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Customer Relationship Management at Tesco
Submitted By
IHTISHAM AKHTAR
Dissertaion
MBA in Marketing
London of business
University of wales
September 2011
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4.5. Embracing Technology .................................................................................4.6. Conclusions of Findings ................................................................................
5. Recommendations and Conclusions ..................................................................5.1. Recommendations .......................................................................................5.2. Conclusions ..................................................................................................
6. REFERENCES ......................................................................................................
Appendix A: Letter of Introduction ...............................................................Appendix B: Interview Questions .................................................................................................
Appendix C: Questionnaire ...........................................................................................................
List of Figures
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Figure 1: Customer Retention: Building Long-term Relationships
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Figure 2: Conceptual of Customer Loyalty
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Figure 3: The Four Dimensions of Customer Relationship Management
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Figure 4: Classifications and Composition of Customer Relationship
Management 21
Figure 5: Customer Relationships Management Conceptual Model
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Figure 6: Customer perceptions on Tesco CRM success
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Figure 7: Customer Services Ranking for CRM
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AbstractCustomer relationship management (CRM) has been widely regarded as a
company activity related to developing and retaining customers through
increased satisfaction and loyalty. However, there is still much debate over
exactly what constitutes CRM. In fact, many scholars have claimed that
the precise meaning of CRM is not always clear in the literature and it is
perceived too young to be fully formed yet. This dissertation discusses the
relationships that keep international student customers loyal to Tesco
even after graduation and how CRM can continue to contribute and assist
the bank to retain its customer base for the long-term benefits of both
parties.
The theoretical framework was positioned to investigate into Customer
Relationship Management (CRM) at Tesco.
The main purpose of this research is the study and analysis of Tescos
customer relationship management, which is an activity that has been
supporting the growth of Tesco assist the giant supermarket to retain and
improve on its market leadership. Customer relationship at Tesco has
helped the company to retain its customer base over the years and has
effectively enhanced the international increase as they take their
experience with them wherever they went.
The scope of this project was the identification of the potential growth
areas of the Tesco customer management, and to learn lessons from of
how Tesco was able to make customer relationship management at Tesco
success, thereby positioning itself as global leader
The outcomes of this study are relevant and enable the derivation of
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recommendations that when followed can enable the replicate of this
success. Customer positioning is very important and it will extensively be
discussed. This study will also study and discuss the positioning of luxury
brands at the same shelves as those of competitors products that has the
advantage of consumer memory due to years of awareness and
advertising that has contributed the customers continuously loyalty all
over the years to date.
ACKNOWLEDGEMENTS
I write to sincerely acknowledge the guidance of my Supervisor without whom this work
would not have been possible. I would also like to acknowledge the support of my friends,
work colleagues and classmates who were a great source of support during some difficult
times in my educational pursuits. I will also like to acknowledge the help of those that helped
with discussions on Customer Relationship Management issues that have contributed in
widening my understanding and have helped me in formulating the answers to the research
questions which was very useful. I would also like to acknowledge the support of my family
especially my parents.
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1. IntroductionTesco was originated in the markets of Londons East End, where in 1914,
war veteran Jack Cohen began to sell groceries. The brand name of Tesco
first appeared on packets of tea in the 1920s. Tesco has seen a rapid
growth and transformation over the years to become the UK most
profitable and giant supermarket and overtook Sainsbury in 1995. In 200,
Tesco has captured 15.6% of the grocery market in the UK, which
increased to 28% in2004 and it currently controls over 34% of the UK
grocery market (UK, 2004). Tesco now operates 2318 stores in twelve
countries and has over 328, 000 employees and is now the principal
private employer in the UK.
In recent years Tescos business growth was based on abroad expansion
and on trading in merchandise other than foods. Tescos success in UK hasbeen mainly been built on low prices, customer loyalty and expansion into
other markets such as banking, insurance and telecommunication. This
diversification has been a great success that 20% of giant market leader
sales in 2004 were from non food. Tesco is the largest petrol retailer and it
operates Tesco Finance in association with Royal bank of Scotland, and
Tesco.com services (Tesco.com, 2010). Tesco is the number one food
retailer in the UK with stores in UK, Europe and Asia. Tesco also offers
financial services and products, insurance and banking services and many
varied services.
In 2004, the company announced that it was purchasing the family-run
chain Adminstore, which operates the Europa, Harts and Cullens grocery
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outlets in the London area, for 53.7 million. By April 2004, Tesco faced a
hurdle in its acquisition of Adminstore, even though the Office of Fair
Trading (OFT) cleared its bid, as the federation of Wholesale Distributions
(FWD) attempted to block the deal. The FWD argue that the OFTs decision
was flawed since the acquisition would make it virtually impossible for
independent retailers to open new stores in central London
(http://web.ebscohost.com/ehost/detail?vid=5&hid=112&sid=04bfca26-
32d1-4eb2-b343- c1fe7c1f3b6e
%40sessionmgr103&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d
%3d#db=bth&AN=36585680)
On the other hand, notwithstanding Tescos position as the giant retailer in
the United Kingdom (UK), its performance in terms of sales was worst in 16years in 2008 which raised fears over its growth and domination of the UK
market was seriously threatened (Thompson, 2008). Although this slowing
down of Tescos growth was due to stiff competition from its main
competitors such as Asda, Morrisons (Morrisons, 2010) and Aldi (Aldi,
2010), much of the cause of the slowdown was due to Tescos vulnerability
to the recession and its consequent impact on consumer spending habits
which has been completely transformed.
Although the overall performance of Tesco is not all gloomy as witnessed
by overall global boost of sales of 11.7% in 2008 and a forecast (in 2008)
of profits of 2.9 billion in 2008, its ;local UK forecast was not that rosy with
only a 2% growth which was its worst for 16 years. In fact in 2008, the 2%
sales enlargement of Tesco was below that of Asdas 6.9% and Sainsburys
3.9% (Thompson, 2008). Unpromisingly, apart from a changing customer
spending and shopping patterns due to the economic downturn, the
slowing down of Tescos sales was partly due to them losing their
customers to their competitors. This trouncing of sales and customers to
their main competitors in the UK was a consequence of falling food prices,
the economic slump and Tescos response to the competition by way of
discounts on many of its brands. This slump in Tescos sales of 2008 was
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just a blip which spurred the retail giant to fight back.
The main purpose of this research is the study and analysis of Tescos
customer relationship management, which is an activity that has been
supporting the growth of Tesco assist the giant supermarket to retain and
improve on its market leadership. Customer relationship at Tesco has
helped the company to retain its customer base over the years and has
effectively enhanced the international increase as they take their
experience with them wherever they went. This relationship with
customers saw the development of Tesco products and services brands,
which is one of Tescos premium labels which overtook Kellogg as UKs
biggest grocery brand and posted of 1.2 billion Tesco in 2007.
One of the key objectives of this research is the study of the customer
relationship management attached to its success over the years amidstthe fierce competition facing the giant store, and it will study how Tesco
was successful despite all odds in the market. This research will
investigate why customer relationship has helped the giant store from
being nowhere to become the market leader in 1995, a position it
maintains today. For example, a decade ago, businesses including
supermarkets have being mindful of the importance of customer
management and most businesses thought customer relationship was not
the reason for driving sales, notwithstanding the kingship of the customer.
The outcomes of this study are relevant and enable the derivation of
recommendations that when followed can enable the replicate of this
success. Customer positioning is very important and it will extensively be
discussed. This study will also study and discuss the positioning of luxury
brands at the same shelves as those of competitors products that has the
advantage of consumer memory due to years of awareness and
advertising that has contributed the customers continuously loyalty all
over the years to date.
