Story of 3 Envelopes

I have decided to put this story on paper now for easy reference and fond recollection about our days at work. I realize that I have told this tale to so many of my friends already - especially when we are discussing the apathy shown by many Employees at many Workplaces.

I had read it long back in a Reader's Digest or something similar, and I think this approach probably holds true now more than ever - thanks to the dynamic job market, where getting another job is so easy. You just hang around at your current workplace as long as the patience & feel-good factor lasts - yours and theirs. When the going gets tough (i.e.tough questions start getting asked), you just move on.

Today, spending 3 years at a single organization is considered to be par for the course. Anything more than that and people (read: other prospect employers) begin to look upon you with suspicion. This is where the "Story of 3 Envelopes" actually helps. It tells you how you can play out these 3 years at work.

Here goes:
A fellow had just been hired as the new CEO of a large high tech corporation. The CEO who was stepping down met with him privately and presented him with three numbered envelopes. "Open these if you run up against a problem you don't think you can solve," he said.

Well, things went along pretty smoothly, but six months later, sales took a downturn and he was really catching a lot of heat. About at his wits's end, he remembered the envelopes. He went to his drawer and took out the first envelope. The message read, "Blame your predecessor."

The new CEO called a press conference and tactfully laid the blame at the feet of the previous CEO. Satisfied with his comments, the press -- and Wall Street -- responded positively, sales began to pick up and the problem was soon behind him.

About a year later, the company was again experiencing a slight dip in sales, combined with serious product problems. Having learned from his previous experience, the CEO quickly opened the second envelope. The message read, "Reorganize." This he did, and the company quickly rebounded.

After several consecutive profitable quarters, the company once again fell on difficult times. The CEO went to his office, closed the door and opened the third envelope.

The message said, "Prepare three envelopes."

Knowing & Understanding Business-Industry History

Working in the very nascent & just-born (5-years old I would like to estimate) Indian Retail Industry, I am increasingly running into the "Indian Retail Doomsday Predictors" everyday - within and outside of my own Workplace.

Typical Conclusions are:
- 3 Years on, What a Mess it is & How it is Not Going to Work.
- They should have done This and That and Even That.
- How the Likes of IT, FMCG & Telecom are doing so well (!)
- There is no Positioning & Strategy.
- And so on...
These conclusions could turn out to be right in the long run alright (yes, things are bad in Indian Retail at this moment), but it is frustrating to see how easily one can be so disillusioned & dismissive about a Sector one was so bullish just about a Year back.

The sense of Doom is accentuated just because 3 Things happened in the Last Year - No increments, No variable pay and Sad job market (which doesn't allow you to quit easily and move on). [As far as Retail Industry growth is concerned, it is still progressing as smoothly (read: slowly) as it was envisaged last year.]

• People loved it when despite being on "Zero" Revenue, Retail companies gave them "Awesome" Pay hikes, to join the Retail Bandwagon. And they loved it when the company gave them their 1st year Variable pay-offs in full - despite still being on Negligible revenue. This Sector rocked and held promise...
• But now that the Retail Environment has toughened and the Company cuts back (big-time) to manage Survival better, the Sector is headed for Doomsday...
• Comparisons are being made with the likes of IT, Telecom & FMCG (and whichever industry which gives out pay-hikes & variable pay) Sectors and I can probably even see regrets on people's faces, questioning the Choices they made and the Opportunities they may have missed elsewhere.

I have this thing to say: Know & Understand Business History.

1. Every "Brand New" Business/Industry goes through the "Up-Down-Up" Cycle:

• Irrational Exuberance about Business/Industry Potential,
• Overboard Vision,
• Too much Investment,
• 100 Models of Working,
• Glitches & Errors & Outright Mistakes,
• Learning & Rationalization,
• Moderated Vision,
• Re-organization & Improvization,
• Re-ignition & Renaissance.

Take any Industry (and the business leaders of their time) - Automobiles, IT, FMCG, Telecom, Oil, Manufacturing - and they will have gone through this cycle. Even Retail - in US, Europe & Asia-Pacific) - has gone through such a Cycle. Things don't Change quickly enough - for the worse or for the better. It takes Years of Effort - to fail at it or to make it work.

