The Importance of Customers for Tesco PLC - Research Paper Example

The Importance of Customers’ for Tesco PLC Table of Contents Part 1 3 Introduction 3 Background of the Organisation 3 Customer Base 4 Products and Services 5 Discussion of the Importance of Customers to Tesco PLC 5 Assessment of the Extent of Tesco’s Customer Focus 6 Identification of the Members of Decision Making Units (DMU) 8 Identification of Factors Affecting each DMU Members 9 Explanation of How a Better Understanding of Customers’ DMUs would improve the Organisation’s Marketing Orientation 10 Conclusion 11 Part 2 13 Introduction 13 Ansoff’s Growth Matrix: Lloyds Banking Group 14 Description of the New Product Development Process 17 Recommendations 19 Conclusion 22 References 23 25 25 Part 1 Introduction Customers are the most significant influential factors in developing or innovating strategies to introduce new products in the target market. In the rapidly changing business scenario it has become quite common for all organisations to conduct businesses according to the requirements of the market. Moreover, the presence of large number of competitors, due to the globalisation effect have strongly motivated companies to constantly innovate and implement strategies that will give them the competitive gain over their contenders. Referring to this context, the discussion will focus on identifying the importance of customers’ for Tesco PLC. Furthermore, the extent to which Tesco focuses on the customers’ needs will be assessed. Moreover, the Decision Making Units (DMU) of Tesco will be identified and factors affecting the DMU members will also be analysed. Background of the Organisation Tesco PLC is considered as one of the world’s largest retailers operating in 14 countries. It has a strong task force that employs over 500,000 people throughout the world (Tesco, 2012). The core values of the company are prioritised by each and every employee that extends the urge to understand customers’ needs and be the first and the most efficient marketer to meet them. The employees support each other and ensure that trust and respect prevails among all the team members (Tesco, 2012). Since the opening of its earliest market stall in the year 1919 in East London, the company has come a long way to mark its presence in the global markets. The strategies of the company have been highly customer-centric assisting the augmentation of its popularity among people. The vision of the company further states that the responsibilities of the communities that they serve will be given equal priority (Tesco, 2012). Customer Base Tesco’s competitive edge over the innovation, price and quality help them to create loyalty and brand awareness among its customers from various age groups across all income sectors. The company believes to be serving millions of customers every week by providing them a convenient shopping experience. Fair, strong and long-term partnerships with the suppliers have further ensured providing quality products to the customers (Tesco, 2012). Products and Services Until the year 1997, Tesco was largely known as a food retailer. However, the company strongly believes that in the coming years it will be able to succeed in the non-food items equally as it is in its food products. The management of Tesco is developing strategies that will make them an outstanding retailer in on-line stores as well. It is determined to provide life time on-line shopping experiences to all its valued customers (Tesco, 2012). Discussion of the Importance of Customers to Tesco PLC Recognising customer intelligence and understanding their needs almost accurately are the key factors that distinguish Tesco from other retail stores. According to Woodruff (1997), managers employed by modern organisations are strictly communicated to consider their customers while determining the needs of any improvements. The assessment of customer needs is done through Customer Satisfaction Measurement (CSM) which ensures to provide feedbacks from the consumers that can improve the quality of the services rendered by Tesco (Woodruff, 1997). Though many companies have implemented these tools, however, very few have taken initiatives to assess the requirements or opinions raised by customers. This initiative by Tesco has given them the competitive advantage as a result of which the company has been able to sell more goods and services compared to its rivals. The initiatives were possible as the company used the technique of ‘Marketing Data Specialist Dunnhumby’ to analyse the sales figures from the stores that gave adequate data regarding the actual buying behaviour of the customers. Therefore, according to the assessed needs, the company took decisions on developing and innovating products or services that deliberately enhanced its sales rewarding competency in the global market (MoneyWeek, 2012). Assessment of the Extent of Tesco’s Customer Focus Tesco has been accumulating customers’ purchase data to act on the basis of customers’ needs. It has introduced Tesco Club Card, a loyalty card that provides information about the purchase behaviour of the customer. On the basis of this loyalty card, Tesco attempts to enhance the aspects related to the store layouts, product presentations and positioning strategies to enhance the buying experiences of its customers. Furthermore, the company has been using the customer feedback to modify the mix of products offered by a store according to the customer profitability analysis and demographic profiling considering the fact that buying decisions and preferences of customers differ largely on the basis of socio-economic distinctions. Moreover, the retail giant has been developing ‘own label’ products to satisfy the customers’ needs and objectives and provide them with higher life-time values. Accordingly, the introduction and promotion of a newly launched