1.1.Scope of Research
Customer relationship management (CRM) is getting increasingly more
paramount and powerful as evidenced by the move to creating CRM
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departments across most businesses with supermarkets inclusive. This
has and is continuously driving the sales force of business, for example,
Tesco was not the leader the industry but due to organized and planned
marketing relationship management in dealing with customers across the
entire store, their history changed from being a follower to a market leader
by overtaking its main competitor, Sainsburys in 1995. Due to this, Tesco
customer relationship has continued to attract strong market penetration
and in roads, and they are establishing themselves as big money makers
for their companies. Tesco continue to increase market share through
offering better value and providing more choice and convenience to
customers.
The scope of this project was the identification of the potential growth
areas of the Tesco customer management, and to learn lessons from ofhow Tesco was able to make customer relationship management at Tesco
success, thereby positioning itself as global leader. The study was not
limited to the critical analysis and observations but an overall study of the
Tesco Customer relationship management, from conception to market
domination. This study will enable the drawing up of recommendations of
value to be made.
1.2.Aims and ObjectivesThe key aims of this study are the establishment of the current strength of
the customer relationship management at Tesco and to analyse the key
factors behind its success. Another objective of this research is to gain an
in-depth knowledge of the workings of Tesco customer relationship
management. The objective also is what future also holds for relationship
marketing that saw the development of Tesco Direct (Tescos online arm)
as a result of the feedback the company continued to receive from loyal
customers, which has the aim of customer satisfaction for future
expansion and driving sales, thereby ultimately outstripping traditional
store sales in future.
1.3. Research Questions
In order to achieve the research objective, it is necessary to formulate
appropriate research questions that need answers. Consequently, this
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research aims to provide answers to the following research questions.
1) Why customers continue to be loyal to Tesco and not changing to their
competitor?
2) What is it that Tesco does to keep and retain customers and what add-ons
services do the market leader offer to earn their customer loyalty?
3) What are customers attitudes towards the supermarket and how does the
market leader
relates and manages such attitudinal behaviours?
4) What is the role of customer relationship management in the
retention Tescos customers and the method used to attract the
loyal customers its competitors such as Marks and Spencers ( M&S),
Sainsburys and Waitrose?
5) How are the online retailing arm Tesco.com and its new Argos-style
catalogue service boosting Tesco Direct sales and market share for
Tesco CRM and how they transform customers habits?
1.4. Significance
The result of this study can potentially ensure the use of the optimum IT
systems that will enhance performance levels and ensure that financial
services companies can remain competitive by using the appropriate IT
systems that are customised for their needs. It will enable an
understanding of the relationship between IT technology, it development
and the impact it has financial services. It will also provide an insight into
whether IT is developing too fast for financial services industry and
whether the financial services industry should keep abreast with IT
developments or use the technology that suits their needs
2. Background and Literature Review
2.1.Introduction
Customer Relationship Management (CRM) has in the main been taken to
generate a competitive edge for an organisation, as well as to have a
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positive impact on organisational performance. Nevertheless, there is still
much debate over exactly what the makeup is. This supports the high
amount of research and the focus that the concept has continued to
experience in recent times, more or so the commencement of the
deregulation of financial services related sectors in the midst 1980. In fact,
definitions of CRM are everywhere, and, different and therefore has no one
meaning in its strictest sense.
This study seeks to find out why customers continued to shop at the
market leader stores amidst the fierce competition that is facing the
industry and to explore the relationships that keep customers loyal to the
store. The overall reason for the research is to find out how the market
leader continued to position and reposition its marketing strategies so asto know, keep and maintain customers and how CRM can continue to
contribute and assist the store to retain its customer base for long-term
benefits for both parties.
This chapter is divided into three parts. The first part examines an
overview of Tesco as a company. It looks into the fierce competition the
industry is experiencing from competitors and the pricing strategy it
adopts to continue win more customers and customer loyalty.
The second part looks at customer relationship management from a
general perspective, CRM in business, relationship marketing and CRM,
CRM at Tesco and the reasons for implementing CRM in businesses.
The third and final part focuses on managing customer relationships, the
rewards (benefits) of CRM, problems and challenges of CRM, the CRM
situation in the future and the conclusions drawn from the concept.
2.2.Tesco an Overview
Tesco was originated in the markets of Londons East End, where in 1914,
war veteran Jack Cohen began to sell groceries. The brand name of Tesco
first appeared on packets of tea in the 1920s. Tesco has seen a rapid
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growth and transformation over the years to become the UK most
profitable and giant supermarket and overtook Sainsbury in 1995. In 200,
Tesco has captured 15.6% of the grocery market in the UK, which
increased to 28% in2004 and it currently controls over 34% of the UK
grocery market (UK, 2004). Tesco now operates 2318 stores in twelve
countries and has over 328, 000 employees and is now the principal
private employer in the UK.
In recent years Tescos business growth was based on abroad expansion
and on trading in merchandise other than foods. Tescos success in UK has
been mainly been built on low prices, customer loyalty and expansion into
other markets such as banking, insurance and telecommunication. This
diversification has been a great success that 20% of giant market leader
sales in 2004 were from non food. Tesco is the largest petrol retailer and itoperates Tesco Finance in association with Royal bank of Scotland, and
Tesco.com services (Tesco.com, 2010). Tesco is the number one food
retailer in the UK with stores in UK, Europe and Asia. Tesco also offers
financial services and products, insurance and banking services and many
varied services.
Tesco is the largest petrol retailer and it operates Tesco Finance in
association with Royal bank of Scotland, and Tesco.com services
(Tesco.com, 2010). Tesco is the number one food retailer in the UK with
stores in UK, Europe and Asia. Tesco also offers financial services and
products, insurance and banking services and many varied services.
In 2004, the company announced that it was purchasing the family-run
chain Adminstore, which operates the Europa, Harts and Cullens grocery
outlets in the London area, for 53.7 million. By April 2004, Tesco faced a
hurdle in its acquisition of Adminstore, even though the Office of Fair
Trading (OFT) cleared its bid, as the federation of Wholesale Distributions
(FWD) attempted to block the deal. The FWD argue that the OFTs decision
was flawed since the acquisition would make it virtually impossible for
independent retailers to open new stores in central London
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(http://web.ebscohost.com/ehost/detail?vid=5&hid=112&sid=04bfca26-
32d1-4eb2-b343- c1fe7c1f3b6e
%40sessionmgr103&bdata=JnNpdGU9ZWhvc3QtbGl2ZQ%3d
%3d#db=bth&AN=36585680)
Tesco is the number one food retailer in the UK with stores in UK, Europe
and Asia. Tesco also offers financial services and products, insurance and
banking services, Telecommunication products and many varied services.
The main strength of Tesco is its huge and increasing share of the market
in the UK. Tescos dominant share of the food retail service and its
increasing share of the retail market will enable Tesco to expand even
more and gain an even bigger share of the non food market. This will see a
continuous increase in revenues.
Tesco also operates tesco.com (Tesco.com, 2011) which covers 96% of theUK. The Tesco.com is very successful with more than a million households
having used it. This is another platform from which Tesco can derive huge
revenues. Tescos has a firm and unassailable share of the UK market
which has seen its sales of 71% more than Sainsburys, which makes it
difficult for its competitors to compete
One of the weaknesses of Tesco is that it is too reliant on the UK market
and any changes in the UK market can have a direct impact on Tesco. Any
merger of Tescos competitors can threaten Tesco as the dominant force
in the UK market. The continued expansion of Tesco imposes restrictions
on available money other operations and there is the danger that Tescos
expansion and acquisition of other companies can reduce revenues and
reduce quality of its products and services. There is also the perception by
many consumers of Tesco products being of low quality.
