Marketing in Action - Assignment Example

Marketing in action My My number Contents Executive Summary 3 Introduction 4 Purpose of the assignment 4 Background to the company 4 Marketing / Competitive Environment 5 PEST Analysis 5 Micro environment- Porter’s 5 forces 5 Competitor analysis 6 SWOT Analysis 6 Segmentation, Targeting and Positioning 7 Segmentation 7 Targeting 8 Positioning 8 Marketing Mix 9 Product 9 Price 9 Place 9 Promotion 9 Recommendations 10 Loyalty 10 Hard discounters 10 Non-food 10 Online market place 10 Bibliography 11 Executive Summary The largest retailer in Europe, Tesco’s sales have been falling in the recent years owing to losing customer loyalty and falling in sales and profit levels. The following report analyzes the position of Tesco in the market, its marketing mix, its environment to identify the factors that is ailing the company. The report then proposes recommendations in order to revive Tesco’s position and its market share. The recommendations have been posted on different lines including Loyalty, hard discounters, non-food category and online market place. Introduction Purpose of the assignment The company in question over here is Tesco. Tesco is UK’S largest supermarket change. It was once poised to become the second largest retailer worldwide after Wal-Mart. However everything has changed in the recent years. From being the darling of investors the preferred choice of the customers it has now become a company which the investors are writing off, customers are abandoning. Tesco has been devastated by poor growth figures combining with profit warning and departure of Philip Clarke. The current report analyzes the current position of the organization in the market, the marketing mix of the organization and aims at making a future marketing plan or a blue print for success for the company to follow to get it out of this mess. Background to the company Tesco Plc is a British multinational supermarket. The supermarket chain sells both food and non food items. The supermarket chain is head quartered in Cheshunt, Hertfordshire, England. As on 2011 it is the third largest retailer in the world in terms profit and second largest in terms of revenue. It has its outlets in 12 different countries in the world. Tesco is the market leader among super market chains in England. Tesco was founded in 1919 by John Cohen. The name Tesco was given by Cohen in 1924 after he purchased a shipment of tea from T.E. stock well. He gave the name Tesco by combining TES from TE s from the first three letters of T. E. stock well with the letters Co from his surname. The business has since expanded rapidly to reach its present state however it has recently faced fall in profit levels and lower sales turnover owing to several problems and challenges. Marketing / Competitive Environment The grocery market in Europe is $150.8 billion and contributes about 8% to the GDP of Europe. For every £1 spent in retail 53p is spent in food and grocery expenditure. PEST Analysis Political Oligopolistic market with many competitors Quotas related to environment Corporation tax has decreased from 30% to 28% Economic Rising oil cost Increasing inflation while wages remain same leads consumers to cut their spending Convince sector is recording a faster growth than grocery market Social The population in Europe is an aging population The extent of immigration has increased Increased obesity leads people in the search of organic and healthy foods. Technological Online shopping is slated to rise Technology is increasing efficiency and leads to increased customer expectation Micro environment- Porter’s 5 forces Threat of new entrants Barriers to entry is very high and hence threat of new entrant entering in the market is very low (Porter, 2003) Entry requires huge capital investment and there is very less market share left Bargaining power of buyer Customers are next to god with the different supermarkets ready to try everything in order to retain and woo customers Online market has increased the bargaining power of customers Bargaining power of supplier Suppliers have very less bargaining power as listing with a supermarket increases sales greatly. Since the control is in the hands of the supermarkets they indulge in harsh bargaining. Threat of substitutes Low threat of substitutes only substitutes are organic foods Rivalry amongst competitors There is high level of rivalry amongst the competitors. The competitors fight on the basis of prices. Competitor analysis ASDA It is the no. 2 market share with 16% market share. There are 523 outlets and mostly the stores are hypermarket format. ALDI & LIDL The combined market share of ALDI and LIDL is about 30%. A major upheaval on the UK market has been the rise of hard discounters such as ALDI and LIDL. No. of stores are 421 for AIDL and 580 for LIDL. SWOT Analysis STRENGTH Biggest market share in UK (Dransfield, 2005) Large list of loyal customers Good and wide brand awareness WEAKNESS Big reliance on UK market Not present in other stores except grocery in the online market Falling sales due to price competition Losing emotional connect with customers OPPORTUNITY Opportunity to venture in online market in non food segments. Learn and use the huge customer data from club card effectively Improve efficiencies especially in overseas market to increase competitiveness THREAT Competitor have come up with their own loyalty program which is competing with club card program of Tesco (Bacon, 2014) Eroding market share Rising supply costs Rising inflation Segmentation, Targeting and Positioning Tesco’s marketing activity is affected by both macro and micro economic factors. The macro economic factors that affect Tesco’s marketing plan include Political, economic, Social and Technological. The microeconomic factors include porter’s 5 forces, competitor analysis, and Swot analysis. Market segmentation is based on the belief that the market is not homogeneous and can be divided into various sub segments each with specific needs and wants (Chandrasekhar, 2010). Segmentation Segmentation of the market can take place on the bases of demographic, geographic, psychographic and behavioral (Dudovskiy, 2014). Segmentation basis Customers targeted Demographic Region- Tesco sales its products in UK and 12 different countries where they have branches. Density- Tesco targets in both rural and urban segments of market. Geographic Age- Tesco’s target customers includes people of all age groups Sex- The customers targeted are both male and female Income- The income groups targeted are lower and middle class people. Profession- People of all professions are targeted by Tesco Education- The target customers of Tesco belong to different education background Family size- Family size of the targeted customers may have a wide range Psychographic Personality- The customers targeted are of easy going but determined