2. No "Two" Industries are the Same, nor are they Completely Different:

• Breakeven in one Industry may happen in 3 years and in some other still it may take 7 years. We cannot compare Apples & Oranges.
• A company in Industry A may take 3 Years to become a 'Leader', whereas a company in Industry B may take 7 years to become a 'Leader'. The important part is that both of them are 'Leaders' eventually. So, in the interim 4 year period, one simply has to be Patient.

3. There are No Absolutes:

• Good to Great & Build to Last Companies have failed (Circuit City in Retail, Motorola in Manufacturing) and Written-off Companies (Amazon.com in E-Business, Cisco in Telecom Hardware) have to come to rule the Businesses they operated in. And, within a decade of them having being written about either which ways.
• When any Company is in a Business with "Serious Intent", the time frames have to be measured in Tens of Years and not in Single Years. To specifically quote Retail Examples, it is worthy to note that the Walmarts & Tescos of the world became 'World Leaders' after nearly 20-25 Years of "Competitive Existence". They didn't start at # 1 and they did not make Zero mistakes along the way.

I hope this is not coming across like a sermon, but I have read a lot of Business Magazine "Archives" (Fortune, BusinessWeek, BusinessWorld, Forbes) in the last few months and I have seen how so many of today's favorite companies (as well as the industries they were in) had had it so tough during their 'initial' lifetimes. It was encouraging & insightful to evaluate them through the complete Cycles and understand that "Uncertainty" always prevails in a Business Environment - Be it a Brand New Industry or the Old.

"Brand New Industry" types can probably take heart from these Old Business/Industry History Lessons and stem a little of the Impatience that prevails in the Indian Retail context today. Walmart, and for that matter, Mr. Biyani's Future Group, wasn't built in a Day.

Go, Kiss the World

I just finished reading Subroto Bagchi's "Go, Kiss the World" and it turned out to be much better than my expectations. Especially appealing are his observations related to a person's Career moves. I have noted some of the gems as below:

§ It is not necessary that everyone has wanderlust in their soul like me. But it is important to know that quite often displacement is the key to progress, and we need to develop comfort with it. My early life experiences helped me build a high degree of comfort with displacement. Water in a pool is stagnant; only when it flows is it energized. The entire universe is in constant motion; even a moment of motionless is inconceivable in the cosmic state of things. Many professionals shudder at the thought of physical displacement, yet crave rapid mobility and growth in their careers. When you are continuously displaced, you make friends easily. You have low expectations from the unfamiliar; hence you are more pleasantly surprised than frustrated when faced with life’s many ups and downs. You explore everything around you, develop curiosity – new lands, customs, food, and ways of doing things begin to draw you in. You learn to survive on the strength of who you are, just for this day, today. You build ingenuity in order to survive. You trust strangers and, hence, strangers trust you. You build intuitive capability to sniff trouble – which can tell you when leave a bar! You become an interesting person, because you have lot of stories to tell. Finally, you learn to move on.

§ … I learnt that our achievements are only as good as the value they create for others.

§ There are two futures, the future of desire and the future of fate, and man’s reason has never learnt to separate them. – J.D.Bernal

§ (Someone once said) Most men take more out life than they give to it. A few give more to life than they take out of it. The world runs because of such men.

§ Our lives are like rivers – the source seldom reveals the confluence. Does a river fret over the long journey and about its end just as it is about to spurt? It simply does not do that, caring instead to flow, to begin its journey, and on its way builds a beneficial relationship with anyone who comes in contact with her.

§ Life sometimes deals you a blank cheque. However, it pays to defer its encashment.

§ Sometimes, in our moments of conflict, we come across a sign that, in a flash, helps us reach a decision which hours of frustrating reasoning cannot achieve. Almost magically, options become clear.

§ Sometimes success is just so close, it looks unreal.