There is however, an opportunity to increase its share of the retail market.
This can be achieved by using its market share and low cost brand and
advertising skills to spur growth. There is also the opportunity the
opportunity overseas growth to increase earnings, develop its telecoms
business, UK health and beauty ranges. Tesco is has millions of Clubcard
users which offers it the opportunity to have invaluable insight in general
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and personal consumer spending patterns which can be used to tailor
marketing campaigns with great effect.
There are threats that Tesco has to be aware of and which it should
manage. The potential price war between its main competitors can lead to
a reduction in profitability. Asda, since being bought by Walmart is a major
competitor capable of competing with Tesco on price and variety of food
items, and the parent company is threat to the Tesco brand. Tescos debts
may increase due to its growth which is expensive. Additionally, any new
brands needs investment and well coordinated marketing campaigns,
which are expensive.
2.2.1.Competition at Tesco
In the current business atmosphere, there are threats that Tesco has to beaware of and which it should manage. The potential price war between its
main competitors can lead to a reduction in profitability. Asda, since being
bought by Walmart is a major competitor capable of competing with Tesco
on price and variety of food items, and the parent company is threat to the
Tesco brand. Tescos debts may increase due to its growth which is
expensive. Additionally, any new brands needs investment and well
coordinated marketing campaigns, which are expensive. Tesco is has
millions of Clubcard users which offers it the opportunity to have
invaluable insight in general and personal consumer spending patterns
which can be used to tailor marketing campaigns with great effect.
Due to the current market fragility that businesses continue to face as
result fierce competition for increased revenue growth and customer
growth and retention, business of all kinds have embarked on product
brand positioning in order to win more customers. Tesco, on its part,
introduced the Tesco finest in 1998 and this has helped the giant store to
continue to win new businesses and more customers to establish a market
leader position.
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Although Tesco's Finest was the first to be launched, Sainsburys Taste the
difference was launched in 2000 (sainsbury, 2000). The Sainsburys taste
the difference brands has more than 350 foods and has a product range
that consists of products from all around the store, including bread, ready
meals, fruit and vegetables, cheese, meat and grocery items. In 2010,
Sainsbury overhauled its Taste the Difference and re-launched it in a multi-
million pound campaign which saw the range expanded from 150 lines to
1,141 products ((Hall & Wallop, 2010). The range was re-energized by the
introduction of products such as slow cooked lamb shanks, roast pork belly
and endorsement from the celebrity chef Jamie Oliver (Sweney, 2010). The
re-launched also focused around the new Bistro line of restaurant-quality
food, which consists of 23 products designed to appeal to shoppers who
are eating out less.
Asda also launched its Asda Extra special in 2004 which however
concentrated more on its mid range brands named Chosen by You. This
helped Asda post a 1.3% like-for-like sales growth in the three months to
the end of September 2010 (Burrows, 2010)). Morrison on the other hand,
changed the packaging and design of its label The Best in 2008. Its The
Best brand was launched in 2005.
Tescos retail positioning is unique, primarily due to its sheer size. Theextent of its retail reach and buying power is enormous, and coupled with
perhaps the strongest and most visible brand on the British high street;
this allowed the company to easily move into other areas of retailing.
Tesco aims for a total positioning, and to appeal to every conceivable part
of the UK consumer base. The retailer aims to maximise the potential of
the local consumer base for its stores. For example, the Tesco outlet in
Brixton, an area of London with a large share of the population coming
from ethnic minorities, offers a wide range of Afro-Caribbean and Asian
produce. This reflects the companys strategy of aiming to be all things to
all consumers. Similarly, the companys pricing strategy is also region-
specific, with lower prices offered in lower-income areas and higher prices
in more affluent areas across the majority of its
formats
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2.2.2.Pricing strategies
Pricing is very important in the consumer market, and it provides one of
the most important forms of information available to consumers when
making a purchasing decision ((Jin & Sternquist, 2002). Prices of
established brands and private label differs among different retailers and
certain products types. According to (Davies & Brito, 2002), although pricevariations tend to have a big impact on pricing decisions private labelled
brands still enjoy about 20 to 44% higher gross profit margins than
established brands.
Several factors are involved in these higher profit margins enjoyed by the
private label brands like Tesco Finest. The reasons include cost saving in
research and development budget, product launch and their advertising
budget is comparatively very low. Despite the less cost, the private label
brand can still command premium price. Constant and innovative
promotions and targeted and mobile marketing campaigns of privately
labelled brands may sway consumers to become aware of price variation
which may eventually and potentially result in a trade down of a
privately labelled item, which according to (Steenkamp & Dekimpe, 1997)
result in deal seekers becoming regular purchasers of privately labelled
brands over time. Consequently, and as a result of this pricing awareness
of customers, many lines of Tesco Finest brands get compared to regular,
value Tesco brands, and sometimes even compared to well-established
manufacturers brands. Although Tesco Finest brands can command
premium prices given that their notion of exclusiveness, they get stiff
competition from their competitors and indeed from within the same store
from the Tesco valued brands. Brand position of the Tesco Finest is also
another critical business pillar.
2.2.3.Tescos Brand Position
Tesco continues to invest heavily in cutting prices and increasing
promotional activity. It launched its Discount Brands private label line in
order to help families with limited budgets over the course of the
recession. This range was launched in an attempt to challenge cut-price
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German discounters Aldi and Lidl. The goods on offer within the range are
priced at a higher level than Tescos Value line, but at a cheaper level
than its Finest line.
Tescos private label products successfully appeal to a wide cross-section
of consumers in the UK. The company offers distinct ranges of private
label products, from Value to Finest, with these priced in order to attract
as wide a consumer base as possible. In its packaged food range, Tesco
also features the Healthy Living, Organic and Whole foods ranges, with
these aimed at more health-conscious consumers
Over the years and most particularly, the last two decades have seen a
change in positioning of retailer own-brands. Originally introduced as
cheap, low-price alternatives to manufacturer brands, many retailer own-
brands are now shifting to premium brands to reflect what de Chernatonydescribed as the personality of stores (de Chernatony, 1988). This
changing position of retailer own-brands appears to result from the fact
that retailers now take an active role in developing and marketing their
own proprietary brands rather than being a passive distributor of brands.
Tesco's strategy for the recession was focused on low prices and its
Clubcard loyalty scheme, but this was in addition to Tesco looking to the
premium marketing positioning (Burrows, 2010).
The market positioning of premium store brands provides consumers with
a high value-added products with an innovative design and sometimes
even higher quality than other brands. For example Tesco Finest Premier
Cru champagne was named the best non vintage champagne at the 2005
International Wine Challenge (Steenkamp & Dekimpe, 1997). Therefore,
and taking the position factor into consideration, premium store brands
like Tesco Finest are often not priced lower than other brands (Laaksonen &
Reynolds, 1994). With widespread acceptance, particularly in the UK, these
premium own-brands are designed to compete with leading brands while
at the same time differentiating their Tesco brands from other brands.
Notwithstanding their success, there is still scope for growth.
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2.2.4.Customer Retention
Customer retention has been shown to be a primary goal in firms that
practice relationship marketing (Gronroos, 1991; Coviello et al., 2002).
While the precise meaning and measurement of customer retention can
vary between industries and firms (Aspinall et al., 2001) there appears to
be a general consensus that focusing on customer retention can yieldseveral economic benefits (Dawkins and Reichheld, 1990; Reichheld, 1996;
Buttle, 2004). As customer tenure lengthens, the volumes purchased grow
and customer referrals increase. Simultaneously, relationship maintenance
costs fall as both customer and supplier learn more about each other.
