The Tesco case

In the Tesco case, it is shown how the good use of IT can lead to significant advantages. The example shown is about retail, but advantages can be built based on IT use on most of the industries.

As it is the case's main focus, I will first do a quick summary of the competitive advantages they get from their CRM/loyalty program:



1) Knowing better who your customers are: Better direct your direct marketing

Knowing their customers' addresses were, allowed Tesco to send eight million customers a quarterly mailing. But the power of CRM and loyalty cards goes much beyond the use of your info as a regular mailing-list. Tesco analyzed who these people were, and sent 80,000 variations of their magazine. Sending the right adaptation of communications leads to improved impact.

The same way we don't talk to elders as to young people, neither should companies. It is amazing how there are companies that have this data or can easily gather it and keep sending mass-advertising almost without segmenting.

2) Knowing better what they buy: Better choose your promotions

Having real time information about what each kind of customer bought, Tesco was able to focus it's promotions strategy towards its regular clients, and not waste efforts on clients that only bought during promotions.

3) Knowing better what they may want: Better choose your new services and products
Knowing your customer base needs other than the products and services you already offer, you can more carefully decide what new services to launch. As an example, knowing how many of your customers are heavy profitable customers of banking services, you can decide to launch your own banking services, knowing already what amount of your customers may eventually be interested in them.

4) Having more and more loyal customers: Selling more to more buyers

Tesco, with the loyalty-card extra incentives for the clients, managed to sell to their clients more stuff they usually didn't buy in Tesco. This scraps market share, increasing revenues and profits. It also increased revenues comming from new customers, attracting about 20 million members.


Other than the loyalty cards and CRM, information technologies also helped Tesco in other ways:


Tesco.com contributes successfully to the revenue stream. It is not only the systems that allow shopping that have contributed to that success, but also the services over them, such as "Price Check", that will probably enhance customer satisfaction having more information in the moment of buying and eventually discovering they are buying cheaper in Tesco. The shopping list offered to the client helps him not to forget anything he usually buys, increasing both, customer satisfaction and Tesco revenues.


The case mentions the SAYE and BAYE programs, that constitute additional benefits to employees willing to adhere. It also mentions the GAYE program, that eases the way for employees willing to donate part of their salaries to charity. This wouldn't be possible without advanced systems to manage the compensation of employees, and gives Tesco a competitive advantage in hiring new employees and in its image towards the community.

Tesco also supports the British Farm Assurance Mark, with its supply chain "master class" program, and probably also uses an Enterprise Resource Planning (ERP) system to manage all of its supply. Correctly drafting and executing a supply strategy, including the reception of goods from suppliers, delivery times, inventories and payments, is often as important as drafting and executing the selling strategies. Correct handling of supplies gives Tesco a competitive advantage probably in both quality and cost of its products.


All of these competitive advantages can be used to enforce its position in the markets they already compete in, as well as to expand to other markets. Answering to the questions at the end of the case:

- They can compete against supermarkets and irate lusury brand owners alike by correctly segmenting their clients and offers, and focusing their promotions and marketing using this segmentation.

- They can expand the supremacy of Tesco.com to other fields of e-commerce, selling, as a real example nowadays, telecom services through their websites. The systems they have used for targeting in the past can also be applied to new products and services. Cannibalization management is done by correctly pricing and promoting the web-services in carefully selected products and customer segments.

- Nothing assures Tesco that they will be able to convince the American consumer to pay 9.95 for home-delivered groceries, but with their customer knowledge they are in better position to know what potential those services have and what are the market segments to target.

- China... I guess that's not really part of the IS subject, is it?