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The Tesco Turnaround - how did they do it?

by Nick Hindhaugh

Tesco turnaround

Tesco has become an international business who, in the last 6 years, have more than doubled sales to £62.5bn ($A99.77 billion), and generated profits in excess of £3.39bn before tax. So how did they do it?

A recent article published by the Australian School of Business detailed the Tesco turnaround. It highlighted their success is down to stakeholder management and targeted brand marketing.

Tesco challenged the industry, and decided that customer data was the way to find growth.

Here's what they did:

1.    Introduced the Tesco Clubcard, to further support their customer-centric culture

The success of this loyalty programme came from the wealth of information about the supermarket chain's customer base.

2.    Engaged a specialist marketing data analysis consultancy

This enabled Tesco to further segment its customers to drive targeted marketing. Examples of this included introducing a Baby Club in 2001, a Wine Club, a Healthy Living Club, and a Kids Club.

3.    Created a line of smaller 'Metro' stores, collaborated in a mutually beneficial way with suppliers, and moved into new retail spaces

And from that, Tesco became the third largest supermarket group in the world.

Michael Fingland, Managing Director of Vantage Performance believes the process Tesco went through is typical of successful turnarounds - they require the right platform, capital structure, people, expertise, and the right approach to culture, particularly stakeholder management.

He identifies three steps to success, and believes Tesco fits this model:

1.    strategic review or diagnosis - the need to create a new, customer-centric culture

2.     the implementation phase - loyalty programme, customer segmentation

3.    a risk/reward discussion - benefits of implementation realised and the decision was to expand internationally in addition to looking for further opportunities in the UK.

What is your view on the current strategies being employed by Australian retailers?