§ When people make mid-career changes, I always hear them ask for a job that impacts corporate strategy, seeking a corner room with a large window, preferably close to the CEO, examining closely the organogram of the organization and hair-splitting on the exact nature of the job. No one says, ‘give me the challenge of a tough, dirty, and strategic role that no one is willing to take, something that may be keeping the CEO awake at night’. But when the outlook changes from ‘what is good for me’ to ‘where is the organization hurting and how can I make a difference’, your professional landscape changes.

§ Only when you are 120% loaded will you be 100% effective. – Azim Premji

§ While it takes time to build perceptions, it takes even longer for perceptions to change. – Sridhar Mitta

§ (Azim Premji) wanted to me stay back. I told him that one of my reasons for leaving was that we were very different people, we thought differently. He answered: ‘That is the reason we should work together’. When we look to hire people, we invariably look for sameness. It is so much more comfortable. But progress requires intelligent friction, push back, points and healthy counterpoints. The job of leaders is to build high personal comfort with contrarians who think differently, create alternative points of view and have the power to question the state of things.

How Tesco beat Sainsbury - 4

3.7 Lean Thinking
Retailer Share of UK Grocery Market
Year Tesco Sainsbury
1993 18% 19.6%
2000 25% 17.9%
2007 31.3% 16.5%

• The rise of Tesco over its rivals is often credited exclusively to its Clubcard Loyalty program launched in 1995. 1995 was the year when Tesco overtook Sainsbury to grasp the “No 1” supermarket slot in the UK.
• Few column inches have been given over to the fact that Tesco started to employ “Lean” experts earlier in 1995 to review their Supply Chain and Supplier Relationships.
  Insights from these “Lean Experts” were shared as early as 1996 in the book “Lean Thinking” and the techniques used in Tesco’s roll-out of the high street Metro stores are revealed in the publication “Lean Solutions”.
• Sir Terry Leahy of Tesco has even been quoted to this effect: Lean Thinking has been an enormous influence on my Business Thinking. It shows how you can fundamentally transform your business.

3.8 New Technology

• It was expanding Internet Shopping Services while Sainsbury's had just reduced its Online Stores. Tesco had even stolen a march on the Internet - offering free access to its Clubcard Members as part of a plan to create a successful e-Commerce website.
• (Sainsbury, however, was aiming to be first with a warehouse delivering goods directly to Online Customers.)

3.9 Growing Abroad

• Tesco had also broken the golden rule that UK retailers cannot successfully expand abroad. While Marks & Spencer and Sainsbury made a mess of their overseas expansion, Tesco had managed to avoid pitfalls into which so many of its competitors had fallen.
• Since its acquisition of the Quinnsworth chain in Ireland in 1997 Tesco has also expanded into Eastern Europe & the Far East (and, most recently, the United States).
• The cornerstone of its international strategy is exporting culturally customized versions of its marketing formula for hypermarkets, the popular department store–supermarket combination that sells massive amounts of food and household goods in a single store.
  Tesco is opting for depth — dominating in contiguous countries — rather than the global breadth Carrefour (and Sainsbury) had sought.
• By forming clusters of shared costs, Tesco hoped to build regional economies of scale. Geographic proximity maximized efficiency by enabling stores to share resources, even if they didn’t operate in the same country.
• Tesco stores in Slovakia and the Czech Republic, for instance, imported up to one-third of their products from each other.
• The company had also calculated that it needs 15 stores in any single country to be profitable. To offset the costs of localization, Tesco management has focused on standardizing management methodology to achieve gobal economies of scale.

3.10 HR Strategy

• With an enviable track record when it comes to HR and Leadership Development, it was arguably Tesco's investment in its People - its 'Every Little Helps' slogan summing up the sort of mentality it was trying to engender in its staff - as much as its ethos of 'pile 'em high, sell 'em cheap' that had been behind much of its growth in the past few years.
• “What really helped Tesco get off the ground in the 1990s was that it recognised that its staff were not as well trained as those at Sainsbury's,” commented Andrea Cockram, then Analyst at Verdict. “It put a lot of effort into that, and it paid off.”

