Tesco's Marketing Mix Plans - Case Study Example

Introduction Tesco, founded in 1919, has diversified businesses under its flagship. Its super market chain is the most successful one of all its businesses and is also the largest retailer in U.K. Currently; the firm also offers online shopping facilities which were instrumental in improving its sales margins by 2.7%. (Mari.A., 2009). Initially, the firm adopted the strategy of piling products and selling them at cheaper rates. This created a very low image in the eyes of the middle class customers. Later on, it started catering to all sections of the people according to their preferences. It has its own brands and believes in delivering value to its customers. Thus customer reluctance could be won over. Because of such customer backing, it could not only achieve the market leader position against its competitors like Walmart and Sainsbury but also challenged majors in many non-food and finance related sectors (Anon, 2009). This year, the company’ super market chain is on a profitable scenario of a 9.2% increase in its revenues to 27.8%. It has reduced around 22% of its prices on a range of 12,500 items of its products through integrating its 4,300 shops in 14 countries. (Lombarde. G. 2009). The company has also introduced club card loyalty program points to its existing customers which, in the eyes of many analysts, are proving to be a factor for this robust growth in this year. After the peak of 2007, the chain experienced a slight down turn from which it is again able to recoup due to such innovative promotional concepts. But then, its competitors are also not leaving any chance to grab the supreme position from its hands. As such, it should be on a continuous run up with no place for complacency. (Startz. S. 2009). It is common that every successful business has to face certain controversies from its competitors. The same holds true even in case of this super market giant. In response to its price cutting program, some of its rivals have started negative propagations that is has increased the prices of certain products (especially turkeys) one month ago. Now, the original prices are being set as a discount strategy just to attract customers during this Christmas time. (Poulter. S. 2009). Though the accusations may look to be quite unbelievable, they may strategically hit the company’s goodwill in the long run. Hence, a detailed study about its marketing mix plans is required to come to a conclusion regarding the allegations and their effect on its brand image. 4P’s of Marketing: The traditional marketing mix comprised of 4 P’s, namely: Price, Product, Place and Promotion. Of late, there are new researches which try to include new terms into consideration like people, process, time, capacity etc. They also stress on the importance of strategies of segmentation, targeting and positioning as the important factors in supply chain management (Brown, 2006). However, our study is confined to the traditional 4 P’s and their manipulation by the company in reaching its targeted results. The importance of the 4 P’s can be better understood by the grid given below. It explains the various functionalities under each P. Price: Level Discrimination Discount Promotion: Personal Selling Advertising Sales Promotion Product: Fair Display Brand Design. Packaging Place: Transportation Warehousing Stock holding Servicing. (Lancaster. G & Reynolds. P., 2005). Pricing: Pricing means fixing the prices of the products sold by the company. An examination of the factors of pricing would help us to understand the firm’s pricing policy. Pricing level: Perfect pricing of products will enhance the brand image of the products. It is one such measuring scale which targets the ideologies of the customer’s right through their brains. For example, in the case of turkeys sold by the Tesco chain, there are allegations of price manipulations. This negative publicity may force the customers to quit the company because of the presence of competitors. (Docters. R.G., et al 2004). Discrimination: Depending on the type of the product, the customer who is targeted, and the availability of competitive or complementary goods, price discrimination should be done. In this case, because the products are of general in nature with lots of competitors, company should be very careful in justifying its price communication task. (Maxwell. S., 2008). Discount: Discounting and lowering of prices which the company has done in the case of 12,500 products may not have positive impact unless they are communicated effectively to the customers. (Dhar M., 2007). In this case, the company was successful in doing the same and thus could come out of the financial implications which otherwise, would cost the company too much. (Kotler.P & Coslione. J.A., 2009). In fact, the negative publicity is also to some extent helping the company. In this way, proper pricing of the product and its