3. ABSTRACT
Thisresearchinvestigatestheroleandimplementationofcustomerrelationshipmanagement(CRM)inTescoPlc.
It investigates the use of information system (IS) in CRM, the obstacles connected with Information system that
supportCRM,andrecommendationsaremadeaboutthedevelopmentoftheCRMcustomsinTesco.
TheliteraturereviewisbasedonthedefinitionandexplanationofdifferenttermsusedtoimproveCRM.Theseare
loyaltyschemes,E-businessandERP.DefinitionofCRMisalsodiscussedinthischapter.Theresearcherhasalso
giventhebackgroundtotheschemesusedbyTescotoimproveitsCRM.Theloyaltycardscheme,onlineservices
and other unique services provided to the customers are also discussed in this chapter. The analysis of the
theoreticalframeworkandthatoftheTescoschemesiscarriedoutattheendofthechapter.
In the next chapter the researcher describes the methodology which will be used to find data for the research.
Primaryand secondarywill be used in this dissertation. Primary data will be collected through questionnaire. The
questionnaire will be distributed amongcustomers at Tesco. Also, qualitative data will be collected, which will be
based on the interviews conducted from the customers. The primary data will be used to support the secondary
data collected from the official website of Tesco, along with earlier research works done on Tesco. The results of
the quantitative data are calculated with the help of certain statistical tools and percentages calculated of the
customers who expressed satisfaction over the services of Tesco. The statements of the qualitative data are also
detailedinthefindingsofresults.
In the last chapter the analysis of the results of both qualitative and quantitative data is carried out and
recommendations are also made for further research in future. The researcher also suggests some changes for
Tescomanagementthatwouldhelpimprovetheircustomerrelationshipmanagement.
4. INTRODUCTION:
Customer Relationship Management (CRM) is the key factor behind the successful enforcement
of strategies which ensure customer pleasure, loyalty and retention thus increasing sales and
repeat purchases of a company (Feinberg & Kadam 2002, Kotorov 2002, Anton & Hoeck 2002).
CRM is the talk of the business world nowadays. It is characterized by the solution to the
peremptory challenges faced by firms in identifying their target market and increasing the profit
levels and customer loyalty. Fairhurst (2000) suggests that the best example of the
implementation of CRM is provided by shopkeepers who get a chance to know their clients
personally by one-to-one services. For centuries CRM has been a major strategy used by many
small companies but with the advent of computer science, CRM has reached new levels. Large
firms can implement effective CRM techniques on their many customers anywhere in the world
now.
According to Gillies et.al (2002) the reason for Tesco still leading the list as UK’s largest grocer
since 1995 is how the CRM program has played a vital role in the company’s transformation
from a buyer-led organization to a customer-focused group. Profits of Tesco have reached a
soaring top of £1billionayearconsideringtheirimageamongconsumerswasprettybadthroughoutthe1980s.
Consumers thought about Tesco as having only mediocre product range shelved in poorlymaintained stores and
theyonlycompetedonprice.Inthelatteryearsofthatdecade,theleadersofthecompanysetouttobringachange
and reinventing the brand. Their first priority was to change their store locations. They moved their stores into
moremarketableareaswhichmeanttheyhadtobuildnewmodernsuperstoresandthusclosingdownunprofitable
stores. Secondly, they focused on their product range and quality by developing its line of convenience food and
healthy food lines. Then they shifted their focus towards creating value for money by introducing an initial 70
valuelinesandreducingthepriceofvariousbasicgoods.
Apart fromthesechanges,Tesco alsomadevariousimportant organizational changes. Anew seniormanagement
team was created for leading the new customer-focused group. . Lord MacLaurin became chairman in 1986and
Terry Leahy was appointed deputy managing director in 1984. Teams of employees were created for different
product categories and each of the team was given responsibilityfor a particular product range. Basis of selection
of these products bythe employees was price, quality, service, innovation and customers’ changing expectations.
After these policies were introduced, Tesco turned its attention towards the technological side by introducing its
first ever and highly successful loyalty card in 1995. This loyalty card helped Tesco know more about their
5. customers’preferencesandtocreatedifferentsegmentsoftheircustomersaccordingtopurchases,locationandlife
stage. Tesco made successful decisions with this knowledge in hand for example not offering meat products to
vegetarian customers and children’s products not offered tochildfreeshoppers. The money-off coupon that Tesco
introduced helped them in diverting their customers attention to high-priced products as well as giving discounts
on their routinely purchase. Later on, Tesco increased their technological side of the business by introducing a
second innovation-online shopping. Byunderstanding the customers’ requirement, Tesco created a gold standard
in online supermarket shopping with a number of facilities like re-order functions and lists of favorites and
previouspurchases.Customerscanalsochooseadeliverytimeschedulesoasnottowaitfortheorderdeliveryand
theycanalso giveTesco’s staffthepermissiontochangetheirorderwithareplacement ifits unavailable.Tescois
nowtheworld’slargestonlinegrocer.
