Tesco 2014 Annual Report Download - page 19

1. Our customers come back time and again 2. New customers choose us
70.0%
retained loyal customers 29.1% of new loyal customers
Definition: Percentage of last year’s loyal
customers* who are still loyal to Tesco
Commentary: Doing the right thing for
our loyal customers and retaining their
loyalty is our first priority. The more we get
it right for them, the more all customers
will benefit.
Definition: New loyal customers* as a
percentage of last year’s loyal customer base
Commentary: We want to build our loyal
customer base so in addition to retaining
our existing loyal customers, we want to
attract new ones. Our investments in the
customer offer are designed to create
long-term value for new customers too.
3. Our customers can shop how they want 4. Our customers use us for more
59.7%
customers shopping
across channels
64.3%
shop the family brands
Definition: Percentage of loyal
customers* who in the last 13 weeks
have shopped two or more channels**
Commentary: This measure helps us to
monitor whether we are providing the truly
multichannel offer that customers want in
the new era of retailing. We know that
customers who shop across channels spend
more with us and this measure tracks
whether they are shopping between different
sized stores, grocery online and services.
Definition: Percentage of loyal
customers* who in the last 13 weeks
have bought / held products from Bank,
Telecoms, Clothing***
Commentary: Our multichannel,
multibrand strategy is founded in the
belief that the whole is more than the
sum of the parts. This measure tracks
whether we are building loyalty and
value across our brands and channels.
5. Loved by customers
Our final measure is one of customer advocacy. Whilst the first
four are functional measures, we know that for our brand to be
loved, liked or actively chosen, our emotional connection with
our customers must get stronger. Emotionally loyal customers,
advocates and fans become brilliant ambassadors and drive
word of mouth, as well as engaging more broadly and deeply
with the business. There are many different ways of measuring
advocacy, not least using a net promoter score, but they all
add up to something similar – do customers like you enough
to recommend you to others?
With our strategy now focused on delivering even greater loyalty from our customers,
we place even greater emphasis across the business on improving five customer-focused key
performance indicators. Whilst we continue to track a range of financial and non-financial
measures, it is these five which each of our businesses now uses to gauge progress.
Key performance indicators of our strategic performance
We have entered the new, multichannel world of retail and customers’ expectations
have changed. Customers have increased access to more and more retailers simply at
their search bar on their smartphone and our success will be a result of more customers
choosing Tesco in preference to others.
As a result of this fundamental change, we have prioritised our customer-focused
measures to track and communicate our progress against the strategy. We believe
these five KPIs are more relevant today, during this time of transition and
transformation, than some of our historical and short-term measures.
Everything we are doing to create the most compelling offer is designed to retain our most
loyal customers, attract new ones and allow them to shop however, whenever and wherever
they want to. These measures both allow us to monitor our progress and to create value
because they are entirely focused on customers and how they choose to shop. Greater loyalty
delivers greater lifetime value so we are tracking the behaviours of our loyal Clubcard
customers – those who are most engaged and typically spend more with us. Focusing on
our loyal customers is how we are driving the transformation we are going through and is
how we will build enduring like-for-like sales.
The measures contained in this section are for our core UK business where they are particularly
relevant. They do however apply to every part of our business – whether it’s a store, a category,
a country or a department – and we are using them across the Group to drive the behaviours
that we believe will lead to long-term success.
* Loyal customers are defined based on their frequency of spend and average weekly spend.
** Channels include: large stores, convenience stores, grocery home shopping, Tesco Direct and Wine by the case.
*** Current results do not include Blinkbox, Clothing online, Nutricentre, Dobbies and our new coffee shops and restaurants. These will be tracked going forward.
16 Tesco PLC Annual Report and Financial Statements 2014
Key performance indicators