Marketing Management of Tesco Company - Case Study Example

Student Name: Name: Title: Marketing Management Course: Institution: Table of Contents Table of Contents 2 Introduction 4 Literature Review 5 Marketing management in Tesco 5 Strategy options 5 Methodology 7 Tesco’s Market analysis 7 Economical factors 7 Political factors 8 Social factors 8 Environmental factors 9 Technological factors 9 Legislative factors 10 Marketing mix analysis and marketing communication mix 10 SWOT Analysis 13 Strengths 13 Weaknesses 13 Opportunities 14 Threats 14 Channel Management 15 Product life cycle analysis 16 Consumer buying behavior analysis 17 Conclusion 18 Recommendations 19 References 20 Belk, R, 2005, Situational variables and consumer behavior, Journal of Consumer Research, 12, 156-164. 20 Datamonitor (2010) “Tesco, PLC SWOT Analysis” Datamonitor Report (2010), 33-54. 20 Desjardins, D, 2005, Tesco strategies turn up competitive heat in UK, DSN Retailing Today, 44 (4), 4-10 21 Dibb, S, Simkin, L., Pride, M, & Ferrell, O., 2007, Marketing Concept and Strategy, 4th Houghton Mifflin Company, Boston 21 Graiser A, Scott T, 2004, Understanding the Dynamics of the Supermarket Sector, The Secured Lender, 60 (6), 10-14. 21 Gopal, V, 2006, Channel management: Concepts and cases, Indiana University Press, Indiana. 21 Hammett S. and McMeikan K, 2003, Tesco - Competitive Management Development, Executive Development, 7 (6), 5-15. 21 Leahy, T, 2004, Tesco and what customers really want, Brand Strategy, Issue 185, p.15-22. 21 Mintel (2009), Food Retail Industry – Including Online, Mintel Research 21 Ritz, C, 2005, Store wars, Business Review, 11, 22-30. 21 Tesco (2010), Tesco plc web-site retrieved on August 1, 2012 from < http://www.tescoplc.com/plc/about_us/strategy/international/> 21 Tomlinson, H. & Evans, R. (2010), ‘Tesco stocks up on inside knowledge of shoppers’ lives’, Guardian, 5-10 21 William, D., & McCarthy, E., 2004, Product life cycle: Essentials of marketing, Irwin Company, New York. 21 Abstract Marketing is a vital functional discipline in every business organization across industries and it plays an influential role in the profitability and revenues generation of the organization. Marketing management focus on a firm’s marketing techniques and management of its marketing activities and resources. Marketing management principles include market planning, analyzing the market, implementing marketing plan and market control. The major objective of these activities is to enable a company to get into exchange with its customers. Once a firm understands its marketing environment, responds to it and collects results, it is capable of evaluating the effect of its marketing activities. So as to develop an effective marketing management strategy, a firm is required to have an understanding of its own business and the nature of market in which it operates. The major goal of marketing management is to establish how to suitably allocate organizational resources towards marketing associated activities. For a company engaging in marketing management, marketing concept is important for decision making and business planning, creating an exchange relationship with customers and profit maximization. Marketing activities collects information that informs the production plan of a firm, so that it is able to decide the quantity of goods to be produced on the basis of the perception of expected demand. Marketing assists companies to develop a successful relationship with customers when firms produce the appropriate product, distribute it appropriately and make it available to the consumers at the right time. Marketing also intend to maximize consumer satisfaction, which subsequently leads to increased demand for services and products. Increased sales volume in turn assists a firm to achieve greater profits. This report looks at principles of marketing management and how they are applied in Tesco Retail Company. Introduction Marketing is a management process that recognizes, anticipates and supplies the requirements of customers profitably and efficiently. Marketing is used in identification of customer, satisfaction of customer and retaining of customer. With the consumer as the core focus of actions, marketing management is a key constituent of business management. Marketing management is focused upon the practical application of the marketing techniques and management of the marketing activities and resources of a firm. Rapidly surfacing forces of globalization and liberalization of markets have led companies to market their products and services across borders, making global marketing greatly vital and an integral portion of the marketing strategy of a firm. Literature Review Marketing management in Tesco Strategy options Marketing strategy is now shifting from the 4Ps (promotion, price, product and place) of conventional marketing management to the thirty relationships of a novel marketing paradigm. This marketing management concept views marketing on the basis of diverse relationships amid the company and its publics in attaining more importance and attention form firm nowadays. Tesco is