Tesco and Green Marketing as a Key Marketing Strategy - Case Study Example

INTRODUCTION Tesco is the biggest supermarket retailer in the UK, the fourth largest internationally as well as being the largest global online grocery retailer. In 2009, Tesco had 4308 stores in 14 countries around the world employing about half a million employees. In 2007, over £7 of UK retail sales was spent in Tesco During the third quarter of 2009, Tesco had a 31 per cent share of UK’s grocery market and its gross turnover for the 2008/9 was at £59.4 billion up 13.5 per cent and the pretax profits were £3.12 billion (McLoughlin and Aaker, 2010, p. 126). This phenomenal success is remarkable and is largely attributable to the solid marketing strategies the organization has employed consistently over the years it has been in operation. Tesco has been keen on implementing various contemporary issues in marketing that have set them apart as a market leader and one such contemporary issue it has placed particular emphasis on, especially in recent years, has been green/ environmental issues. As the world becomes more complex with the environmental pollution, consumers and business firms have become concerned with the natural environment. Consequently, businesses have started to alter their business behavior so as to deal with these new concerns. The retail supermarket sector in particular has been a leader in green marketing issues with major players such as Walmart taking major steps towards eco friendly policies. Indeed, the increasing regulatory and social concerns for the environment have caused a growing number of companies to consider environmental issues as a principal source of strategic change and Tesco has not been left behind in that regard. Its marketing experts have been using green elements as powerful marketing tools to contribute towards conserving the environment. It with this in mind that the following discussion will focus on how exactly Tesco has executed its green marketing strategies and the success or lack thereof of such strategies. HISTORICAL CONTEXT OF GREEN MARKETING The concept of ‘green marketing’ generally refers to a holistic management process that involves the identification, anticipation and satisfaction of the needs of society as a whole and customers in specific in a sustainable yet profitable and sustainable manner (Peattie and Crane, 2005). It incorporates and expands on the concepts entrenched in social and ecological marketing concepts. According to Hennison and Kinnear (1976), the roots of green/ environmental/ ecological marketing are traced all the way back to the stream of concerns that existed revolving around of the 1970s which generated the concept of ecological marketing. This wave was mainly alarmed by those sectors that contributed the most to the harshest environmental effects such as the motor industry as well as with the creation of new types of technology to ease certain environmental hazards. These concerns lessened in the late ‘70’s but resurfaced again in the ‘80’s hence the response of several marketing experts and academics to the new environmental concerns was a feeling of déjà vu. Nevertheless, it was only during the 1990s that the discipline of marketing started to seriously discuss the physical repercussions of business habits on the environment. TESCO AND GREEN MARKETING AS A KEY MARKETING STRATEGY The concepts of sustainability and holism that are central to green marketing appear to be simple on the surface, but can be immensely hard and complicated to translate into action. This is mainly due to conventional management wisdom which stresses on specialism and reductionalism, and is based upon economic theories which erroneously treat environmental resources as inexhaustible, free (apart from the cost of extraction) and/ or worthless with regards to market-less commodities such as the stratospheric ozone (Peattie and Crane, 2005). This is where an organization such as Tesco Plc has thrived in- by steering clear of such misconceptions and combining sustainability with profitability thereby effectively satisfying all stakeholders- the customers and the organization As Polonsky (1994) aptly explains, green marketing consists of a wide range of activities, including product modification, changes to the production process, packaging changes, as well as modifying advertising. According to Wiener and Doesher, (1991), green consumerism (pro-social consumer behavior) is rampant in developed nations such as the UK and consequently, Tesco’s green marketing strategy has been quite a success. To explain this success, a variety of academic theories are necessary to shed more light. Systems theory is one of the main theories that formed the earlier basis for green marketing. According to Polansky and Mintu-Wimsatt (1995, p. 47), this theory envisions the environment to be the biggest general system- a system within which the rest of the systems function. Therefore, since the culture of consumption inputs from and outputs to the environment thereby endangering the health of the environment, the survival of all other systems is likewise endangered. It is this theory that has formed the justification of a company such as Tesco to become involved in green marketing since the global warming currently being experienced in the world is due to in large part to consumerism, a culture encouraged by the retail supermarket industry. More recent studies have revolved around more contemporary theories such as stakeholder theory (ST) within the context of creating an environmental marketing strategy. Environmental marketing strategy can be enhanced through the use of the four- pronged stakeholder management process that incorporates the identification of the relevant stakeholder groups; ascertaining the stake of each group; ascertaining how best the needs of each group can be met; and developing corporate priorities and goals that take into account the stakeholder's interests (Polonsky, 1995). By understanding and attempting to socialize key stakeholders, environmental marketing strategy can be made more effective. Tesco has been highly successful in implementing this four- pronged stakeholder management process by developing a delicate balancing act between consumers who have high expectation for eco friendly policies; the government; and the company itself to ensure that sustainability and profitability are in tandem. Kalafatis, et.al (1999) analyzes green marketing in relation to Ajzen’s theory of planned behavior and explains that there are various factors that influence