Delivering Customer Value Based on Service Proces: the Example of Tesco

This report summarizes and identifies the key points for the article “Delivering Customer Value Based on Service Process: The Example of Tesco.com”.

The main objective of the paper is to investigate how Tesco delivers customer value in an effort to attract new customers and preserve previous customers. Tesco, founded by Jack Cohen in 1929, is a UK-based global supermarket chain, popular for its “Everyday low prices strategy”. It is the first company to introduce grocery online shopping through its website Tesco.com from the notion that customer would prefer online purchasing from the store they usually go to in person.Two central conceptions that are at the very heart of marketing and delivering customer value are service quality and satisfaction (Spreng and Mackoy, 1996).

In a study conducted by Shemwell et al. in 1998 (cited in Ismail et al., 2009 p. 30), it is stated that in order to maintain the high level of competition in today’s business world, the delivery of high quality service is the key to customer satisfaction and loyalty. By offering different service processes for its customers, businesses can deliver better value than its competitors.

2.0The Ten Key Points in the Study The authors have specifically chosen the example of Tesco.com; therefore, this paper would mainly summarize how Tesco.com delivers value by creating a good shopping experience for its customers. The next few paragraphs will attempt to analyze the article in ten sections, according to the main points the article tried to highlight:2.1Customer SwitchingWith more choices and greater convenience presented before them, customers have the increasing tendency to switch between retailers.

Loyalty is not as concrete among customers as it used to be: they are in a constant search to find better choices. If a retailer with characteristics better-suited to the customer’s preferences is found then they would easily switch. This is the main reason for the rising competition between businesses, including Tesco.com. According to Mohsan et al., (2010), customer satisfaction is a direct determine factor in the achievement of customer loyalty, which would ensure their satisfaction and preventing them from switching to other retailing outlets.

2.2Efficient Service Process Leads to Customer LoyaltyBusinesses desire to maintain long-term relationships with customers, so creating superior value for them is a vital step in achieving these goals. A recent study (Ismail, et al., 2009) found that proper execution of service quality features such as assurance, reliability, responsiveness, empathy and tangibles increase customers’ perceived value about quality features. This leads to higher chances of achieving customer satisfaction. Ultimately, improving service processes and providing superior value of products and services should lead to more satisfied and loyal customers (Ma and Ding, 2010).

2.3Importance of Service ProcessAccording to Goldstein et al. (2002), the service concept for a company is the expectations of both the business and customer of what the service should entail, and which customer needs will it satisfy. It is how the company works as a whole in an effort to link the customer, process and materials to deliver the best possible customer value.

It plays an important part in maintaining customers and creating lifetime loyalty. According to Schmenner, services are classified into two categories: degree of interaction (intervention of customer in service processes), and customization (customer preferences). Tesco's service concept is based on delivering as simply and cheaply as possible as a response to its customers wanting “more for less”. (Ma and Ding, 2010)2.4Tesco.

com’s Service ProcessTesco is a company that adopts new service processes to improve customer value. Tesco.com’s managers face challenges such as marketing, training, employees’ welfare, development and control, attention to physical surroundings, scheduling workforces, and many more. Tesco.com’s service processes are of two types: front office (direct customer interaction with Tesco’s employees in the shopping process), and back office (indirect customer participation in the process online).

2.5Tesco.com’s Customer Value DeliveryThe study states that customer value and satisfaction is directly related to the benefit that a product or service provides. Tesco regards its customers as the very center of their business, which is why they created a new service process (Tesco.com, 2011) to create value for customers.

Therefore, delivering superior service which manages to satisfy the customer can lead to higher customer loyalty and retention, higher market share and lower costs.2.6The Four Ps: ProductThe study indicates that Tesco’s progression in product offering not only increases their market share but also offers their customers with a wider variety of products to choose from. It also offers its own line, “Tesco Choice”, which offers over 1000 products all at very low prices compared to other brands.

(Tesco.com, 2011) Statistics show that the majority of customers agree that Tesco’s product offering has improved, through which it has delivered better customer value.2.7The Four Ps: PriceTesco offers reasonable prices to its customers, some even lower than those of other competitive retailers as a response to its customers’ desire: “More for less”. As confirmed with surveys filled out by customers for the study, 71% of customers considered Tesco’s prices to be reasonable.

Apparently, Tesco’s pricing is suitable for its pricing objectives seeing as most of their customers are ordinary people. Tesco’s maintaining reasonable prices ensures its customers to sacrifice time, money and effort reasonable to achieve the benefits they would like.2.8The Four Ps: PlaceTesco, by launching Tesco.com, its e-tailing website, offered customers convenience, ease and minimum effort no other competitor was able to match.

Online, customers can find items they are not able to find in their local store, which would save much time and effort. For a 5 pound fee it is well worth the time saving and can benefit all kinds and classes of people, like the elderly and people with small children who would rather shop online than have the hassle of going to the supermarket and taking the children along.2.9The Four Ps: PromotionTesco’s almost entire promotion strategy is built on the “Clubcard”, a membership scheme which allows customers save money on shopping by providing them cash vouchers. It has been very effective in attracting and retaining different customer segments. Customers get one point on every pound spent shopping at any Tesco store.

Once 150 points accumulate, they are converted into Clubcard cash vouchers which enable the customer to save money on shopping. (Tesco.com, 2011) Surveys point out that 76 out of 90 people own Clubcards, and the majority agree that Tesco’s Clubcard has delivered them better customer value.2.

10ConclusionSurvival and competitiveness of any business depends on the effectiveness of its service process. According to the results shown in the study for Tesco.com, the service process provided by Teso.com is effective and convenient for customers, and in particular those who shop online.

The more the service processes the more the customers; the diversity of a company's deliverance of customer value is important in maintaining a diverse number of consumers. Both customer value and service processes go hand in hand to achieve higher instances of retail. Delivering customer value is not only crucial in maintaining the company's image but it is also the method used to gain competitive advantage.