deviate from the formula in previous years. This fear – due to the fact that Tesco's super-power status didn't really justify any changes – became quite obsolete.

In the wake of the horse meat and accounting scandals that plagued Tesco's reputation in 2013-14, changes had to occur. The company then began to try out a new form of marketing – humour – in its Christmas commercial campaigns. By using previous commercial actors in a new setting, the business was able to keep a familiar spirit around a new concept.

The head of marketing at Tesco, Robin Terrell, noted that many lessons in humour were learned from the campaign. The biggest of all – that humour is a medium not everybody appreciates – helped the business adapt its future plans. Many companies prefer to avoid humour in profitable times, due to it being a risky gambit that doesn't resonate with everybody.

"We are trying to approach things in a very different way. If you look at the market generally there’s a lot of sameness out there. Even in terms of media mix, execution, style, tone, it’s all the same."

Tesco's marketing gamble helped pay off in the end, by and large.

Creating new product lines

Reviewing the marketing mix was also required and one of the steps Tesco took was to launch a new line of new farm brand products. This dramatic rebranding of products such as beef, fish, pork and fruit allowed the company to appeal to cost-conscious consumers who didn't previously value Tesco's offerings. Prior to the rebranding, Tesco's basket of farm-style products was about 15% more expensive.

The brand understood the need to compete in this category and prices were reduced. The result was a dramatic increase in farm and fish sales at the new price point.

Shifting toward digital marketing

A tried and true mega-business in any market would be expected to invest billions in marketing. Many businesses that enjoy the market share that Tesco has, invest heavily in TV, press, radio and cinema. Tesco realized, however, that changes in this particular marketing strategy had to occur.

In 2013, Tesco spent approximately £110 million on marketing efforts in traditional outlets. By 2014, that number had declined by about 10 percent. In 2015, Tesco's ad spend declined sharply to less than £80 million, marking a huge shift compared to just two years prior.

While specific figures are not available, it is reported that a 1:1 shift in ad spend from traditional marketing tactics to digital marketing efforts has occurred. This means that the company is now spending at least  30% of its marketing revenue on digital marketing. This allows the business to reach highly-targeted individuals in methods that traditional marketing simply cannot provide.

Overhauling product packaging

Another huge shift at the grocery giant involved repackaging many of its high-quality offerings in higher-quality packaging. Much like what the brand did with its farm and fish products, the company took a good look at its sales and preferred items. From there, it determined which items were suffering the most from consumer drop-offs in demand and which were performing just fine.

With this information, Tesco was able to devise new packaging designs and branding campaigns for items in need of assistance. Many of these new rebranding efforts revolve around connections to farms, ranches and other elements that elicit imagery of home-grown atmospheres. Because of the challenges the brand faced, giving shoppers a more organic and locally-sourced feel in products was a smart move.

Competing with smaller chains

In years past, Tesco didn't have to worry much about competing with smaller chains. Today, however, those worries are a necessity. With chains such as Aldi now encroaching more and more on market share, Tesco has been left with no other choice than to fight back.

One of the biggest challenges of the past few years has been to stabilize market share. Fortunately for Tesco, its market share stabilised in 2016 – the first time following the scandals of 2013-14. The company's shift from traditional marketing to a digital marketing effort across all channels has made this possible.

Chains such as Aldi continue to compete on social media and beyond, Tesco has found a way to promote and attract customers from outside its realm. With new value items and advertisements featuring substantial deals, the giant is once again luring shoppers back into its stores.

Customising media

The brand sees a huge need for focusing on “the individual experience” in its resurgence. Tesco's marketing team has come up with a variety of great marketing ideas for this approach. From deep discounts delivered by email on birthdays to print campaigns delivered directly to the door, customization is key in the new world of marketing.

Marketers with the company report that instead of maintaining a big, generic image, its goal is to hyper-target specific shoppers and earn their trust. Much of this will be done through direct customised marketing approaches that appeal to specific shoppers' desires.

The reinvigoration of Tesco's strategies – and subsequent financial rebound – is a testament to the power of marketing. As businesses continue to feel the strain of competition both domestically and internationally, these entities will need a response plan.

In the wake of multiple scandals and plenty of competition, Tesco has managed to deliver both to its shareholders and shoppers. This truly successful and innovative resurgence is a far cry from such a horrible slump that haunted the company just a few years prior.

Thanks to Boris Dzhingarov for sharing their advice and opinion in this post. Boris is an internet marketer. He spends a lot of time checking out the marketing campaigns of the top companies in the UK and analyzing their results.

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