CW Tesco-Marketing - assignments PDF

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Principles of Marketing

The Segmen tation, Targetin g and Position ing strategy for Tesco Contents Page Cover Page: Page 1 Content Page: Page 2 Introduction: Page 3 Advantages of Segmentation, Targeting and Positioning: Pages 3&4 Profile of Tesco: Pages 4&5 Assessment of Tesco’s Segmentation, Targeting and Positioning: Pages 5&6

CMM115

Niall Byrne

B00660103

Principles of Marketing

Conclusion: Pages 6&7

Introduction Throughout this assignment I will explain segmentation, targeting and positioning. I will give detailed definitions of each marketing strategy, then I shall give a short synopsis of my chosen organisation which is Tesco and link them together with these marketing strategies to show how Tesco uses them. I will analyse how Tesco has used segmentation, targeting and positioning within their company and how they have fared against their competitors. Advantages of market segmentation, targeting and positioning ‘Market segmentation is the process of dividing an entire market up into different customer segments’.

CMM115

Niall Byrne

B00660103

Principles of Marketing

Suttle,R.(2009) Online article: Define Market Segmentation & Targeting. Available at: http://smallbusiness.chron.com/define-market-segmentation-targeting-3253.html. Accessed [22/11/2014] Market segmentation is a marketing strategy that is dividing the market into subgroups that have common interests and creating methods of which to target them. Segmentation is influenced by lifestyle, values, motives and shopping orientation. The main variables for segmentation are Demographic which include age, gender etc., Geographic which is area type, area density etc., Behavioural which are spending status, loyalty etc. and Psychographic that is Fashion orientation and values etc. There are many advantages to segmentation: 

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One of the main advantages is that the company is given focus. With segmentation the company can achieve an effective method of being able to focus on market segments. Another is efficiency, with putting customers into segments the company is then able to establish resources for each segment and discover any resources that aren’t being efficiently used. Clear Media choice, segmentation also offers the company choice on how to choose the right Media to communicate their product or service to their customers.

‘Targeting or target marketing then entails deciding which potential customer segments the company will focus on’. Suttle,R.(2009) Online article: Define Market Segmentation & Targeting. Available at: http://smallbusiness.chron.com/define-market-segmentation-targeting-3253.html. Accessed [22/11/2014] Targeting is a process by which a company tries to understand the needs of the customer and if it matches the service or product they provide, they then focus on this group and this is their ‘target market’. Companies would hold focus groups, create questionnaires etc to further improve their service or product with a selection of their target market so that once they are dealing with the full target market they know in what way they need approached and what is expected from the company.

With targeting there are many benefits: 

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Once you have identified your target market it is much easier than for the company to communicate to that market as they are then able to set-up promotional campaigns to attract those customers. Upon completion of targeting your market the company is able to discover their benefits and drawbacks of the product or service they have offered and there they can make any adjusts to make them more competitive. Targeting your market gives you the opportunity to determine where and how you can most effectively market you product or service.

CMM115

Niall Byrne

B00660103

Principles of Marketing

‘Positioning starts with a product, a piece of merchandise, a service, an institution or even a person. But positioning is not what you do a product. Positioning is what you do to the mind of the prospect. That is, you position the product in the mind of the prospect’. Ries and Trout (1982). McGoldrick 2nd Edition Retail Marketing. London. The McGraw-Hill Companies. Positioning is where your product or service is in comparison to other companies offering the same as your company in the same market. To be seen as having a good position in a market all comes down to having a good USP (Unique Selling Proposition). A USP could be that your company is always known for giving outstanding quality on your products and so when a customer thinks of buying a product in your market they will go to your company due to the fact that you offer better quality than your competitors, thus this is a USP. Positioning offers many advantages: 

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Differentiation, when customers see that a company has positioned themselves better than competitors they are more inclined to go to the better positioned company. Companies that are different from others are more memorable which makes them the easier option for customers to choose. Premium pricing, positioning can create the option of allowing the company to set a premium price if the positioning is done correctly.

Profile of Tesco Tesco was founded in 1919 by Jack Cohen, he ran a market stall in London’s East End and from there he sold ‘naffy’ goods from the war. The Tesco name came when Cohen had combined initials from surnames of a shipment of tea he had purchased. The first store was created in Burnt Oak, Middlesex. After 1939 his business had grew to 100 stores and it was a UK-focused retailer but in the early 1990s Tesco diversified into more than just a grocery store, it started selling clothes, books, furniture, technology etc. From the diversification Tesco created different stores for different needs, Tesco Extra was the huge supermarket that sold all foods, household goods, clothes, technology and books, while Tesco Metro and Express provided just the essential groceries. Tesco’s main competitors are Sainsbury’s, Asda, Morrisons and Marks & Spencers. In 1995 Tesco created the ‘clubcard’ which took the grocery retail market by storm. This ‘clubcard’ gave Tesco the chance to view what their customers were buying and in what quantity, they then were able to send out vouchers encouraging customers to come back and buy more. The ‘clubcard’ was revolutionary as it put Tesco in front of Sainsbury’s, Asda, Iceland, Morrison’s etc and with Tesco’s own brands which include Tesco basics, Tesco Everyday value, Tesco Brand, Tesco Finest etc they gave themselves a huge competitive edge. Other competitors tried to copy the clubcard, such as Sainsbury’s with their Nectar Card, Iceland and their Bonus Card and Morrison’s Match and More card. Now Tesco has over 500,000 employees, operating in 12 countries and has 75million shopping trips every week. It is the number 1 retailer in the world measured by profits and the 2nd largest retailer in the world measured by revenue. Assessment of Tesco’s segmentation, targeting and positioning

