7th March 2012
A year after taking over the chief executive's suite, Tesco boss Philip Clarke tells The Financial Times that he plans to spend hundreds of millions in the UK "to put the love back into our stores."
He has to do something. At 312p, the share price of Britain's biggest private sector employer is down some 22% from when Clarke took over from previous CEO Sir Terry Leahy twelve months ago. It's been a multi-billion disaster for investors.
The stores are going backwards in market share; the big store opening programme has been reined in; the expansion of Tesco Bank has gone quiet; the US Fresh'n'Easy store project is bleeding cash; the move from double Clubcard points to price cuts has left consumers confused; its rush for retail space has spawned the terms "tescopoly" and "Tesco towns"; and there is that little matter of January's profit warning, the first in 20 years.
In all, it is hard to find positive Tesco coverage either in the media or in stockbroker analysis. Tesco has become for some a distress shopping experience – you buy there because there is no easy alternative. In short, it's become an unloved brand with few able to remember the last time it attracted hugs and kisses. Even the announcement earlier this week of 20,000 new jobs was painted as a move to counter last month's "slave labour" allegations.
So how does anyone put the "love" back into the stores, assuming it was there in the first place? What is the recipe to love-bomb consumers who want to go elsewhere? How do you woo customers who would prefer to hide Tesco own brand labels from friends and family?
The Philip Clarke interview gives few clues other than spending £350m more on staff and spending a further £300m giving the stores a friendlier look – perhaps a Fresh'n'Easy makeover as many non-food sales migrate to the internet (and the Tesco online offering is not the easiest to navigate).
To help Clarke – and perhaps Tesco investors – Mindful Money has undertaken a search for "love".
What love is not
It's not an embrace from the checkout person, nor walking down the wine aisle to the sound of the Wedding March, nor special reductions on ready-made candlelit dinners for two. But Clarke must know this.
What love could be
Love is the mantra of Kevin Roberts, the worldwide CEO of advertising agency Saatchi & Saatchi. In 2004, he published "Lovemarks, the future beyond brands", and set up the Lovemarks Company. His speeches and singling out of particular "lovemark" companies – are attempts to highlight the relevance of his theory.
Embracing love – applying the Roberts formula to Tesco
The keynote thought is: "Brands have run out of juice. More and more people in the world have grown to expect great performance from products, services and experiences. And most often, we get it. Cars start first time, chips are always crisp, dishes shine. What makes some brands inspirational, while others struggle? The solution is: Lovemarks: the future beyond brands"
The Tesco brand is tired and tottering although far from toxic. It starts with a personal experience. Consumers know what to expect at the corner shop, at low cost retailers such as Aldi and Lidl, at Marks & Spencer and at Fortnums & Mason. What does anyone expect at Tesco? And do they get it? Frequent changes of direction – price cuts, Clubcard, variety of own brand offerings make the Tesco experience unreliable.
· Lovemarks transcend brands, Roberts believes. Love has to reach your heart as well as your mind, creating an intimate, emotional connection that you just can't live without. You never want to let go.
Clarke will have to create an emotional bond with Tesco customers if they are not to fade away. It's a long haul – and it could start with leading on customer service even if that means lower profits for a while. He'll know when he has loved enough when shoppers greet a new Tesco in the same way as they hail a new Waitrose or Marks & Spencer.
· Create wonder and mystery, which add to the complexity of relationships and experiences because people are drawn to what they don't know.
Where's the "Wow!" factor at Tesco? Where's the sense of wonderment? Or has Tesco become a utility, like the water in the tap or the electricity from the socket?
· Roberts recommends keeping the five senses on constant alert for new textures, scents and tastes, even wonderful music. "When they are stimulated at the same time, the results are unforgettable. It is through the five senses we experience the world and create our memories," he says.
This is more than the old tricks of ensuring coffee scents from one area and the smell of bread from another. It means clean, non-confusing and non-confrontational stores. Clarke has to create retail space that draws customers in because they want to be there, not because they have to be. Once you have consumers in store, they will probably go beyond the shopping list they arrived with.
· Stress empathy, commitment and passion. Close connections win intense loyalty – it can be a small gesture that goes beyond the purely functional. These are often remembered long after the event itself and attendant benefits have faded.
Tesco needs to have more staff and encourage them to be helpful. What about better car park management or improved price labels or in-store product directories which direct shoppers to the correct aisle?
Taking the Lovemarks test
Do consumers respect Tesco or just put up with it? Clarke needs to test the love/respect axis to see where the superstore firm stands.
Clarke needs to engage if his love concept is to work. Stores may no longer attract shoppers because milk is 5p cheaper (customers too often suspect that means bread will be 5p more expensive). Now it's all about the single question consumers have of you: "How will you improve my life?"
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