We all know about the issues Tesco is facing because much has been written about its predicament and many solutions have been put forward by all and sundry.
Tesco: searching for the solution it had all along.
Blame for its current weak position has been apportioned to numerous sources – some of them more plausible than others. But for Retailinsider.com one thing stood out from everything else in all the analysis of the firm’s problems.
It was the comment from Tesco CEO Philip Clarke that he was to put Dunnhumby (creator of the Clubcard) “back at the heart of the business”. This rang alarm bells as my assumption had been that it had never been anywhere else but at the heart of the business.
It has been a vital component in Tesco achieving its market-leading position. Asking Sir Terry Leahy and his predecessor Lord MacLaurin what do they think was the secret of the firm’s success over the years would quickly lead to them mentioning the impact Clubcard (and Dunnhumby) had had on the company.
Whatever the reason for not using this powerful division of its business, it was a serious mistake. While it failed to use Dunnhumby’s skills and insight Tesco arguably became just another supermarket, which has been ultimately sucked into the promotional pricing game.
Scattergun, indiscriminate promotional activity, provides little or no value to loyal customers of a business and it has historically been the case that Tesco has based its strategy around rewarding its most loyal customers – with the help of Dunnhumby and its Clubcard.
What happened to the genius?
It deviated from this strategy and clearly the wheels came off the wagon. With hindsight it should have been clear that Tesco was not relying sufficiently on the insight thrown off by its Clubcard analysis.
Consider that it was hell bent on rolling out more of its ever-larger hypermarkets. (A strategy that it has recently curtailed). The data would have shown it that this was a flawed route to growth. Online sales were going up and general merchandise was a strong driver of this web turnover, so why did it continue to build big stores designed to stock a greater range of non-food lines?
Many years ago Dunnhumby analysis showed Tesco that its customers would value online shopping and a home delivery proposition. We all know how much it has benefited from acting on that insight.
So surely the Dunnhumby analysis should have more recently also told the company’s management that customers were no longer interested in larger stores and in buying non-food item from them.
It no doubt would have done just that – provided Dunnhumby had still been at the heart of the Tesco business and management had been listening to its valuable customer insight. This wasn’t the case but we know it is now. And we all now know why.