1. Introduction
This summary compares and contrasts the key similarities in focus and key differences in chronology of the information systems implemented by Tesco Plc. as explained in the Harvard Business School case by David E. Bell and Carnival Cruise Lines as explained in the Harvard Business School case by Lynda M. Applegate, Robert J. Kwortnik, and Gabriele Piccoli.
The focus of both companies in the case studies is identical—that of implementing current and effective information systems in order to attract and retain customers. However, the chronological order of the information systems implementation for the two companies is exactly opposite.
2. Contrasting IS Implementations to Attain Similar Goals
The key information systems that were implemented within each organization in contrasting chronologies are:
Tesco Pls.
· Customer Loyalty Program: The Clubcard system tracked customer spending and supplied a 1% return on items purchased by the customer as a loyalty reward. Later, this system allowed for tracking of customer purchases specific to demographic information.
· Website-based Planning: This information system gathered information about customer buying habits via Tesco.com that were used for store planning and new customer forecasting.
· Rapid Data Collection: This system is able to forecast and quickly respond to the needs of new customers using a 'pull' strategy to meet demands in quickly expanding new markets, especially international.
Carnival Cruise Lines
· Rapid Data Collection: This information system collected data from current Carnival customers and recorded their on-board buying habits.
· Website-based Planning: This system gathered information about each customer's planned itinerary to create more accurate event forecasting.
· Customer Loyalty Program: This system allowed Carnival to attract and retain past-users by tracking their preferences, improving communication, and creating lock-in via the Carnival Vacation Club point offerings.
3. Analysis
Companies that wish to remain competitive in the modern global business world must implement current and effective Information Systems. The important responsibility of the company is to determine the definition of information systems that will be the most current and effective for its particular strategy. Tesco and Carnival are two international companies that have undergone their own defining process of information systems during their lifetimes. Both companies defined methods to manage their information systems in a method that is strategically sound, successful and sustainable.
The first process for defining information systems required Carnival and Tesco to determine strategic applications for the acquired data. Principally, the organization needed to determine which data to collect and why. These questions were answered identically by each company; however, the identical answers arrived within each company at opposite stages in the companies' lifetimes.
From the cruise line's root in the 1970's, Carnival had been operating a primitive information system, reporting that "Carnival had amassed a large past-cruiser database, though the company had done little with it to date" (Applegate, 2). A large part of their data gathering process was acquiring back data that was not acquired first hand—that of the vendor travel agencies. Brenda Yester, VP of Revenue Management, expressed the difficulty that Carnival found in collecting this data, saying, "There's been a lot of discussion in the industry about who owns the guest. No one owns the guest, frankly. Still, we've been very careful about marketing to agents' guests" (Applegate, 7). This "toe-stepping" relationship between Carnival and the travel agents slowed much of their initial data-collection process. They also identified technology incompatibility between their own information systems and those of the agencies as a slowing agent. Although reasonable offerings, I am not certain this was the root of the issue.
The major difficulty that I identify for Carnival's reluctance to pursue more current and effective information systems is their lack of perceived value in customer retention. Carnival reported that their "[m]arketing intelligence . . . suggested that other cruise lines saw little return on loyalty spending" (Applegate, 12). In fact, the company CEO had overtly expressed the focus that "cruise lines must develop the first-timer segment in order to convert land vacationers to cruisers." (Applegate, 2). Carnival's belief that their largest customer base would come from the first-time user segment negated the company's motivation to collect past-user data and slowed the implementation of more effective data collection methods.
Tesco, on the other hand, began early to track customers via information systems in order to reward customer loyalty. At first, the Clubcard offered only a cash return of a penny on a pound to Tesco customers, but later the card was used to track customer buying habits and tie it into demographic information. This was such a success that "[t]he company credited knowledge of customer needs derived from Clubcard data with adding three points to its in-stock percentage" (Bell, 4). Tracking customer buying habits quickly proved to be an effective way to forecast sales and growth for the company, as well. John Browett, CEO of Tesco's web operating subsidiary said, "[D]oing the numbers allows you to make the right call. For example, when we lower prices we know exactly how low we can go" (Bell, 9). With the apparent success that technology was playing in company growth, coupled with the rising use of the internet, taking the companies' information systems online seemed like the obvious next step. However, the companies encountered difficulties and learned important lessons in response to their internet launches.