How Tesco Beat Sainsbury - 3

3.6 Brand Building & Advertising (As a Strategy Enabler)

• Tesco stayed faithful to one slogan - "Every Little Helps" – for a long time. And its adverts featuring Prunella Scales - also of Fawlty Towers fame - had gone down relatively well, appealing to a Mass Middle-class market.
• Mike Pearce, then chairman of marketing agency TSM, summed it up: "Tesco has done to Sainsbury's what New Labour did to the Tories. It has hijacked its ideas, added some value and stolen the hearts of Middle England."
• Although Tesco made radical structural changes to its operation, a fundamental turnaround in Tesco's brand image was key in making these changes meaningful to consumers and other stakeholders alike. This was in sharp contrast to Tesco's key competitor, Sainsbury's, whose image declined over the same period.
• In the early 90s, Tesco had an unappealing reputation of “pile it high, sell it cheap, and watch it fly”. This was a legacy of its shrewd and bargain-driven founder Jack Cohen.
  Tesco's brief to its ad agency Lowe Lintas in 1989 was, "We are looking to smash away preconceptions about our business with advertising to develop an image campaign which will lift us out of the mould in our particular sector."

Advertising helped improve Tesco's image in the minds of 3 audiences:
1. Tesco Store Staff, whose competent delivery of Tesco's initiatives was vital.
2. Marketing Community, an important source of talent to drive its development.
3. City Analysts, who directly influence its share price.

There are 2 phases to Tesco's Transformation:
1. Pursuing and Achieving Market Leadership (1990 to 1995).
2. Consolidating this Position (1995 onwards).

3.6.1 The Pursuit of Market Leadership (1990 to1995)

• In the early 1980s, Tesco was perceived to be a basic groceries store that bore no comparison to the sophisticated ranges stocked by market leader, Sainsbury's.
  Yet Tesco had set its sights on market leadership. It launched a major programme to counteract its key weakness in terms of quality. This was Sainsbury's strength.
• From around 1983, Tesco started to upgrade its stores and the quality and range of what it put onto its shelves. By 1990, it had failed to dent Sainsbury's dominance. Although the changes in store were evident to existing customers, they had not affected Tesco's image amongst non-shoppers.
• By now Tesco was as good, if not better, than its competitors. But it had an image problem. The UK supermarket price wars of the 1970s were more closely associated with Tesco than any other retailer and were still top of mind for consumers.
• Non Tesco shoppers had a significantly more positive image of Sainsbury's than they did of Tesco since many of them shopped at Sainsbury's. But the fact that people who did not shop at Tesco had a much worse view of Tesco than people who did not shop at Sainsbury's did of Sainsbury's, is testament to Tesco's image problem at the time.
• By 1990, non shoppers did not appreciate the quality improvements that Tesco had made. Consequently, only a few new shoppers had been persuaded to give Tesco a try between the beginning of the Quality Programme (1982) to the launch of its new campaign in 1990.

The Opportunity for Advertising:

• The opportunity for advertising was to persuade non shoppers to consider Tesco by presenting it as a credible alternative to Sainsbury's. Everything they could find at Sainsbury's they could buy at Tesco and the quality would be as good.
• In addition, people had to want to shop there on an emotional level to be comfortable carrying a Tesco carrier bag. Tesco needed to present its changes in a way that would build a more positive identity for the brand as classless, confident, bright and innovative, in order for it to change perceptions in its particular business sector.

The Quest for Quality: (May 1990 to Dec 1992)

• The first campaign, the Quest for Quality, ran from 1990 to 1992. In total, 18 TV commercials flighted, with 400 ARs being the typical burst weight.
• The campaign adopted a deliberately (and, at the time, unusually) lighthearted approach. It starred Dudley Moore as a Tesco buyer who scoured the world in pursuit of an elusive flock of French free range chickens. En route, he discovered other surprisingly high quality products in the Tesco's range.
• Products were obviously chosen to demonstrate Tesco's newfound quality. The idea that it would stock free range chickens was astonishing at the time.
• But there was nothing too exotic. Each product needed to appeal to the aspirant taste buds of the average Brit. They included French camembert, Colli Albani (Italian white wine), Scottish salmon and tiramisu.
• The campaign was highly impactful, peaking at 89% awareness. Non shoppers even remembered the campaign more than they remembered advertising for the competitor stores they shopped at. The key message was understood and started convincing people that Tesco was improving its quality.
• Importantly, they enjoyed the advertising more so even than Sainsbury's Recipes campaign and this began to affect the way they felt about Tesco.
• The main message consumers took out of the campaign was that Tesco strived to provide the customer with the best quality and most interesting variety of products.