using loyalty schemes and relationship marketing and online marketing strategy to create and sustain subsisting relationships with diverse customer segments .Retailers are searching for ways of expanding to global marketplace and are heavily investing in internet customer service. Tesco is using online marketing strategy and the expediency of internet to better attend to their customers. Tesco’s online marketing is very simple. Information on services and products of all groups of firms are accessible on a sole website which is presented in fine integrated manner. Customers are able to move from groceries store to insurance and finance division on a single web page (Tomlinson, & Evans, 2010). Tomlinson and Evans (2010) note that Tesco’s almost overall relationship marketing strategy is based upon its clubcard scheme. The company has been capable of using the Clubcard effectively to address diverse consumer segments and in the attraction and retention of all types of customers. With the use of the clubcard scheme, the company has been capable to surpass Sainsbury as the leading retailer and has also strengthened the company’s market share in the UK considerably. Clubcard is a membership scheme in Tesco which permits its customers to make savings on shopping trough given them a price off vouchers. Customers are offered a point on each pound they use to shop at stores of the Tesco group as well as stores of their associate companies. The success of Tesco’s clubcard is greatly contributed by the actuality that the company has also developed partnerships and relationships with well known organizations like Powergen which is a supplier of gas and electricity, Beefeater restaurants, Marriot Hotels, and National Tyres. Thus, consumers are able to get points using Clubcard at Tesco and also at stores of these companies. The Clubcard is also used by the company as a tool for gathering helpful marketing data connected with purchasing habits of different customers, information that assist the company to develop better services and products for their customers (Desjardins , 2005). Methodology For the purpose of carrying out research about the topic, both qualitative and quantitative methods of data collections were used. The qualitative methods included interviews with the members of the marketing team of the company. This is considering that the marketing team has all the knowledge and experience of how marketing is done within the company. Direct interview methods were the most applicable during the research. Other members of the management were also interviewed for the purpose of verifying data and coming up with an accurate research. Literature review was also an important tool during the research. It provided theoretical information about the topic. Books, journal and internet sources were the most relevant for the purpose of literature review. However only the verified sources and trusted internet sites were used during the research for the purpose of ensuring the data collected was accurate and relevant to the topic. Tesco’s Market analysis Market analysis studies the dynamics and attractiveness of a unique market within a distinctive industry. A market analysis can help a firm to attain its marketing goals through outlining the actions and techniques it can take to accomplish its marketing objectives. Market analysis entails examining the firm’s future present and past. With most of focus being on the future activities of the firm, marketing managers explore information like economic, social, political, technological and legal environment. Economical factors Economic factors are very important to Tesco, since they are greatly affect demand, prices, profits and costs. High levels of unemployment are one of a key influential factor, which reduces demand for several goods and services, negatively influencing the demand needed to produce these services and goods. The economic aspects are greatly outside the power of the organization, but their impacts on the marketing mix and performance can be deep. Though global business is still expanding, and is anticipated to greatly contribute to the profits of Tesco over the coming years, Tesco is still greatly dependent on UK market. Therefore, the company would be negatively affected is there is any slowdown within the food market in UK (Graiser , & Scott, 2004). Political factors Operating within a globalized environment with numerous stores across the globe, the performance and marketing of Tesco is greatly influenced by legislative and political conditions of these nations, including European Union. The promotion of liberalized trading blocs by the governments has given Tesco the chance to further expand globally. The immersion of ten other countries into the EU occurred in 2004, further promoting trade amid Eastern and Western European nations. This has offered Tesco with the platform to expand retail networks across European Union (Graiser & Scott, 2004). Social factors Present trends designate that British consumers have shifted towards bulk and one-stop shopping as a result of several societal changes. Thus, Tesco have