Did Tesco’s failure begin on Leahy’s watch?

Tesco's Failure and Sir Terry LeahyEarlier this week, Sir Terry Leahy laid the blame for the widespread erosion of customer-trust that led to Tesco’s failure at the feet of his successor, Philip Clarke. I suggest the signs were there before and the underlying problems actually began earlier.

The underlying problem was that Tesco’s failure to react to the growing importance of value requirement for the UK customer. They ether missed, or chose to ignore, the trend to smaller baskets that reduced wastage and spend per visit and the year on year shift in shopping patterns away from Superstores and toward smaller stores. At the same time, the price champions (Aldi and Lidl) were making a conscious effort to get closer to customers and to listen to and react to their needs.

Was Tesco’s failure to anticipate the impact of this shift because analysis and customer insight had become less central to Tesco strategy? Perhaps because the capability was outsourced entirely to dunnhumby and Tesco leaders as a result were less insight aware and more willing to cede responsibility to the data geeks? Interestingly, at the same time, Lidl were concentrating customer insight in a small central team at the heart of their operation.

Whatever the reason for Tesco’s failure, there were indicators, going back a number of years, that should have rung alarm bells at Tesco. In 2011, of the major Supermarkets, only Tesco had a negative NPS score. This along should have forewarned management that a major problem was coming their way. In addition, December 2011, YouGov’s Stephan Shakespeare predicted Tesco’s decline based on the sharp decline in their BrandIndex scores.

Tesco’s Failure Analysed
BrandIndex is a composite of six measures – quality, value, customer satisfaction, corporate reputation, general impression & likelihood to recommend. Through 2011, Tesco’s score fell from +32 in the January to +22 by that December. This put them below Morrisons (+28) and on a par with Asda (+21), a long way behind leaders Sainsbury on +40. On Value alone Tesco fell to joint last.

Major shifts in customer engagement and brand image metrics tend to build over time. Therefore, whilst Sir Terry left in March 2011, it is reasonable to suggest that the problems indicated by these measures in 2011 began on his watch and were not entirely a result of changes in culture brought in under Mr. Clarke’s new management.

Andy Green is Director of The Customer Framework.  He is a specialist loyalty programs and the application of data driven marketing in a digital world.  Email Andy here and follow him on Twitter at @andyattcf

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