Student number:

Course: Marketing with advertising management

Unit: Application of Corporate and Business Awareness
(BUS136)
Tutor-Debbie Pearson.

Table of Contents
Introduction........................................................................................................ 2
Description of the Business................................................................................3
The Market.......................................................................................................... 4
Business Information Systems and Customer Experience..................................6
Customer Relationship Management and Customer LifeTime Value...................7
HR and Marketing Practice................................................................................. 9
References........................................................................................................ 10

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Introduction
Headquartered in Chestnut, Hertfordshire, Tesco is a Multinational British
retailer of grocery and general merchandise. With 7817 stores across 12
countries, it is the second largest retailer in the world in terms of revenue.
In the UK, it is the market leader in the grocery sector. On the company
website, it claims to serve some 66 shoppers every second.

The organisation is located in 12 countries outside the United Kingdom,

including China, Malaysia and more recently United States. (Tesco annual
report, 2009). The organisation has several subsidiaries including Tesco
Bank and Tesco mobile and it dominates the UK food and grocery market
with a market share of approximately 28.4% as seen in figure 1 below.
(Mintel)

FIGURE 1, UK grocery marker

share. Mintel, 2015

As a grocery retailer, their product ranges include departments for chilled

goods such as meat, dairy and fresh produce. There is also reserved shelf
space for bakery, canned and packaged goods and alcohol as well as a

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range of non-food products such as pet supplies, clothes, medicines and
household items.

Below is an overview of Tesco PLC (Tesco PLC Annual Report and Financial
Statements 2015)

Type Public limited

company
Number of locations 7,817 stores
Number of 500,000
employees
Revenue (2015) 62.284 billion

Description of the Business

Tesco is market oriented organisation meaning that their customers are at
the forefront of every executive decision. According to the company
website No one tries harder for customers. Its core values are to:

Understand customers
Be first to meet their needs
Act responsibly for our communities

The organisation mission is to be to be the champion for customers,

helping them to enjoy a better quality of life and an easier way of living.
(Tesco PLC Annual Report and Financial Statements 2015)

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Figure 2 below illustrates Tescos organisational structure.

FIGURE 2, Tecso PLC

organisational
structure

Tesco has a hierarchical structure therefore there is a clear line of

communication. It also makes decision making more efficient and each
manager is skilled in a specific segment of the business. This is a very
appropriate structure for an organisation of this size as it spread out over
various sectors.

Tesco is a Public Limited organisation listed on the London stock

exchange. With a market capitalisation of 18.1 billion, it is a primary
listing of the London stock exchange and is a constituent of the FTSE
index. (Keynote)

The Market
Tesco PLC operates in several markets including finance and
telecommunication. This report however will be focus on the food and

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grocery market due to the size of the organisation. According to the
organisational overview of Tesco PLC on keynote, the organisation has
several standard industrial classification codes; within the grocery sector.
Below are a few as defined by the 2009 report by the office of national
statistics.

Sic Definition
code
47290 Other retail sale of food in specialized stores
47210 Retail sale of fruit and vegetables in specialised stores
47220 Retail sale of meat and meat products in specialised stores
47230 Retail sale of fish, crustaceans and molluscs in specialised stores
47710 Retail sale of clothing in specialised stores
47250 Retail sale of beverages in specialised stores
47260 Retail sale of tobacco products in specialised stores
47750 Retail sale of cosmetic and toilet articles in specialized stores

A report by the Institute of Grocery Distribution concluded that the UK

grocery market is worth 177.5 billion in the year leading up to March
31st 2015, an increase of 1.7% from 2014. Food and grocery expenditure
accounts for 53p in every 1 of UK retail sales.

There will always be a demand for food and grocery as they are part of
our psychological needs according to Maslows hierarchy (Maslow, 1943).

IDG has predicted the UK grocery market to increase in value by 13.0% to

200.6bn in 2020. The expected increase in population means the market
will benefiting from an additional 2.2 million consumers in the next five
years; as illustrated in Figure 3 below.

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 FIGURE 3, UK grocery market 5 year
forecast. IGD, 2015

This increasing demand has caused the players in the market including
Tesco to become a multi-channel retailer. Tesco was the first grocer in the
grocery market to provide online deliveries as well as click and collect.
The organisation has also invested 65 million in a data centre strategy to
drive online growth.

Mike McNamara, then CIO said in a keynote at Oracle OpenWorld in San

Francisco that Retail 2020 will be radically different from what we know
today, Increasing numbers of people are riding the digital wave its
force is unstoppable. If you let it crash over you, it will wipe you out.
(2013).

