Tesco customer relationship management

Marketing is one of the important tools for any organization to reach its target customers. We hereby select Tesco stores for the case study as the organization is very customer oriented. The Tesco store is one of the largest retail chains for all types of household items in the region. The business is all dependent on the walk-in customers as they are the actual purchaser or consumer of all kinds of products. The retail business directly deals with the customers therefore the Customer Relationship Management (CRM) is very important for the business that deals directly with the customers. The CRM is the strategy that enriches and enhances the relations of an organization with their customers by understanding and learning more about the customers and their needs and behavior towards the product and purchase habits, influences on their purchase and other psychological and environmental factors related to the customers.

The Customer Relationship Management helps in providing better customer service and sell products more effectively. The CRM simplifies the marketing and sales promotion as it makes the understanding for customer behavior and preference easier and clearer. It helps in identifying the new customers based on the customer needs and understanding. All these efforts help in ultimately increasing the revenues and profits of the organization. The CRM helps in understanding how the customers think, feel and act. It clarifies the customer thinking process and their reasoning while making purchase decisions. The psychology of the customers is influenced a lot by their environment and related factors. The purchase decisions are affected by many factors like customer’s knowledge about the product and market, their budget, family values, background, purchasing power of the customer, marketing influence on the customers, limited knowledge of the customers, friends’ and family influence, impulsive decisions at the point of purchase etc. are various factors that affect the customer’s purchases.

The consumer behavior is the study of individuals or groups or organizations and the processes they use to procure or select products & services to satisfy their needs and their impact on them and their environment. The study of consumer behavior could be in context of an individual or a group or even an organization to understand their attitude and purchase decisions for various procurements. The study of consumer behavior involves the use of products and how they are selected and purchased. This process involves a complete understanding of the consumer psychology as to why they purchase a particular product and not the others in the same product line. This explains why some brands are preferred over the others in the market. This also explains the success and failures of the products in the market. Such studies then help the organizations to change the positioning, placement and other marketing strategies related to the product so that the product reaches its right customers with a right understanding of the consumers for the product and thus make it a success. E.g. when Kelloggs launched their product in Indian market, it failed initially as the company was positioning the product as a breakfast option. The company then had to understand the consumer psychology for their product and changed their marketing strategies. The Kelloggs was then re-launched as nutrition filled hunger option for kids. This helped the company in making the product successful in the market and gradually the product has established itself as a healthy breakfast option as well.

The consumer behavior is also influenced by the social and economic factors as well. The society where we live influences our decisions substantially even if they are related to our day-to-day purchases. From the washing detergent to the car that we buy has influence of our friends, relatives and neighbors. The kinds of people around us are big influencers of our decisions related to the products we use and purchase. Sometimes the consumers purchase few items as per the recommendations of the relatives and friends. There could be few brands and products which people might find that it affects their impression upon others and enhances their reputation in their friend circle so they tend to use those products even if they might be over expensive according to their budgets or might not be serving the entire purpose of their need and requirements. Such recommendations are not even possible to be ignored for the personal relationship that the consumers share with their friends and family and often land up making purchases influenced by others’ decisions. There are also the economical factors affecting the purchase decisions of the consumers. Their income, expenditure budget, purchasing power etc. are the factors that may influence their decisions of purchasing various products and availing some services. The kind of money to be spend on any purchase or service is decided by factors like the consumer budget, willingness to spend money on some item or service.

There are many applications of the study of the consumer behavior. These are:

