Tesco Marketing Plan - Case Study Example

Tesco Marketing Plan A) Food retailing industry is the largest industry around the world. Tesco, a leader in food retailing industry, was founded in 1924 by Sir Jack Cohen in London's East End. Today, it operates around 2,318 stores and employing over 326,000 people. In the UK, Tesco has opened 1878 stores which operates under Extra, Superstore, Metro and Express trade marks (Palmer, 2004). Today, "the three biggest supermarket groups, Tesco, Sainsbury and Asda, account for nearly 40 per cent of the market" (Owen, 2003). Tesco replaced Sainsbury and became #1 food retailer in the UK in the mid-1990s, "and has since extended its lead, both in sales and in stock market value" (Owen, 2003). Price competition, backed by improved efficiency, is the main feature of food retailing industry today. UK food retailers fight for survival in markets faced with over-capacity. Within rapidly changing environment, this kind of development ensures that long-term survivors are those firms who are more competitive and are better able to satisfy consumer needs and adapt to the new competitive environment. In 2004, consolidation re-shape UK retailing industry and Hypermarket retailers (like Tesco) want to make sure they don't miss out on this growing area of the UK market" (Moreau, 2004; Desjardins, 2005). B) Marketing aims of Tesco is based on necessity to obtain competitive position on the market and sustain its strong brand image. The first marketing aim is to get the right goods to the right consumers, trying hard for customers. Another marketing aim is to build and promote healthy living brand. Knowing what individual customers appreciate and what they want to avoid can add up to one of differences that create a competitive advantage. The marketing objectives of Tesco are: maintaining a reputation for innovation; making shopping easy and interesting; and continue to grow (www.tesco.com). C) Tesco customer groups are defined on the basis of their specific segments and buying potential whether they be country groups or individual consumer groups-of potential customers with homogeneous attributes who are likely to exhibit similar responses to a company's marketing mix. Tesco customers can be divided into five broad categories: "Recency, frequency and value of shopping, and time of day; Life stage of customers (students, young adults, older adults, young families, older families, over 60s); lifestyle ('Basket typology'); Customers driven by product promotions; Customers loyal to specific brands" (New Marketing Techniques Search for the Edge, n.d.). The first group of consumers is characterized by strong purchasing power. They need high quality product and ready to pay for them. This is a high-income group. The second group of customers share universal wants, needs, desires, (for name brands, novelty, entertainment, trendy, and image-oriented products). This segment is attractive both in terms of its size and its multi-billion dollar purchasing power. This segment's needs and wants are spread over various product categories: durable and nondurables goods. The third group is characterized by share few family activities; they want build-to-order solutions. They do not need a specific brand or new product, but high service and product at low price. This is a fast-growing segment. Customers driven by product promotions are not usual visitors of Tesco being attracted by low price and discount for new products. They are deluged with passive information. The fifth group includes people whose tastes are based on desired standards. Quality is the main purchasing criteria of this group. Their choices are made on the basis of price and product features. Graphically these groups can be represented as follows: 100% (customers) 50% 1 2 3 4 5 (Groups) It is important to note that there are some customers which belong to two different groups. For instance, they can represent lifestyle ('Basket typology') group, but be loyal to specific brands. D) The main competitors of Tesco are Sainsbury and Asda. Minor competitors include: Safeway, Somerfield, Morrisons. The relative ease with which Tesco emerges in a large market, suggests that the threat to existing is not essential because company has a strong brand image. It replaced its main competitor, Sainsbury, and became number one in the UK. At the end of 1990s, Sainsbury failed with price differentiation policy. It increased competition and resulted in a highly volatile market. Sainsbury and Asda were faced considerable competition from the large number of other companies, including Tesco. For instance, Morrisons "has a much smaller involvement in non-foods than, say, Asda or Tesco, although it does offer banking services" (Owen, 2003). It is known that a substitution occurs where a consumer is able to replace the product with a different type of product performing the same service or satisfying similar needs. In this case, Asda's limited line discount chain was substituted by Sainsbury and Somerfield. "Safeway had become the third largest retailer (thanks partly to the decline of Asda and Dee), its sales, at 4.5bn, were far below those of Sainsbury at 7.8bn and Tesco at 6.3bn" (Owen, 2003). Within rapidly changing environment this kind of development ensures that long-term survivors are those firms who are more competitive and are better able to satisfy consumer needs and adapt to the new competitive environment (Tesco, 2002). E) The possible strategies for Tesco: Tesco has to shift its focus to core brands and price reduction measures. This strategy will help Tesco to maintained high-speed growth through continuous optimization of its product mix and constant technological innovation. Positioning of the