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Listening to the customer was how Leahy and Tesco conquered the world

Helping take Tesco from a business with a market capitalisation of less than Marks & Spencer and Sainsbury’s in the early 1990s to today being seven times their value is a result of listening to the customer, according to Tesco’s former chief executive Sir Terry Leahy. By Glynn Davis

GENERAL MERCHANDISE

Listening to the customer was how Leahy and Tesco conquered the world

Speaking at the first Retail London Conference this week Leahy told delegates the first thing he looked to solve on joining the business as marketing boss was its image problem: “When buyers were [once] being considered for Tesco, a tobacco company turned us down as an acquisition because they thought it would be bad for their image.”

Leahy sought to “find the truth” of what was the actual cause of the problem at the business and for this he turned to the customers. “We set up panels around the country and we listened to what customers were doing – just listening, not talking. If you can get close to the customers then you have an opportunity,” he suggests.

Over the course of his career at Tesco he used this “strategy of harnessing [the business] to customers’ lives” to help him make many big decisions. These included the introduction of ‘Value’ lines “that customers’ liked but shareholders’ did not as it didn’t copy the iconic retailers of the day M&S and Sainsbury’s”. The ‘Finest’ range then followed.

He also removed queuing at the checkouts - “the bane of supermarkets” – through the initiative of opening another till when there was more than one person queuing at any of the checkouts. The introduction of Clubcard in the mid-90s then had a radical difference as it enabled Tesco to get even closer to its customers.

The move into smaller Express stores on high streets (that now number 3,000 around the world) was also an important move that went against the perceived wisdom of opening large stores in the suburbs.

The internet was another pioneering move that Leahy says was first investigated in the mid-90s after he visited an Accenture show that included a kitchen of the future that included a PC where goods would be ordered for home delivery. “We then created the world’s first grocery online shopping business and Tesco is now the largest in the world,” he says.

These initiatives took Tesco to the position of the UK’s number one retailer ahead of M&S, which then led Leahy to look overseas for future growth. A focus on “local customers’ needs” has enabled it to be successful where other retailers have faltered through trying to replicate their domestic models in these new markets.

Although no longer with the Tesco business Leahy highlighted to delegates what he regarded as the key drivers for future growth in retail. These included: building trust on a personal basis with the customer; using information within the business and involving customers in the decision-making process; and recognising that health will play a big part in customers’ lives so for food retailers this will be very important.

He also points to: convenience, as being of continuing importance as people’s lives will be busier than ever; simplicity, as consumers increasingly want retailers to provide them with complete solutions; loyalty, because there is too much marketing money being wasted on disloyal shoppers; and going green will be an imperative as retailers will ultimately not grow unless they are “compatible with sustainability”. 

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