Because fewer customers churn, customer replacement costs fall. Finally,
retained customers may pay higher prices than newly acquired customers,
and are less likely to receive discounted offers that are often made to
acquire new customers. All of these conditions combine to increase the net
present value of retained customers. Lindgreen et al. (2000, p. 295), for
example, compute that it can be [up to] ten times more expensive to win
a customer than to retain a customer and the cost of bringing a new
customer to the same level of profitability as the lost one is up to 16 times
more..
Figure 7 Customer Retention: Building long-term relationships
Source: Karin A. Venetis et al (2004) European Journal of Marketing Vol. 38No. 11/12, 2004
Customers are able to access information, using anywhere, anytime
technologies, that were previously scarce or at least difficult to access.
Thus, customer expectations of employees in service organisations have
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increased because customers have become more knowledgeable about
the products and services available to them. This
influences customer choices about their use of service delivery channel in
a multi-channel service delivery environment
2.2.5.Customer Loyalty
Customer loyalty presents a paradox. Many people view it as mainly an
attitudinal base pattern that can be predisposed significantly by customer
relationship management initiatives such as the increasing popular loyalty
and affinity programs. In the case of Tesco, the use of Clubcards has
increasingly made customers to stick to their store.
At a very general level, loyalty is something that consumers may exhibit to
brands, services, stores, products categories (cigarettes) and activities
(swimming). In this context however, it is used to emphasize that loyalty isa feature of people (consumers) rather than something inherent in brands.
Like CRM, there is still no universally accepted definition (Jacoby and
Chestnut, 1978; Dick and Basu, 1994; Oliver, 1999). Instead there are
three famous conceptualization as follows:
I.Loyalty as primarily an attitude that sometimes leads to a
relationship with a brand Model 1)
II.Loyalty mainly expressed in terms of revealed behaviour (i.e. the
pattern of past purchases (Model 2); and
III. Buying moderated by the individuals characteristics,
circumstances, and/or the purchase situation (Model 3) (see figure
1).
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Figure 7 Conceptualization of customer loyalty
Source: Uncles, M.D Customer loyalty and customer loyalty
programmes (2003) pp294-316, Vol.20 No.4
With loyalty as primarily an attitude that sometimes leads to a relationship
with the brand (Model 1)
Many people argue that there must be strong attitudinal commitment toa brand for true loyalty to exist.
This is seen as taking the form of a consistently favourable set of stated
beliefs towards of the brand purchased as evident with the case of Tesco
brand. These attitudes may be measured by asking how much people say
they like the brand, feel committed to it relative to competing brands.
To support the above notion and beliefs, Oliver (1997, p.392) defines
customer loyalty as:A deeply held commitment to rebuy or repatronize a
preferred product/service consistently in the future, thereby causing
repetitive same brand or same brand-set purchasing despite situational
influences and marketing efforts having the potential to cause switching
behaviour.
An extension of the attitudes define loyalty perspective is to suggest
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that consumers form relationships with some of their brands.
Loyalty mainly in terms of revealed behaviour (Model 2)
Paradoxically, this model is arguably the most controversial but the best
supported by data. The controversy comes about because loyalty in this
model is defined mainly with reference to the pattern of past purchases
with only secondary regard to the underlying consumer motivation or
commitment to the brand (Fader and Hardie, 1996, Kahn et al; 1988)
The attitude approach taken by Tesco aims to increase sales by enhancing
beliefs about the brand and strengthening the emotional commitment of
their customers to their brand. It suggests that most consumers have
split-loyalty portfolios of habitually-bought brands. Here it is assumed that
consumers tend to view advertising and other forms of marketing
communication more as publicity that sustains awareness and offersreinforcement, rather than as highly persuasive information that
fundamentally change their attitudes and/or levels of commitment
(Ehrenberg et al..; 1998; Brown, 2000). Loyalty programmes also designed
to strengthen commitment and create velvet handcuffs to bond the
customer to the brand. This way of thinking has become commonplace in
communication, branding and CRM textbooks.
Buying moderated by the individuals characteristics, circumstances,
and/or the purchase situation (Model 3)
Supporters of this model, the contingency approach, argue that the best
conceptualisation of loyalty is to allow the relationship between attitude
and behaviour to be moderated by contingency variables such as the
individuals current circumstances, their characteristics, and/or the
purchase situation faced. This is not to suggest that attitudes will not form
towards these brands over time (model 1), but they will be of secondary
importance to the functional adequacy of the brand.
The Tesco Clubcard scheme is regarded as a financial success and has
continued to help push and grow the size (and thus sales revenue) of a
typical brand when used in combination with other marketing
programmes. This is especially in terms of cross-selling and up-selling,
although this success is also closely linked to the high-profile advertising,
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product range extension, and strategic developments in the management
of Tesco (Broadbent, 2000; East and Hogg, 1997)
2.3.Overview Definitions of Customer Relationship
Management
Customer Relationship Management (CRM) is really too young to be fully
formed yet and what it is rather depends on who you happen to be talking
to or who is trying to sell it to you (McDonald, 2007:388). Definitions of
CRM are everywhere, and different. It all depends on which perspectives
one is looking at. McDonald (2007) offers a selection of what could be
referred to as CRM. CRM can be defined as consistent high-quality
customer support across all communication channels and business
functions, based on common information shared by employees, their
customers and business partners. This means it is focuses on customer
support across towards satisfying customers needs using all the available
channels of communication within the organization setup.
In another aspect, the term Customer Relationship Management has been
defined by Foss & Stone (2002) as the business strategy and mode of
operation deployed to maintain and develop relationship with profitable
customers, and manage the cost of doing business with less profitable
customers. This means that organizations must have strategies of
identifying, knowing and retaining their valuable customers in order to
increase their long-term operational efficiencies and profitability at all
levels of business operations and also finds solutions to reduce the
operational costs with less valuable and profitable ones.
Referring to the works of McDonald (2007:p388), another dimension of
CRM is, it is a continuous performance initiative to increase a companys
knowledge of its customers, which seeks to integrate, and enhancesmultiple-delivery channel that allows companies to capture profitable new
customers and improve service on existing customers. This means it is an
integrated process that is aimed at continuously improvising ways of
knowing an organizations customers and how to attract new ones by
utilizing your capabilities and competencies.
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Research has shown in general that according to companies, their CRM
initiatives are focused on improving customer service, increasing revenue,
improving retention, and getting an enterprise-wide view of the customer.
While there are many paths that companies can take to achieve those
objectives, many start at the same point: creating a unified view of their
customers across sales, service, and marketing departments (Dynia,
2002). Carriers want their CRM initiatives to help establish a single view of
a customer or household with constantly updated information that can be
seen by sales, marketing, and service functions. Such information could be
used for cross selling, up selling, product development, and target
marketing. The system should ensure that customers will never be
orphaned and will receive excellent customer service (Dynia, 2002).
2.3.1.An Overview of the Conceptual Development of Customer
Relationship Management.
Customer Relationship Management (CRM) has generally been assumed to
create a competitive edge for an organisation, as well as to have a positive
impact on organisational performance. However, there is still much debate
over exactly what constitutes CRM. In fact, many scholars have claimed
that the precise meaning of CRM is not always clear in the literature
(McDonald, 2007; Nevin, 1995; Parvatiyar and Sheth, 2001). Furthermore,
Nevin (1995), Luck and Lancaster (2003) note that the term has become a
buzzword, with the concept being used to reflect a number of differing
themes or perspectives. For example, at tactical level, CRM may mean an
electronic marketing (Blattberg and Deighton, 1991) or a technology or
software solution that helps track data and information (data base
marketing) about customers to enable better customer service. Others
think of CRM, or one to- one, as an elaborate marketing or customerservice discipline (Peppers and Rogers, 1995 and 2004). At a strategic
level, CRM may mean customer retention or customer partnering (Peppers
and Rogers, 1993; Vavra, 1992). At a theoretical level, CRM may mean an
emerging research paradigm in marketing (Parvatiyar and Sheth, 2001).
