An Evaluation of the Effectiveness of Marketing Mix of the Tesco - Case Study Example

Introduction: Marketing mix refers to a set of tactics or actions that an organization would use for purposes of promoting its product or brand within a particular market. A typical marketing mix is characterized by the 4Ps. These 4Ps are Product, Price, Place and Promotion (Pride and Ferrell, 2008). For any business organization to achieve success in their industry there is a need of the management to understand their weaknesses and strengths, in relation to the various marketing mix they employ (Barnes, 2011). It is important to understand that effective understanding of these marketing mixes plays a great role in determining the kind of corporate strategies that the business organization would employ or use. For example, the pricing strategy of an organization can either be high or low (Stone, 2004). This depends on the costs of production, and the nature of competition that the organization faces within its target market. This paper is an evaluation of the effectiveness of marketing mix of the Tesco group of supermarkets. For purposes of achieving the objectives of this paper, the researcher will identify the market share of the organization, its positioning against rivals, its market segmentation, and the target market. It is important to explain that the retailing industry in United Kingdom is highly competitive, with companies such as Morrison, Sainsbury, and ASDA dominating the markets. Therefore, these are the major competitors of the Tesco group of supermarkets. Market Share: The retailing sector in the United Kingdom is dominated by four main retailers. These retailers control more than 50% of the market. Tesco is the most dominant retailing organization in the United Kingdom, and it controls more than 30.6% of the market share (Barnes, 2011). This is followed by ASDA chain of supermarkets, which controls approximately 17.2%. Another company is Sainsbury and it controls 16.4%. Morrison on the other hand controls approximately 11.3% of the market share (Barnes, 2011). Through this statistics, we are able to denote that the four retailing giants are able to control more than 75% of the retailing market share. The following tables and graphs indicate the level of market position that the four retailing giants have in United Kingdom. Supermarket Percentage Tesco 30.6% ASDA 17.2% Sainsbury 16.4% Morrison 11.3% It is important to explain that the intensity of competition is always high, whereby a small number of companies are able to control the market of an industry (Humby and Hunt, 2008). Therefore, there is high competition in the UK retailing industry, and this cuts on the profits that these companies are able to get or acquire (Barnes, 2011). Market Position of Tesco Prior to the 1990s, the market leader in the UK retailing industry has been Sainsbury. This company has always engaged in supremacy battle, against Tesco, until 1996 (Chiron, 2001). This is the year when Tesco was able to assume the market leadership of the UK retailing industry, until now. To maintain this leadership, Tesco has positioned itself as a low cost retailing unit. This strategy has managed to keep Tesco as a market leader in the UK retailing industry. This is because it is able to attract a lot of customers who come to buy the products, because of their low costs. Furthermore, Tesco chain of supermarkets operates a loyalty program that offers a rebate to its most loyal customers (Humby and Hunt, 2008). Under this program, customers normally earn points, based on the amount of purchases that they undertake. Tesco will thereafter give out cash vouchers based on the points earned by the customers. This is a successful tactic used by Tesco, and it has helped to position it as a market leader, in the retailing industry. Market Segmentation: Tesco normally uses the geographic segmentation process, for purposes of segmenting its market. All the stores of Tesco are located in its sub urban and urban areas. Therefore, it is possible to denote that Tesco serves its customers, based on the density of the population. In coming up with its segmentation strategy, Tesco normally uses five major criteria in determining its segments (Barnes, 2011). These criteria are accessibility, measurement, substantial, actionable, and differentiable. Under measurement, Tesco considers whether it is possible to measure the purchasing power, profile and size of the segment under consideration (Chiron, 2001). Under accessibility, the company would consider whether it will have the capability of reaching its target market. Factors such as roads and infrastructures play a great role in this sense. Furthermore, the company would also consider whether the market under consideration is large and profitable. This would play a great role, in determining the kind of products and substances that Tesco would have to sale, within a particular geographic location (Lowe and Wrigley, 2009). Furthermore, the company also considers whether the segments under consideration can respond to the marketing mix. This would determine the type of strategies the organization would employ, while serving the market under consideration (Humby and Hunt, 2008). Under actionable, the organization identifies whether it can effectively use marketing programs to promote their products or substances. It is based on these factors that Tesco has managed to use the geographic segmentation process. Market Mapping: The UK retailing industry is very competitive in nature. However, competition lies amongst the four largest companies in the UK retailing sector. These are, ASDA, Morrison, Tesco, and