Tesco: Assessment of Marketing Plan - Essay Example

? Table of Contents Introduction 3 Tesco’s Mission ment and Aim 3 Marketing Mix – TESCO 4 Product 4 Price 4 Place 5 Promotion 5 Relationship Management at Tesco 6 Loyalty Cards Scheme 6 The Rifle-Shot Approach 7 ‘Me Time’ Initiative 7 Frequent-Shopper Marketing Programs 8 Technological Factors 9 Sustainability of Marketing Approach 10 Conclusion 10 Appendices 12 Appendix 1 12 Appendix 2 12 Bibliography 13 Tesco: Assessment of Marketing Plan Introduction All organizations are open systems; they exist within a dynamic and complex environment having a variety of interchanges with it, both receiving inputs and outputs. Companies try to control the nature of their output but very few of them can control more than a few of the inputs they receive. Hence organizations try to predict, in future, the changing environment in which they are working and in result they make strategies to combat such changing environment. Successful organizations tend to such things and hence positive results follow. The organization that I have chosen is TESCO, which is a well diversified company working in many different ventures and has created a great deal of value in the eyes of their customer. Tesco’s Mission statement and Aim The mission that Tesco wants to achieve is ‘creating value for customers, to earn their lifetime loyalty.’ Tesco holds values which give priority to the customers, their wants, requirements and expectations. It sets principles which motivate innovation and strategies to initiate programs and introduce services which the loyal customers expect to have. Tesco believes in the principle, ‘treat people how we will like to be treated.’ It emphasizes an organizational environment where respect, mutuality, collaborative work and sharing is highly regarded. It provides clear aims of satisfying customers and the employees are given guidelines on achieving these aims (Tesco plc). Marketing Mix – TESCO The main function of marketing is to satisfy customer need profitably through an appropriate marketing mix. Marketing mix comprises product, price, place, promotion. Marketing mix is an important and strategically important concept. The 4P’s element in the marketing mix act substitutes for each other, hence they must be integrated e.g. higher quality of any particular product would lead to higher selling price being sought for it (Sandhusen, 2000). TESCO marketing mix in USA under the Fresh and Easy title is; Product Product element shows the product that a particular company is about to sell. TESCO, entered the USA market with a business well diversified from their core activities, under the brand name of Fresh and Easy, TESCO opened up a grocery store to sell up grocery related products, proper branding was done under the Fresh and Easy label to make customer aware of the presence of a different brand. Fresh and Easy was not profitable initially when it was launched in 2007 in the U.S.A. later on it provided favorable results and it is expected that by the mid of year 2010 it would turn around as a good profitable venture. Price TESCO approached an aggressive pricing strategy to grab its market share. It went on to give its customers ready meals i.e. selling high value meals at fraction of the normal cost. This pricing strategy would be considered Penetration Pricing i.e. to charge lower prices than that of competitors to achieve early market share. Place Place deals with how product is distributed and how it reaches its final customers. Fresh and Easy had to absorb heavy distribution cost as they had to build their own independent distribution channels. Logistics are an important feature as they determine the efficiency of the distribution system i.e. a warehouse close-by would make it easy and fast to make the product quickly available for the customer. Promotion Promotion is one factor of the marketing mix over which a company usually enjoys greater control. Promotion helps in increasing the knowledge and know-how about the product within its customers. Fresh and Easy had to face huge promotion expenses just to promote its brand, creating better brand awareness among customers by designing their stores in a unique way and avoiding the use of traditional media outlets. Besides all this, they have created their green stores which show their corporate responsibility and environment friendliness (Kerin & O’Regan, 2008). This marketing mix strategy has contributed positively for Fresh and Easy. Marketing mix is the set of controllable variables and their levels that the firm uses to influence the target market. These are product, price, place, promotion. Tesco has a well-established and consistent strategy for growth, this is a way in which it has strengthened its UK business and has created ways to expand into new markets. TESCO is considered a market leader in many countries in which it operates except U.S.A. TESCO has kept its image up by showing the whole world that is a socially responsible firm, this has led TESCO to achieve many awards too. TESCO has invested too much in climate change at Manchester University, this seems that it has invested too much in environmental issues whilst there are other areas which require major investment e.g. the new market i.e. U.S.A which would require major investment to prosper in future. Customer Relationship Management at Tesco Tesco is more focused towards answering the customer’s demands and expectations then anything. Their Customer relationship management strategy enables them to strengthen the marketing plans in a manner that they support customer loyalty and satisfaction