increased the quantity of non-food products. Demographic changes like the aging populace increase in women workers and a reduction in home food preparation implies that retailers in the UK are focusing upon added value services and products. In order to meet consumer needs and wants, Tesco have adopted its product mix to accommodate an expanded consumer demand for organic products. The organization has also allowed consumers to pay in cash and cheques at checkout (Euromonitor, 2010). Environmental factors There has been an increased demand organization to acknowledge their obligation to society, and undertake their activities in manners that are beneficial to the society. The key social issue intimidating food retiles is environmental issues, a major area for organizations to act socially responsible. As a result of customer awareness of carbon foot print of the company, Tesco has attached carbon footprint data on their dairy products, orange juice and potatoes, bread and n0n-food items (Tesco, 2010). The company has also initiated greener living scheme to advice customers on environmental matters, entailing the way to minimize food waste as well as carbon footprint when making meals. Technological factors The operation of the supermarkets is highly influenced by the utilization of Internet via online grocery retailing. Technology has increased customer satisfaction since products are readily accessible, services have become highly personalized and shopping greatly convenient. Hammett and McMeikan (2003) note that Tesco stores uses wireless devices, electronic shelf labeling, and intelligent scale to make customer service more appealing . In addition, the company has adopted electronic point of sale, electronic scanners and electronic funds transfer systems, which have highly improved the effectiveness of stocking and distribution activities, with wants being communicated in real time to suppliers. Legislative factors Several government policies and legislations directly impact the performance and marketing of Tesco. The food retailing commission has enforced a code of practice that bans numerous of the present practices, like demanding pays from suppliers and changing the agreed prices without notice. So as to implement politically appropriate pricing policies and practices, Tesco providers customers price reductions when they purchase fuel on the basis of the amount of money they spent on groceries at Tesco stores and whilst prices are reduced on promoted products, costs elsewhere in stores are increased to compensate (Hammett & McMeikan, 2003). Marketing mix analysis and marketing communication mix Marketing mix is a set of marketing variables that an organization blends to generate the response it needs in target market. Tesco utilizes a collection of variables to attain this: product, promotion, price and place. Through manipulating these variables as required by a certain markets and their customers, the company is capable to maintain its brand standard whilst adapting to the ever changing variables of particular market areas. Product: A product is a subtle service or object that is mass manufactured or produced on large scale with a particular volume of units. The product range of Tesco is ever increasing and there isn’t restraint to what the company can provide its consumers. New development of product is a crucial portion of Tesco’s marketing mix as it leads to the constant expansion of product choice available. The product mix of Tesco comprises of a huge variety of non-food and food items. A typical superstore contains over 40,000 product lines, of which approximately 25,000 are food lines (Mintel, 2005a). Price: This is the amount of money a consumer pays for a product. Price is determined by several factors such as market share, material costs, product identify, competition and consumer’s perceptible worth of the product. Tesco’s brand signifies convenience, value for money and price. The success of the brand can be viewed in the company’s huge increase in market share in the past years. The company has been able to position itself in the market using value for money and low prices. Through low prices, Tesco is able to attract consumers from each socioeconomic band. The low price preposition by Tesco has been greatly successful and is anticipated to go on putting price pressure on the competitors in future. Its highly effective supply chain will enable the company to bring reduce supermarket prices to convenience store sector and drive costs down in these stores (Tomlinson & Evans, 2010). Place: Place is the site where a product or service can be bought and is usually called distribution channel. It may entail physical store and virtual stores on internet. Tesco has been able to grow its market share via a multi-format strategy whereby four clearly outlined store formats target faintly diverse segments. Two of the larger stores containing several non-food items target primary buyers with the two other smaller shops target secondary buyers. Promotion: It represents all communications that marketers utilize in marketplace. It has four distinct elements; public