Marketing Strategy: The marketing strategy is the most affected and dependent on the study of the consumer behavior for any product or service. The main objective of any marketing activity is to reach the desired customer base in best possible manner so that the customers can relate themselves with the product or service and their interest is generated in the product or service so that the potential buyers turn into actual consumers. The study of consumer behavior helps in understanding the psychology of the customers related to a product or service and the factors that influence the customers towards purchasing a particular product. These observations and conclusions then make an inevitable data for formulating the appropriate marketing strategy for any product or service. This way the marketing activities are able to generate maximum result in most effective manner so that the customers are easily approached in the market for the particular product or service and the organization is able to achieve their desired objective by adopting right marketing strategy prepared in the light of the study of consumer behavior for that product or service which the related organization intend to introduce in the market or make available to existing or potential customers. The study of the consumer behavior helps in formulating appropriate marketing strategy e.g. the ad schedule can be planned according to the customer interest and line of thought of the prospective customers related to the product or service. The kind of medium that will best suit the product can be identified through the right and thorough study of consumer behavior. In some cases, print medium could be the best way to reach the customers and in some other cases, television could be the better medium for reaching target customers. Similarly, the organization can avail other marketing options like outdoor advertising, promotions and direct marketing. In case of Tesco, the store found it more appropriate to highlight their savings scheme through direct marketing mode by promoting projects like Club Card, vouchers, discount coupons etc. Also the outdoor medium was extensively used to create a brand recall and also remind the customers about the bigger benefits the store is offering to its customers through little things. The tagline of “Every little helps” became the motto of all the customers as they started realizing the importance of small savings and the bigger benefits in long term that are attached with these small savings. Sometimes the customers find that through regular use of their Club card, they are able to accumulate so many free points that one bill in every 3-4 months is covered through their discount coupons and club card points only. This way they end up saving huge money in their monthly expenses and substantial saving every 3-4 months in their household expenditure. The right study of consumer behavior helped Tesco in realizing the importance of savings for the customers and thus they chose to formulate their marketing plans around the same concept of savings and customer benefits.

Social Marketing: The study of the consumer behavior also finds its application in case of the social marketing. The social marketing does not involve selling of a product to the consumers but it focuses on promoting an idea of some social relevance to the community. The study of consumer behavior for that particular social awareness subject can be availed to promote that subject and generate better understanding and awareness for that subject.

Better customers: The consumer behavior study help in making customers better with respect to the market response and understanding for a product and service. The study of the consumer behavior makes the customers aware of the factors involved in their decision making and they tend to analyze things more clearly and thoroughly. They realize the importance of the factors involved in their perceptions and decisions. They become more aware and intelligent in making decisions related to their purchases.

The research method is involved in the study of consumer behavior. This helps in knowing the customer needs, desires and requirements and also eliminates the possibility of application of our own perceptions and thoughts related to the consumer behavior. The research involves primary and secondary research methods. The secondary methods rely mainly on the sources that already contain the related information collected earlier though primary methods for some other research. The primary method involves tools like mails, questionnaires, surveys, observations and focus groups. The tools like questionnaire and survey help in collecting some specific information accurately and precisely. The focus groups involve a group of few people that come together to discuss the positive and negative points related to any product. This is more helpful in new product development. The focus group presents its views and opinions for that product. They highlight the customer desires and expectations for that product or service. They help in understanding the consumers in detail by highlighting the important factors that the customers relate to any product or service available in the market and they make their purchases for them. The focus group has a major disadvantage. It represents a very small sample size of the target group so it becomes difficult to assess exact customer perceptions and ideas.

The consumer relationship management also helps in assessing the effects of relative factors related to the product or a service. Tesco store may try to find the particular product or brand in product categories that sells the most, the time at which the sale of a particular item is maximum, the offers or promotions that attracted the customers most, the kind of money spend in particular category, the queries that are generated for any specific product or brand, the usage of cards and coupons by the customers etc can be found by making certain efforts in the customer study. This will help in knowing and making available any product or brand that the customers desire the most. This will help in knowing the general expenditure done by customers for any particular product or category and the kind of money the customers are willing to spend on those items so that the store can make those products available in substantial quantities and no customer faces any problem due to non-availability of the product. This will also be helpful in knowing the customer response towards the promotions that the store got involved in and the coupons that they distributed among the customers under some scheme.

There are various factors that affect the consumer behavior. These factors are:

Culture: The culture is the external influence that other people impose on the consumer. The culture includes the knowledge, belief, art, values, customs and other habits that a person attains from the society by being a part of it. The cultural background plays a very important role in the personal choice and notions a person possess. The cultural issues are quite complex to understand but are very significant. The language, customs, values and influence group are all part of the culture that develops around us.

Demographics: The demographic details elaborate the population distribution and segmentation according to the age, income pattern, family size, population growth and other population related factors. These population patterns play a very important role in building the customer’s mindset, perceptions and values which affect the purchase decisions of the customers and their behavior towards the products and services which are available in the market for the customers to avail.

