D1 - Unit 12, 4, 7 PDF

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Unit 12, 4, 7 ...

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D1 – Evaluate the appropriateness of business information used to make strategic decision Introduction In this task, I will be explaining about Club card and how Tesco is collecting information from customers and how they are implementing the strategic decision to improve the business performance. Moreover, the effectiveness of Tesco’s strategic decisions in introducing loyalty schemes. Club Card Club card is the loyalty card of Tesco. Club card can be used to collect points and vouchers. Club card holder will receive one point for every £1 that they spend. Holders will get extra points in the special offers and will receive one “Green Club Card Point” for every carrier bag they re-use. Vouchers can be spent inside the store, online shopping etc. Club card holders are entitled to the free access to Club Card clubs like baby and toddler club. Through Club Card Tesco can gain information about customers like: Age - Through Club card they can gain information about the age of the customers. For instance, if the customer buys baby foods and baby clothes, chocolate and candies. This shows that the customer has a baby who is probably will be 6 months – 1-year-old and might have a teenager as well. The list of products that they buy in every months or weeks can help the Tesco to understand about the age of the customer. Location- Tesco can easily gain the information about where the customer lives by looking at the Tesco store that they are going to. Customers of Tesco will go to the nearest store from their house. Thus knowing the location of the customers can help the Tesco to decide where to open a new store. If there are many customers coming from a specific location, then Tesco can open a new store in that location to gain more profit and customers. Shopping habits - Club card allow Tesco to achieve what customers like and the combination of products they buy from Tesco. For example, if they buy healthier products then Tesco will suggest them more of the healthy products that they unaware about. This can help Tesco to make strategic decision based on the products that customers are buying. Therefore, if Tesco

reduce the price of that product it can increase customer satisfaction and thus more sales by providing them vouchers. Shopping baskets - This helps Tesco to know exactly what the customers are buying. It helps the Tesco to know about the members in the household and what kind of food they like. This can help them to make strategic decision as they can introduce or promote more products that they like. Household income - Depending upon the shopping habits and the money that the customer is spending will allow the Tesco to know about the household income. But Tesco will not able to identify the exact house hold income, but it will tell them how much they are spending in every week or month. Depending on the average household income Tesco can decrease the price of the product in order to satisfy the customers. Household structure – The shopping habits will allow the Tesco to know about the structure of the house like adults, baby, teenagers and elderly people. It also shows that what kind of food they like. For example, Asian, Italian, Chinese etc. All this above information will allow the Tesco to create a customer profile, once the information has been collected, the Tesco will implement strategic decisions to improve the business performance. 

The Tesco will create a profile and analysing everything about the customer like the age, location, shopping habits etc. All this information about the customer can help the Tesco to work out the effective pricing strategies and the product availability

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Creating a customer profile can help the Tesco to target the promotional material to the customer like for example, if the customer buys a specific product every time when they visit the store and the Tesco can put offers and discounts and even can promote more about the product.

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Tesco can decide whether they should continue to sell the products. For example, If the customers are not buying a specific product then they can decide whether they need to sell that specific product in the store.

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When customers are buying products from the store, Tesco will know that which products they are buying and what they need to sell and get in the stock. This can lead to Tesco securing their customers from going to the competitors or other

supermarkets. For example, if Tesco doesn’t have the product that the customers usually buy then customers can easily substitute Sainsbury or Asda. Therefore, stocking the products can leads to increase in profit, market share and revenue. 

Tesco was not number one in UK; it was Sainsbury but as soon as they launch Club card in 90’s and other strategies help them to gain number one position in supermarket. Club card is the strategic tool that Tesco has used to become number one. Club card helped them to gain information about customer in what they like and what they prefer.

The way Tesco uses strategic decision Tesco can use the information that they have collected from the customer to implement the strategic decision. Tesco use customer’s Club Card to create customer profile therefore it can help Tesco to meet the needs and wants of the customers when they are purchasing from Tesco. Moreover, they can attract the customers by range of deals where other competitors don’t have. Customer profile can help Tesco to target customers while they are promoting the product. Promoting the product that most customers are purchasing can satisfy the customers and attract other customers to buy it. Tesco can identify the least purchasing product through Customer profile which will allow them to promote more or find the reason why customers are not buying it. This can increase sales revenue and market share of Tesco. The Tesco’s strategic decision was to introduce Club Card which help Tesco to know what customers are buying and what are their preferences in buying products. The Club Card was successful as it has increased their sales, revenue and market share. Which made Tesco to be the best out of all other competitors. This made other competitors to launch a similar scheme to help them to attract existing and new customers. Turnover Turnover is the amount of money that is taken by the business in a period of time. Tesco’s turnover is more than its competitors. In 2015 – 16 the financial year of Tesco shows that its sales dropped by 1.3% compared to 4.4%. The chief executive of Tesco is deciding to improve the business by boosting the sales and customer satisfaction for the long term. Tesco has

