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CREATING LONG-TERM LOYALTY RELATIONSHIPS | CHAPTER 5 149 based on shopping habits. To build this profile, it classified each product purchased by a customer on a set of up to 40 dimensions, including price, size, brand, ecofriendliness, convenience, and healthiness. Based on their DNA profile, Tesco shoppers received one of 4 million different variations of the quarterly Clubcard statement, which contained targeted special offers and other promotions. The company also installed kiosks in its stores where Clubcard shoppers could get customized coupons. The Clubcard data helped Tesco run its business more efficiently. Tracking Clubcard purchases helped uncover each product’s price elasticity and helped set promotional schedules, which saved Tesco over $500 million. Tesco used its customer data to deter<strong>min</strong>e the range of products and the nature of merchandising for each store, and even the location of new stores. Within 15 months of introduction, more than 8 million Clubcards had been issued, of which 5 million were used regularly. Tesco’s customer focus strategies enhanced by the Clubcard helped propel Tesco to even greater success than in the early 1990s. The company’s market share in the United Kingdom rose to 15 percent by 1999, and that year other British companies voted Tesco Britain’s most admired company for the second year in a row. In the following years, Tesco continued to apply its winning formula of using customer data to do<strong>min</strong>ate the British retail landscape. Tesco moved beyond supermarkets to “bigbox” retailing of general merchandise, or nonfood products. This strategic growth not only provided additional convenience to consumers who preferred shopping under one roof but also improved overall profitability. In 2003, the average profit margin was 9 percent for nonfood products versus 5 percent for food and nearly 20 percent of Tesco’s revenues came from nonfood items. That year, the company sold more CDs than Virgin Megastores and its apparel line, Cherokee, was the fastest-growing brand in the United Kingdom. Tesco continued to conduct extensive customer research with telephone, written surveys, and customer panels to extend its lead in the grocery market. By 2005, the company had a 35 percent share of supermarket spending in the United Kingdom, almost twice that of its nearest competitor, and a 14 percent share of total retail sales. Tesco sought growth overseas in the mid-2000s and today, the company operates 4,300 stores in 14 countries, with a strong focus on high-growth markets in Asia. The company has used the same customer-centered strategies that worked in the United Kingdom to expand into these new markets. Tesco continues to diversify its product and service offerings in order to reach more consumers. In the late 1990s, Tesco launched its own ISP service, Tesco Broadband, to provide Internet access to homes and businesses. During the 2000s, the company partnered with existing telecoms to create Tesco Mobile and Tesco Home Phone, a service now used by over 2 million UK residents. Recently, Tesco joined forces with the Royal Bank of Scotland to create a banking division, Tesco Bank. In addition, Tesco offers insurance policies, dental plans, music downloads, and financial services. One Citigroup analyst said the chain had, “pulled off a trick that I’m not aware of any other retailer achieving. That is to appeal to all segments of the market.” Tesco has accomplished this feat by creating three distinctive Tesco-branded price ranges in order to appeal to everyone: “Finest,” “Mid-range,” and “Value.” In addition, Tesco has categorized its stores into six different formats, depending on where they are located and whom they are targeting. From largest to smallest, these stores include Tesco Extra, Tesco Superstores, Tesco Metro, Tesco Express, One Stop, and Tesco Homeplus. Throughout Tesco’s massive expansion, both globally and through its product and service offerings, Tesco has stayed true to the importance of its Clubcard loyalty program. Consumers can now earn points on their Clubcard every time they shop at a Tesco store, use one of Tesco’s services (Tesco Mobile, Tesco Home Phone, Tesco Broadband, Tesco Credit Card, or Tesco Financial), or use one of Tesco’s partners’ services. During the recent worldwide recession, Tesco helped trigger spending through special loyalty promotions such as double reward points. During a double points promotion, consumers receive 2 points for every £1 spent. For every 100 points, consumers receive a £1 voucher good for any Tesco product or service. In 2009, Tesco’s profits reached £3 billion, which resulted in £59 billion in revenues. Today, it is the largest British retailer measured by both sales and market share (30 percent). Based on profit, it is the second largest retailer in the world after Walmart. Questions 1. What’s next for Tesco? Where and how can it grow? Who will it target? 2. How can Tesco take its customer loyalty programs to the next level? Sources: Richard Fletcher, “Leahy Shrugs Off Talk of a ‘Brain Drain,’” Sunday Times (London), January 29, 2006; Elizabeth Rigby, “Prosperous Tesco Takes Retailing to a New Level,” Financial Times, September 21, 2005, p. 23; Laura Cohn, “A Grocery War That’s Not about Food,” BusinessWeek, October 20, 2003, p. 30; “The Prime Minister Launches the 10th Tesco Computers for Schools Scheme,” M2 Presswire, January 26, 2001; Ashleye Sharpe and Joanna Bamford, “Tesco Stores Ltd,” paper presented at Advertising Effectiveness Awards, 2000; Hamish Pringle and Marjorie Thompson, Brand Spirit (New York: John Wiley & Sons, 1999); Hannah Liptrot, “Tesco: Supermarket Superpower,” BBC, June 3, 2005.
150 PART 3 CONNECTING WITH CUSTOMERS Chapter 6 In This Chapter, We Will Address the Following Questions 1. How do consumer characteristics influence buying behavior? 2. What major psychological processes influence consumer responses to the marketing program? 3. How do consumers make purchasing decisions? 4. In what ways do consumers stray from a deliberative, rational decision process? LEGO has programs in place to help it stay close to its customers—especially the more devoted and loyal ones.