Family: The family is very close and important factor in an individual’s life. The family members influence each other in many ways. The kids follow their parents and learn a lot of things from their actions, behavior and attitude. They see the decision making of their parents and try to understand and learn the factors they consider while making their decisions related to many matters in the life including the purchase of even minor things from market. When parents use a particular brand of toothpaste, washing detergent, food items, toiletries, groceries etc, normally the kids also build their preference around these particular products and brands till they become willing enough to try something new in the market. The family decisions are affected by the factors like income, background, family traditions, age etc. The expenditure patterns tend to repeat in the family matters. The study of consumer behavior tries to understand various factors that are involved in the family oriented decisions and the influence which family members induce on each other in the family. Some decisions are made by mostly the male members and some decisions are made mainly by the female members. The decisions like insurance policies, investments, savings, purchase of electronic consumables, cars etc. are made generally by the male members, whereas the decisions related to home use items, domestic help, kids care etc. are female dominating decisions.

Social or reference group: The way family affects our decisions, similarly the social groups also affect our purchase decisions. The people around us have their specific influences over our decisions and affect the thinking and perceptions related to the purchases and expenditure.

Perceptions: The perceptions of the customers are very significant as they influence the decisions to a great extent. These perceptions are built due to various factors and incidences that happen around people. These incidences take their place in the mind of people and the perceptions are developed in the minds of people. These perceptions influence the decisions of the consumers while they make the purchase for any product or service they wish to avail.

Memory and learning: The information as displayed through various advertising and marketing mediums is retained by the customers who help them in remembering the products, brands and their respective features. The phone numbers of various helpline or home delivery outlets are also memorized by people in their minds. The advertising in newspapers involve detailed information which is given to the customers for providing details about the features and benefits of the products or service offers like insurance policies, banking accounts etc. This kind of information is read by the customers and is retained in their minds. This memory is enhanced by other mediums like television, outdoor options as bill boards, hoardings etc. These options help in enhancing the brand recall and strengthening the information that is already present in the minds of the customers. Thus the memory helps customers in building up their brand perceptions and product information. Learning means change in the behavior through information retained in the memory. The learning changes the behavior of the people, not only the customers but also those on the other side of the counters. Tesco stores can enhance customer service by making their sales staff learn new techniques for customer services. This will improve the performance of the helping staff in serving the customers and also enhance the customer relationship.

Innovation: The customer behavior also helps in bringing about the innovation in the products. When the product reaches its decline stage of the product life cycle, the product faces problems in the market where it may find redundancy because of the new technologies being introduced in the market every now and then. This makes many of the products unable to serve the customers better. The new product development or the modifications in the existing product involve innovation. These innovations make the products updated according to the needs and requirements as expressed by the customers in the study of the customer behavior. In case of Tesco stores, this can be applied to various products that the store offers to its customers or any kind of services that are offered. When customers found the payment system as old and non-updated, the Tesco introduced new system of self-payment which involved the hi-tech machine. This helped the store in increasing the customer satisfaction.

Attitude: The attitude of the customers is affected by the beliefs, feelings and behavioral intentions of the customers. The customer attitude is creating and changed by various marketing tools once the organization understand the customer preferences and requirements. Attitude is also affected by various factors like family, society and other influence groups. The personal usage and trials also help building the attitudinal behavior of particular type for any product or service.

In case of Tesco, according to a survey, the top 5% customers account for the 20% of the sales. The CRM of Tesco is very popular and many stores in the region try hard to match the Tesco standards and techniques involved in their CRM. Its CRM program is one of the best and involves segregation of the customers according to their expenditure in the store. This helps Tesco in prioritizing the clients on basis of the business they offer to the store. The Tesco introduced their club card in 1995. This facilitates the loyal and regular customers to add more value points in their cards on every purchase and these points keep on getting accumulating. Later, these points account for rebates and offers on the cards and otherwise for these card holders. This enhance their preference and loyalty towards the store as they find that shopping at Tesco is not only better for them in terms of savings every time they come and make any purchase, but their loyalty is also awarded from time to time with some very special and unmatched offers and discounts. Some extra and special privileges are also offered to the card members. The use of eco-friendly Tesco jute bags also helps the customers in gaining extra points every time they carry that bag for shopping. This not only helps the customers but also shoe the concern of the store for the environment and better life for people. This social responsibility is also a very good factor that adds and enhances the customer priority and preference for the store. The tagline of Tesco “Every little helps” is by far followed by the store very religiously and they actually mean and prove the same in every purchase of the customers.

The Tesco has been able to successfully implement its CRM and as a result it has been able to gain maximum market share in the region. The customer facilities, convenience and the social concerns that Tesco has, helps the store in increasing profits, market share, customer base and popularity even among the tourists besides the regular customers. A well managed CRM is helpful in enhancing the brand image and profits of the organization.