Thus a clarification and conceptualization of what CRM actually means is
needed to ensure that our knowledge of CRM grows in a snowballing
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manner. Moreover, while we note and observe that there has been an
increase in the focus paid to CRM by practitioners and academics, to date
no systematic attempt has been made to develop a valid measure of it, or
to assess its influence on business performance.
Given these problems, CRM as an emerging paradigm in marketing, will
remain underdeveloped until its key dimensions have been identified and
operationalised. In fact, Gummesson (2002a) observes that CRM, as an up-
and-coming discipline, is in need of further theoretical development.
Figure 7: The Four Dimensions of Customer Relationships Management
Source: Sin, LYM et al (2003) CRM: Conceptual and scale of development
The identification of the fundamental dimensions of CRM is therefore very
paramount. It is no longer sufficient to advise practitioners or researchers
that the key to successful marketing is through CRM without providing
information on what dimensions actually constitute relationships upon
which CRM can be considered to exist (cited from Sin, et al, 2004).
2.3.2.Customer Relationship Management in Business
CRM is an information system that tracks customers interactions with the
firm and allows employees to instantly pull up information about
customers such as past and current sales and/or service records,
outstanding records or unsolved problem calls.
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Figure 7: Classification of framework for CRM articles (Composition of CRM)
Source:Kincaid, J.W. (2003), Customer Relationship Management: Gettingit Right!, Prentice-Hall PTR, Upper Saddle River, NJ.
A CRM system stores all information about its customers in a data base.
This agrees with the concept put forward by peppers & Rogers (1995 &
2004) that describes CRM to mean a number of differing themes or
perspectives. Again this supports the reasoning argued by McDonald
(2007) that CRM rather depends on who you happen to be talking to or
who is trying to sell it you for one to understand the meaning attached to
it.
Information such as customer names, what they bought, and whatproblems they have had with their purchases, is retained in a CRM
database. The system not only uses this data to generate simple reports
but can produce critical information to help coordinate sales, marketing,
and customer service departments to better and faster serve customers
needs.
Freeland (2003) suggests that companies should define the goal of
implementing CRM in their businesses. He proposed the following 2 goals:
1). Guiding principles - Organisations who want to reshape the focus of
their
CRM programs should follow these three guiding principles:
Customer experience is essential to creating brand value i.e. by
doing something with their logos or catchy styles that can give
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customers the impression or awareness that it is their product or
service.
Customer insight should inform and drive customer treatment. Every
contact that the company has with its customers determines the
economic value of its future.
CRM programs should be executed in a pragmatic way that
mitigates financial and delivery risk. CRM programs should be
planned according to both financial ability and risk elimination to the
best of companys practice.
2). Components for success.To achieve these, organisations should
Organize their CRM initiatives around the following four components:
Setting the strategy. Identifying the customers that thecompany wants based on its existing business corporate
mission.
Gaining customer insights. The ability to understand
customer needs and accurately predict their behaviour.
Realizing greater value from customer contact activities.
Improving the quality of customer interactions while at the
same time driving down the cost of service. Transforming marketing. Identifying where money is being
wasted or misspent on the market while ignoring the
market noise to efficiently quantify and optimize all
resources.
2.3.3.Relationship Marketing and CRM
Although past studies have made significant progress toward
understanding the importance of cooperative and collaborative
relationships between buyers and sellers (e.g. Berry, 1983, 1995, 2002;
Crosby etal., 1990; Dwyer et al., 1987; Hart and Johnson, 1999; Morgan
and Hunt, 1994; Palmer, 2000; Parvatiyar and Sheth, 1995)(cited from sin
et al,2004). There are still some questions remaining to trash out:
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What precisely is CRM?
How can it be implemented properly in a business organisation?
In the marketing literature, the terms CRM and relationship marketing are
used almost interchangeably (Parvatiyar and Sheth, 2000). For example,
Berry (1983) defines relationship marketing as attracting, maintaining
and enhancing customer relationships.Harker (1999) proposes the
following definition: An organization engaged in proactively creating,
developing and maintaining committed, interactive and profitable
exchanges with selected customers (partners) over time is engaged in
relationship marketing.Recently, by broadening the scope of relationship
marketing and viewing it in a comprehensive management and social
context, Gummesson (2002b) defines it as marketing based on
relationships, networks and interaction, recognizing that marketing isembedded in the total management of the networks of the selling
organization, the market and society. It is directed to long term win-win
relationships with individual customers, and value is jointly created
between the parties involved.
On the other hand, Jackson (1985) suggests CRM to mean marketing
oriented toward strong, lasting relationships with individual accounts.
Payne (2000) asserts that CRM is concerned with the creation,
development and enhancement of individualized customer relationships
with carefully targeted customers and customer groups resulting in
maximizing their total customer life-time value. Kotler and Armstrong
(2004) define CRM as the overall process of building and maintaining
profitable customer relationships by delivering superior customer value
and satisfaction.
Although the above definitions differ somewhat, they all indicate that the
core
theme of CRM and relationship marketing perspectives revolves around its
focus on individual buyer-seller relationships, that these relationships are
longitudinal in nature, and that both parties benefit in the relationship
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established. In short, from a firms perspective, both the CRM and
relationship marketing concept can be viewed as a distinct organizational
culture/value that puts the buyer-seller relationship at the center of the
firms strategic or operational thinking.
In spite of the commonalities described above, some important differences
between CRM and relationship marketing do exist: first, relationship
marketing is relatively more strategic in nature, whilst CRM is used in a
more tactical sense (Ryals and Payne, 2001; Zablah et al., 2004). Second,
relationship marketing is relatively more emotional and behavioural,
centering on such variables as bonding, empathy, reciprocity, and trust
(Yau et al., 2000). On the other hand, CRM is more managerial per se,
focusing on how management can make concerted efforts in attracting,maintaining, and enhancing customer relationships.
2.3.4.Customer Relationship Management at Tesco
The goal of every enterprise, once you strip away all the activities that keep a
business busy every day, is simply to get, keep, and grow customers. Whether a
business focuses its effort on product innovation, operational efficiency and low
price, or customer intimacy, that firm must have customers or the enterprise isnt
a business its a hobby. This is true for nonprofits (where the customers may
be donors or volunteers as well as for firms large and small, for public as well as
private enterprise (Peppers & Rogers, 2004)
Figure 7: Customer Relationship Management conceptual modelSources: Mercedes Marzo-Navarro et al (2004) pp.425 - 436
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Over the past decade new technology, global economics, and regulatory
tightening have put pressure on the financial services industry to evolve how it
approaches customers. Change is occurring across the spectrum of segments
from retail consumers to commercial customers, from private clients to
institutions, and their brokers and agents. Customers and partners are savvier
today than ever before, in terms of their level of financial knowledge, needs, and
their service expectations. Yet satisfaction levels have not kept pace, which
means financial institutions have put themselves at risk of losing customers
(http://search.live.com/results.aspx?q=CRM+media&src=IE-SearchBox).
