Tesco: great example of the perils of data driven marketing & neglect of the customer experience?

Tesco continues to do ‘badly’ in the UK

The other day I was reading the business press and the following piece on the poster child loyalty schemes/analytical CRM/data driven business management caught my eyes:  Tesco UK sales fall for more than a year.

If you don’t know then let me remind you that for many years the loyalty/CRM folks were holding up Tesco as the shining example of how to run a business intelligently/smartly and out compete your competitors by harnessing data and using this insight to drive/run the business.  And about a year ago the wheels came of the bus.

What got Tesco here?

Looking at it from the customer perspective, I say that the difficult economic environment forced customers to take a closer look at Tesco.  Some of these customers noticed that the ‘great deals’ from Tesco were actually more marketing gimmicks than genuine value.  And they noticed the poverty of the overall shopping experience – stores, products, service….. Here is a comment that speaks of the marketing gimmicks:

“..   It is consistently more expensive than Asda, Morrisons, even Sainsburys. It’s offers are phoney.  Strawberries “half price” at £2. Never seen them at £4 at Tescos or any other supermarkets. Asda had them at £1 so Tesco offered 2 for £2.50 next day, but smaller punnets. Their price drops are a joke, they drop from inflated price (Sometime BOGOF price) and are still expensive. They must think the public are fools and I suppose some are – they don’t even look at prices.”

As a strategist and business consultant, I say that like many successful businesses that end upon hard times Tesco’s strength became its weakness.  Put differently, Tesco placed pretty much all of its emphasis on data driven marketing and business management.  And in the process it gradually sucked the life out of brand and the customer experience. Rather like a television whose picture quality degrades gradually such that you don’t even notice these small changes until one day you happen to view a television that works properly. The recession was the wake up call for customers.

The data driven marketing allowed Tesco to maximise response and sales by personalizing the offers and coupons to the needs/interests of shoppers.  One the business management side, the Clubcard based analytics allowed Tesco to stock the right products in the right stores.  It also allowed the business to penny pinch on various areas including the stores, the products and the staff in the stores.  This is the classic example of the ‘extraction’ mentality powered by data driven analytics – in my view they power each other.  If you have worked  with database marketers you might have learned that their focus is on optimising return on the campaign as opposed to maximizing the long-term value of the customer. Often what optimises the ROI on the campaign does the opposite for longer term customer lifetime value and loyalty.  The opposite also applies.

What do retail experts say?

According to the Guardian piece (bolding is my work):

“At its annual results in April, Tesco’s chief executive, Philip Clarke, announced a £1bn makeover of the UK chain designed to “put the heart and soul back into Tesco” after domestic profits fell for the first time in more than 20 years. With more than 2,700 stores, Tesco’s domestic chain pumps out two-thirds of the group’s profits and Clarke admitted it had taken “a little bit too much away from the shopper” during years of penny-pinching to boost the bottom line.

And according to the Telegrah piece Phil Dorrell, a director at retail consultants Retail Remedy, says the following ( the bolding is my work):

“Tesco is treading water but the paucity of its long-term marketing strategy could still drag it under. Tesco… continues to offer a bland and soulless shopping experience and will be hard pushed to maintain its market share over this financial year. The leadership still seems to be focused on the quick fixes, more appropriate to running a store than a business”

And finally 5 questions for you to ponder

1.  If Tesco was genuinely customer-centric, all those years that it was touted as being the poster child of customer-centricity, then why is it in the state that it is in today?

2.  Is it possible that customer-data/insight centricity (which is what often passes of as customer-centricity) is not actually authentic customer-centricity?

3.  If intuition is such a poor guide to decision making and salvation lies in data driven insights that drive rational decision making then how is it that by pursuing this path Tesco has ended up here?

4.  Is it possible that what is rational over the short-term is not rational over the longer term?

5.  Is it possible that what occurs as rational to data scientists and data driven marketers and business managers is actually irrational because customers are human beings and as such irrational factors such as the brand, the customer experience, authentic customer care matters and weaknesses show up over the longer term?



Posted on June 13, 2012, in Case Studies, CRM, Customer Experience, Customer Insight (inc VoC), Customer Philosophy, Customer Service, Customer Strategy, Marketing and tagged , , , , , , , , , . Bookmark the permalink. 7 Comments.

  1. Great article.

    I think that Tesco have lost a very important thing – trust. Of all the offers and enticements around the store, I only need to see one dubious one to lose faith in them all. I tend to notice wine and spirits prices, and, as with the strawberries, you frequently see “half price” offers that are just the normal price – £5.99 for Australian blended red wine etc. Years ago people would shop at Tesco knowing that they were getting value pricing, and nowadays I do not think this is true.

    It also brings to mind the BA Executive Club. When it launched, BA suddenly found that 10% of its travellers were generating 90% of the profit (figures from memory to illustrate the point), I was an early card holder, they treated me as someone special, upgrades if available etc. At some point some smart person decided that they should extend the scheme, and I do not know if people still care about it. Would be interested in whether the Executive Club is a differentiator when selecting a flight.

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  2. “Is it possible that what is rational over the short-term is not rational over the longer term?”

    Maz, I have worked for both public and privately owned businesses. The publicly owned always focused on their year end numbers. The privately owned came to the conclusion that they had all the money they really needed and were much more value driven

    I always felt it was a far more sensible place to work

    James

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    • Hello James
      You make a great point. We so often attribute behaviour to the personality/character of the person or persons. Yet, it is the ‘structure’ (the design) of the system that dictates behaviour. If you are a Top at a publicly owned business the mandate is to make the numbers at any cost. And if you do not make the numbers then you pay the cost – publicity, reputation, bonus…..

      All the best
      maz

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  3. “Trust arrives on foot and leaves on a horse” – old Dutch saying. I don’t know how Tesco could get my trust back.
    Data driven marketing was behind the Ford Edsel. We saw the recent disaster with pregnant girls at an American chain. You do actually need to watch and listen to customers.

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    • Hello Brian

      Thanks for dropping by and adding your voice to the conversation.

      What can I say except that I find myself in total agreement with you. Thanks for sharing the Dutch saying – love it, expresses what is so beautifully.

      Wishing you well and looking forward to hearing your voice and learning from you.

      All the best
      Maz

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  4. Hi Maz,
    I really like your point about rationality vs irrationality and the short term versus the long term. I would throw in another element which is the emotional vs functional dynamic. Data, figures and analytics from a psychological and memory perspective is very functional, left brain, short lived and lives in short term memory. Whereas, experience, trust, care and building long term value not short term numbers is more emotional, memorable, right brain and lives in the long term memory.

    I think I may have used this quote before but it merits repeating. May Angelou once said: ‘People will seldom remember what you did or what you said but they will always remember how you made them feel’.

    You can only scam and rip people off for so long before everyone knows and then everyone remembers.

    Adrian

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  5. Hello Adrian

    You make excellent points. Yes there is that distinct difference between the right brain and the left brain: the prelingual/intuitve and the lingual/analytic brains. Yes, there is the difference between the experiencing brain (which has no access to language and thus cannot speak) and the remembering brain.

    Cannot agree more on the Maya Angelou quote. We know that is true. Yet, so few businesses people act on that. That is what is most interesting!

    Scams and how people respond. Not convinced that reality is on your side. All kinds of scams work simply by convincing customers that scam is simply standard way of doing business. Banking is full of ‘scams’ which are accepted as standard practice and customers do not switch banks due to perception that they are all the same. And at same time it is not practical to be without a bank account.

    Maz

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