Word-of-Mouth and Referral Marketing Blog

How Tesco Became the UK’s Biggest Retailer via Word-of-Mouth

Tesco is a famous UK supermarket chain that currently operates in 11 different countries, becoming one of the world’s largest retailers.

Despite its gargantuan size and success, Tesco came from humble beginnings. Its founder, Jack Cohen, bought a small plot of land in North London with the idea of selling surplus groceries for a profit.

In the 1970s, supermarkets began to revolutionise the way people shopped, and Tesco initiated a massive expansionary strategy, opening stores throughout England.

In the 1990s, when competition in the industry was heating up, Tesco implemented several successful business strategies that effectively cemented its position at the top.

What sort of marketing strategy did Tesco use?

1. The Tesco Clubcard provides a reward system that keeps customers coming back

image01

The Tesco Clubcard and its benefits (Tesco.com).

The Tesco Clubcard offers the cardholder a variety of benefits; the main one being a rewards system where customers collect points for every purchase.

When enough points have been accumulated, these points can be exchanged for cash vouchers which can be used in-store.

This rewards system is a tried-and-tested way of cultivating brand loyalty. To accrue future savings, customers are incentivised to shop exclusively with Tesco.

In fact, the Tesco Clubcard scheme was so successful that it helped Tesco overtake its closest rival, Sainsbury’s. As such, Tesco became the UK’s largest food retailer. 

The Tesco Clubcard also allows customers to keep track of their purchases through their online account. In turn, Tesco is able to monitor and cater to their customers’ preferences.

Tesco has a team of analysts who routinely study its customers’ behaviour by examining the data collected by Clubcard. This data is then used to discern latest consumer trends, thereby allowing Tesco to create innovative products and advertising campaigns that are based on their customers’ changing tastes and preferences.

Word-of-mouth tip: Tesco’s success is synonymous with the Clubcard scheme. A conventional rewards system has proven to be extremely successful in cultivating brand loyalty, especially when it comes to necessities. The Clubcard scheme also creates an invaluable database of information that Tesco can use for market research, to inform the latest innovations.

2. Launching separate ‘venture brands’ allowed Tesco to reach very specific niche markets

chokh-1b9b9f1e-b688-4240-8ebb-6c0371f14f46-0-472x310

The ChokaBlok ice-cream, one of Tesco’s most successful venture brands (Tesco.com).

With eyes on a global brand strategy, Tesco, with its extensive market research and Clubcard database, made a calculated move to create venture brands that sold products lacking in the market.

Some of Tesco’s venture brands include their famous ChokaBlok ice-cream, Yoo Yoghurt and NutriCat cat food.

The ultimate aim for these venture brands is to create products that are dissociated with the Tesco brand name and can be sold in non-competing retailers.

Many of these venture brand products are branded as “premium products”, and have enjoyed success in competing against other premium brands.

As Tesco owns these venture brands, it can make their products exclusive only to Tesco stores, thus creating an aura of exclusivity and increasing brand loyalty.

Word-of-mouth tip: As the biggest UK supermarket retailer, Tesco benefits from access to suppliers and market information. By diversifying and creating venture brands that people won’t necessarily associate with Tesco, the company instantly creates new and exciting brands that will spread via word-of-mouth.

3. Brand Guarantee – A price matching scheme gives customers assurance and confidence

 

image02

Tesco’s brand guarantee (Tesco.com).

After a period of crisis in late 2014, Tesco launched the Brand Guarantee scheme in 2015. The scheme promised to refund customers if a branded basket of ten or more products were found to be more expensive than those sold at their rivals’ stores.

On their bills, customers would receive the price differential between the amount they paid and what they would have paid at a rival store.

To ensure transparency, Tesco engaged an independent agency to check the prices at rival stores daily.

The Brand Guarantee scheme was launched after receiving feedback from shoppers that its previous price match vouchers were ineffective at saving shoppers money as many forgot to use the vouchers on their subsequent shopping trips.

Matt Davies, CEO of Tesco UK and Ireland said that “with Brand Guarantee customers will never lose out on their branded shop by getting money off their bill at the till.”

Word-of-mouth tip:  Tesco keeps an open channel of communication with its customers, allowing them to easily submit feedback on its services through an online survey. Tesco takes customer feedback seriously and is constantly improving its services based on what customers value. The Brand Guarantee is one such example that not only helps to maintain brand loyalty, but also sends a strong signal to customers that Tesco is listening and is there to help.

4. Strong social media presence on Facebook and Youtube creates warmth and positive emotional connections

Tesco’s tear-inducing ad for Father’s Day (Youtube.com).

Tesco actively engages social media through its official Facebook and Youtube accounts.

Tesco’s Facebook page has garnered more than 2,000,000 likes, and its most popular Youtube video has close to 2,000,000 views.

Tesco’s Facebook timeline is regularly updated with seasonal promotions and advertisements, which feature recipes that customers can easily recreate using ingredients from their nearest Tesco store.

Tesco customers also sometimes take their feedback and questions to the Facebook page, where they receive prompt replies and clarifications from Tesco customer officers.

Its Youtube channel is neatly categorised into playlists, with videos produced for seasonal campaigns.

For example, in the lead up to Valentine’s Day, Tesco produced videos teaching customers how to make a delicious chocolate bowl, and how to create tasty canapes, using ingredients easily found in any Tesco store.

Word-of-mouth tip: Today, consumers are constantly tuned in to social networking platforms to find out out about the latest and trendiest. Hence,  it is imperative for all companies, including industry heavyweights, to tap into these social media platforms to engage and reward their customers.

Recap:

  1. Clubcard reward system keeps customers loyal
  2. Venture brands to reach specific niche markets
  3. Brand guarantee that gives customers assurance
  4. Strong social media presence that inspires warm relations

Read next: How Chobani Dominated The Yogurt Market In Just 8 Years Via Word-of-Mouth

 

Andrea Lee

Andrea is an undergraduate majoring in international relations and East Asian politics. She enjoys a good run in the city.

Add comment