Every Little Helps (Nov 1993 - March 1995)

• In 1993, having made major improvements to product and store quality, Tesco embarked on a newer and bigger strategy. The retailer understood that the act of shopping was much more than just the products bought.
• The company realised that none of its competitors was making serious attempts to improve the whole shopping experience.
• Tesco capitalised on this key insight by launching 114 new initiatives which included mother and baby changing facilities, the removal of sweets from till points, the One in Front till opening system, a new value range and a loyalty Clubcard.
• The new strategy required new advertising, as Dudley was associated purely with the products sold by Tesco. Whilst publicising the new initiatives, it needed to continue to build affinity with shoppers who had not experienced the new Tesco for themselves.
• The advertising idea was that whilst not everything in life goes perfectly, Tesco was doing its best to make at least one aspect of the shopping experience a little easier.
• Each of the 20 commercials focused on a different initiative, but the payoff line, "Every Little Helps", was used across all advertising and communications tools to encapsulate Tesco's new consumer-oriented philosophy of always doing right by the customer.
• Awareness of the new campaign peaked at 64%. It successfully communicated each new initiative to shoppers and non shoppers, with high proportions claiming their awareness was a result of the advertising.
• These included One in Front, and, importantly, Clubcard (which helped attract the final tranche of new shoppers that secured market leadership).
• At the same time it helped to build a more positive overall impression of Tesco among shoppers and non shoppers. What happened?
• Tesco's turnover increased by 38%, enabling it to overtake Sainsbury's in early 1995.
  In contrast to the period before 1990 when Tesco's instore changes had not affected non shoppers' image of Tesco or their willingness to shop there, 1.3 million extra households were now persuaded to choose Tesco between 1990 and 1995.
• Significantly, this penetration growth is not simply the result of more stores and increased floor space. Tesco's floor space grew by over 4 million square feet during the Dudley and Every Little Helps advertising.
• Nonetheless, the penetration gained per additional square foot was significantly higher during the latter than in the initial years of Tesco's expansion programme.
• The belief is therefore that the advertising was instrumental in the improvement of Tesco's fortunes between 1990 and 1995. Tesco made massive changes to its business between 1990 and 1995, not least of which was the increase in its sales area. However, attracting new customers was fundamental to achieving market leadership.
• It seems reasonable to suggest that without the benefit of advertising which not only publicised Tesco's new approach to shoppers and non shoppers, but also helped them like the brand, Tesco may not have attracted so many additional new shoppers. Tesco certainly believed this was the case.

3.6.2 Consolidating Leadership (Mid 1995 onwards)
A New Campaign

• By 1995, as intended, "Every Little Helps" had become the driving philosophy that steered every initiative that Tesco made.
• Whilst Tesco continued to develop these initiatives, the advertising needed a change.
  Britain had come out of recession. The advertising could now try to mirror the public's increased confidence. But for the consumer-oriented strategy to succeed, it was important that the public still believed Tesco was on their side. Alienating customers was more of a risk as top dog than as Number 2.
• So Tesco turned the tables. Instead of focusing on Tesco's attitude to its customers, it concentrated on customers attitudes to Tesco. And this was no ordinary customer.
  The new campaign centred on the mother of all shoppers, Dotty Turnbull, who regarded each of Tesco's initiatives as an opportunity to put the store to the test.
• She did it in 25 commercials that kept her one frustrating step ahead of her long suffering daughter, Kate. In testing it to the limit, Dotty gave Tesco and, importantly, its staff, the opportunity to shine.
• The flexibility of this idea allowed Tesco to communicate service, quality, range, value for money and Clubcard, yet remain faithful to the core "Every Little Helps" philosophy.
  Whilst Sainsbury's has very publicly experienced the difficulties of injecting value into its quality-based positioning, Tesco had seamlessly integrated this message because lowering prices for the consumer was as relevant to "Every Little Helps" as offering better service.