Business Information Systems and Customer Experience

Tesco is a market oriented organisation, meaning its customers are at the
forefront of every executive decision (Narver and slater, 1984)

Researching consumer behaviour is imperative for any market oriented

organisation. One of the ways the Tesco builds a strong relationship with
its customers and ensures lifetime value is though their loyalty card
scheme. It was originally introduced by then CEO Terry Leahy and

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customer science agency Dunnhumby, as a trial in 1994. After findings
were presented, Chairman Lord McLaurin said in a statement "What scares
me about this is that you know more about my customers after three
months than I know after 30 years. As of November 2015, the organisation
boasts 38 million club card holders according to the company website.

To obtain a club card, customers must sign up using personal information

such as Full name, address and email address. Every time a club card is
used, information is stored against the account such as items purchased,
where it was purchased, price paid and the quantity. (Cellan-Jones, 2007)
Information of shopping behaviour is kept for up to two years.

Dunnhumby then analyses the data to figure out the purchase patterns for
the household. According to the company website, Dunnhumby uncovers
valuable insights: what customers want, where they want it, and how
much theyre willing to pay for it.

This then benefits the customers shopping experience as the organisation

is aware of their shopping patterns. Promotional offers and rewards are
then personalised making the customer feels more valued; and making
the shopping experience better.

Matt Atkinson, chief marketing officer at Tesco, said in a statement

addressing Tescos multi-channel approach to customer experience that
prices will become increasingly personalised, with more targeted
promotions, while physical stores will become very finely tuned to tend to
local taste and needs, this is mass customisation.

Customer experience is important to the organisation instore as well as

online.

In December 2012, page views on the company website exceeded visits

from a computer for the first time ever. By the end of 2013, the
organisation launched a club card mobile application that allowed the
vouchers received to seamlessly integrate with the mobile app, so that at

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the point of sale, promotions will be instantly recognised (Computer
weekly, 2013)

Matt Atkinson, chief marketing officer at Tesco said in a statement Weve

seen the emergence of a seamless, blended world of physical and digital
and we enable the customer to move between those two worlds.

Customer experience is a very important factor for the organisation as

they aim to be the champion for customers in the 2015 annual report.

Customer Relationship Management and Customer

LifeTime Value
The organisations loyalty system is a great way to obtain customer
lifetime loyalty. It works as a point system where a point is earn for every
pound spent either in Tesco stores or any of its partner organisations such
as: E.on, F&F Esso Top cash back and Nutricare.

Every quarter, points are transferred into vouchers valued at 1 penny

each. 500 points are therefore 5 worth of vouchers. The points are
transferred into the next quarter if the threshold of 150 points isnt
reached. Card holders also have the chance to multiply their points by up
to 4x with Tescos club card boost scheme. Points are also doubled for the
Christmas period. (Tesco.co.uk)

The organisation also use the information they have obtained from the
club card holders to advertise to the customers directly. By personalising
correspondence including email, telemarketing well as post, customers
feel more valued. Research shows that mentioning a person by name
automatically makes you more endearing.

The customers also receive promotional discount vouchers along with club
card magazine personalised based on their shopping habits. The rewards
of Tesco club card system ranges from money of when shopping in Tesco

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to other sectors such as travel, days out, eating out and lifestyle. Rewards
include:

10 to spend with 5 worth of vouchers toys, Stationary Party, gifts

Technology gaming phones and accessories as well as Christmas
lights and decoration
30 to spend in Goldsmiths jewellers , with 10 worth of
vouchers
10 to spend in Pizza express with 2.50 worth of vouchers
20 to spend in spa finder wellness 365 with 10 worth of vouchers

FIGURE 4, Loyalty
ladder. Kotler, 2011

All the benefits the customers receive from having this loyalty card
encourages a repeat purchase, thus elevating the customers from a
customer to a client; as seen in figure 4. (Kotler, 2011)

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Dunnhumby stated on their company website that by personalising the
experience of the shopper, in and out of store, online and off, before,
during and after, earning a lifetime of loyalty

CLTV is a very significant factor in the success of the organisation. Tesco

was the second largest grocery retailer in the UK before the inception of
the club card system. Research shows that it is more cost effective to
retain a customer as opposed to gaining new ones.