with the organization. Loyalty Cards Scheme Tesco’s marketing plan is highly dependent on Customer Relationship Management (CRM) Strategy. This strategy is specifically aimed at valuing customers over any other aspect of the business operations. The initiatives of Tesco and new strategies are developed with particular attention given to the impact of the changes and innovations on its customers. Tesco’s priority list keeps customer ease and satisfaction at the top. It continuously measures the loyalty level of the customers (Varey 2002, pp. 184-189). In 1995, the focused CRM strategy was developed for the marketing of Tesco products in the shape of loyalty card scheme which boosted up the sales as shown in Appendix 1. This approach and scheme was an inspiration from the success and continuous use of such schemes in other businesses. This approach was also adopted due to its relevance to the core values and mission of Tesco. Moreover, Tesco realized the importance of its top buyers 100 in terms of the sales patterns and growth which is comparable to the revenues earned by as much as bottom 4000 customers’ purchasing habits. It analyzed the situation of their buying habits and contribution to the overall sales which is higher than the infrequent customers (Humby, Hump & Phillips 2007, pp. 130-190). The Rifle-Shot Approach The loyalty card scheme helped Tesco in collecting data about individual choices of its customers. This data was particularly helpful for Tesco to follow rifle-shot approach and target individual customers rather than accumulating groups in the marketing campaigns i.e. carpet-bombing approach. Tesco uses coupons in order to meet customers demand and purchasing behaviors. Twenty percent of Tesco’s coupons were used and cashed in. This approach helps Tesco to improve the customers’ loyalty by the strategic marketing decisions made after the loyalty card scheme was introduced. Using this approach the customers are categorized in various groups as per their buying habits. The marketing plan then, incorporates a number of methods to attract, update and manage its customers (Dymsza, 1971). The quarterly magazine is one of the examples of the segmented marketing approach of Tesco, whereby, it compiles important information on discounts, advertisements aimed at targeting the specific group, the products and services they use the most and so on. ‘Me Time’ Initiative Innovation is the key element of Tesco’s marketing approach. Tesco adopts a rather innovative and creative marketing method by changing the sales patterns and offers continuously (Heidingsfield, 1972). The ‘Me Time’ initiative, launched in 2003, is another form of rifle-shot marketing approach which was aimed to target the larger group of the society i.e. female gender in particular. This approach helped the female customers in using the points earned through Clubcards in a variety of third party shops. The basic aim of this approach was to enable customers on using the rewards on their personal expenses (Jobber 2009, p. 293). This loyalty scheme contained offers for female customers to benefit from products and service which attract them. These services and products include free sessions at health spas, gyms and beauty specialists, designer dresses, colognes, beauty products, handbags etc. Frequent-Shopper Marketing Programs The focus on loyal buyers and the expenditure on retaining their loyalty is an effective and sustainable approach to attract sakes and earn profit. Tesco operates in an environment where customer choices and preferences are particularly linked to the quality with high price competition prevailing in the industry (Paul & Yeates, 2006). In such a competent environment, Tesco’s focus is more inclined towards the loyalty schemes whereby, the customers’ trust and confidence is built stronger. The proper incorporation of specific groups of customers who play a major role in Tesco’s overall revenues in the marketing and promotion programs helps Tesco in building relationships with the customers (Keller 2008, p. 679). The relationship management and marketing, hence, develops customer satisfaction and loyalty which retains the existing customer and upholds the goodwill of the company. Table 1 Evaluation of frequent shopper Marketing Programs at Tesco Areas influenced Without Shoppers Marketing Program Implementing Shoppers Marketing Program Communication Goals Chances of miscommunication and the chances of missing targeted population Achieves its aim to communicate the new offers and programs effectively Recognition of persistent customers Company may miss valuable customers due to lack of knowledge about their buying habits The valuable customers may be recognized and targeted easily and effectively knowing their needs and expectations Specific Marketing Criteria Customers may be sent marketing and advertising material, emails and magazines which are irrelevant to their needs and purchasing patterns A more specific marketing plan for each group may be maintained with specific and relevant information for the customers targeted A tool to Collect Customer related Data No information on the changing patterns of purchases of particular customers Customer purchasing habits provide insight to their requirements and expectations Technological Factors These may include changes in retailing methods, changes in production methods (e.g. greater use of automation) and greater integration between buyers and suppliers via computer link-ups. The management should also keep itself up to date with respect to rapid changes in technology and hence adapt to such changes (Zikmund et. al., 