Media Strategy: Making Dotty Popular

• The Dotty campaign was designed to have a populist, yet quality appeal and the media strategy complemented this. The campaign was deliberately mainstream.
  An average execution typically reached 88% of housewives at 6.2 OTS (opportunities to see). The quality and relevance of each OTS was maximised by the following strategy:
  1) More top programmes were on the schedule in order to maximise attentiveness.
  2) The campaign was skewed towards populist programmes where Dotty fitted in most naturally as a commercial break.
  3) More centrebreaks were bought than by its competitors, again, to reach the captive audience in the middle of a programme they enjoyed.
  4) More spots were first in and last out of each break for the same reason.
  What happened?
  Over the period of the Dotty campaign, Tesco considerably strengthened its brand image versus Sainsbury's.
• This was reflected in its widening share advantage over Sainsbury's. The growth was principally because more people were encouraged to shop at Tesco and, in contrast to the previous five years (where loyalty was static), those who did shop there also became more loyal.

3.6.3 Advertising and its Effect beyond Customers
Since the beginning of the 1990s, Tesco's advertising helped change the image of Tesco for the better in the minds of two other important audiences, i.e.: the staff and professional marketers.
The impact of Tesco's Advertising on Store Staff:

• Tesco had close to 200,000 employees. The effect of the advertising on them was fundamental to the success of the Every Little Helps strategy and to securing their loyalty and support. The advertising helped ensure that staff lived up to the promise of Every Little Helps.
• Since Every Little Helps was introduced in 1993, the advertising had been a very public statement of the kind of experience Tesco will deliver in store.
• The new customer-oriented strategy was launched to the staff in a video which used the advertising to demonstrate what was meant by the new strategy. Ads were run on a loop in staff canteens and they were regularly featured in further First Class Service training videos and the First Class Success service bulletins that were issued to staff.
• It was an efficient way for Tesco to train its staff, since the advertising is effectively a free training tool. Using advertising to train staff was not only efficient, but also effective.

The value of advertising in attracting better quality Marketers to Tesco:

• Great marketing has been instrumental in Tesco's success and it was essential that it continued to attract the best marketing talent around. Yet retailing was not regarded as a particularly attractive or lucrative sector in which to work.
• However, Tesco's positive public image had helped it shrug off the limited attractions of retail, enabling it to attract new talent easily. The advertising had been instrumental in transforming this image.

3.6.4 The Advertising Payback

• Using econometric modelling, it was calculated that the Dotty campaign delivered an incremental £2.206-billion of turnover (excl. VAT) across fiscal years 1995 to 1999.
  Using Tesco's average operating margin over that same period of 5.9%, the campaign delivered an incremental operating profit of £130-million.
  So every pound spent on advertising generated an incremental 38 pounds of turnover and 2.25 pounds of operating profit.
• Thus the campaign paid for itself more than twice over, delivering a 225% return on investment. This is a significant payback to operating profit, given the Dotty campaign accounted for less than 1% of Tesco's operating costs over fiscal years 1995-1999.
• Expansion in non-staple categories is essential to Tesco's continued growth. The advertising has helped transform Tesco's brand image to the point that it is able to operate more successfully in grocery categories such as wine and gourmet food (via the launch of its premium range, Finest), where brand affinity is particularly important.
• This transformation in Tesco's credibility enabled it to expand into new non grocery categories (such as financial services, children's educational toys, cosmetics, medicines and computers).
• The Tesco brand could now be used to sell almost anything. From wine through to DVDs, home, pet and car insurance, cellphones, petrol and banking. Tesco has moved into one sector after another.