product is performed based on a particular selected customer section for a specified region. Furthermore, the company has been strategically transferring customers’ buying behaviour of the grocery industry to the manufacturing units intending to enable the suppliers to accurately identify and offer what the customer prefers. Thus, the huge availability of data resources has enabled Tesco to shift from customised Customer Relationship Management (CRM) to customer-based marketing (Frow & Payne, 2009, pp. 19-22). Identification of the Members of Decision Making Units (DMU) Tesco’s Decision Making Units (DMUs) comprises of a few of the important members that have been analysed to cause significant influences to the company’s employees, its decisions and growth prospects. Richard Brasher, Andrew Higginson, Laurie Mcllwee and David Potts are the critical decision makers in each of their responsible roles. Richard Brasher, the CEO of UK division, is responsible for making decisions regarding marketing, store operations and commercial positions. He has influenced the activities related to marketing and store operations and therefore has been able to contribute to the considerable growth of the company (Tesco PLC, 2012). Chief Executive Officer in Retailing Services, Andrew Higginson, has influenced the retail service unit of the company largely. Considerably, due to his strategic decisions, the retail sector has been growing and expanding throughout the world (Tesco PLC, 2012). Chief Financial Officer (CFO), Laurie Mcllwee, a Chartered Management Accountant, is given the responsibilities for maintaining the finance of the organisation. Providing quality products in comparatively cheaper prices is one of the core strategies of the company where the CFO’s decision on pricing the products according to the consumers’ preferences has assisted the company to enhance its sales thereby, increasing its profit by a significant margin (Tesco PLC, 2012). David Potts, CEO in the operations of Asian region, further took decisions regarding the supply chain of UK and significantly due to his decisions, Tesco was able to maintain a long-term relationship with the suppliers (Tesco PLC, 2012). Identification of Factors Affecting each DMU Members One of the core principles of Tesco is to create value for its customers in order to attain ‘lifetime loyalty’. The decision makers are confident that no other organisation can be acknowledged as better in assessing the customers’ knowledge than Tesco in the retail market. In terms of the positive results of having the most loyal customer base across UK, especially in the grocery retail sector, has proved that the appointment and decisions mostly taken by Andrew Higginson in the retail service has affected and enhanced the values of the company (Tesco PLC, 2011). The strategies followed by Richard Brasher have further ensured caring and looking after the staffs that ultimately motivated the workforce to look after the valued customers. The organisational value towards their employees could be proven by their statement of ‘treating people exactly the way they would like themselves to be treated.’ Hence, the company needed an employer who would be capable of managing their valued task force. Thus, the influence of Richard Brasher in the marketing and store operations of the company has enabled other supervisors to focus on their employees in order to reap the benefits of its leadership position (Tesco PLC, 2011). The appointment of Laurie Mcllwee, has further helped the company to retain its shareholders substantially, who are considered to be the owners of the company. Thus, the company provides equal importance to the shareholders’ earnings as a form of dividends. Subsequently, the importance of shareholders dividend has urged Laurie Mcllwee to develop strategies that will reward the partial owners with year-after-year benefits (Tesco PLC, 2012). After completing a decade of international expansion, the company has been able to prove its leadership skills and features in the global market. Furthermore, the company is focussed towards delivering growth to three of the largest target markets, namely, China, India and United States which will enable the company to attain future growth prospects. Thus, it can be affirmed that the vision of the company has significantly affected the decisions of David Potts, to promote strategies that will effectively support the company’s values (Tesco PLC, 2011). Explanation of How a Better Understanding of Customers’ DMUs would improve the Organisation’s Marketing Orientation Tesco understands that customers’ desire to have a convenient shopping experience that will enable them to shop from anyplace where internet facilities are available. Similarly they also know that the female populace are the most interested ones in spending a considerable time in shopping compared to the men. Therefore, when the company launched on-line grocery business in the year 2000, it was considered as being the pioneer in its kind as it primarily focused on enabling the male populace to spend less time on shopping activities such as shopping. In the recent phenomenon, this business has gradually emerged as the most profitable business industry worldwide. Considering the hardships experienced by the male populace regarding time consumption process of shopping has influenced the company to introduce on-line grocery stores where the customers with their smart phones can access the facility to scan the barcode of any product, place the order and have it delivered at their door step (Tesco PLC, 2011). Conclusion Customer Relationship Management (CRM) was considered as an innovative process to develop and understand the relationships of the customers with the organisation in the beginning of the 21st century. However, adding an extension in the conception of CRM, being strong influenced by