HR and Marketing Practice

Tesco have successfully integrated human resources into the overall
strategic direction of the business. Training and development is a crucial
aspect of the growth of any organisation. It makes employees more
productive, effective and gives them the tools required to deliver a good
customer experience. Before training and development occurs, the
employees are required to identify their strengths and weaknesses; which
are then logged in a personal development file. The managers are then
tasked with finding the appropriate solutions. Tesco uses training methods
such as shadowing, coaching and mentoring. Development programs are
designed to help the employees extend their abilities focusing on both
leadership behaviours and operating skills. (Winterman, 2013)

Within the organisation, training and development occurs in various tiers

of the organisation.

Training and development helps create long term proficiencies; meaning

employees become more positive, productive and valuable to the
organisation. Tesco's brand image also benefits as customers are more
confident in the competence and knowledge of the employees. (Aguinis
and Kraiger, 2009)
The organisation needs to maintain its training and development schemes
to keep the employees more efficient; thus improving customer
experience.

Communication with customers is very important to market oriented

organisations. It maintains on the company website that No one tries

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harder for customers. Tesco does a lot to improve its Customer touch
point on various different platforms including print and TV.

All these platforms are somewhat out dated to a modern audience. The
organisation has a social media presence however it more dedicated to
their mobile network. Social media is equally as beneficial in the grocery
market. Research shows that 26% of customers would post a negative
comment on social media if they have a bad experience with a company
(Mintel, 2015)

Tesco being more active on social media would be a great way to improve
customer experience because the customers can contact the organisation
directly in seconds and vice versa. Being more active on social media is a
a very beneficial marketing practice for a market oriented organisation, it
is a very direct communication channel to their consumers.

References
o Aguinis, H. and Kraiger, K., 2009. Benefits of training and
development for individuals and teams, organizations, and society.
Annual review of psychology, 60, pp.451-474.
o Annon, (2007). Standard industrial classification of economic
activities (SIC).
o Company House. [online] Available at:
https://www.gov.uk/government/uploads/system/uploads/attachmen
t_data/file/455263/SIC_codes_V2.pdf [Accessed 17 Nov. 2015].
o Annon, (2015). Five year forecast: the grocery market by 2020.
Institute of Grocery Distribution. [online] Available at:
https://www.igd.com/Research/Retail/Five-year-forecast-the-grocery-
market-by-2020/ [Accessed 17 Nov. 2015].
o Annon, (2015). UK Grocery Retailing. Institute of Grocery
Distribution. [online] Available at:
http://www.igd.com/Research/Retail/UK-grocery-retailing/ [Accessed
17 Nov. 2015].

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 o Cellan-Jones, R. (2015). A journey into personal privacy. BBC.
[online] Available at:
http://news.bbc.co.uk/1/hi/technology/6763307.stm [Accessed 17
Nov. 2015].
o Christie, S. (2015). Tesco Clubcard vs Nectar: Best loyalty schemes.
The telegraph. [online] Available at:
http://www.telegraph.co.uk/finance/personalfinance/household-
bills/10273842/Tesco-Clubcard-vs-Nectar-Best-loyalty-schemes.html
[Accessed 28 Nov. 2015].
o Clubcard scheme is set to revolutionise the way the store responds
to demand. (Marketing) Mitchell, Alan Marketing Week, May 2, 2002,
Vol.25(18), p.30(2) Full text available
o Dunnhumby.com,. 'What We Do | Dunnhumby'. [online] Available at:
https://www.dunnhumby.com/what-we-do [Accessed 17 Nov. 2015].
o HALL, D., I. CHAMBERS and D. GRAY, 2008. Business studies. 4th ed.
Harlow: Pearson Education
o http://www.tescoplc.com/files/pdf/reports/annual_report_2009.pdf
o Keynote.co.uk,. 'Tesco Plc | Key Note'. [online] Available at:
https://www.keynote.co.uk/company-report/overview/00445790
[Accessed 17 Nov. 2015].
o Maslow, A. 'A Theory Of Human Motivation'. Psychological Review
o Narver, J.C. & Slater, S.F. (1990). The effect of a market orientation
on business profitability. Journal of Marketing, 54(4), 20-34.
o Poulter, S. (2005) 2billion Tesco, Daily Mail. London (UK): Apr 13th
2005
o Verdictretail.com, (2015). Summary - Verdict Retail Service - Tesco.
[online] Available at:
https://service.verdictretail.com/verdict/companies/food-and-
grocery-specialists/tesco/summary/article74649.ece [Accessed 19
Nov. 2015].
o Winterman, D. (2013). Tesco: How one supermarket came to
dominate. BBC. [online] Available at:
http://www.bbc.co.uk/news/magazine-23988795 [Accessed 17 Nov.
2015].

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