In this regards, businesses including Tesco need to hedge against the risk of
losing customers by coming up with management techniques of how to relate to
their customers. This would entice customers to continue with loyalty and offer
their businesses to the institutions that are outward looking and taking on board
customer suggestions of future improvements. Some of these recommendations
offered by customers enhanced the advent of an appropriate management tool of
managing customers relationships for the achievement of organizations
strategies and objectives.
2.3.5.Reasons for Implementing CRM
The motivating factors for companies moving towards Customer
Relationship Management are numerous. The major considerations for
companies to using CRM are to:
Improve customer satisfaction level
Retain existing customers and to improve customer lifetime value
Providing better strategic information to sales, marketing, operations
finance, etc
Attracting new customers
Cost savings
Researches over the years have shown that it is mostly costly to gain a
new customer than retaining an existing customer. Several authors
highlight the strategic advantage of maintaining the customer base as
opposed to merely attracting new customers (Luck and Lancaster, 2003;
Rowley, 2004). For example, Kandampully and duddy (1999) quote that it
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costs five times more to attract a new customer than it does to keep an
existing one. Zineldin (1999) argues that getting customers is important,
but keeping and satisfying them is more important. Customer retention is
less costly and, therefore, more profitable than customer attraction. It is
generally believed that retention contributes to the creation of reputation,
which in turn further lowers customer acquisition costs and thus increases
profitability and growth.
2.4.Managing Customer Relationships in the financial
services
The financial industry has faced unprecedented changes since the advent
of the deregulation of the financial services industry in the midst 1980.
Due to this development, Banks have evolved from providers of simplebanking services to vast groups selling services that range from banking,
insurance, loans and mortgages, through business advice to asset finance
and fleet services. Competition for customers is fierce. Thus the need to
develop business strategy that allows them to identify customers,
differentiate customers, interact with customers and then provide
customise treatment to their customers for the long-term relationship and
profitability.
The objective for client-facing staff in banking is to understand, own and
then maximise and manage customer relationships: their biggest asset
and then offer them high service qualities in order to keep them satisfy
and retain them (Rust and Zahorik, 1993).
2.4.1.Types of Customer Relationship Management
CRM allows a company to address all of the types of customers it serves at
different points in their life cycle and to choose the marketing program
that best fits a customers attitude toward the company and willingness to
purchase its products and services. Brown (2000) identified four types of
CRM programs that enable the company to win back customers who have
defected or are planning to or to create loyalty among existing customers,
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to up-sell or cross-sell services to these customers and to prospect for new
customers.
Win Back or Save
This is the process of convincing a customer to stay with the organisation
at the point they are discontinuing service or convincing them to rejoin
once they have left. Of the four categories, win back is the most-time
sensitive.
Selectivity is the other essential characteristic of a successful win-back
campaign. Leading organisations often filter their prospects for contact to
exclude customers who have frequently switched (churners), who have
bad credit ratings or whose usage is low. To preserve the revenue stream
and prevent the customer from becoming a traditional win-back
candidate, a few organisations are now including partial disconnects andreduced usage customers in their win-back campaigns.
Prospecting
Prospecting is the effort to win new, first-time customers. Apart from the
offer itself, the three most critical elements of a prospecting campaign are
segmentation, selectivity and sources. It is essential to develop an
effective needs-based segmentation model that allows the organisation to
effectively target the offer. Without a focus, organisations either fails to
achieve an adequate acceptance or rate on the offer or spends too much
on promotions, advertising and concessionary pricing, in a bit to have
penetrating market share.
Loyalty
This is the category in which it is most difficult to gain accurate measures.
The organisation is trying to prevent customers from leaving and uses
three essential elements: Value-based and needs-based segmentation and
predictive churn models. Value-based segmentation allows the
organisation to determine how much it is willing to invest in retaining a
customers loyalty.
Once the customer has passed the value-based segmentation screening,
the organisation can use needs-based segmentation to offer a customize
loyalty program. Affinity programs, such as airline miles and hotel points,
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are some of the most popular. Other programs offered include customised
billing, special help lines or back-end loaded credits as a means of
encouraging loyalty. The final component of the successful loyalty
campaign is the development of a predictive churn model. This is achieved
by using the vast amount of demographic data and usage available for the
existing base of customers.
Cross- Sell / Up- Sell
This CRM program is also known as increasing wallet share or the amount
the customer spends with you. The purpose is to identify complementary
offerings that a customer would like. For instance, a basic long- distance
customer could be a candidate to buy Internet access.
Up-selling is similar, but instead of offering a complementary product, theorganisation offers an enhanced one. For example, replacing an analogue
data line with ISDN is a good example of an up-sell.
2.4.2.Benefits (Rewards) of Customer Relationship Management
CRM is first and foremost a business philosophy or strategy where all
activities in the company are driven by the needs of the customer.This
means the objective of CRM is to build and maintain relationships with
customers. In order to maintain relationships, promises have been made
and kept so as to win customers loyalty (Gronroos, 1990), and the loyalty
won from customers would enhance new promises to be made for the
benefit of both parties in the future. Osborne (2002) identified some of the
key benefits of CRM as follows:
Customer
Enhanced understanding and forecasting of customer behavior and
needs
Precise customer targeting
Improved customer service
Increased customer retention, win-back rate, acquisition, and cross-sell
capabilities
Decreased churn rate
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Financial
Reduced marketing and sales cost
Better tracking and evaluation capabilities
Lower communication cost
Increased efficiency through supply chain management
These benefits run across the board for all types of customers, including
the student market which is the focus of this research. The student
segment has a limited financial services needs and uses basic services,
which are dominantly money transmission focused and may involve
limited lending. In addition, students have been found to prefer free
banking and free overdrafts to interest on credit accounts (Lewis and
Bingham, 1991). However, Thwaites and Vere (1995), suggested that thestudent segment may use similar products but have different preferences
for how they deal with a bank and, by implication, the extent to which they
wish to develop a relationship with a bank.
In short, and to borrow Kotlers (1997) metaphor, organisations must have
achieved marketing enlightenment in order to implement relational
approach effectively with customers.
2.4.3.Problems/challenges of Customer Relationship Management
Despite the above identified benefits, organisations seeking the benefits of
CRM face considerable challenges and setbacks if CRM is handled and
managed. Peelen (2005), Dibb and Meadows (2001), Perrien and Richard
(1995) and McDonald (2007) identified the following key potential
challenges and impediments:
The firms understanding of the customer base and /or technological
resource for managing the information may be inadequate and, as
such its structure may be insufficiently decentralised to encourage a
relationship approach and too inflexible to adapt.
Policies for managing human resources may impede the recruitment
and training of suitable staff. This could have serious impacts on
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implementing a CRM strategy.
There could be a lack of commitment from people within the
company to the implementation of a CRM solution. Adapting to a
customer-focused approach may require a cultural change. There is
a danger that relationships with customers will break down
somewhere along the line, unless everyone in the business is
committed toviewing their operations from the customers'
perspective. The result is customer dissatisfaction and eventual loss
of revenue.
Poor communication can prevent buy-in. In order to make CRM
work, all the relevant people in the business must know what
information is needed and how to use it.
Weak leadership could cause problems for any CRM
implementation plan. The onus is on management to lead by
example and push for a customer focus on every project. If a
proposed plan isn't right for your customers, don't do it. Send your
teams back to the drawing board to come up with a solution that will
work.
2.4.4.The future of Customer Relationship Management
In just a few years Customer Relationship Management has emerged as a
powerful business trend. However, the best is yet to come. CRM customers
are also demanding more and more knowledge management functionality.
In short, the future of CRM is bright indeed. CRM will become deeply
ingrained as a business strategy for most companies. Technology will
evolve while technical and organizational challenges are overcome. Much
will change in the years ahead, but one thing is certain: CRM is a journey,
not a destination, and customers have their hands on the road map and
the steering wheel. The rest is up to you. Are you ready?