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Marketing Management 14 PHILIP KOTL
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This book is dedicated to my wife a
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Kevin Lane Keller is widely recogni
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Contents Preface PART 1 CHAPTER 1 x
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Maximizing Customer Lifetime Value
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PART 5 Expanding Total Market Deman
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CHAPTER 16 Managing Retailing, Whol
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Managing the Development Process: C
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even part of the marketing vocabula
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• Interactive Elements—A wealth
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We are indebted to the following co
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Marketing Management
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Defining Marketing for the 21st Cen
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DEFINING MARKETING FOR THE 21ST CEN
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Developing Marketing Strategies and
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DEVELOPING MARKETING STRATEGIES AND
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Collecting Information and Forecast
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COLLECTING INFORMATION AND FORECAST
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Conducting Marketing Research Good
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ANALYZING BUSINESS MARKETS | CHAPTE
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Identifying Market Segments and Tar
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IDENTIFYING MARKET SEGMENTS AND TAR
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Creating Brand Equity One of the mo
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CREATING BRAND EQUITY | CHAPTER 9 2
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Crafting the Brand Positioning No c
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CRAFTING THE BRAND POSITIONING | CH
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Competitive Dynamics To be a long-t
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COMPETITIVE DYNAMICS | CHAPTER 11 3
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Setting Product Strategy At the hea
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SETTING PRODUCT STRATEGY | CHAPTER
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Designing and Managing Services As
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DESIGNING AND MANAGING SERVICES | C
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Developing Pricing Strategies and P
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Designing and Managing Integrated M
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DESIGNING AND MANAGING INTEGRATED M
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Managing Retailing, Wholesaling, an
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Designing and Managing Integrated M
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Managing Mass Communications: Adver
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MANAGING MASS COMMUNICATIONS | CHAP
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Managing Personal Communications: D
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MANAGING PERSONAL COMMUNICATIONS |
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Introducing New Market Offerings Ne
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INTRODUCING NEW MARKET OFFERINGS |
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Tapping into Global Markets With ev
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Managing a Holistic Marketing Organ
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MANAGING A HOLISTIC MARKETING ORGAN
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APPENDIX | CHAPTER 22 653 • Marke
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APPENDIX | CHAPTER 22 655 Step 1: I
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APPENDIX | CHAPTER 22 657 keeping a
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Appendix SONIC MARKETING PLAN AND E
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Targeted Segment Customer Need Corr
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Samsung Galaxy S - Captivate Apple
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in February. Also, we will create b
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Chapter 4 Your next task is to cons
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• As a start-up company, what com
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Chapter 20 Knowing that the smart p
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Endnotes Chapter 1 1. Michael Learm
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Harvard Business School Press, 2004
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30. Queena Sook Kim, “Fisher-Pric
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Tabor, “Contributing Factors; Sev
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29. For an empirical comparison of
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75. Michael D. Johnson, and Fred Se
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Perspectives in Consumer Behavior (
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Theory and Measurement (New York: J
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25. Piet Levy, “Reeling in the Hu
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Chapter 8 1. Jonathan Schneider,
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57. Jerry Harkavy, “Colgate Buyin
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in-depth examination of how brand n
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79. John Milewicz and Paul Herbig,
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22. Kerry Capell, “Thinking Simpl
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29. Theodore Levitt, “Innovative
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Chapter 12 1. John Frank, “Beep!
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Room for Growth in Printer Market,
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23. W. Earl Sasser, “Match Supply
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Jaishankar Ganesh, Mark J. Arnold,
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Cosmetics,” Journal of Economic P
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72. For an interesting discussion o
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29. “Nike Says No to Blue-Light S
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80. Susan Fournier and Lara Lee,
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43. Ben Paynter, “Happy Hour,”
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22. Michael R. Solomon, Consumer Be
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Tribune, May 12, 2007; Avery Johnso
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Split Cable T.V. Advertising Experi
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29. Julia Angwin and Tom McGinty,
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Marketing?” Marketing NPV 3 (2006
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9. Stefan Wuyts, Shantanu Dutta, an
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Innovations,” Journal of Marketin
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89. Jordan Robertson, “How Nike G
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41. For some research method issues
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Global Strategies: A Contingency Mo
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Takes on Coffee Giants Cup by Cup,
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Metrics: 50+ Metrics Every Executiv
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Glossary A activity-based cost (ABC
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customer lifetime value (CLV) the n
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J jobbers small-scale wholesalers w
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personal communications channels tw
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target market the part of the quali
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Image Credits Chapter 1 page 2: New
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Free; page 619: Lou Linwei/Alamy Im
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Index Name Aaker, David A., 203 Aak
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McCausland, Tom, 7 McDonald, Bob, 6
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Andersen Consulting, 208, 209 Andro
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Disney Channel, 44, 178, 179 Disney
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IKEA, 5, 35, 37, 83, 179-80, 219, 2
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Nordstrom Rack, 148 North American
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StubHub, 73, 74, 412 Suave, 306 Sub
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African Americans, 77, 224 Age in d
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Channel integration and systems, 41
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Customer relationship in services,
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Family of procreation, 154 Farm pro
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Legal issues in advertising campaig
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Master brand, 260 Master franchisee
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Price, selecting final, 402-3 compa
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Retail sector, 356 Retail store, de
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Telemarketers, 558 Telemarketing, 5
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