relations, point of sale, word of mouth and advertising. Marketing communication mix or promotion mix is a specific mix of public relations, direct marketing, sales promotion and advertising that the company utilizes to pursue its marketing and advertising objectives. The major aim of marketing communications is to deliver messages on the benefits of services, and products to potential customers. The major promotional tools utilized by food retailing companies are in-store sales promotions and advertising, with minimal amounts of direct marketing and public relations being used in the promotional mix. According to Graiser and Scott, (2004), Tesco largely utilizes Television advertisements, a medium that ideal for Tesco as a market leader whose major goal is to reinforce its brand along with its brand values. The company also uses campaigns such as ‘Every Little Helps’ campaign which was introduced in 2004. This campaign emphasizes that the company is still a modest retailer that is fully focused upon its customers. Tesco’s public relations activities entail its corporate social responsibility website as well as a barrage of the press release. The company also utilizes email to reinforce its online sales. Tesco utilizes retention and loyalty programmes such as Tesco Club card as a form of sales promotion to create loyalty and retain customers. The Clubcard is the most common card in UK with more than six million people being card holders. Consumers get points for discounts or offer together with a magazine published by national magazine company. In addition, in-store affairs are organized as a way of adding value as well as rewarding cardholders, whilst mailouts are used to alert them on special offers (Ritz, 2005). SWOT Analysis Marketing managers usually use SWOT analysis to establish weaknesses and strengths and threats and opportunities in the market. Strengths Tesco is placed as the third biggest grocery retail firm in the globe, operating more that 4,331 stores . The primary strategy adapted by the firm is services and product customization according with market demands. The strategy of the company intense at focusing upon product affordability which makes sure that consumers are offered products to suit their budgets without tampering with quality. The company also has a consumer retention strategy which uses a loyalty scheme; the Tesco Clubcard. Tesco utilizes data gathered form this loyalty program in its powerful customer relationship marketing systems named Zodiac and Crucible , and the information is utilized for efficient direct marketing and several other promotional techniques (Datamonitor, 2010). Weaknesses The company hasn’t been capable to perform well for the past few years in comparison to its rivals. Datamonitor (2010), notes that several products were recalled by the company in 2009, a move that has led to financial loss and a damage in brand image, such as the firm’s value lines, which are being market as superior quality cheaper substitutes to major brands. Another weakness is that the major operations of Tesco are concentrated in UK retail sector and this inability to geographically diversify is a key weakness because the company is subjected the systemic hazards of UK market. Opportunities The business network portfolio of the company is increasing. Tesco opened more than six hundred stores in 2009, with 435 of them being international. This type of geographical diversification is capable of assisting the firm to invent its economies of scale, whilst reducing its exposure to systemic risk. There is a rapid growth in the attractiveness of Tesco.com, which has offered a chance to the firm to attract novel consumers and minimize overall cost leading to increased profits (Tomlinson, & Evans, 2010). Threats The initiation of a global economic crisis has made the UK economy to contract and the concentration of the company within the UK market is likely to have a negative effect on its monetary standings. In addition, the increase in employment and decline in revenue have greatly influenced the flexible buying behavior of customers which has negatively affected the sales of the company, especially non-food products. There is immense competition within the UK food and grocery market and though Tesco has been the main leader in this sector for several years, the company is presently faced with fierce competition from its rivals which are attaining a market share (Mintel, 2010). Channel Management Channel management is the way a business utilizes several sales strategies and marketing techniques to reach a widest probable consumer base. Gopal (2006) notes that when properly executed, channel management stimulates these channels to market products and eventually develops a good relationship between product and customer. This is accomplished through recognizing the objectives for every distinct channel and implementing numerous marketing strategies to ensure these goals are achieved. Tesco uses different marketing channels such as physical stores and online virtual stores. According to Tesco (2010), the effective utilization of information technology