globalisation and increased competition, companies like Tesco, have been focussed on customer-based marketing approach as it assists the company from avoiding wastage of time and money by investing on specified products that majorly suits the desires of the consumers. Furthermore, it has been noticed that Tesco has taken a majority of initiatives in recognising customers buying behaviours by implementing various measuring tools. It has also lived up to the commitment on acting according to the consumers’ behaviour by analysing the customers’ needs as well as introducing and developing new products accordingly. Last but not the least, in order to sustain in the fierce competition the company’s DMUs need to continuously develop and innovate strategies that will assist it in preserving its leadership position in the world market. Part 2 Introduction Modern day organisations are constantly developing strategies that will eventually contribute to their future growth. The issues regarding marketing mix, promotions and innovation of products as well as techniques are underlining the effects caused over organisational growth. One of the key factors identified while developing a new product is the successfulness of its promotional strategies. Thus, organisations have been focusing on employing special tools for developing and strategising processes required for the development of a new product (Welbourne, 2009) In this context, the Ansoff’s Growth Matrix is illustrated to assess the growth strategies for developing a new product for Lloyds Banking Group. Lloyds Banking Group has been formed after the acquisition of HBOS Plc in the year 2009. Since then, the company has been one of the largest retail banks in the United Kingdom (Lloyds Banking Group, 2012). The product or market matrix was introduced by late Igor Ansoff which is generally considered as an essential planning and marketing tool required for assessing the prevailing scenario and strategies for launching a new product and expanding the company’s operations (Alan Hargreaves, 2011). In respect to the above discussion, this paper will consider Lloyds Banking Group’s New Product Development (NPD) process taking into account the strategies which the management has decided to adopt for this purpose. Furthermore, the essential components of an effective marketing mix that will give Lloyds Banking Group a competitive edge over the major players in the industry will be discussed in this paper. Ansoff’s Growth Matrix: Lloyds Banking Group Ansoff’s Growth Matrix consists of four significant components that intend to suggest strategies for the improvement of the existing product/service portfolio of a company. The initial step before implementing Ansoff’s growth strategies is to identify whether the company grows by introducing or modifying existing products or its growth involves deep penetration into existing markets or expanding into new ones (Alan Hargreaves, 2011). Thus, the essential components of Ansoff’s Growth Matrix are discussed below: Market Development – Organisations often tend to develop its target markets for existing products and services either through aggressive pricing policies, rebranding initiatives, developing new distribution channels or penetrating into new geographical areas. These are considered as medium risk strategies and are significant for retaining competitive position generating larger profits (Alan Hargreaves, 2011). Market Penetration – This strategy is learnt to focus on establishing a strong foothold through sustainable market share and position in the newly identified target market. It presumes that the market share is comparatively stagnant and growth of the company will be possible by achieving a larger proportion of market share. Though this strategy involves lesser risk, the growth and profit margin attained with the implementation of such planning are also low (Alan Hargreaves, 2011). Product Development – This strategy assists the organisation to introduce new or unique product(s) into the existing market. The risk factor is very high in this kind of strategy, even though the procedures are based on the information provided by the existing distribution and marketing channels (Alan Hargreaves, 2011). Diversification – This strategy is considered to engage highest risk factors compared to other aforementioned strategic dimensions, though it has been the major cause for growth in many successful companies. It generally stresses the need of exceptionally thorough and honest appraisals with the addition of extremely hard-working execution processes (Alan Hargreaves, 2011). Thus, from the above strategies provided by the Ansoff Matrix, it can be affirmed that Product Development will be a suitable strategy for Lloyds Banking Group to launch a unique product in the existing market that will reward the company with competitive advantages over its rivals. Though the Lloyd’s has been successful in rendering efficient services, this particular strategy will significantly assist the organisation to enhance the satisfactory level of the customers by introducing an innovative product in the market. Description of the New Product Development Process Lloyds Banking Group has been identified to value the time invested by a customer to avail the rendered services as one of its most respected assets. Therefore, it has developed products and services in order to save valuable time of its customers and provide best-in-class facilities through innovative ideas. The company’s also intends to launch a wealth management product, named Lloyds TSB Global MultiFund Allocation that will attempt to reduce the investment risk as well as assure accurate stock and third party funds selection process. It is also expected to enable the investor to alternate their investments to lower the portfolio instability. With this concern, the process of launching the wealth