communication to customers is very important for the financial success of any organization. Tesco has manipulated its price levels by offering discounts. This should be able to win more loyal customers in the future. Promotion: It is one of the supportive functions in the marketing of a particular product. It helps in improving the knowledge of the customers about the existence of the product and convinces them to purchase the same. Promotion can be of three types: Personal Selling: It needs aggressive advertising strategy of push and pull. The consumer should first be forced to step into the stores to make a decision regarding the purchase. Then, the staffs should be well trained to convince the customer to make a purchasing decision. When it comes to super market chains, owing to its huge size, attractive hoardings about the promotional offers and discounts also do a lot of the deal. Tesco was successful in this strategy of giving discounts and convincing the customers. Thus, it could improve its sales revenue. (Rothschild.W.E., 2007). Advertising: Most of Tesco’s advertising is online. Banners, promotional mails, pop-ups or search/survey ads can be the main way of implementing advertising for this super market chain. Discounting of products has been the strategy of this group from last one year and it is on the aggressive lines till this Christmas. The same is and should be propagated thoroughly to continue and increase the benefits already accruing to the company. (Plummer. J. et al, 2007). Sales Promotion: It is an accepted reality that sales promotion expenditure accounts for at least 60-70% of the total promotional expenditure. Sales promotion includes discount offers, gifts, club card reward points etc. Tesco is rewarding its loyal customers through doubling its club card points. Its 22% discounts on a range of 12,500 of its products is also a sales promotional concept. Thus the company is effectively promoting its products. (Mulin.R. & Cummins. J., 1998). From the above discussion, it is observed that the company is advertising aggressively online and taking up all necessary promotional measures like discounts and club card reward points. This is the reason why it could improve its sales revenue. Product: Tesco offers a range of food and non-food products and in both the categories; it is challenging its competitors to stay at the no.1 position. It has a strategy of marketing its own brand products and the best part is that it could convince its customers about the quality of its own brand. Thus, it need not depend on any third party for maintenance of quality levels. Fair Display: The product for sale should be fairly displayed in its perfect condition. Misleading details should not be exhibited. Sales managers should ensure customer satisfaction to the ultimate extent. Products which may look attractive but do not have the quality should be avoided for sale because they damage the reputation of the firm. (Gorchel’s L., 2006). Design: Earlier, the chain gave no importance to the designing factor and just piled up the products to sell them cheap. But, now, it is trying to define the products from its customer’s stance. In this way, it is trying to deliver value to the price paid by the customer. Depending on the affordability, rich buy luxury products and the poor man also can buy his necessities from the store. Thus, it is designing products for all classes of people. (Haines. S., 2009). Brand: Tesco produces its own brand products and was also successful in convincing its customers about its brand quality. The same should be continued even in future. For that, it should ascertain that the products which it sells are, to a lot extent, complementary rather being competitive. This will ensure more service ability to the customer. (Betan Court. R.R., 2004). Packaging: It connects with the physical attributes and elements of design regarding the information about the product. It should be attractive to be marketed in super market chain. As there are a number of products in the Tesco super market, each product line may have a separate brand manager who will have take care of the packaging details. (Klimchuk. M.R., 2006). Design and branding are the key areas in which Tesco is currently focusing its marketing mix strategy of product. Tesco being a 90 year old company has been successful due to delivery of value to its customers. The current strategy will only strengthen its mission further. Place: Place of marketing the product plays a vital role because it should be convenient to the customer to reach the same. Tesco chain is spread over many countries and it also has online shopping presence. This is to ensure that those people who cannot take advantage of its wares personally can order those products online. Transportation, warehousing and Stock holding of the products is more dependent on the perish ability of the products. Goods which are of non-food nature and are