How Tesco beat Sainsbury - 2

3 Tesco Moves
3.1 Strategy

• Ignoring doubters, Tesco Management stuck with its belief that the company could reach both Bargain Hunters and Premium Shoppers.
  They felt: ‘It’s great to be in the middle, because that’s where the mass market is.’ They knew if they did a good job in the middle, they would win.
• In 1989, Tesco began gathering data from shoppers on what they wanted from a retailer. The most common responses were Lower Prices, Better Service, More Selection, and More Non-food Products.
• In the early 1990s, the company began to accelerate its construction of Superstores, bigger than its traditional Supermarkets, to allow for greater selection at lower prices.

3.2 Acquisition of William Low
In 1994, Tesco beat Sainsbury's in the race to buy supermarket chain William Low - giving it an important presence in the Scottish Market.
By 1995, Tesco had overtaken Sainsbury's as Britain's biggest food retailer. The William Low deal certainly helped.

3.3 Store & Service Improvements
3.3.1 Assortment Expansion & Diversification from Grocery

• It introduced New Economy-lines under the “Tesco Select” Private-Label. This gave shoppers the chance to save money on Basics.
• The group also pushed Non-food Sales, including Clothes and Home Entertainment.
  No items were out of bounds, it seemed. At one stage, it offered some of the cheapest PCs - with the added incentive of earning Clubcard points on a major purchase. It had even been selling Mopeds.
• Then, Tesco took on designer brands such as Levi's and Nike, offering their products at Cut prices. Even England and Scotland Football Shirts went cheap.
• It introduced house brands for value-conscious and more indulgent shoppers, and focused on customer service.
• To satisfy upper-end shoppers, it introduced Organic Food Products.
• The group also launched a wide range of house-brand goods differentiated by Price or Quality, first under the Value brand, and later under the Finest gourmet label.
• As supermarkets strode into the personal finance sector, Tesco was the first supermarket to offer Personal Pension Schemes, aimed at people unfamiliar with buying any financial products.
• Also in the 1990s, Tesco began to experiment with new products and channels. It moved into gasoline retail, placing convenience stores by the pumps. Through a joint venture with the Bank of Scotland, Tesco also started offering a wide range of financial products, including car and pet insurance.

3.3.2 Out-of-Town Superstores as well as High Street Presence

• It was the first UK retailer to realise that the future lay in giant “Out-of-Town Superstores” of 100,000 square feet or more. By the time Sainsburys and its other competitors woke up to what was happening, Tesco had grabbed most of the best sites.
• In fact, many of the sites were purchased by Tesco specifically to block competitors getting their hands on them, and they either remain undeveloped or were sold on with restrictive covenants preventing the new owners building shops on them.
• When out-of-town shopping trend, with higher fuel prices and increased traffic congestion, had almost certainly peaked, Tesco had anticipated this development. It had built up its Tesco Express and Metro Convenience Store Formats.
• Tesco realised the value of keeping a High Street Presence and as of 1999, it had 41 Metro stores in prime spots in the centre of Towns and Cities.
• It returned to the High Street by opening smaller Tesco “Metro” Stores. The idea was initially dismissed by Sainsbury's – which was then forced to play catch-up - with decidedly mixed results.
• For years, Sainsbury ignored the trend back towards convenience, but later caved in and decided to set up "Local" shops. They still had only two in 1999.

3.3.3 New Services

• Tesco proved adept at introducing a range of innovative new shopping services to entice customers like - Supermarket Bank Accounts.
• Tesco was first to react to customers' frustration at long Check-out Queues, initiating a "One-in-Front" policy - if there was more than one customer in front, they would open another check-out. The policy is still in place.
• And Tesco also removed sweets from Check-outs, pleasing parents bullied by their sweet-tooth children.
• 24-hour Shopping: By 1999, Tesco had more than 100 stores open round the clock. Sainsbury had 30.
• “If you ask an employee where something is, they will not only tell you; they’ll take you to the spot,” said the then Tesco Corporate Communications Manager Ian Hutchins.
• In 1996, it launched a dot-com delivery service. Unlike the fabulously funded, now departed grocery-delivery dot-coms — Webvan, Streamline, and HomeGrocer — Tesco.com has not only endured, but become profitable.
• It all gave shoppers the impression that Tesco chiefs had their interests at heart.