systems has enhanced the firm’s low cost leadership strategy. The firm has invested more that 76 million pounds to streamline its operations via its Tesco digital program, which acts as the third generation enterprise resource planning for the firm. The wide use of ERP has also enabled the company to minimize stock holdings. According to Mintel, (2010), the company has leadership position in offline and online food retail segments, as a result of its effective and efficient outbound logistics. The firm has created a variety of store types and formats, which are strategically situated to attain maximum consumer exposure. These formats are Express, Superstores, Metro, Homeplus and Extra, which have been segmented in accordance to target populace. The company has introduced loyalty programs such as Tesco Clubcards via information technology advances, a move that have deterred customers from switching to Tesco’s competitors. The company has been undertaking a dual differentiation and cost leadership strategy, which has resulted to a rise in significance being placed on consumer service. This strategy has been exhibited through development of financial services, self service kiosks, promotions and focused direct marketing (Hammett & McMeikan, 2003). Product life cycle analysis Product life cycle is a concept which explains the stages through which a product goes through from its introduction into the market to its final withdrwal from the market. William and McCarthy ( 2004 ) note that The understanding of the life cycle of a product helps Tesco to realize and understand the right time to introduce or withdraw a product from the market, its position in market in comparison to competitors and the failure or success of the product. When deciding on a distinctive communication mix, a company should consider product life cycle. Tesco uses product life analysis to determine which marketing mix to use in order to generate greater revenues. During the introduction stage, the products are introduced into the market and sales are low until consumers gain awareness of the product along its benefits. Tesco usually invest in advertisement so as to raise consumer awareness of their new products and target early adopters. During this stage, the goal of the company is to establish market and create basic demand for the particular product. The next stage is the growth stage which is characterized by quick revenue growth. Sales expand as more consumers gain awareness of the particular product along with its benefits. Additional market segments are also targeted. During this stage, Tesco expand their distribution so as to meet the increased consumer demand. When competitors begin entering the market during the later stage of the growth phase, price competition arises and thus Tesco increases its promotion so as to convince customers that the product of the firm is the best in comparison to that of competitors. During growth stage, the goal of the marketing mix is to increase sales and attain customer preference. Growth stage is followed by maturity stage which is usually marked by high profits. William and McCarthy (2004) argue that there are increased sales in this stage and since there is strong brand awareness, Tesco reduces its advertising. There is also competition which usually leads to reduced market share or low prices. Competing products are usually similar in this stage, which makes it hard for Tesco to differentiate its products. Tesco thus increases its efforts in encouraging competitors’ consumers to switch, raising usage per consumer and changing non-users to consumers. Thus, the company offers sales promotions so as to encourage retailers to offer their products increased self space over the competing products. The role of marketing mix in this stage is to retain market share and expand product life cycle. The last stage is the decline stage where sales start to decline as market become saturate with similar products, as product s become technologically outmoded or consumers change taste. If Tesco’s products have gained brand loyalty, profitability is maintained. Tesco usually rejuvenates the existing products to make them appear new again and lowers prices so as to liquidate the inventory of the discontinued products and also use promotion to reinforce brand image. Consumer buying behavior analysis Consumer behavior is a dynamic interaction of cognition and affection, environmental and behavioral events through which humans carry out the exchange elements of their lives. Firms are concerned with consumer behavior since they may come with marketing strategies to influence the consumers to buy their products and services based on analysis of the buying behavior of a consumer. The success of a firm’s marketing strategy depends on how consumers respond to it and to understand what satisfies buyers, marketers should assess the major influences of where, when, what and consumers buy services and goods. Through understanding there factors, a company is able to forecast hoe customers will react to different marketing strategies (Dibb et al, 2007). According to Belk (2005), consumer