CompanyProfile
Tesco was founded in 1919 as a market stall in the United Kingdom, London. The stall grew to
be a small store, which was first opened in 1929 in Edgware. From then on the journey of the
retail store started till now it has reached the status of UK’s largest retail store chain and an
international retail business. The headquarters of the business is in Chestnut, UK. The company
is also listed in London Stock Exchange and Irish Stock Exchange (Guardian, 2011).
The main business of the company is retailing, but now it has diversified its business into
insurance and banking as well. The company has opened its international stores in China, the
Czech Republic, Hungary, Ireland, India, Japan, Malaysia, Poland, Slovakia, South Korea,
Thailand, Turkey and the United States of America (Tesco, 2011). The company also offers the
services of online grocery and home delivery services to its customers. The retailing business of
the company is divided into different subsidiaries, such as, Tesco Express, Lifespace, Kipa,
Tesco Metro, Tesco Bank, Tesco Phone Shop, Tesco Extra. The brand names of the products
Tesco produces are Technika, Go Cook and F&F. By the end of fiscal year 2011 in February, the
company was successful in adding 13% to its assets through acquisition of different companies
and also buying more shares (Guardian, 2011).
AimsandObjectives
6. The aim of the research is to explore the importance of customer relationship management in retaining customers
and generating profits in a retail sector. For this purpose, the case study will be performed on Tesco, which is the
leadingretailstoreintheUnitedKingdomandalsohasbranchesglobally.
Basedontheaimoftheresearch,followingaretheobjectivesoftheresearch:
ToinvestigatetheimpactofCRMontheprofitabilityoftheorganization.
ToexploretheimplementationanduseofInformationSysteminTesco
TomeasuretheinfluenceofE-businessonthegrowthofanorganization
TosuggestrecommendationstoimproveCRMinTesco
Followingresearchquestionswillbeansweredinthisdissertation:
WhatistheroleofCRMinsuccessofanorganisation?
HowisInformationSystemsandE-businessusedinCRMforcompany’sbenefit?
WhatareTesco’sCRMactivities?
HowsuccessfullyTescofollowsCRMpolicies?
8. LITERATUREREVIEW
This studywill reviewthemain theoretical areas that support theroleofCRM implementation inTesco. Different
definitions of basic research concepts will be presented including Customer Relationship Management,
KnowledgeManagement,E-business,EnterpriseResourcePlanningSystemandLoyaltyscheme.
CustomerRelationshipManagement
CustomerRelationshipManagement covers thewholeprocess on which theentirerelationship with acustomeris
founded upon, says Bocij et.al (2008). Different ranges of information system which contains data regarding
customers are integrated by CRM. This may include various information system applications such as customer
details andpreferencedatabases, salesorderprocessingandsales forceautomation.AccordingtoJelassi &Enders
(2005), main focus of CRM is the relationship between an organization and its customers and these relationships
include activated like marketing, sales and services. According to Finnegan & Willcocks (2007) business process
of managing customers is a vast field to contemplate and CRM helps in integrating this vast field on a single
enterprise-wide information system. Increased efficiencies in customer support along with improved customer
satisfactions are the main benefits of CRM. Many CRM early processes were regarded as IT initiatives explains
Buttle (2003). Therefore most CRM system would require creating a strong customer database and use IT
solutions and so CRM is normally used in creating better value for customers and organizations. According to
Godson (2010) the technology behind the implementation of CRM has increased drastically and it’s based upon
maneuvering of millions of customer data. For a long time, identifying customers’ needs and requirements have
played a vital role in the success of a business and today CRM helps in identifying the most profitable customers
and creates a best way of serving them (Godson, 2010). Whereas Kroenke (2008) explains that customer
relationship management integrate all of the business activities. They track all the activities relating to a customer
fromidentifyingacustomertofollow-upserviceandsupport.Mainreasonforacompany’ssuccessthroughCRM
isthatitmakesanorganizationcustomer-centric.ThisimplementationhasthusresultedinthegrowthofTescoand
making it the number one in UK retail industry(Kroenke, 2008). According to Godson (2010), CRM is not only
applied to the marketing department but requires the whole company to be customer centric. CRM is a business
strategy to achieve to achieve customer satisfaction through taking customer specific actions (Godson, 2010).
