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TESCO – What ails Customer Centricity’s poster child?

I have been closely following the happenings at TESCO over the past few months and the news keeps getting grimmer. It seems the trouble is all pervasive; extending from a slew of profit warnings, restatement of accounts, cooking the books to pathetic standards in dealing with suppliers and large scale customer defection. Hold on, wasn’t this the company every marketing and customer guru hailed as the paragon of excellence till recently? The original leading light of customer centricity, CRM, predictive analysis and data mining (isn’t  that Big Data?) is imploding. Yet, we seem to have caught a collective bout of amnesia. Why do we forget to pause and question what in the world is going on with TESCO? May be, it is easier to chant the next new buzz word and raise a toast for the next poster child.  I prefer to take a long pause. The hope is, we might just a little wiser and learn something more about the deeper workings of a firm which is the third largest retailer in the world.

So what really happened at TESCO? In a nutshell, the ‘customer centric’ tools which the company was supposed to be using to deepen relationships with customers ended up being used for exploiting them to maximize shareholder returns. It became an extractive process with every stakeholder the firm interacted. Over the years, the real purpose of TESCO became a very distorted and devious version of ‘Every Little Helps’. It became a well oiled machine designed to squeeze out every drop from the suppliers to keep seducing customers with price off deals. In a fitting karmic payoff, the founder’s philosophy of ‘pile it high and sell it cheap’ has come back to haunt the firm. The firm has systematically eliminated any form of philosophical and moral foundation for its existence and gorged value from stakeholders in the name of offering a better price. May be, there are some lessons for retailers and their business models. There was some hard work put in to ‘attract’ customers with schemes and offers to drive short-term sales. It was done by personalizing the offers and coupons to the needs/interests of shoppers. All very scientific and objective. But none of that is really customer value or building a relationship. The Clubcard based analytics allowed Tesco to stock the right products in the right stores and drive down costs but cutting costs is not being customer driven. Here is the real danger for marketing and management in general. The use of data base marketing and modelling typically puts the context around the ROI of a campaign/scheme. Most of this is nothing more than consumer titillation programs which have no strategic depth. They are usually inimical to any long-term purpose driven marketing effort. But any such a debate gets quickly side-lined, in the rush to secure market share and next quarter’s numbers. However, it did keep their marketing folks and the crew at dunnhumby very busy till the house came crashing down.

Here are a few questions to ponder about TESCO.

  1. Can a company be really customer centric when it has no purpose and principles other than delivering shareholder returns? Or put it bluntly, devoid of a soul and a heart can you be true to any stakeholder relationship?
  2. What are the repercussions when this kind of customer centricity driven by data/analytics (Big Data) is left to run riot without being tempered by a human need to add value to customer relationships? Is there a way to separate the wheat from the chaff?
  3. If purpose and principles are not firmly deployed in marketing and the business model, is there a risk that firms will be led astray by ‘data driven’ insights to serve short-term exigencies?
  4. Devoid of such a Singularity of Purpose at leadership, is there a risk that what might appear as a data driven ’insight’ in the short-term will morph into ‘risk’ in the long-term?
  5. Lastly what does it say about the leadership and governance at this multinational institution?

It is painful to watch the self-induced harm which large firms manage to do with such regularity. How many more iconic institutions will need to fall before we stop forgetting and asking the right questions?

© M Unni Krishnan, 2015

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Last modified: April 2, 2020
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