management product has been discussed below. Idea Generation – Lloyds Banking Group has been focusing on the exact requirements of the customers with the intention to reward them with enhanced services and products. Thus, information regarding the expectations of the customers can be collected through a survey conducted by the management. After the survey, the decision makers of the company will decide whether the new product will prosper in the existing market rendering an in-sight as to any enhancements required (Toubia, 2006). Idea Screening – After the justification of the prosperity of the new product, any modifications or development requirements will be assessed. Opinions and suggestions from any employee of the organisation are also encouraged by the board of members for any development to the new product (Toubia, 2006). Concept Development and Testing – In this process, the idea or concept will be released in a small section of the market to examine the advantages and disadvantages of the product. Furthermore, in the testing stage, the customers’ response and behaviour in buying the offered product will be analysed. At the initial stages the product will be released to potential customers of the retail banking and depending upon its successfulness, the product will be launched on a large scale basis (Toubia, 2006). Business Analysis – After the introduction of the product for two months in the market, a sample survey may be conducted in order to gain information regarding the growth of the business with the virtues of the newly launched product. Moreover, the aspect that whether the product will enable Lloyd’s competitive advantage in the existing market will be examined (Toubia, 2006). Prototype Development – The business analysis will provide a clear picture whether any development on the sample product is required. In case, any development is required, the decision makers have to decide the exact modification that will satisfy the customers’ requirements effectively (Toubia, 2006). Test Marketing – After the final modification (if any), the product will be launched once again to the existing customers and focus on gathering feedbacks from the customers regarding its launched product. Moreover, the strategies, distribution channels and promotional activities will be tested in order to initiate the product with effective force (Toubia, 2006). Commercialisation – The final phase for launching an effective new product is the commercialisation step. This step is considered to be the marking stage that focuses on deciding the growth and competitiveness of Lloyds Banking Group (Toubia, 2006). Recommendations In regards to the launch of the new product, few recommendations for successful marketing are being provided that may enable the management to choose the appropriate strategies. Product – The management of Lloyds Banking Group’s decision of launching the unique product may be successful as this is the first in class of its kind. The company should focus on the security aspects or risks involved in its products that will encourage the customers to avail the offered facilities. Price – Lloyds should ensure that the product in valued not in terms of its prices but in terms of the perceived significance amid customers. However, the company can specify that to avail the services of the new product, an individual has to be a customer of the bank which in turn is quite likely to increase its customer base substantially. On becoming a new customer of the bank, the organisation may provide added values to the customers, such as cash credit account, opportunities to avail house loans and many others. Promotion – The organisation can provide free services to people through online payment facilities on different bills and expenditures. This strategy will help the targeted customers to gather adequate information regarding the uniqueness of the bank in delivering its services. Place – Lloyds Banking Group has positioned itself in the major cities of UK that enable the customers to avail the convenience of accessing the banking services regularly. Thus, its positioning advantage will enable the customers to get the information related to any new product launches efficiently compared to other players in this industry. Conclusion Lloyds Banking Group has been operating since 2009 and has emerged as one of the largest retail bankers in the UK with strong positioning in various other sectors. In order to retain its competitive advantage in this sector, the company has decided to introduce a new product in its wealth management segment. Furthermore, the organisation has been focussed on developing an environment of creativity to continuously introduce unique products in the UK banking industry. Moreover, Lloyds can implement the Product Development strategy that will enable the company to focus on its customers’ requirements which in turn will help it to attract and retain new customers in the long run. References Alan Hargreaves. (2011). The Ansoff Growth Matrix Assessing Growth Strategies for New Markets and Products. Retrieved June 08, 2012, from http://alanhargreaves.com/storage/recharge-workshop/The-Ansoff-Growth-Matrix.pdf Frow, P. & Payne, A. (2009). Customer relationship management: a strategic perspective. Jbm, 3(1), 19-22. Lloyds Banking Group. (2012). About Us. Retrieved June 08, 2012, from http://www.lloydsbankinggroup.com/about_us.asp MoneyWeek. (2012). How Tesco Became Britain's Top Supermarket. Retrieved June 08, 2012, from http://www.moneyweek.com/news-and-charts/how-tesco-became-britains-top-supermarket Tesco. (2012). About Us. Retrieved June 08, 2012, from http://www.tescoplc.com/index.asp Tesco. (2012). Our Values. 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(2009). Extreme Strategising. Retrieved June 08, 2012, from http://www.eepulse.com/documents/pdfs/Extreme_strategizing_journal.pdf Read More