Student Name: Case Study 1 Tesco.com increases product range and uses triggered communications to support CRM Tesco, well known as Britain's leading food retail group with a presence in Europe and Asia has also been a pioneer Context online. By September 2005 online sales in the first half of the year were 401 million, a 31% year-on-year increase, and profit increased by 37% to 21 million. Tesco.com now receives 170,000 orders each week. Soon it should reach an annual turnover of 1 billion online and it is generally recognized as the world's largest online grocer. Product ranges The Tesco.com site acts as a portal to most of Tesco's products, including various non-food ranges (for example, books, DVDs, and electrical items under the 'Extra' banner), Tesco Personal Finance and the telecoms businesses, as well as services offered in partnership with specialist companies, such as dieting clubs, flights and holidays, music downloads, gas, electricity and DVD rentals. It does not currently sell clothing online but in May 2005 it introduced a clothing website (www.clothingattesco.com), initially to showcase Tesco's clothing brands and link customers to their nearest store with this range. Competitors Tesco currently leads the UK's other leading grocery retailers in terms of market share. This pattern is repeated online. The compilation below is from Hit wise (2005) and the figures in brackets show the market share for traditional offline retail formats from Taylor Nelson. Tesco Superstore - 27.28%, ASDA- 13.36%, ASDA @t Home 10.13% (17.1%), Sainsbury's 8.42%, Tesco Wine - Warehouse - 8.19%, Sainsbury's to You - 5.86% (15.9% ), Waitrose.com - 3.42% (3.6%), Ocado - 3.32% (owned by Waitrose, 3.6%), Lidl -2.49% (1.8%), ALDI-UK-2.10% (2.3% ). Some companies are repeated since their main site and the online shopping site are reported separately. Asda.com now seems to be performing consistently online to its offline presence. However, Sainsbury's online performance seems to be significantly lower compared to its offline performance. Some providers such as Ocado which originally just operated within the London area have a strong local performance. Notably, some of Tesco.com's competitors are absent from the Hitwise listing since their strategy has been to focus on retail formats. These are Morrison's (12.5% retail share), Somerfield's (5.5%), and Co-op (5.0%). Promotion of service As with other online retailers, Tesco.com relies on in-store advertising and marketing to the supermarket's Club card loyalty scheme's customer base to persuade customers to shop online. New Media Age (2005c) quotes Nigel Dodd, marketing director at Tesco.com, as saying: 'These are invaluable sources as we have such a strong customer base." However, for non-food goods, the supermarket does advertise online using keyword-targeted ads. For existing customers, e-mail marketing and direct mail marketing to provide special offers and promotions to customers are important. According to Humby and Hunt (2003), e-retailer Tesco.com uses what they describe as a commitment based segmentation' or 'loyalty ladder' which is based on recency of purchase, frequency of purchase, and value Tesco then uses automated event-triggered messaging to encourage continued purchases. For example, Tesco.com has a touch strategy that includes a sequence of follow-up communications t customer Iffecycle. Tesco's online product strategy New Media Age (2005) ran a profile of Laura Wade-Gery, CEO of Tesco.com since January interesting insight into how the business has run. In her first year, total sales increased 24% to 40 years old, a keen athlete and has followed a varied career developing through a Oxford, an MBA from Instead; Manager and partner in Kleinwort Benson; Manager and senior com Consulting Targeted marketing director (Tesco Club card), and Group strategy director, Tesco Stor overseen by Wade Gery has been achieved through a combination of initiatives. Product range develo key area. In early 2005, Tesco.com fulfilled 150,000 grocery orders a week but now also offers offerings, such as e-diets and music downloads. Wade-Gery has also focused on improving the customer online-the time it takes for a new customer to complete their first order has been decreased from over ans 35 minutes through usability work culminating in a major site revision. To support the business as it diversifies new areas, Wade-Gery's strategy was to make home delivery part of the DNA of Tesco' according to New Media (2005). She continues: What we offer is delivered to your home of a Tesco service- it's an obvious extension of the home-delivered groceries concept'. By May 2005, Tesco.com had 30,000 customers signed up for DVD rental, through partner Video Island (which runs the rival Screen select service). Over the next year, Wade-Gery's target is to treble this total, while also extending home-delivery services to the likes of bulk wine and white goods. Wade-Gery looks to achieve synergy between the range of services offered. For example, its partnership with eDiets can be promoted through the Tesco Club card loyalty scheme, with mailings to 10m customers a year. In July 2004, Tesco.com Limited paid 2 million for the exclusive license to eDiets.com in the UK and Ireland under the URLS www.eDietsUK.com and www.eDiets,le. By promoting the services through the URLs, Tesco can use the dieting business to grow the use of the Tesco.com service and in-store sales. To help keep the focus on home retail delivery, Wade-Gery sold the women's Portal Village (www.ivillage.co.uk) back to its US owners for an undisclosed sum in March 2004. She explained to New Media Act: It's very different sort of product from the other services that we're embarking on. In my mind, we stand for providing services and products that you buy, which is slightly different from the world of providing information. The implication is that there was insufficient revenue from ad sales on iVillage and insufficient opportunities to promote Tesco.com sales. However, iVillage was a useful learning experience in that there are some parallels with Village, such as message boards and community advisers. Wade-Gery is also director of Tesco Mobile, the joint 'pay- as-you-go' venture with 02 which is mainly serviced online, although promoted in-store and via direct mail. Tesco also offers broadband and dial-up ISP services but believes the market for Internet telephony (provided through Skype and Vonage for example) is not sufficiently developed. Tesco.com have concentrated on more traditional services which have the demand, for example, Tesco Telecom's fixed-line services attracted over a million customers in their first year. However, this is not to say that Tesco.com will not invest in relatively new services. In November 2004, Tesco introduced a music download service, and just six months later Wade-Gery estimates they have around 10% market share - one of the benefits of launching relatively early. Again, there is synergy, this time with hardware sales. New Media Age (2005) reported that as MP3 players were unwrapped, sales went up - even on Christmas Day! She says: The exciting thing about digital is where can you take it in the future. As the technology grows, we'll be able to turn Tesco.com into a digital download store of all sorts, rather than just music. Film (through video on demand] would be next. Answer any two questions from the selected case study. All questions carry equal marks QUESTIONS 1. How does Tesco promote its services? 2. Who are its Competitors of Tesco and what is their market share? 3. Describe the range of products that Tesco deals in