BA (Hons) Communication Cohort: BAHC/15B/FT Examinations for 2017/2018 Semester II & 2018 Semester I MODULE: CUSTOMER RELATIONSHIP MANAGEMENT MODULE CODE: SMKG 3408B Duration: 2 Hours and 15 Minutes Instructions to Candidates: 1. This question paper consists of Section A and Section B. 2. Section A is compulsory. 3. Answer any two questions from Section B. 4. Always start a new question on a fresh page. 5. Total Marks: 100 This question paper contains 4 questions and 5 pages. Page 1 of 5
SECTION A: COMPULSORY QUESTION 1: (40 MARKS) Case Study: Tesco Tesco, the giant and most successful supermarket chain in the U.K., has a CRM system that is the envy of many. Tesco found, while looking at its customer base for a typical retail outlet, that the top 100 customers were worth the same as the bottom 4,000. It also found that the bottom 25% of customers represented only 2% of sales, and that the top 5% of customers were responsible for 20% of sales. Like many other companies that have embarked on CRM programs, Tesco realized that all customers are not equal! Tesco now measures valuable customers by the frequency of purchase and value of expenditure. When Tesco says, Every little helps, it really means it. Its CRM program is certainly one of the best in the world, and customers love it. Tesco has been principally a food retailer in the U.K., in a mature market that has grown little in the last 20 years or so. That Tesco has grown its business at all is a testament to consumer attraction, when the only route to growth is taking market share from competitors. Its CRM program started with the Clubcard in 1995, offering points on purchases and giving a small rebate to loyal shoppers. Dismissing the initiative as nothing new, competitors did not realize that Tesco was capturing valuable information with every swipe of the card and building a powerful database of customers, which it gained through card membership information. The card provided Tesco with vital customer information such as what products they were and were not buying, where they were spending their time in the store, and where they were not, as measured by spending. Customers received vouchers for items they liked to buy and offers to explore parts of the store that they had not yet seen. Different lifestyle magazines were created for different customers, and highvalue customers got calls from the manager of the store, valet parking when they came to shop, and other special privileges. In 1996 Tesco created a student card and another card for mothers, with offers suited to their needs. Tesco then added a travel service through a partnership with Lunn Poly, giving discounts off high-street Page 2 of 5
prices. It also combined its card with Visa through the Royal Bank of Scotland, and offered discounts on DIY goods through well-known home improvement chain B&Q. In 1997 it added a full range of financial services, and the Tesco Direct service. Adding value was mandatory to these functional items so, for example, expectant mothers were given priority parking outside the store, changing facilities, and personal shopping assistants to help them. In 1998, after the U.K. s deregulation of utilities, Tesco began to offer electricity and telecommunications products and services. Also in that year, clothing was added to the range through Next. By this time, Tesco had identified 108 customer market segments. In 2000, a joint undertaking with General Motors allows customers to buy cars from Tesco. Tesco had the vision to see that really understanding their customers was the key to customer loyalty and satisfaction. This loyalty card has transformed Tesco s relationship with its customers and the information from the database guides all the key business decisions. The loyalty scheme allows for many benefits one of which is targeted communication. There are over four million variations of its quarterly customer mailing to ensure that its discounts and offers are tailored specifically for the customer. Noting the interest of some customers in the Internet, Tesco also sells online, delivering products to the customer's door, by refrigerated truck, if necessary. Visit the company's website (www.tesco.com) and you get the same friendly look and feel that people get in Tesco's physical stores. Everything is made easy, and you can buy groceries, books, CDs, furniture, videos, and other items, as well as arrange your personal finance. And, of course, every time there is a transaction, the points mount up. And as the points accumulate, more and more relevant special offers and privileges are given. All in all, the company offers great value and a great experience. The company is now well on its way to becoming a successful international brand, expanding into Asia by taking over the Lotus supermarket chain in Thailand, where customers can now buy scooters (tescooters) and have them delivered to their homes. But adding value to the customer relationship is still the driving force behind Tesco s success. Page 3 of 5
As a result of Tesco s efforts to delight the customer, its profits and market share figures rose tremendously over time, making it a prime example of how technology, coupled with a human touch, can provide customers with a great experience. For Tesco, though, there are several arguably more fundamental issues that underpin all of this and revolve around the question of where the organisation goes next. The Clubcard has undoubtedly been successful and made a major contribution to the business. It is also the major reason given by consumers for switching from a competitor to Tesco. However, for the management team today, the priorities within the core UK market include the development of the in-store experience, the brand, how best to manage the customer relationship, and how to operate within a far more competitive environment with, at one end of the spectrum, the highly aggressive discounters such as Aldi and Lidl and, at the other, Sainsbury s and Waitrose. More broadly, there is the question of the balance between the UK operation and the company s expansion overseas. There is also the issue of the organisational culture and managerial mindset which, having been accustomed to dominating the market, now has to come to terms with the gap between Tesco and its competitors having become smaller. Much of the company s success throughout the 1990s and up until 2010-11 was based upon very clever thinking and how it reinvented the ways in which it interacted with its customers. The challenge now is how it might do this again. However, whatever is decided, one thing is certain and that as Justin King the CEO of Sainsbury s has pointed out, the divide between the data-haves and the data have-nots will grow ever wider. Recognising this, Clubcard-style loyalty schemes will undoubtedly continue to play a pivotal role in the digital eco system. (source: www.tesco.com) You are required to answer the following questions: (a) (b) Majority of the CRM programmes fail to deliver what is promised or expected when they are introduced. Critically discuss five of the CRM critical success factors to explain why the Tesco schemes have been successful. (25 marks) Explain how Tesco has used a Loyalty programme to modify its marketing strategies and what types of benefits were derived as a result of such modifications. (15 marks) Page 4 of 5
SECTION B: ANSWER ANY TWO QUESTIONS QUESTION 2: (30 MARKS) Complaints should be considered as an indicator of organisational performance assessment, signalling some problems or failures in internal processes that need quick recovery in order to avoid migration of profitable customers. However, it is well documented in the CRM literature that many companies are poor at handling customer complaints. Critically discuss the key features of an effective complaint management process. QUESTION 3: (30 MARKS) Strong brands may enhance market share, create customer loyalty and increase profit as they are valuable assets to a firm and therefore, it is important for managers to measure the equity that had been built up by their brand. Critically discuss the 5 key features of customer-based brand equity and explain how those features can impact upon the customers perception of the organisation brand. Use relevant examples to support your answer. QUESTION 4: (30 MARKS) A CRM system can provide a powerful competitive advantage for organisations to enable them to survive in today s market. Critically discuss the stages in developing and implementing CRM strategy. ***END OF QUESTION PAPER*** Page 5 of 5