It has been a difficult few years for Tesco, even if the broad consensus is that it has turned the corner. But Tesco remains a clear number one in the UK, with nearly twice the market share of Sainsbury’s and Asda. How did it get to such a strong position and what can we learn?
The key is the customer-focused culture that has pervaded the company, can be seen in many of its successes, and will be essential to future success. What such a culture can bring has been apparent as the Tesco offer has developed over the years.
First, customer-focused product development. At its best, Tesco intuitively understands what products its customers will value. For examples, look at City Kitchen in ready meals or its work in prepared vegetables. Then try the products. The quality is typically very good - all new products are robustly consumer tested. Tesco could spotlight its champion products better in-store - the new smaller ranges will help - but those champion products exist, and across many categories.
Second, customer-focused ranging. Tesco has been much better, much faster at ranging for the local audience. Take ranging for ethnicity and nationality in the catchment. Getting, then applying, Clubcard data has been key to local ranging. And the bigger Tesco got, the broader its audience became, so the better Tesco could understand how that audience varied by location.
Third, customer-focused store development. More than most, Tesco talked to prospective customers as it built and fitted stores. This included ‘meet the public’ sessions as well as surveys. Stores were built for customer tastes. You can see it now in details like the design of toilets. Handles, tap and dryers are almost always touch-free. That is insight by common sense and empathy, rather than by unnecessarily complicated research. Touch-free is obviously a good idea if you think like a customer. It probably wouldn’t happen if you only thought about the cost.
Fourth, a customer-focused loyalty scheme. Customers consistently praise Clubcard. Again, scale has helped. The more you spend, the more you get. The use of Clubcard partner companies has allowed the impression of a multiplier effect - the customer’s points go even further. Clubcard has been an important part of the mix for Tesco.
So it is all about customer-focused culture. To quote Amazon’s mantra, “Start with the customer and work backwards”. Understand your customers, anticipate their needs and give them what they will value. The theory is simple, yet so often organisations lose track of this essential rule of the road.
Jeremy Garlick is a partner of Insight Traction
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