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2.4.5.Conclusions
Customer Relationship Management (CRM) has been in existence for a
long time, however, it did not come into its name and officially gain
momentum especially in terms of its name - until the 1990s. CRM is the
management of relationships between the firm and its customers in order
for both the company and its customers to receive maximum value fromthe relationship (Gupta et al, 2004; McLeod and Schell, 2004). Gupta et al
(2004) further went on to state that: It is important to cultivate long-term
customer relationships as it costs substantially less to keep an existing
customer as opposed to obtaining a new one.
In another dimension, the term CRM has been defined by Jackson (2005)
as CRM is a business strategy evolved to manage the development of a
company, the acquisition and retention of its customers and to create
long-term value between them, thus supporting the arguments made by
Luck and Lancaster (2003) that CRM has become a buzzword, with the
concept being used to reflect a number of differing themes or
perspectives.
Developing and maintaining customer satisfaction should lead to deeper
relationships with customers where customer loyalty is increased and
there is a good prospect of attracting potential customers (Turban et al,
2004).
It is important to note that CRM is a complex area and is certainly an
interdisciplinary field, i.e. marketing management (Ryals and Payne 2001).
This means the term may have several meanings to several people,
thereby making its precise meaning shadowy. The term can be used to
reflect differing perspectives in all walks of life, and what it is rather
depends on who you happen to be talking to - who is trying to sell to you
(McDonald, 2007).
There are many aspects of CRM which were mistakenly thought to be
capable of being implemented in isolation from each other. CRM can
therefore, only be successfully implemented if it receives the full
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commitment of all the stakeholders.
When someone mentions CRM, we immediately think of technologies that
could improve marketing, sales, customer services and customer relations.
However, CRM is more than just technologies, it is a strategic process.
CRM helps companies better understand their customers needs so they
can provide these needs to their customers at the right time while
improving the companys processes (The ABCs of CRM, 2005).
From the outside of the organization, a customer experiences the business
as one entity operating over extended periods of time. Thus piecemeal
CRM implementation can come across to the customer as unsynchronized
where employees and web sites and services are acting independently of
one another, yet together represent a common entity.
In a nutshell, CRM is a combination of philosophies, polices and
strategies connecting different players within an organization so as
to coordinate their efforts in creating an overall valuable series of
experiences, products and services for the customer. In this
regards, CRM can allow Tesco to gather student data swiftly,
identify the most valuable student customers over time and
increase customer loyalty by providing bespoke banking and
facility services. It also reduces the cost of serving these customers
and makes it easier to acquire similar customers (i.e. new
international students) (Rigby & Ledingham 2004).
3. Methodology
3.1.Overview
This section describes the research methods undertaken and reported in
this dissertation. This research method section deals with the different
aspects of the research into customer relationship management (CRM).
The main purpose of this research is the study and analysis of Tescos
customer relationship management, which is an activity that has been
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supporting the growth of Tesco to assist the giant supermarket to retain
and improve on its market leadership.
This section identifies and provides justification for the methodology used
during the research. It specifically discusses the research options that
were available and describes the reasoning behind the choices that were
made in the design of the research, the data collection methodology,
sampling and verification. The following subsections provide explanations
for the theoretical and analytical basis for the choices that were made.
3.2.Research Design
Research design is a two tier process. The first level provides the logic for
and helps to structure the research to enable the delivery of the evidence
that is needed to answer the research question. The second level is
concerned about data and evidence collection (McGivern, 2003). There are
many research designs in the literature, of which case study and
experimental research designs are common. A case study approach
provides an in depth investigation of a case (McGivern, 2003) whilst the
experimental research design methodology uses independent data and
variables to measure effect (McGivern, 2003). This project is well aligned
with the case study research design given that it is set out to determine
the case/cause of Tesco brand success.
The research design is a critical part of the research process because it
enables the collection of the appropriate evidence that is used to answer
the research question. But for this to be done effectively requires the
specification of the type of evidence that should be collected to describe
what it is that the research sets out to do and to answer the research
question comprehensively. In order to get an answer to this research
question, a qualitative research strategy that consisted of the study of the
consumer companies and the services they offer was conducted in order
to provide an understanding of the context in which branding occurs. A
case study research strategy was used because it aligned well with the
objective of the research of obtaining an in depth understanding of the
Tesco Finest brand. This enabled a comprehensive study of Tesco which
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gave context to the study and provided an understanding of the brand in
the Tesco context.
3.3.Data Collection
The descriptive and qualitative research methodology was used because it
goes more deeply into the research issue and enabled the accurate
description of the characteristics and causes of what the research tries to
explain (Robson, 2002). The quantitative approach was selected because
the aim of this study was to investigate the consumers perceptions,
attitudes and behaviours about the factors.
3.3.1.Primary data
A personal interview with a sample of carefully selected Tesco consumers
and management was used as a vital source of primary data collection(see Appendix B: Interview Questions). An interview with primary source
allows more detailed questions to be asked and ensures that answers to
questions are responded to. It is however expensive, and its outcome can
be influenced by bias and cheating by the interviewer if not conducted
properly.
A questionnaire was also used for primary data collection because it is cost
effective, eliminates researchers bias and results in more accurate
answers. It is a structured technique for data collection consisting of a
series of questions, written or verbal, that a respondent answers (Malhotra
& Birks, 2006). Defining clear research questions is one of the key criteria
for a successful research process as emphasized by Nutbrown (Clough &
Nutbrown, 2007). However, the main disadvantages of this type of primary
data collection methodology are its low response rates, and it can lead to
some unanswered questions and sometimes in accurate answers.
In order to benefit from the advantages of this type of primary data
collection, a specially designed questionnaire was used (see Appendix C:
Questionnaire). The questionnaires of the required sample size (see data
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sampling section) were distributed at a number of Tesco stores.
The stores were chose due to location accessibility and friendliness of
customers and research was mainly conducted during the evening and
weekends. Given that this type of data collection results in low response
rates, the researcher ensured an increase response rate by personally
distributing and collecting questionnaires at Tesco stores and handing.
Telephone interviews as a means of data collection was not used because
even though it would have saved time and reduced bias, it limits the depth
and the length of the interview and customers reluctance to share
personal data limits this data collection method. Email communications
with customers and Tesco management was also not used for similarreasons
The questionnaire was made up of 14 questions which were clear and easy
to understand. The purpose of the questionnaire was to investigate the
level of brand awareness, competitiveness, and perception by customers.
It also investigated customer shopping habits. The questionnaire was
designed such that it took not more than 10 minutes on average to
complete.
3.3.2.Secondary data
Secondary data collection method was by the use of journal articles, news
paper articles and business books. Collecting secondary data was
straightforward given that many articles, journals and books are written on
Tesco and Store brands. Tescos Annual Report and review was also an
excellent source of relevant information. Secondary research is a use of
previously existing resources to meet the research goals (Grossnickle &
Raskin, 2001) and it is a cost effective way of obtaining certain types of
data. The collected secondary data was used to provide an understanding
of the brand, and to study customer attitudes and behaviour
3.4.Data Sampling
Sampling is defined as ... the process of selecting without bias and with
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as much precision as resources allow, the items or elements from which or
from whom we wish to collect our data (McGivern, 2003). It involves the
definition of the population, determination of frame, frequency and
method of the sampling and the size of the samples. In this research the
population of interest was limited to Tesco management and customers. In
theory, the population chosen can provide the data that will enable the
drawing of conclusions relevant to the research (Jankowicz, 2000).