consumers decisions to purchase environmentally friendly products and these include the media, the work of environmental groups and peer pressure among others. This theory is very applicable, particularly in developed countries and well established markets that are marked by clearly formulated behavioural patterns. It thus fits in perfectly with the countries that Tesco has set up shop in where behavioral patterns are relatively clear cut and which are in tandem with the situation in a developed country such as the UK. According to the self-perception theory, social pressure helps influence green consumerism since people use their own initial behavior to arrive at a favourable disposition toward an issue thereby enhancing the chances of later positive behavior. In addition, the self-perception theory posits that labeling a person as “green” prior to for a monetary commitment influences a favourable reaction to green marketing strategies. In fact, it has been discovered that people who show a lesser willingness to purchase environmental products may best be targeted through interpersonal influence such as peer pressure. For instance, a shrewd green marketer could call upon local politicians to deliver the message to “buy green.”It is through such measures that Tesco have been able to win over the public to their green marketing strategies. Marketing mix of green marketing is yet another theory applicable to Tesco whereby just like n the usual marketing mix there are the 4Ps of product prices, place and promotion, green marketing also has its own 4ps in addition to having three more P’s: people, planet and profits. Thus, products have to be developed according to the customers who have a preference for eco friendly products. Green chemistry is central to such product development. The duty of the green marketer here is to provide product designers with customer requests like energy saving which has been accomplished in Tesco which has implemented several energy saving measures such as energy saving bulbs. In addition, the concept of green promotion is important and it entails configuring the tools of promotion like advertising by keeping people, planet and profits in mind. Another theory underpinning Tesco’s involvement with green marketing is that of market orientation. According to Narver and Slater (1990), market orientation is actually the basis of marketing. A marketing orientated approach is simply one in which a business acts in response to what customers want as opposed to what the business assumes is right for the customer. A majority of the most successful businesses in the world use a market-orientated approach. As a result of the retail sector’s direct contact with customers and the market as a whole, it is very likely that market orientation as a concept has much to do with the success of Tesco. With global rivals such as Walmart having already implemented green marketing, Tesco had no other choice but to follow suit in order to remain competitive therefore whereas Tesco may allege that their green marketing stance is due to noble, societal concerns and duties, the truth is that the need for market orientation was at the core of its green marketing decision. That said, regardless of the motive Tesco had in executing green marketing, it is evident that it was a smart business decision for the organization. The general environmental marketing strategy is simple: to market their eco-friendliness social responsibility. Further to that, Tesco’s management stresses the importance of customer needs through their Tesco Values philosophy which embodies the ideas that they work the hardest for their customers and them how they would want to be treated (Reuvid, 2005, p. 197). Therefore, since a majority of customers are environmentally conscious and favour green products, Tesco had an obligation as part of its company values to go the green route. In addition, Tesco has gained a reputation for inventive information solutions with Clubcard loyalty scheme being central to this. Being the UK’s largest retailer, Tesco has a substantial customer base on which analysis can be performed. Since a lot of these customers return at regular (mainly weekly) intervals, the data from Clubcard is very considerable. As such, Clubcard is crucial in shaping consumer behaviour within the UK (Humby, Hunt, & Phillips, 2004). Tesco’s utilization of technology in marketing, data gathering and planning has three aspects to it. The first is data collection whereby the Clubcard scanned at the till as well as EPOS till that can collect all transactions is a significant basis. The second aspect relates to customer interactions –Tesco supervise an assortment of interactions that the customer has with the brand and try to reward every interaction and thus Tesco can effortlessly see the differences and similarities that exist between offline and online customers in relation to what they buy, how they mix channels and how they react to the services. As such, tracking customer opinions about green marketing strategies is made easier. Data analysis is the third aspect. Tesco are very keen with respect to the design of data analysis and ensure that there is a sufficient database, data quality, data currency as well as strict control of data analysis costs. In addition, data analysis seeks to discover why customers behave in certain ways. This process involves profiling the qualities of products, developing clusters according to these customer product purchase profiles then using them to segment and profile customers in line with the contents of their Tesco shopping baskets (Humby, Hunt, & Phillips, 2004). Thus, if a great number of customers fit the profiles of customers that had an inclination towards green products. It follows that Tesco would thus place a greater emphasis on green marketing for economic reasons. Ever since 1999, Tesco has implemented Customer Panels to allow research data to be communicated to the Head Office. Tesco also conducts image research in every country and a brand image analysis is done half- yearly and the data collected range from perceptions of price image to quality of service. Customer complaints are also recorded. Such data collection further makes it easier to collect data on customer opinion on green issues thereby enabling the firm to act on such data. It is in line with such data that Tesco has implemented a wide range of significant green marketing initiatives/ strategies. Leahy (2008) explains that the green strategy at Tesco is threefold. The first part is the greening of Tesco itself. The