Tesco, the global supermarket chain had its worst holiday season sales for 30 years. It also issued a profit warning despite increasing its social media activity in 2011.
£3.7 billion was wiped off the value of Tesco this morning. More embarrassingly, Noel Robbins, Chief operating officer, sold 50,000 shares 8 days before Tesco reported the drop in retail sales.
Tesco, founded in the UK, has become a global brand with stores in 12 countries outside of the UK. Its turnover to February 2011 was over 67 billion. In 2007, £1 in every £7 spent in the UK was spent in Tesco.
Connecting with customers
Tesco ramped up its social media activity in 2011 including Tesco themed Twitter feeds and a Facebook page to showcase its promotional campaigns. It has also purchased social media company BzzAgent
to help better connect social media with product marketing. It uses crowdsourcing company Right Now
to monitor sentiment about the brand.
Nick Lansley, head of research and development at Tesco.com said that certain Tesco units were considering increasing social activity to 'promote awareness of aspirational products'.
Tesco has had challenges with its social media engagement in the past. It challenged a shopper, Nancy Atkinson-Turner, claiming that she stole shampoo from one of its stores. Her subsequent blog post went viral and even though Tesco contacted the mother of two imediately after she had published the blog post, the propagation of the complaint had already begun.
Atkinson-Turner maintained that Tesco only dealt with the issue once the blog post had gone viral. It would have been a non-issue if face to face customer service problems had been dealt with promptly.
The growth of online and mobile shopping has contributed to this slump in sales. Home delivery has been growing at double digits
. Customers are using coupons, local shops and offers to get the best bargains. Loyalty is hard to maintain.
Perhaps Tesco still needs to fully integrate its social media with product marketing and customer response frameworks. It needs to turn customer loyalty into customer sales and it needs to address customer satisfaction issues before they are propagated across social media channels.
With a third of the UK grocery market, Tesco has the potential to get a third of the UK customer loyalty. Social programs designed to "enrich and add value to the customer's journey" might not be enough.
But if Tesco manages to get this right, then its social customers will return it to the growth its shareholders want.