3.4 Marketing - Clubcard

• Tesco had the facility to listen more than Sainsbury, through the Clubcard. The idea was dismissed initially by Sainsbury who was then forced to play catch-up.
• {Lord Sainsbury famously dismissed the idea as nothing more than an "electronic version of Greenshield Stamps". He lived to regret that comment. Sainsbury's was forced to make an embarrassing U-turn and introduce its own loyalty card when the Clubcard became a roaring success.}
• They were 18 months behind in launching their own Reward Card, which had opened the door to a massive amount of Market Research for Tesco.
• Whilst loyalty had risen in recent years, Tesco's ability to attract new shoppers was been essential to its success. Just over two million more households chose to shop at Tesco over this nine year period. (TGI based on female housewives).

3.5 Price Management
Tesco had repeatedly captured more headlines by firing more shots in the Price Wars. The cuts would have cost it more than £1m in total (in 1999). Earlier then, it had announced it was reducing the price of more than 300 goods. To which, Sainsbury said it would "probably" match the cuts and boasted of having price guarantees on key lines.

How Tesco Beat Sainsbury - 1

I am starting a series on "How Tesco Beat Sainsbury", based on my Research and Notes on the said Topic. I found it a very interesting subject to study, because Tesco did the "Awesome" during a "Recessionary Period" - something that we probably are in today.

My sources of information are:

• BBC News The Company File Profits a store point for Sainsbury's
• BBC News The Company File Shake up at Sainsbury's
• BBC News The Company File Stores at war winning secrets
• Marketingweb - ADVERTISING - Case study Tesco - Pedro de Gouveia of Salient Strategic Advertising & Design
• ResQ Management Resources
• Supermarket sweep Nic Paton
• Tesco leaves them trailing

The (Insightful) Takeaways:

1 Market Leadership by Tesco in 1995
Between 1990 and 1999, Tesco's turnover increased from 8-billion to 17-billion pounds sterling and its share rose from 9.1% to 15.4%, overtaking Sainsbury's to become market leader in 1995. (Institute of Grocery Distribution, Grocery Market Shares: Dec 1989 to June 1999).

2 Sainsbury Faux Pas(ses)
2.1 Red Tapism
While Tesco extended its lead at the top of the supermarket table (in 1995) and Sainsbury's was left languishing in its wake – Analysts believed the group had been dogged by bureaucracy and an old-fashioned management style which left it without the fleetness of foot enjoyed by its nimbler rival.

2.2 Bad Advertising

• Sainsbury's 1999 Advertising Campaign - which featured Monty Python comedian John Cleese shouting loudly about Cheap Offers - flopped badly. For a supermarket which had prided itself on Quality - to shout about economy goods proved to be a a misguided tactic. It was a marketing disaster which many analysts believed destroyed its credibility in the City.
• The commercial, which showed him bellowing at staff through a megaphone, brought protests from workers - and customers - that it was patronising. The campaign was voted most irritating advertising of the year in a Marketing magazine poll.
• Also, Sainsbury famously ditched probably the best-known advertising slogan in retailing: "Good food costs less at Sainsbury's".
• The company then tried out a variety of slogans, ranging from "Everyone's favourite ingredient" to "Fresh food, fresh ideas" and "Value to shout about".

2.3 Organizational Issues

• Sainsbury's profits and its share price had stalled.
• The group's orange and brown logo and livery was to receive a £100m facelift as Sainsbury's tried to position itself for the new millennium.
• There are rumblings that the Sainsbury family had become restless at the group's lack of success and looked to sell up and bail out. There were even rumours that Sainsbury's could fall prey to a takeover bid.
• 230 jobs were lost with the closure of the head office of its Savacentre division, followed swiftly by a cut of 300 head office jobs due to "unacceptable" sales figures.
• Between two and four middle management jobs were shed in each store - 1,100 in total. The individuals were moved to other jobs or retrained, although some redundancies were likely among those who disliked the change.