types. Behavioral Benefits that are sought after- The benefits that are sought after by the potential customers of Tesco are cost advantage. Targeting The targeted customer segment of the Tesco includes those customers who are cost conscious and value variety of choices. Both these sought after things are provided by Tesco and that is what has promoted the company to the no. 1 status in the list of supermarkets in UK. However in recent years Tesco is losing its market share and profitability rapidly as other competitors are eating into its share due to low prices and its customers are losing the emotional connect with Tesco. Positioning Positioning involves focusing on individual elements marketing mix so that it can attract the customers in the most effective manner. Functional positioning- This type of positioning is used by a company and is associated with increased range quality and functionalities of products and services. For selling its Tesco finest range of products Tesco uses functional positioning (Galal, 2014). Symbolic positioning- Tesco uses this type of positioning in selling its fair trade range of products in food and grocery sector. Tesco utilizes symbolic positioning by refusing the use of cotton in countries where child labor is utilized in this sector (Shimp, 2008). Tesco utilizes experimental positioning for marketing its health and beauty products to its customers. Marketing Mix Product Tesco runs a supermarket chain and sells products of different category including both food and non-food category. Tesco concentrated in advertising product quality and they sell products of low prices in order to attract customers. Tesco used newspaper, Radio, TV and magazines and other media for new products (Business teacher, 2014). Price Tesco’s focus all the way has been to woo customers by providing product of high quality and low process. By providing its customers with high product quality, low price and high service associated with their sales they draw customers to their stores. The low prices strategy is being copied more viciously by its competitors such as Aldi and lidl and Tesco is losing its market share owing to the shift of customers to these super market chains who are offering far lower prices than Tesco. The price of manufactured goods can be made lower in order to increase sales or sometimes the price of a product can be kept artificially high in order to project on the superior quality of a product. Tesco’s pricing strategy is important as Tesco competes with its competitors on the basis of price Place Tesco sales its products through its different stores that is located at different places in Europe and world. Tesco has its stores on the high streets and they use the stores to connect to the customers and promoting the customers to get hold of different products that it has to offer based on the customer service. Tesco selects the sites of the stores that it operates very carefully and in each of the stores it keeps items that match the expectations of the local customers. Tesco always wants to keep stocks of product as the customer wants and needs. The stocks of products that Tesco has, keeps on changing depending on the customer’s needs and wants. Promotion Tesco communicates with customers through different medium and Medias such as television, radio, newspaper campaign and places offer for good product and price promotion. Tesco uses data from Club card in order to increase their promotion efforts and improve sales performance. Recommendations Loyalty In order to make the club card scheme seems a profitable decision Tesco has to do three different things. Tesco has to make club card more relevant for its present generation of customers, widening the scheme to become all encompassing and integrating with other business units and lastly opening up its profiles and customer base to other business. A step change is necessary for Tesco so that it can woo back its customers (Retail bulletin, 2014). Hard discounters To woo back its customers Tesco has to lower margins, invest in price, buying the best convenience sites, focusing on online and engage in battle in the Omni channel world and that has moved from competition on spending in retail to competition in overall consumer experience. Non-food In the non food criteria the retailer should go with category of offerings online. The company should sort out its search function so that it includes the largest range of or rather the right range of products that the customers search for. This will however be the first step in its decision and strategy to boost the non-food category. In the long run it has to take a good look on the market trend and decide on what are their businesses plans regarding this category and what it needs to do with it (Jones, 2014). Online market place Tesco has brought its food category online and is one of the top companies in that area. It has to do the same for its non food category and bring the same online. Tesco is also advised to bring all other categories of Omni channel business and various categories of business online. Tesco should also engage in cross selling of products and should innovate its service arms. The cross shopping behavior of the customers of its various channels should be encouraged and the club card should be enhanced and overhauled to bring to effect these changes. Bibliography Bacon, J. 2014. Data could be Tesco’s salvation [Online]. Available at < http://www.marketingweek.com/2014/09/30/data-could-be-tescos-salvation/ >[Accessed 10 February 2014] Business teacher. 2014. Analysis of Tesco’s extended marketing mix. [Online]. Available at < http://www.businessteacher.org.uk/essays/business/analysis-of-tesco.php >[Accessed 10 February 2014] Chandraserkar, K.S. 2010. Marketing Management: Text & Cases. New Delhi: Tata McGraw-Hill Education. Dransfield, R. 2005. GCE AS Level Business Single Award for OCR. Oxford: Heinemann. Dudovskiy, J. 2014. Tesco Segmentation, Targeting and Positioning. [Online]. Available at < http://research-methodology.net/tesco-segmentation-targeting-and-positioning-2/ > [Accessed 10 February 2014]. Galal, K. 2014. Strategic Positioning in the Consulting Industry: An Empirical Analysis of Strategic Groups and Performance. Berlin: BoD – Books on Demand. Jones, K. 2014. Tesco in crisis: how can Dave Lewis steer the supermarket back on course? [Online]. Available at < http://www.marketingmagazine.co.uk/article/1313722/tesco-crisis-dave-lewis-steer-supermarket-back-course >[Accessed 10 February 2014] Porter M. E. 2003. The Competitive Strategy: Techniques for Analyzing Industries and Competitors. London: Simon & Schuster. Retail bulletin. 2014. What Tesco needs to do now: A strategic blueprint for a better future. London: Research Farm. Shimp T. 2008. Advertising Promotion and Other Aspects of Integrated Marketing Communications. NY: Cengage learning. Read More