Tesco is the leadingsupermarket in UK and was founded bySirJackCohen(Thompson & Martin, 2005). Tesco
transformed itself to become the market leader. Tesco has continuously used IT as a way to communicate with
their customers more effectivelybysharing their sales data with them in order to keep track of sales trend use this
information to stock up their warehouses accordingly so that individual stores never run out. Tesco have, with
9. time, increased the use of IT in their business, for example, they have introduced a small computer which can be
attached to a customer trolley which bar-scan items on shelves. They also show prices of products, accumulated
totals,locationofproductsonshelvesandproductavailability(Thompson&Martin,2005).
KnowledgeManagement
According to Curtis & Cobham (2008) knowledge management explains how the intellectual assets, that are a
resultant of utilizing important business intelligence tools and techniques, are produced and shared among an
organization. It improves employee performance and corporate competitiveness by implementing a systematic
business optimizationstrategythat selects,stores,organizes packages and communicates information important to
thebusinessitself.
LoyaltySchemes
Loyalty schemes basically provide rewards to loyal customers by offering discounts or other benefits on their
purchase (Godson, 2010). In the 60s and 70s, loyal customers were given green stamps with each purchase by
retails shops and petrol retailers which could be saved up by the customers and later on given special rewards on
them. One of these schemes was the Green Shield Stamps. Depending on how many stamps a customer has
saved,theycouldchooseanumberofgiftsfromacatalogue.ThesestampscouldalsobeexchangedatHighStreet
redemption centres for household appliances (Godson, 2010). Todaycustomers are given loyalty cards instead of
stamps.Everyloyaltycardisdifferentinterms ofbenefitstheyprovideandtheyincludesimplepoint accrual, club
cards and combined credit cards (Godson, 2010). Due to the price competitiveness in UK grocery sector,
customers’ perception and behaviour is destabilized and therefore the use of loyalty card is fading (Seybold et.al,
2002). According to Humby et.al (2003), loyalty schemes is a way in which a business can attract customers by
providing them incentives on products related to the ones they are buying. Loyalty cards help in communication
withthecustomersoveramassivescale(Humbyet.al,2003).
Loyalty cards also help large organizations to change their taste and behaviour which are normally susceptible to
change. They provide sufficient information to the change of shopping behaviour of customers which minimizes
theriskofchange(Humbyet.al,2003).
E-business
E-business is using Internet to conduct business (Bocji et.al, 2008). Internet helps in streamlining the business
which increases productivity and efficiency. E-business has a lot of advantages like helping in communication
10. withpartners,vendorsandcustomersandcarriesoutcommerceinamuchsecuremanner.Inthisglobalizedworld
today, internet has greatly facilitated the retail industry. E-business is a vast area of internet economy where the
entire business is conducted over the internet. According to Finnegan & Willcocks (2007) e-business is a wayof
conductingexternalandinternalbusinessprocesseselectronically.
The increase use of internet in this age is primarily due to the significant changes being made in the information
systems that support the commercial activity (Curtis & Cobham, 2008). Early data processing era gave way to
management information systems generation of last 30 years and now internet era is beginning to overtake the
MIS age. Internet has provided with easy accessibility of data and also smoothes the different channels of
communicationswhichresultantlyhashelpedthedecisionmakersandeveryonerelatedtoanindustry.Internethas
entirelychanged the environment in which business is conducted nowadays for example now the vendors have a
globalmarkettocontendwith.Tradingisnowdone24/7insteadofthenormalworkinghoursofdayspast.
Online transactions can be executed for both the small and large organizations. According to Mari (2008) the
internet sales ofTescoincreased by31percent in2007to £1.6bn withaprofitincreaseof£124m, primarilydueto
improvedorderpicking.Tesco’s onlinemarket hasoveronemillion activecustomersandvitalimprovementslike
delivery slot and product availability has resulted in 20 percent increase in new business. Tesco also announced
that its online store with its small warehouse that can deliver to a local are in Croydon is now reaping profits and
handlingordersofover£1mperweek.Tesco’schiefexecutiveTerryLeahysaysthattheyhaveyetanotheryearof
growthinachallengingmarketduetothesestrengthsintheirbusinessmodel.TescoDirect,anonlinecataloguefor
Tesco,haveits performanceincreased considerablyduetoservicelevels andavailabilityofproducts. Thedivision
comfortably exceededits revenue target of£150m and posted sales of almost £180m, but start-up costs and
operatinglosseswere£25m,whichthesupermarketwillaimtoreducetoaround£20mthisyear.Numerouscross-
functional changes have taken place such as improvement in supply chain management and introduction of new
checkout technology for stores which has result in efficiency savings of more than £350min2007. Also
outsourcing of IT and administrative support has helped in reducing cost and due to this there are now 3,000
employeesinIndiafortaskslikesoftwaredevelopmentandmanagementaccountingandpayroll.
