Tesco Woes Predicted by NPS as Early as 2011

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Back in 2011 Tesco was still riding high with over 31% market share but even at that stage it was the only one of the big 4 supermarkets to have a negative NPS value. Moreover, the 2011 NPS scores for each of the top 4, as measured at the time by research company PRmoment.com, proved to be a very reliable to their long term market share performance, as can be seen below.

The problem with NPS, however, it that it is does not, of itself, tell you what the problem is. For that you need underlying diagnostics. In Tesco’s case we can find such evidence in the general YouGov tracking study, BrandIndex™. As can be seen in the chart below, the tracker showed how perceptions of value had been falling like a stone throughout the whole of 2011 and by 2012 Tesco was being rated the worst of all the major supermarkets.

Tracking your NPS but only having individual customer feedback to help diagnose what the big issues are means that companies can fail to get the big picture and take the right strategic steps to correct the problems.

That is where RedRoute’s AIME Tracker gives companies a vital edge. It tracks the 5 key aspects that determine whether customer prefer your service to the competition. Its overall metric, Effective Net Preference (ENP), not only explains movements on NPS but also predicts them. So you know what the causes of your low NPS are, whether it makes a difference to your sales, and in what direction it is likely to move in the future. It is based on the five dimensions shown below:

More colloquially, these five dimensions can be thought of being customer perception of whether your offer provides:

- The Right Solution from
– The Right Brand for
– The Right Effort for
– The Right Value in
– The Right Way

To find out more, come along the Customer Experience Summit in London on October 15th and 16th and see how our analysis of the Tesco situation and how you can avoid similar problems when using managing your NPS programme.

Steve Messenger
RedRoute International Ltd

The Price of Austerity

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Someone once said:  “Promotions are like heroin – best not to start.”  Of course, this is not true of all promotions, but it is increasingly true of price cutting promotions.  Here, it is the major retailers are becoming increasingly addicted to price cuts and most of the cost of this is being funded by their suppliers.

I have worked with one famous FMCG company who are spending £10 million a year on brand building activities such as advertising but £100 million on trade price support.  Curiously, they spent a lot of time and effort analysing the effectiveness of the £10 million spend – for example, they knew the sales response they could anticipate by changing their advertising investment – but devoted little effort to analysing the £100 million trade price support spend and how they could improve the efficiency and ROI from this.

This is not uncommon across many companies.  I suppose that more often than not this expense is regarded as a “cost of doing business” with the big retail groups and therefore unavoidable.

If it’s an unavoidable expense, then why bother with the effort of analysing it?

Even though the spend on trade price promotional support is often impossible to avoid, it still brings potential dangers in its wake, not just the danger of undermining the brand’s positioning carefully built up over the years, but also the serious danger of plunging the business into losses if the sales uplifts fail to cover the price support costs.

And given the highly competitive nature of today’s marketplace and the focus on the next promotion, the amount of time and effort devoted to analysing past activity becomes difficult to sustain.  But if you do put in the effort, the immediate returns can be quite spectacular.

The charts below help illustrate this.  This is the end result of an analysis of the effectiveness of price promotions for the same brand in two major retailers across the same time period.  The price reductions are similar, but the resultant sales uplifts vary wildly and the proportion of loss making promotions is much higher in one retailer than the other.

Comparing ROI   performance on similar price promotion programmes across two major retail   chains – on the left, mainly positive ROI performance, but on the right it is   mainly negative

This kind of analysis and comparison creates the stimulus to go further and understand why there are these differences and the determination to align the performances across retail groups and create better short term commercial returns.

Most companies that have done this and reshaped their price support plans have generated an immediate improvement in ROI of at least 15%.

There’s nothing clever about losing money on price promotions – nobody gains in the long run.  Data driven analytics helps pinpoint where you are losing money and helps you determine how to reshape you trade price support programmes to stop the losses.

The quickest way to make money is to stop losing it.  Now, why wouldn’t you want to do that?