not perishable need only transportation and stock holding facilities. On the other hand, goods of perishable nature have fixed life time and random life time perish ability. Hence, they may need warehousing according to their nature. The supply chain strategies for these products comprise of co-ordination and interaction between finance, investment, production and distribution logistics. Demand for products is usually estimated through the shelf life of the inventory. If there is positive shelf life, probably, there is less demand for the product and so on. Hence, lesser quantity needs to be ordered for in the next supply chain cycle. Thus demand and supply have to be equated and then supply chain logistics have to be continually ensured for effective product sale ability. When it comes to online shopping, clarity of display becomes vital. The features, extensions and motivational aspects of every model have to be clearly depicted so that the customers may opt for their purchase. Only non-perishable goods can be displayed online. (Chan. C.K. & Lee. H.J., 2005). Servicing is one more aspect which is very vital after sales. Customers get satisfied only when they get more than expected when they pay price for any product. This extra feature is the after sales service which can long term customers. (Alessandra.T. et al, 1990). Since Tesco already enjoys established supply chain logistics, it is challenging the majors even in non-food item category, through its after sales service for improving its brand image. With regards to Tesco, being in this field from many years, the firm plans to draw customers to its stores by offering huge discounts on perishable and non-perishable goods because of the logistics it enjoys in supply chain management. When customers realize that it is offering greater value for lesser price, they tend to be loyal. Based on the above discussion, if we map the manipulating factors in the earlier grid, it would look as below: Price: Level Discrimination Discount Promotion: Personal Selling Advertising Sales Promotion Product: Fair Display Brand Design Packaging Place: Transportation Warehousing Stock holding Servicing. Summary: Tesco is a profitable super market chain leading in U.K. retail business. Its competitors are trying to steal its position through negative publicity. Its success is mainly based on the successful manipulation of marketing mix of the 4 P’s (Price, Promotion, Product and Place) which it adopts. In pricing, it extends discounts to its customers to draw them to its store. In promotion, it is relying on online advertising and sales promotion strategies of club card reward points. In product, it is giving importance to designing and branding details. In terms of place, it is using its already established logistics of supply chain management to deliver value to its customers. Its online services also attract long term customers. Thus the company is able to retain its market position as of now and also hopes to retain the same through such manipulations of the 4 P’s even in future. Conclusion: The super market giant is well positioned in terms of its marketing mix factors. The factor which it needs to take care of is the huge discount which may at some point prove to be costly. Even the competitors are trying to create negative publicity because they cannot cut down prices to those levels. This may disrupt its existing supply chain logistics through decreasing demand and increasing shelf life. To avoid this, the company needs to convince the customers that it is truthful in its promise to deliver value to its customers. References: Alessandra. T., Connor. M.J. & Van Dyke. J. (1990). People Smart: Powerful Techniques for Turning Every Encounter Into a Mutual Win. Tony Alessandra Publications. U.K. Ch. 7. Betan. C.R.R. (2004). The Economics of Retailing & Distribution. Edward Elgar Publishing. U.K. Ch. 3. Brown. I.R. (2006). Mastering Marketing: A Comprehensive Introduction to the Skills of Developing and Defending Your Companys Revenue. Thorogood Publications. U.K. Ch. 3. Chan. C.K. & Lee. H.W.J. (2005). Successful Strategies in Supply Chain Management. IGI Global Publications. U.K. Ch. 10. Dhar.M. (2007). Brand Management: 101 Lessons Learned From Real World Marketing. John Wiley & Sons. U.K. Ch. 3. Docters. R.G., Roepel. M.E., Maysun. J. & Tanny. S.M. (2004). 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Tescos Rivals Accuse The Supermarket Giant Of Trying To Dupe Customers With Half-Price Turkeys That Dont Add Up. Available: http://www.dailymail.co.uk/news/article-1228740/Tescos-rivals-accuse-supermarket-giant-trying-dupe-customers-half-price-turkeys-dont-add-up.html Last Accessed: 20th Nov. 2009. Startz. S. (2009). Loyalty Program Helps UK Supermarket Chain Tesco Recover. Available: http://www.brandchannel.com/home/post/2009/11/11/Loyalty-Program-Helps-UK-Supermarket-Chain-Tesco-Recover.aspx Last Accessed: 20th Nov. 2009. Read More