second is causing the supply chain to turn green. The third is to assist their customers to make green choices in a simpler and more affordable way. In addition, for Tesco to really turn green and reduce the carbon footprint, knowledge of what the actions that discharge greenhouse gases are is crucial. This was ascertained through research and the carbon footprint was found to be 4.47m tonnes of CO2 equivalent in 2001. The aim is thus to halve emissions from the stores and distribution centres by 2020. A particularly successful green marketing strategy Tesco has employed has been the use of eco labels as well as carbon labels. These are labels that show that a product is eco-friendly and its carbon foot print. Critics have however argued that the labels are misleading and actually confuse customers. In response, however, Tesco argues that the strategy has already delivered significant tangible benefits. Another strategy has been with the use of a green loyalty card system, where if one re- uses carrier bags, they accumulate points to spend on goods. All Tesco green marketing initiatives are effectively aimed at reducing the carbon footprint measurement. According to Siddall (2009) one carbon reducing such initiative has been the opening of an eco friendly supermarket in Wick that has energy-saving cooking and cooling equipment, wind turbines, low-energy lighting as well as system to collect and use rainwater. Further to that, the building has been designed to have half the carbon footprint of similarly sized supermarkets. Another initiative has been in energy saving measures in the stores through the hanging of curtains on freezer doors, the use of better insulation, new refrigeration systems and low-energy lighting. Tesco has also implemented a major green marketing tool- the use of eco- labels. This is in addition to displaying the full carbon footprint of milk. All Tesco own-label milk ranges display the carbon footprint label to assist shoppers to make "green" decision when buying their milk. All these measures have been implemented due to the data accrued through data analysis measures which revealed that 50 per cent of customers surveyed in 2009 understood the proper definition of “carbon footprint”, as opposed to a mere 32 per cent of people in 2008. The research also showed that more and more customers want to be green. More than half revealed they that would look out for lower carbon footprint goods during their weekly shopping relative to the 35 per cent who said so in 2008 (Rex and Baumann, 2007). A CRITIQUE OF TESCO’S GREEN MARKETING STRATEGY Despite the relative successes of Tesco’s green marketing initiatives, there has been consumer scepticism, mistrust and indifference as has come to be the norm with various green marketing strategies of other companies. Many critics argue that Tesco’s green marketing is a mere gimmick as opposed to a real and genuine attempt at saving the environment. According to the Friends of the Earth (2006) Tesco is not cutting total energy use by half but just ‘wanting’ to cut per store energy use. Analysis by Friends of the Earth shows that even if Tesco achieves this target for existing stores, expansion plans will counteract this, with the result that there will be no absolute reduction in energy use. In fact, total energy use is likely to be higher in 2010 than it is now with the result that greenhouse gas emissions (GHG) will also be higher In addition, as Tesco tries to strengthen its position as a reliably price-conscious retail supermarket chain, the decision to pursue green marketing strategies and initiatives may send out confusing messages as green products are often perceived to be more costly than regular products and this strategy is called into question when most of Tesco’s customers are lower middle to middle class who do not have enough disposable income to spend on such out of reach products in the current economic climate (Siddall, 2009). Recommendations: To improve its green marketing strategies, Tesco should implement the following measures: • Put a halt to its expansion plans and concentrate on ensuring existing stores reduce emissions by half. • Ensure all new buildings are constructed according to the highest environmental standards. • The government must set targets for carbon dioxide emissions for all retail, manufacturing and road transport components related to Tesco and these targets should not cause emissions to be exported abroad through factories being shifted overseas with goods imported into the UK (Friends of the Earth, 2006). CONCLUSION Tesco is undoubtedly one of the largest retail supermarkets in the world. Like all organizations, it is faced with several contemporary issues in marketing, the most prominent being green issues. With global warming and climate changing emerging as a very important contemporary issue generally, green marketing is gaining prominence as way that businesses respond to green issues. Tesco is one such business that has been at the forefront of green marketing and several theories such as systems theory have been analyzed to justify the necessity of green marketing for a company such as Tesco. As part of their marketing strategy, Tesco have implemented a variety of green marketing initiatives such as the use of eco labels and carbon foot print labels to considerable success, success which has been recognized through the awarding of Tesco with various “green” awards. However, Tesco’s green marketing strategies are far from perfect all and the energy cuts are to a large extent superficial. Measures such as the reduction of its expansion plans are thus necessary for the firm to effectively reduce their carbon foot print for the betterment of the environment both for the present time and for future generations to come. REFERENCES AUS Food News. 2010. UK’s Tesco wins drinks Green Retailer of the Year. Retrieved on 16th March, 2010 from http://www.ausfoodnews.com.au/2010/03/23/uks-tesco-wins-drinks-green-retailer-of-the-year.html Friends of the Earth. 2006. Tesco's Green Claims. Retrieved on 18th March, 2010 from http://www.foe.co.uk/resource/media_briefing/tesco_agm_2006.pdf Hennison, K.E., Kinnear, T.C. 1976. Ecological Marketing. Ecological Marketing Vol 168, American Marketing Association Humby, C., Hunt, T., & Phillips, T. (2004). Scoring points: how Tesco is winning customer loyalty. Sterling, VA: Kogan Page. Kalafatis, Stavros P. et.al. 1999. Green marketing and Ajzen’s theory of planned behaviour: a cross- Market examination. 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