behavior is usually unpredictable, thus, firms do their best in order to retain their customer base and also go further to reward consumers who show loyalty towards their brand. This strategy has been utilized by Tesco to crate a huge base of steadfast customers. The company uses loyalty programs such as Tesco Clubcard to understand the buying behavior of consumers. Through emphasizing that Tesco Clubcard is an inherent portion of online shopping with Tesco, the company has been able to forge a strong ling between the bricks and clicks portions of the business. Club-card allows consumers to shop in a similar in-store as online through sending their favorites in form of a saved shopping list, on the basis of store choices and also online purchases. According to Belk (2005), companies give loyalty cards to maintain consumer loyalty and to analyze the buying behavior of consumers through loyalty card database. In Tesco, every time the Clubcard is swiped, the company attains information on what consumers purchased, where and their mode of payment. The date attained form every transaction helps the company to focus more on customers and understand their buying patterns. Conclusion Marketing is an important concept in Tesco and it has enabled the company to generate great revenues and profitability. The company uses effective marketing management strategies that have enabled the company to secure a large market share to become the biggest retail company in the UK. Through effective marketing, the company has been able to meet consumer demand through offer a wide range of products at a favorable price. The company has also been able to maintain loyal customer base through use of Tesco Club-card and overcome its competitors. Through the use of this loyalty program, the company has also been able to reward their loyal customers and to analyze consumer buying behavior. Recommendations In order to know their market, Tesco should use their Club-card to establish their customer base and products that consumers purchase regularly. Through looking at the past sales, Tesco can forecast future sales and ascertain whether the company is likely to maintain market dominance. Tesco can improve its marketing activities through strategic alliances. Entering into novel markets like Japan and China it can act as a major driver of the firm’s expansion strategy and revenues. The firm’s interest in Japan is likely to continue expanding in due course because Asian markets are demonstrating an expansion in consumer spending as well as raised trend towards retailing. Therefore, one of the strategic options that Tesco should use is global alliances with local retailers in the Asian markets. By entering into partnerships or joint ventures, so as to attain a bigger economy of scale together with bigger market presence, the company will be able to draw on extensive operating expertise and local knowledge of the partners while adding its individual product development, store operations and supply chain skills to offer excellent shopping experience of its customers. The company can meet the changing needs of consumers through introducing new product lines. This is because changes in business environment are creating demand for novel services and products at the expense of already established provisions. Through following the transforming needs of customers, Tesco should introduce novel product lines and if new services and products are to be developed for subsisting markets, the firm’s management should consider a product development strategy. Through diversifying and expanding Tesco’s product mix, it will also be vital for the company should implement interior development when novel products and services are being developed. References Belk, R, 2005, Situational variables and consumer behavior, Journal of Consumer Research, 12, 156-164. Datamonitor (2010) “Tesco, PLC SWOT Analysis” Datamonitor Report (2010), 33-54. Desjardins, D, 2005, Tesco strategies turn up competitive heat in UK, DSN Retailing Today, 44 (4), 4-10 Dibb, S, Simkin, L., Pride, M, & Ferrell, O., 2007, Marketing Concept and Strategy, 4th Houghton Mifflin Company, Boston Euromonitor (2010), ‘Industry Profile – Food retailing’, Euro-monitor International, 2010 Graiser A, Scott T, 2004, Understanding the Dynamics of the Supermarket Sector, The Secured Lender, 60 (6), 10-14. Gopal, V, 2006, Channel management: Concepts and cases, Indiana University Press, Indiana. Hammett S. and McMeikan K, 2003, Tesco - Competitive Management Development, Executive Development, 7 (6), 5-15. Leahy, T, 2004, Tesco and what customers really want, Brand Strategy, Issue 185, p.15-22. Mintel (2009), Food Retail Industry – Including Online, Mintel Research Ritz, C, 2005, Store wars, Business Review, 11, 22-30. Tesco (2010), Tesco plc web-site retrieved on August 1, 2012 from < http://www.tescoplc.com/plc/about_us/strategy/international/> Tomlinson, H. & Evans, R. (2010), ‘Tesco stocks up on inside knowledge of shoppers’ lives’, Guardian, 5-10 William, D., & McCarthy, E., 2004, Product life cycle: Essentials of marketing, Irwin Company, New York. Read More