The discussion came on the back of Tesco’s latest set of results (the first under new chief executive, Ken Murphy), which announced a surge in pre-tax profits to £551m for the 26 weeks to 29th August – up nearly 29% on the same period in 2019. This is despite a hit of £533m in coronavirus-related costs.
Refocusing on what really matters to customers
Parsons began by asking what has helped steer Tesco’s turnaround from its accounting scandal back in 2014. Both Tarry and Bellini said that a renewed focus on the customer has been a key factor.
Tarry conceded that “In the lead up to 2014, that was a particular time where we had some well-publicised challenges, and I think we sort of took our eye off the ball from a customer perspective. Putting them (customers) back at the heart, and reorienting our brand around that has helped with the turnaround.”
Bellini agreed, “Putting the customer back front and centre is something that is easy to say, but it has some consequences and implications for the total company, not just the customer or the marketing team.”
As part of this approach, Tesco really honed in on what really matters to its customers. “The biggest change then was to focus on food, and share the passion that Tesco has for food, which is shared with our customers,” says Bellini. “People love to talk about food, they love to share ideas. Before that, Tesco’s communication was about value and prices and offers but in a big noisy way. So we did two things – cut down the noise and focus on what really matters.”
The brand is the experience, not its marketing
Bellini echoed chief exec Ken Murphy’s sentiment in Tesco’s recent interim results, which is that the customer experience is far more important than marketing.
“I fully agree with what Ken said which is that the experience that forms the opinion of the brand starts with the interactions you have with Tesco every day – be that online or in-store. At least 30% of that impression is created in-store; it is nothing to do with advertising. It has to do with the intrinsic quality of our product. Most importantly, how clean and tidy our stores are, how well we are displaying our food, how our colleagues are seen to be knowledgeable and friendly.”
Tarry referred back to previous criticism of Tesco, and the brand’s aim to continuously improve the experience. “We have 3,761 stores in the UK, and most people’s impression of Tesco is their local store. Some of the analysis that we did back at the start of the turnaround showed us that customers were saying – ‘We really love our local Tesco and the people that work in it, but I don’t like Tesco’. There was that disconnect between Tesco as a brand, and Tesco as a store experience.”
“There’s no barriers to entry in retailing, you can walk into any shop at any time. We have to make sure that we do a great job every day, every time we get one of the 50m transactions that we get a week – we’ve got to make sure they all count.”
Maintaining brand purpose throughout the pandemic
Bellini explained how Covid-19 has re-emphasised Tesco’s brand purpose, saying “…we saw it as an imperative to actually bring our purpose to life. ‘Serving British shoppers a little better every day’.”
She explains, “The priorities were very clear, we set them in the first week. It was safety for all, food for all, support our colleagues and support our communities. We have used this framework throughout the pandemic, of which we are still in. That allowed us as a leadership team and as a customer team to really focus. A lot of people are saying ‘Covid-19 accelerated everything’, and I’m really proud of the fact that it accelerated all the things that we were already planning to do – we didn’t have to change or pivot.”
One thing Covid-19 did change was Tesco’s approach to internal operations. Bellini stated, “We changed the way we work together, and we changed the way we work with our agencies and partners and that’s a huge benefit – the only benefit of the crisis. We really shortened the timeline and the chain of conversation and discussion from insight to brief to execution…”
Going back to the notion of what really matters to customers, Tesco also looked at how existing campaigns might align with new or emerging trends. “We found that Food Love Stories was a campaign that could stand the test of the crisis,” says Bellini. “At a time when everyone was cooking or trying to bake – we estimate that there were over 750 million more meals cooked at home during the crisis – Food Love Stories provided a very important platform to communicate every week to customers and inspire them, guide them, and give them support.”
Discovering real-time insight, and a changing view of success
In terms of responsiveness, Tarry explained how, at first, Tesco’s once-a-week formal feedback strategy (from colleagues in-store) was too slow.
“What we then did was go to the frontline, out to the stores, the depots, and where the pickers were, and talked to them in real-time to understand what we needed to do from a central perspective in order to be able to support them to serve our customers safely.”
“Because we had to shield our vulnerable colleagues, we had over 20,000 colleagues off for 12 weeks, which left us with a real gap. We ended up recruiting 47,000 temps, and we reduced our on-boarding training period from three weeks to do two days. You end up with a situation where everything is compressed, and we needed to react at break-neck speed.
“Going back to our colleagues on the frontline, their reaction in order to make sure we could deliver our core purpose was truly humbling. 290,000 colleagues all stepping up; that’s probably the best example of our core purpose and renewed values. At the most difficult times, to make sure that people were able to do what they needed to.”
When questioned, both Tarry and Bellini suggested that profit has not been front-of-mind. Rather, Tesco has approached the year with a “play what you see in front of you” mentality, which has involved making costly decisions and worrying about the impact later.
“In terms of our personal targets,” Tarry says, “they do involve what are suppliers feel about us, what our customers are saying about us, and how our colleagues feel about us – as well as our delivery of the financial targets.”
“Our interim results in the first half year were strong, but they were an output of all the other things that we did. We have a plan that we call our ‘Little Helps’ plan, which is how we more broadly support our communities. At the height of the pandemic when stock was short and people were panic buying, our charity partners who run the food banks came to us because they couldn’t get any stock, and we diverted £15m worth of extra stock to them even when we needed it for our own customers. We felt it was important to ensure that those most in need were able to have that.”
“If customers recognise what we are doing for their communities, they will reward us.”
Thinking ahead in uncertain times
Finally, the discussion turned to the future, and whether or not Tesco will be able to plan ahead in what are still such uncertain times.
Tarry says, “There is no doubt that the infrastructure of our business has served us well. Our large stores where you can do a full shop of everything you want, our convenience stores that tend to be a go-to, neighbourhood shop. The fact that online, we’ve been able to increase our capacity from 600,000 orders a week to 1.5m.”
“It’s about that sort of response and we will continue to look at it in that way – what can we do and how can we provide food in a safe way, and support our colleagues and customers going forward.”
Bellini also highlighted Tesco’s ability to stick to planned initiatives, which again align with the brand’s core values, which include price. “Value is even more important. People are looking for the one or few shopping trips they are allowed to make to be the best possible experience.”
“We launched ‘Aldi Price Match’ as an initiative a week before lockdown, and then picked it up halfway through April because we believe it is really important for customers to be reassured they can find the very best value in Tesco. Now, the Clubcard pricing initiative – which was always planned for September, despite the pandemic – is also part of our strategy to reward our most loyal customers through better deals. Our key strategic pillars have not changed.”