2000). TESCO has adapted to changes in the technological environment to keep itself as a profitable and a competitive organization. TESCO, in recent years has used such technologies and has advanced its operations, it has introduced innovative technology which has allowed them to electronically check-in bread and milk deliveries at their depots, thus eliminating paperwork and reducing human administration (Fernie & Sparks 2004, p. 104). Check-outs have been another critical issue for sales in any supermarket or hypermarket, hence TESCO has also introduced new checkout technology for its store. This has made the checkout procedure more prompt and precise; roughly twenty-five percent of TESCO’s UK customer dealings are via self-service checkouts (Tesco, 2009). TESCO has wide controls in place to maintain the integrity and efficiency of its IT infrastructure and these IT systems are shared from their international operations to ensure consistency of delivery. Sustainability of Marketing Approach The customer-oriented approach of Tesco is successful in achieving higher revenues and profits so far. Its continuous development and innovations help in grabbing the attention of its customers. The quarterly magazines help in making the new campaigns, programs and offers known to the valued customers of each category. This approach is flexible in retaining customers and attracting the new ones using Television advertisements, magazines, newspapers, banners and so on. These other marketing approaches and the goodwill of the organization help in attracting new customers. The loyalty cards and offers made to the existing customers help in retaining them (Botten 2007, pp. 216-219). Since the marketing approach is not limited to print media, but incorporates electronic media like internet, emailing, posts, regular updates on websites and individual marketing techniques on outlets, the marketing approach is highly sustainable. The extensive mediums used and the aim of retention is more efficiently achieved using loyalty schemes and shopper marketing programs (Solomon, 2003). The use of advanced technologies in this regard, is also a valuable tool to ensure the future sales and growth of the business. Conclusion In conclusion, we can say that Tesco is a leading supermarket chain with critical decision making on marketing plans and schemes. Its marketing plans and strategies are in line with the aim of the organization to achieve loyal customers. The specific marketing approach, i.e. rifle-short marketing approach, aims to target a particular group of customers and helps in the retention of their sales. The technological innovations have continuously been incorporated in the business’s overall marketing and corporate strategy. These innovations and technological changes help in improving the operations of Tesco as well as the customers’ satisfaction with the services it provides. Appendices Appendix 1 Company Profile Tesco runs more than 2,300 supermarkets, hypermarkets, and convenience stores in the UK (where it is the market leader in food retail), Ireland, Central Europe, and Asia. Its operations include convenience and gasoline retailing (Tesco Express), small urban stores (Tesco Metro), hypermarkets (Tesco Extra), and financial services through Tesco Personal Finance. A global leader in online grocery sales, it owns a 35% stake in US grocery chain Safeway's Grocery works. It is the leading online grocery store and it is now expanding its business with a TV channel and a "retail based education institution”. Appendix 2 Figure 1: Source: (Jobber & Fahy 2009, p. 292) Bibliography Top of Form BOTTEN, N. (2007). CIMA Official Learning System Management Accounting Business Strategy. Burlington, Elsevier Science & Technology. http://public.eblib.com/EBLPublic/PublicView.do?ptiID=548852. Bottom of Form DYMSZA, W. A. (1971). Multinational business strategy. New York, McGraw-Hill. Top of Form FERNIE, J., & SPARKS, L. (2004). Logistics and retail management insights into current practice and trends from leading experts. London, Kogan Page. http://encompass.library.cornell.edu/cgi-bin/checkIP.cgi?access=gateway_standard%26url=http://www.books24x7.com/marc.asp?bookid=9918. Bottom of Form Top of Form HEIDINGSFIELD, M. S., & EBY, F. H. (1962). Marketing and business research. New York, Holt, Rinehart and Winston. JOBBER, D., & FAHY, J. (2009). Foundations of marketing. Maidenhead, McGraw-Hill Higher Education. KELLER, K. L. (2008). Strategic brand management: building, measuring, and managing brand equity. Upper Saddle River, NJ, Pearson/Prentice Hall. KERIN, R. A., & O'REGAN, R. (2008). Marketing mix decisions: new perspectives and practices. Chicago, Ill, American Marketing Association.Top of FormBottom of Form PAUL, D., & YEATES, D. (2006). Business analysis. Swindon, British Computer Society. SANDHUSEN, R. (2000). Marketing. Hauppauge, N.Y., Barron's. http://www.netlibrary.com/urlapi.asp?action=summary&v=1&bookid=52572. Top of Form SOLOMON, M. R. (2003). Conquering consumerspace marketing strategies for a branded world. New York, AMACOM. http://www.netlibrary.com/urlapi.asp?action=summary&v=1&bookid=86803. TESCO PLC PRELIMINARY RESULTS 2008/9. TESCO: GROWTH IN TOUGH TIMES, 2009. www.tesco.com Our values- Tesco www.tescoplc.com/plc/about_us/values/ Top of Form Bottom of Form Bottom of Form Top of Form Bottom of Form VAREY, R. J. (2002). Relationship marketing dialogue and networks in the e-commerce era. Chichester, J. Wiley & Sons. Top of Form ZIKMUND, W. G., & D'AMICO, M. (1997). Effective marketing: creating and keeping customers. Cincinnati, Ohio, South Western. Read More