EnterpriseResourcePlanning(ERP)
According to Mohamed (2009), Enterprise Resource Planning (ERP) systems carry out business planning
functions which may previously be executed by many smaller applications. Examples for ERP systems include
product lifecycle management, supply chain management, warehouse management, customer relationship
11. management, sales order processing, online sales, financials, human resources and decision support system. ERP
system helps in running the business smoothlyand efficientlybyuniting various aspects of a business together. It
helps in creating a single database which eradicates the problem of having synchronizing data on multiple
databasesandprovidesmoreaccurateandtimelyinformationtobusinessmanagers.MicrosoftDynamicERPand
SageisacoupleoffamousERPvendors.
12. RESEARCHMETHODOLOGY
In this chapter the researcher discusses the methodologyused to collect data for the study. Research methodology
is the way that researcher uses to define the research problem, finds an approach to research, makes research
designandcollectsdataforanalysis.Throughthistheresearchermakesasystematicattempttocollectevidencefor
thesupportoftheresearch(Bryman and Bell, 2007).
DataCollection
The researcher uses bothqualitative and quantitative form of methodologyin this study. The data collectedforthe
research is based on primary and secondary sources. The primary data is the one collected through surveys and
interviewsandthesearefirsthandsourceofinformation.Secondarydataisbasedoninformationalreadyavailable,
forexamplepreviousresearches,journals,books,internetsourcesetc.
The researcher will carry out a survey to collect the primary data. The questionnaire will be based on questions
regarding the CRM services of Tesco. These questionnaires will be distributed among 200 customers of Tesco.
The questionnaire will contain both closed ended and open ended questions. Closed ended questions are the ones
that have a definitive answer among the choices given, whereas, in open ended questions the respondents have to
give their opinion or views (Bryman and Bell, 2007). This helps the researcher to get both quantitative and
qualitativedatafortheresearch.
The secondary data is obtained from the reviewed literature and case study of CRM implementation in Tesco.
Existing data (Journals & Articles) will be used in analyzing the role CRM performance and also an in-depth
interview will be conducted with one of Tesco’s managers. Customers will be asked as well through customer
feedback form about how they view the CRM services of Tesco and if they suggest any recommendations for
improvement. The secondary data will be used to support the primary data obtained from the customers and
managerofthestore.
Limitations
One of the hindrances in this research is availability of information from Tesco’s managers. This
research involves face to face interviews with the managers who are well-informed about the role
of the CRM and the information system of the company. The managers are not reliable sources
since they can retain some of information knowing that they are employed by the company.
Thus, the researcher would have to rely on information collected from newspapers and journals.
13. REFERENCES
Bocij, P., Grealey, A., and Hickie, S., (2008), Business Information Systems: Techonology, Development and
Management,4th
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Bryman A., Bell E.; 2007; Business Research Methods; Oxford University Press; Pages 153-177.
Buttle,F.,(2003),CustomerRelationshipManagement:ConceptsandTools,Butterworth-Heinemann:London
Curtis, G., and Cobham, D., (2008), Business Information Systems: Analysis, Designs and Practice, Pearson
EducationLimited,Harlow
Finnegan,D.,andWillcocks,L.,(2007),ImplementingCRMfromTechnologytoKnowledge,JohnWiley&sons
Limited,WestSussex
Gillies, C., Rigby, D. And Reichheld, F., (2002), The Story Behind Successful CRM, European
Business Journal
Godson, M., (2009), Relationship Marketing, Oxford University Press
Guardian, (2011), http://www.guardian.co.uk/sustainable-business/profile-tesco
Jelassi, T., and Enders, A., (2005), Strategies for e-business: Creating Value Through Electronic
and Mobile Commerce – Concepts and Cases, Prentice-Hall, Essex
Kroenke, M.D., (2008), MIS Experiencing, Pearson Education Limited, New Jersey
Mari, A., (2008), Technology Boosts Tesco Results, Computing Weekly News
Mohamed, A., (2009), Enterprise Resource Planning (ERP) Software Suppliers, Computer
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Seybold, P., Marshak, T., and Lewis, J., (2002), The Consumer Revolution, Business Books
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