In their effort to use information systems in a current and effective manner, Tesco and Carnival both implemented online programs. These efforts were met with lackluster results that required further research to achieve success. "Launched in December 1996, the [Tesco.com] project soon foundered." John Browett, CEO of the project reported that "[they] discovered that the 5% of the British population who had Internet access didn't buy groceries" (Bell, 8). This was an instance that taught the company that using technology just because it was available was not a road to success. The company studied the way that customers would use the internet service and adjusted their system to fit the customers needs and user habits. "Tesco.com was relaunched with orders taken over the Web and fulfilled from the stores. Logistics were improved in two ways, one by reducing the flexibility of delivery windows and the second by improving the order-picking process" (Bell, 9). Tesco improved their online service and reported that 2% of the company's total sales were bought online by 2002. Although slow to start, Tesco's website became an effective and successful use of information technology.
Carnival launched its own website and immediately came to the realization that "[f]ew customers booked online at Carnival.com, in part because of the complexity of the product and the purchase process, but also because most cruise customers still preferred to speak to a 'live' person when buying a cruise." (Applegate, 7). The breakthrough for Carnival that lead to successful use of this technology was the "Fun Pass." This not only aided the company in capturing customer's demographic data, but also allowed for more controlled revenue management and more precise demand forecasting for events. "Having customers sign up for excursions online before they boarded the ship provided significant advantages" (Applegate, 8). As Carnival began to understand more of their customers' wants, it found it could easily appeal to those customers in the future in order to create repeat business. This process lead to the creation of a repeat-user customer loyalty program.
Carnival now took all of the information that it had been collecting about past-users and created a customer loyalty program. "Its first foray was offered as part of the Carnival Vacation Club. This program, sold on selected ships, enabled guests to purchase cruise points redeemable for cruises or time-share products over the following five years. [VP of Marketing Planning, Terry] Thornton explained: 'The value of this program for us is that it locks in future purchases. Once you bought into the carnival vacation club you are not going to cruise with a competitor. Moreover, because the ticket was purchased with points—it's funny money—we see these customers spending much more on board the ship during their cruises" (Applegate, 12). With their development of information systems as an effort to plan for the revenue management of new-users, Carnival created a current and effective system to create loyalty and increase revenue among repeat-users of their product.
Tesco had begun the Clubcard in 1995 as a way of rewarding loyal customers to their brand. However, the company quickly entered a period of rapid growth, both across the UK and internationally, meeting with great success on both counts. "At the end of 2002… Tesco was nearing [CEO Terry Leahy's] goal of being 50% international, and perhaps most incredibly of all, it had become the most admired retailer in the United Kindom" (Bell, 11). It achieved this status by rapidly attracting new customers in myriad ethnic and demographic markets. Leahy said, "We needed countries where we would be early entrants" (Bell, 10). These were countries have no brand loyalists, but have instead required of Tesco that they quickly find out what a local market needs and provide it to them. The new "Tesco Way" uses its information systems to draw out the potential needs of the new customers. Leahy said, "You could say that we had pursued a 'pull' strategy overseas by letting the local market dictate what we offer. A 'push' strategy would have presumed we knew what could work and would have proceeded by rolling out store after store" (Bell, 10). By implementing information systems early on in their effort to create a loyalty reward program for repeat-users, Tesco had created a current and effective information system for determining and responding to the demands of new-users to create rapid growth through new customers.
4. Conclusion
Tesco Plc. and Carnival Cruise Lines each utilized information systems in order to improve the level of service they were able to offer to new and repeat customers. The key focus for each company was to determine which information to collect and how to manage this data strategically. Both companies essentially used the exact same information systems to achieve the exact same results, but they used them in the exact opposite order. Tesco first determined that it would collect customer information in order to retain customers. Carnival first used customer information to find and plan for new customers. Gradually, Tesco began using its information collecting process as a pull strategy to attract and satisfy new customers. This spurred the company's rapid growth during the period covered in the case study, and will be a source of new revenue for the future. Ultimately, Carnival recognized the value of its information system as a means to retain repeat-users through the creation of customized loyalty programs. Repeat business and advanced purchases will fuel growth and augment future revenues earned from the new-user segment. Information systems can be implemented to both forecast for new-user acquisition and create loyalty programs for past-user retention with equal effectiveness.
Sources:
1. Applegate, Lynda M., Robert J. Kwortnik and Gabriele Piccoli, "Carnival Cruise Lines." April 24, 2006.
| Focus Question | Tesco Plc. | Carnival Cruise Lines |
| What spurred the initial implementation of information systems strategy? | Focused on Customer Retention | Focused on First-Time Cruisers |
| What program most attributed to each firms E-business success? | Clubcard, customer needs & fulfillment | Fun Pass, revenue management |
| What current strategy resulted from the initial information systems? | "Pull" strategy for New Customers | Customer loyalty programs for Retention |