brand can be characterized by establishing trustworthiness, confidence, and competence for customers. This strategy is supported by the buying process and pricing policy. Degree of differentiation is not large, and Tesco should represent a market where competitors can differentiate their products and that is why have less rivalry. Rivalry will be reduced where customers have high switching costs - i.e. there is a significant cost associated with the decision to receive products from an alternative competitor. Tesco should propose to its customers competitive prices to ensure customer satisfaction. Development of web services should become the top priority for Tesco. On the one hand, it will help to sustain strong brand image and deliver better services to customers. The role of e-marketing is to inform the market clearly and persuasively about the company, its products and services. As businesses compete in a progressively fiercer market place for a larger wallet share of an increasingly discerning and diverse customer base, they become ever more communication-dependent. This is very important because consumers are becoming increasingly demanding and sophisticated in their service requirements and expectations, and able to defend their bargaining stance/purchase position. Greater access to information, growth in self-assisted services, and the widespread change from a sellers' to a buyers' market, are just a few of the drivers of consumer empowerment (Evens, O'Malley, 2004). F) A focus to core brands and price reduction measures can be achieved through the following marketing mix: Direct marketing refers to the marketing operations where the sale is made directly to the purchaser without any conventional distributors being involved. Applied to Tesco consumer market, direct marketing refers to consumers being able to order products from their home. Direct marketing involves a number of different methods which can be used in order to reach, communicate, interest and encourage consumers to buy. The methods are: direct response advertisements direct mail and mail drops personal (direct) selling Catalogue selling (McDonald, Christopher, 2003). Direct mail will involves the posting (mailing via the normal postal service) of promotional literature, designed to sell a product or service direct to a potential customer's home. Direct mail may involve posting through letter boxes, handing promotion literature out in the streets. Direct mail will help Tesco to reach a widely dispersed target market. Consumers may treat it as something specially selected for them or for their needs (Berry, 1998). Advertisements will be placed in the local and national Press, on TV and radio, and consumers will be encouraged to order directly by telephoning or writing to the supplier of the goods or by filling in a coupon which may be incorporated in a Press advertisement (Hodgetts, 1986). 'Off-the-page' purchasing of this nature relies on impulse, and there is a need to present an attractive proposition. The advertisement must be informative enough to enable potential customers to make a decision to purchase. The use of demographic descriptors can be helpful in identifying commonalities. For consumer markets, these will include age, sex, education, stage in the family, life-cycle, and socio-economic group. The Choice of Press issues should be based on readership. It refers to the total number of people who probably will read the publication. For example, Sunday newspapers and colour supplements are invariably passed around the family for reading. Therefore, for maximum penetration it may help to select primary (first choice) media that interlock or cross support each other. If deeper penetration into the same target market, for example, is required, then vertical advertising in the media that reach the same target market will be sought. For example, advertising on commercial television may be linked with advertising in the magazine that provides the program schedules for viewers, or local radio advertising in a particular area may be accompanied by direct mail or press advertising. The outlet for communicating and selling in this case is a producer's own catalogue of the products. Catalogues have to be kept exciting and they should be able to appeal to highly diversified audiences with ever changing needs. They may sometimes be added to by simply sending pages with additional products for sale to the customers who have already received the initial catalogue. Interactive TV is another way to reach wider target audience. The goal of the company is to provide the opportunity to personalize purchase. Internet and e-commerce creates great opportunities for automotive industry (and customers) to hasten the process of purchase. As Internet marketing is essentially a matching process between the needs and expectations of customers, and the organization's ability and capacity to satisfy them, the aim of the company is to create a good website to meet the needs of the customers and attract new client. market, "Tesco undoubtedly has power and can use it to push down the prices it pays to its suppliers" (Tesco Takeover, 2005). Techniques used here include: temporary price reductions; extra value offers, including offers relating to future purchase; premium offers (incentives), including free mail-in premiums, self-liquidating premiums and banded free gifts (relevant for electronic services). Tesco can develop an online community. Internet-based catalogs can be updated immediately to reflect changes in pricing or product availability. Online catalogs can also provide more thorough information than conventional catalogs. Advertisements will be placed on sites and take the form of banner advertisements. The