suffered price war from the other 4 supermarkets in order to compete with the budgets giants Aldi and Lidl, causing the food prices to fall significantly. 1 Market share Tesco’s market share is more than its competitors. However recently it has declined. Tesco’s which is biggest supermarket in Britain has seen its market share fall to 28.4% compared to 28.7% at the same point a year ago. However, it shows a signs of recovery as then the sales down 0.8% in the 12 weeks to 28 February comparing it to the 1.6% decline revealed a month earlier. However, Asda, Morrison’s and Tesco all lost market share while Sainsbury’s only managed to keep its share flat at 16.8%. Tesco has been improving their pricing which has encouraged more customer to come into the store and attracted the other back shoppers who has previously defeated. Tesco’s customers highlights the benefits of having large variety stores types – physical and online. Other supermarkets are focusing of offering more locations, good private and superior customer experience not by just lowering price can attract the customers. 2 Profit Tesco is planning to cut the price after they face a more than halved in the first 6 months of its financial year. The UK’s biggest retailer made operating profits of £354m excluding the exceptional items. Sales at the store in UK slid by 1.1% in the 6 months up to 29 august. There was 26% fall in the profits at the Tesco’s international. Tesco’s sales has fall largely due to new tax and Sunday trading laws. However, they managed to increase the sales by attracting the customers who are buying more items on each visit. Basic sales in the UK has continued to fall as the basket of food from Tesco was now 3% cheaper than a year ago. Tesco has price cuts as the grocery market deflation and its own action which had cost them £200m over the half year.3 However, the Tesco has lot of success due to the Club Card as they utilise it to get information from customers. However, there are many external factors that can affect 1 http://www.ibtimes.co.uk/tesco-reports-slows-revenue-drop-still-suffers-falling-food-prices-1508048

22 https://www.theguardian.com/business/2016/mar/08/tesco-recovery-sales-supermarket-retail-sector 3 http://uk.reuters.com/article/uk-tesco-results-idUKKBN0ND0FB20150423

Tesco’s sales and market share such as Horse meat scandal and economic condition. The main two factors that can affect the business is recession (2008) and the horse meat scandal (2013). The recession in 2008 has leaved many supermarkets in threat as the value of sales will decrease. Tesco was affected by recession in which the value of the sales has decreased by 2%. The Tesco retaliated by introducing a new discount range which bring the people into the store but lowering sales values and profit margins. Tesco has lost £22 million from the customers. Who have substituted other competitors like Asda, Aldi and Morrison’s in which their profit increased. This leads to decrease in profit and it was really difficult for Tesco to regain it. As the Tesco was facing recession, they made £39.7 million profit. The other factor that affect the Tesco is the Horse meat scandal in 2013. Tesco faced fall in sales due to the Horse meat scandal in 2013. Media has identified that instead of beef, the supermarkets and other fast food are selling horse meat. But media has attracted Tesco than other supermarkets as the 29% of their beef burger were horse which left their sales and market share drop by 5% during the year. Due to the problems that they faced in that year, the profit of Tesco was fallen at the cost of £1.2 billion after 20 years. When the media was focusing on Tesco, the other supermarkets were aware of the meat that they sell and make sure that they not selling horse meat. However, due to the horse scandal customers starts to purchase meat from butchers than from the supermarket. Which has declined the sales by 0.5%. Marketing The marketing is meeting the needs and wants of the customers by understanding the customers and the ways to provide the products and services which customer likes. The strategic decision for Tesco was to increase the Tesco’s finest range. Marketing department of Tesco can use the information from Club card to know the products of Tesco is doing well at the market or not. Club card will also help to find what customers like and what kind of product they usually buy. Tesco can use Club Card to identify why some products are not being sold. It can be due to the price or the quality of the product. Therefore, it is important to look at the sales figure for the similar premium product before deciding to enter the market. For example, the new

version of Patak in Tesco has increased the sales as they sell in cheaper price. Therefore, the strategy that they use to create a new version of

Indian cruise was

successful for Tesco.

Conclusion Overall, Club card played an important role in making strategic decision to help Tesco to improve the sales and meet their aims and objectives. However, they have faced decline in sales due to some external factors. Moreover, Club card can be one tool that can help Tesco to maintain their profit but Tesco can’t depend too much on Club card....