The strategic approaches which have helped Tesco.com achieve success online are as follows:
Tesco.com use what he describes as a ‘commitment-based segmentation’ or ‘loyalty ladder’ which is based on recency of purchase, frequency of purchase and value which is used to identify 6 lifecycle categories which are then further divided to target communications:
Tesco then use automated event-triggered messaging can be created to encourage continued purchase. For example, Tesco.com have a touch strategy which includes a sequence of follow-up communications triggered after different events in the customer lifecycle. In the example given below, communications after event 1 are intended to achieve the objective of converting a web site visitor to action; communications after event 2 are intended to move the customer from a first time purchaser to a regular purchaser and for event 3 to reactivate lapsed purchasers.
2. Identify customer profile characteristics. This is a traditional segmentation based on the type of customer. For B2C e-retailers this will include age, sex and geography. For B2B companies, this will include size of company and the industry sector or application they operate in.
3. Identify behaviour in response and purchase. As customers progress through the lifecycle, by analysis of their database, they will be able to build up a detailed response and purchase history which considers the details of recency, frequency, monetary value and category of products purchased (RFM analysis).
4. Identify multi-channel behaviour (channel preference). Regardless of the enthusiasm of the company for online channels, some customers will prefer using online channels and others will prefer traditional channels. This will, to an extent be indicated by RFM and response analysis since customers with a preference for online channels will be more responsive and will make more purchases online. Customers can also be asked direct through surveys. It is useful to have a flag within the database which indicates the customers channel preference and by implications, the best channel to target them by. Customers that prefer online channels can be targeted mainly by online communications such as e-mail, while customers who prefer traditional channels can be targeted by traditional communications such as direct mail or phone.
5. Tone and style preference. In a similar manner to channel preference, customers will respond differently to different types of message. Some may like a more rational appeal in which case a detailed e-mail explaining the benefits of the offer may work best. Others will prefer an emotional appeal based on images and with warmer, less formal copy. Sophisticated companies will test for this in customers or infer it using profile characteristics and response behaviour and then develop different creative treatments accordingly. Companies that use polls can potentially use this to infer style preferences.
Touch strategyTo deliver relevance also requires a plan specifying the number, frequency and type of online and offline communications and offers. This is a contact or touch strategy. A good starting point is to ask ‘what will annoy’ the customer. Clearly if e-mail communications are too frequent, then the customer is less likely to have the time or inclination to open an e-mail. So one approach is to monitor the response for e-mail communications. But higher frequencies will likely lead to higher response. This helps explain the high volume of e-mails sent by Tesco.com to its consumers, which averages between 1 and 2 per week for me. But Tesco.com have recently been exposed as ‘bombarding UK consumers with a massive e-mail marketing campaign’ Based on the E-mail tracking service E-mail Monitor from Interactive Prospect Targeting Services, Tesco is blitzing the nation with 16-20 million e-mails per month. It reports that in September it issued 44 separate e-mail campaigns last month which was more than Sainsbury, Asda, Waitrose and Somerfield put together. Part of this activity can be explained by Tesco’s market share. A Tesco spokesman was reported as saying ‘More people shop with us online than with anyone else and we do communicate with a lot of them by email.