The sampling frame is vital as it contains all the elements of interest
(McGivern, 2003). This work used a sample frame of all Tesco stores in
England with particular emphasis on the store at Harlow. A probability
sampling method was used by selecting customers and Tesco
management as random. The benefit of this type of sampling type is that itcan be used to project the outcome to the whole customer base and
management corps of Tesco. It enables the gathered data to be
representative of the population that interest us which in this case is the
Tesco customers (Wilson, 2006). Although this has the disadvantage of
being more time consuming and increases costs, it was used because the
results were then representative of the whole customer base.
The determination of sample size is dependent on a number of issues such
as financial issues (Wilson, 2006). The sample size used in this research
was determined by financial and time constraints. A total of 85 samples
were distributes from which 60 were returned. The design of the
questionnaire was mainly focused on customer attitude, customer
behaviour and customers perception of the brand and values associated
with it.
3.5.Data Analysis
Gathered data was analysed and used to generate descriptive statistics
and for each variable in the questionnaire and interview, the overall
percentages (where applicable) were determined. As most of the questions
are open-ended, the response to them were categorised and prioritized
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based upon frequency of mention. In fact, the answers to the open ended
questions provided the strongest and most important responses and
provided customers and management the opportunity to express their
opinions in their own words. The data collected was quantitatively and
qualitatively analysed which enabled data to be sorted and structured
according to its characteristics, structure and impact. The qualities
analysis method was used to describe the general characteristics of the
Tesco Fines brand and the quantitative approach was used to determine
the characteristics.
3.6.Validity and Reliability
The validity and reliability of collected date is paramount. As a result all
conducted interviews will be recorded with consent of interviewees to
ensure accurate transcribing of the interview and standard interview
protocols will be used to ensure repeatability by other researchers. All
collected data from interview and from questionnaires will be reviewed
and data found to be unduly biased or inaccurate will be discarded.
The quality of research design can be evaluated through four criteria,
namely internal validity, construct validity, external validity and reliability
validity (Yin, 1994:18). Validity, according to Zikmund (2003:302) is theability of a measure (for example, an attitude measure) to measure what
is supposed to measure. Validity can be supported by building the data
collection framework of the study. The internal validity refers to the
reliance of the researchers conclusion as to whether the experimental
treatment was the sole cause of observed changes in the dependent
variable.
Construct validity refers to establishing the correct operational measures
for the concepts being studied. Referring to Collis and Hussey (2003:59),
this relates to the problem that there are a number of phenomena which
are not directly observable, such as motivation, satisfaction, behaviour,
attitude, ambition and anxiety. These are known as hypothetical
constructs which are assumed to exist as factors which explain observable
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phenomena. In the present study, to meet the construct validity, both
customer retention and customer satisfaction variables in relation to the
student market are assessed and studied separately from the other
customer relationship variables, but also related to the other issues of
customer relationship management practices of the financial services
provider.
Furthermore, construct validity is increased by the use of multiple sources
of evidence. Interviews of key bank decision- makers have been conducted
to clarify some specific issues. Additional sources of evidence include third
parties contacts, archival documents, brochures, bulletins and Tescos
customers statistics.
The aim of the interviews are to obtain as a true a record as possible of
what customers perceived of particular issues, e.g. customer relationship
management practices at Tesco supermarket, (Lindsay, 1997:33-41).
External validity is the quality of being able to generalize beyond the data
of an experiment to other subjects or other groups in the population under
study. Generalization, as it is sometimes referred to, is the extent to which
you can come to conclusions about one thing (Collis & Hussey, 2003:59).
However, Gummerson (1991, cited in Collis & Hussey, 2003:60) argues
that using statistics to generalize from a sample to a population is just one
type of generalization; in a phenomenological study you may be able to
generalize from one setting to another. He supports the views of Normann
(1970, cited in Collis & Hussey, 2003:60) who contends that it is possible
to generalize from a very few cases, or even a single case, if your analysis
has captured the interactions and the characteristics of the phenomena
you are studying. One of the aims of the current study is What is it that
Tesco does to keep and retain customers and what add-ons
facilities/services does Tesco offer to gain customer loyalty and why new
customers shop with the store?
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With regard to the results, generalization is attempted by concluding the
results of the subunits of the study and returning to the original
phenomenon of interest, namely customer relationship management
Tesco. The generalization of the results is rather high within the
respondents in relation to the customer relationship management
practices. The respondent sample represented over 80% of the targeted
customer and management market and this indicates a high response
rate.
However, data does not allow the analysis of single variable or
respondents by statistical analysis. Thus the results have to be interpreted
with the help of a qualitative approach.
Finally, reliability refers to demonstrating that the same results could be
obtained if the data collection procedure is repeated again (Yin, 1994:36).
Easterby-Smith et al (2002, cited in Saunders et al 2003:252) supports
Yins views and thus said, In relation to qualitativeresearch, reliability is
concerned with whether alternative researchers would reveal similar
information, if they are to carry out similar data collection procedures.
The data collection is not dependent on the investigator but the data is
obtainable by identical procedure. A prerequisite for reliability criteria is
that the research procedure is well documented. That is the very objective
of the present chapter. Observing the same phenomena in the same
setting should also provide similar information, as some of the
interviewees are Tesco Management, staff and professionals and others
hold key managerial positions in businesses and there is no reason to
expect that they had not understood the interview questionnaires.
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3.7.Limitations
This research was subject to the following limitations.
Customers who completed the questionnaires might not willingly
provide truthful and correct answers given the suspicion that most
people have of Tesco. In fact, recent antagonism towards Tesco due
to their aggressive expansion might lead some customers todeliberately not provide truthful answers as they might wrongly
construe the data collection exercise as sanctioned by Tesco.
However, the letter in the Appendix explaining the purpose of the
research was designed to limit the impact of this limitation.
The taking of notes during personal interviews can be very time
consuming and tedious and getting busy management staff for a
long interview is difficult. To reduce this limitation, the recorders
were used during interviews with prior consent of interviewees.
There were limitations on the number of sample used and on the
locations of sampling due to financial constraints. However, the use
of probability sampling was used to reduce this limitation.
The time used for the data collection was also limited due to a limit
on the duration of the research.
3.8.Ethical and Legal Considerations
The research and data collection involved interaction with customers and
the process therefore had to comply with standards of code of conduct.
Additionally, the confidentiality of collected data was assured and all
customers and Tesco management staff who participated were assured of
this data confidentiality. Permission was sought when using any equipment
such as recorders and they were all informed of their rights particularly
that of confidentiality as outlined in the data protectionact of 1998.
3.9.Outcome
a) The outcome of the data collection exercise and research enabled an
understanding of the Tesco customer relationship management.
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b) It also enabled the underlying reasons why Tesco has used it
overcome their competitors and how Tesco was able to make it
competitive and successful.
c) It also provided an understanding of how customer relationship
management is used to support the driving the sales across the
store.
d) Identifying the various ways of how CRM can improve the giant stores
operational efficiencies in managing its relationships.
e) Identify the criteria the supermarket uses to acquire valuable customers
and the various
f) types of CRM techniques available and the benefits that accrues to
adopting CRM.
g) It also helped to identifying various methods that could be used to
improve customer relationship management
4.Results: Analysis of Findings
4.1.Interview Questionnaire Development
This section summarises the results of the research into why the customer
relationship at Tesco has been so successful and why there has been such
customer loyalty and retention. In order to establish this, an interview
questionnaire was developed to aid the collection of the data from
participants. In order to save time, the researcher made on the spot
interviews as and when opportunity was available to do so.
The interviewer not only took time to record and transcribe exactly what
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