By Amanda Dankwa

TESCO
How the internal structure of the
organisation impacts internal and external
communications and customer experience.
The publication below is an analysis of the supermarket chain
Tesco, and how the organisation delivers customer experience
to its customers. The paper express the link between
customer relationship management and customer life time
value for the organisation, well as recommendations to
improve customer experience.

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 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
Number of locations
Number of employees
Revenue (2015)

Public limited company

7,817 stores
500,000
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)

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 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
47210
47220
47230
47710
47250
47260
47750

Other retail sale of food in specialized stores

Retail sale of fruit and vegetables in specialised stores
Retail sale of meat and meat products in specialised stores
Retail sale of fish, crustaceans and molluscs in specialised stores
Retail sale of clothing in specialised stores
Retail sale of beverages in specialised stores
Retail sale of tobacco products in specialised stores
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.

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 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 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 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)
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 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.

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