power of banner advertisements is that they can be targeted at a particular audience. Tesco should pay for banner advertisements for two main reasons: (a) in the hope that the customer will click on the advertisement and then will be exposed to more detailed brand information on the company's website, (b) all visitors to a page will see an advertisement, either noting it consciously or viewing it subconsciously. This technique can be used in West European countries where Internet purchase becomes common. In this case, customer service relies on reputation and trustworthiness and this no less true in the new forms of system-service. In Consumers are seeking indications that their risks will be minimised or eliminated. For these types of consumets, Tesco service plays an essential role in assuaging the fears of consumers by projecting an image of trustworthiness and expertise. G) Marketing planning will be based on marketing research. The challenge of marketing research is to recognize and respond to the important differences that influence the way information can be obtained (Eagleton, 2005). These include economic, political, religious, historical, and market differences. In order to compete and create strong market position, Tesco should know its customers one-by-one and should be well aware of their needs, wants and desires be able to meet the highest possible standard (Sterman, 2000). Tesco should employ professionals in marketing industry who are able to achieve specific organizational objectives and concerned with the co-ordination of work activities on the diverse market. In this company people will be brought together on the basis of defined roles within the structure of the organization. The nature of the tasks to be undertaken is a predominant feature of Tesco. The demand from the clients and the procurement of highly professional staff to support the service has made this business one of the great potential. H) Recommendations. Based on the present day situation it is possible to recommendation for marketing actions. The three immidiate marketing strategies will include opening 20 stores in the UK, incresing the range of non-food products, and creating development of web-services. Within a year, Tesco should increase the number of potential customer in 7% on the basis of new advertising compaigns and new stores. Taking into account the present day situation, it is possible to say that in the next three years Tesco will retain its dominant position as the top retailer in the UK, while expanding its operations and becomes a major player. For this reason, in three years Tesco should increase its global operations panatrating Post-Soviet Union market. Its new technology achievements and overall business strategy, potential and capability to support high performance environments will be the key elements for the next years. It is possibel to conclcude that the top priority is to examine customer "needs". Each customer can be asked to fill a small questionnaire to receive "improved service" the next time. It is important that customers become creators of their "favorite place for vocation" and realize that it was they who brought novelty and suggested new services. A 'pattern of behaviour' strategy is one in which progress is made by adopting a consistent form of behaviour. Unlike plans and ploys, patterns just happen' as a result of the consistent behaviour. Patterns of behaviour are sometimes unconscious, meaning that they do not even realize that they actually following a consistent pattern. Nevertheless, if it proves successful, it is said that the consistent behaviour has emerged into a success. This is in direct contrast to planning behaviour. Evidence is mounting that consumer needs and wants around the world are converging today as never before. This creates an opportunity for global marketing. Tesco should pursuing strategies of product adaptation run the risk of falling victim to competitors that have recognized opportunities to serve customers. References 1. Berry, M. The New Integrated Direct Marketing, Gower, 1998. 2. Desjardins D. Tesco strategies turn up competitive heat in UK, DSN Retailing Today, Feb. 2005, Vol. 44 Issue 4, pp.4-6. 3. Eagleton D. Power hungry: six reasons to regulate global food corporations. ActionAid. Available at: http://www.actionaid.org.uk/1498/corporates.html; 4. Evens, M. O'Malley, L. Exploring Direct & Customer Relationship Marketing, 2nd edition, London: Thomson, 2004. 5. Hodgetts, R.M., Management: Theory, Process and Practice, 4th Edition, Academic Press, College Division, Orlando, 1986. 6. Johnson, J., Scholes, K. Exploring Corporate Strategy, Prentice Hall, 1998. 7. McDonald M., Christopher M. Marketing: A complete Guide. Palgrave Macmillan, 2003. 8. Moreau, R. Consolidation re-shapes UK retailing. 29Sep2004. Available at: http://www.euromonitor.com/article.aspid=4003 9. New Marketing Techniques Search for the Edge. (n.d.). Available at: http://www.pmsociety.org.uk/reports/10-4-03/index.shtml 10. Owen, G. Corporate Stratagy in UK food retailing. 2003. Available at: cep.lse.ac.uk/seminarpapers/ 24-05-04%20-%20Background%20paper%20by%20Geoffrey%20Owen.pdf 11. Palmer M. Retail multinational learning: a case study of Tesco, International Journal of Retail & Distribution Management, Vol. 33 Issue 1, 2005. pp.23-48. 12. Sterman, J. D., Business Dynamics: Systems Thinking and Modeling for a Complex World, Irwin McGraw-Hill, New York, 2000. 13. Tesco. Nov 2002. Availabel at: http://62.169.137.181/tesco/newinvestor/pubandresults/annandint/an2002/index.htm 14. Tesco. Nov 2002. Available at: www.tesco.com 15. Tesco Takeover. ( 2005). Available at: www.foe.co.uk/resource/briefings/the_tesco_takeover.pdf Read More