Sainsbury. Therefore, for the company to achieve efficiency in meeting its objectives it has to map out its products and market (Barnes, 2011). Market mapping refers to the identification of market conditions, trends, and variables between products and consumers. One of the major trends in the retailing industry is the use of online shopping. Shoppers are now concerned with looking for materials and products through the internet. Through its online shopping portal, the company has managed to attract these types of shoppers, hence cementing its position as a market leader (Chiron, 2001). Furthermore, the mass marketing strategy of Tesco enables the company to appeal to a large number of people. This is because the company does not have a specific target group, but anybody wishing to buy retailing products. Success in the use of the marketing mix: The marketing mix employed by Tesco comprises of four major elements, namely, place, price, products and promotion. Tesco is able to sale a variety of products, and these products range from non-food items, to food products. Therefore, this helps to cover, virtually all the needs of its customers (Pride and Ferrell, 2008). The company sales a wide range of items that includes mobile phones, electronics, clothing, kitchenware, food substances, etc. Furthermore, the company has also engaged in internet sales, whereby it sales its products through the internet (Barnes, 2011). This makes it possible for the company to access a wide range of customers, who are found in different locations. Because of the sale of virtually all products within its stores, the company has managed to attract a large number of customers, who feel satisfied by shopping at its stores. This helps the company to achieve a competitive advantage over small rival companies that do not have a similar capability. Furthermore, the company has also managed to use the cost leadership strategy, in penetrating and increasing its market share in the United Kingdom (Barnes, 2011). The prices of the company’s products are always low, when compared to the prices of the products of its rivals. Tesco has realized that the average UK consumer is price sensitive, and to capture these consumers, there is a need of selling their products at a lower cost when compared to their competitors (Chiron, 2001). This strategy has worked out for Tesco, and companies such as Sainsbury, is now using it, in a bid to overtake Tesco as a market leader in the UK retailing market (Barnes, 2011). Furthermore, Tesco also takes advantage of its wide distribution network to achieve a competitive advantage over its rivals. Retailing organizations must have their stores in areas where it is easy to access them by their target customers. Tesco has over 1800 retailing stores all over United Kingdom, and they are designed differently to suite the various preferences of their customers. Furthermore, these stores are categorized in accordance to the services they offer (Grönroos, 1997). These categories include metro stores, express stores, extra stores, superstores, etc. Through this category, shoppers have managed to identify a store that may suite their preference, and hence shop in them. Under promotion, the marketing campaign initiated by Tesco is aimed at appealing to a large population of the UK shoppers. The company uses the social media for purposes of communicating and advertising its products (Grönroos, 1997). This is an effective method of reaching a wide audience of people, and this is mainly because there is a heavy presence of online users in the United Kingdom. Other promotional methods used by the company include public relations, sales promotions, personal selling, and direct marketing. These are the methods which are responsible for making the company to be a market leader in the retailing industry in the United Kingdom. Conclusion: The success of Tesco has been attributed to its effective use of the marketing mix. Tesco uses the price leadership strategy for purposes of appealing to a wide number of people. The company believes that the average UK consumer is price sensitive, and hence offering low cost products would be beneficial to them, and the company. On place, the company has a number of stores in different geographical locations of United Kingdom. These stores are always found in urban and semi urban areas, and they are on different categories. There are some superstores, whereby the customers can find virtually anything they want. These stores are always found in urban centers. Furthermore, its promotional campaigns have managed to make the company achieve a competitive advantage over its rivals. This is because they have been effective in appealing to the population, to visit its stores. Therefore, Tesco still remains the most dominant retailing organization in the United Kingdom. Bibliography: Barnes, R. (2011). The great Tesco beauty gamble (the Tesco supermarket chain’s marketing strategy for breaking into the UK beauty services market). Strategic Direction. Top of Form Bottom of Form Chiron, P. (2001). Tesco ([Éd.] 2000. ed.). Paris: Eurostaf. Top of Form Bottom of Form Grönroos, C. (1997). Keynote paper From marketing mix to relationship marketing – towards a paradigm shift in marketing. Management Decision, 322-339. Top of Form Bottom of Form Humby, C., & Hunt, T. (2008). Scoring points how Tesco continues to win customer loyalty (2nd ed.). London: Kogan Page. Top of Form Bottom of Form Lowe, M., & Wrigley, N. (2009). Innovation in retail internationalisation: Tesco in the USA. The International Review of Retail, Distribution and Consumer Research, 331-347. 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