CMM115

Niall Byrne

B00660103

Principles of Marketing

Tesco has a segmentation by which they operate in urban and sub-urban areas, this provides the theory that Tesco serve their customers based on the density of the population. This means that Tesco operate in areas with big populations due to the fact that they know they will receive higher sales in these areas rather than rural areas. However Tesco don’t forget about rural areas, they simply place smaller outlets in rural towns as they know there is a segment of their market in those small rural Towns. Tesco used their clubcard as a tool for segmentation, once Tesco had gathered information about their customers through the clubcard they were then able to segment their customers. They grouped the customers in segments were each customer was put into a category with other customers who have similar buying habits to them, this allowed Tesco to discover what buying habits were the most popular. The clubcard also provided Tesco with the cahcne to segment their products, they were able to see which of their products were frequently bought and which weren’t and again Tesco were able to set up promotions for the less frequently bought products in order to encourage customers to start buying them. For example, Tesco’s own brand came into existence once the company noticed that there was a segment in their market for customers who wanted cheaper brands of products normally found in supermarkets. Customers had wanted for instance cheaper tomato sauce but the same quality, so Tesco sold their own brand tomato sauce that was cheaper than other brands such as Heinz Tomato Sauce but they still produced Tomato sauce that was of the same quality. The Targeting for Tesco isn’t on any specific type of customer, they try to produce products and offer services to all customers. The object from Tesco is not to differentiate but to produce low priced products and hence Tesco is seen as a discounted supermarket. Initially once Tesco had started out they targeted just customers looking to buy groceries, however in 1960 they sold clothes, household goods and electronics, then in 1995 Tesco started an online shopping service and in 2001 their own clothing range. So at the beginning Tesco had targeted just the grocery market but as the years went on their target market grew and grew to the point now where Tesco attempts to target the vast majority of the market.

‘Tesco's rise to the top is fascinating. If I had to put it down to one thing it would be diversification. It is quick to spot gaps in the market, adapts to consumer trends and gets ahead of the competition. The Clubcard was pivotal in helping it understand customers, a lot of new developments came off the back of it. It also has a very aggressive approach to business and took a hell of a lot of risks in the 1990s, most of which have paid off. This year saw its first fall in profits for 20 years. It took its eye off the ball and stopped focusing on innovation in the UK market, instead pushing international expansion. The senior management are going back to basics now’. Gray, D. (09/09/13). Tesco: How one supermarket came to dominate. Available at: http://www.bbc.co.uk/news/magazine-23988795. Accessed [23/11/14].

CMM115

Niall Byrne

B00660103

Principles of Marketing Tesco position themselves as a low price retailer, this is supported with their slogan ‘cheapest price everyday’. This position is very useful and tactical as Tesco gave themselves the appearance that they are always the cheapest company and customers will get the cheapest prices at their stores, their slogan also helps as customers have the idea that Tesco is the cheapest at the back of their mind. Tesco also have themselves positioned as a respectful company, this is that if they receive your loyalty they will reward you. Their clubcard is a perfect example as every time the clubcard is used at Tesco they send out vouchers that give the customers money off their next shop or money off one of their most frequently bought products. Another position Tesco has is that when their customers change, so to do they and this is when current trends change in markets so take keep competitive, Tesco will always aim to try and keep up-to-date and aware of customer changes so that they can remain at the top of the market. What is unusual about Tesco is that more than any other grocery retailer they have multipositioning, this is that Tesco, Tesco Extra, Tesco Metro and Tesco express all support the power of the main Tesco brands but all have their own different positions and purposes. Tesco Extra has a position that they want to try offer customers more than just food that is furniture, toys, TVs etc while Tesco Metro and Express are the more inner city shops by which they just offer more essential products that people will want to quickly come in and out, the Tesco Extra is the outer city shop that tries to draw in customers to make a big shop and spend more time in their store. Conclusion ‘We should discard the old, unquestioned assumption that demography is always the best way of looking at markets. Markets should be scrutinised for important differences in buyer attitudes, motivations, values, usage patterns, aesthetic preferences or degree of susceptibility’. Yankelovich. (1964) McGoldrick 2nd Edition Retail Marketing. London. The McGraw-Hill Companies. ‘A lifestyle retail organisation is one that bases its strategy and operations on unique living patterns of its target customer, rather than on demographics or merchandise strength’. Blackwell and Talarzyk. (1983) McGoldrick 2nd Edition Retail Marketing. London. The McGraw-Hill Companies.

‘Strategic positioning involves providing unique value. The retailer must first identify a specific consumer segment, then gain a thorough understanding of it, including what kind of goods these people want to buy, how they want to shop for them, and what auguented benefits and services they expect’. nd

Wortzel. (1987) McGoldrick 2

Edition Retail Marketing. London. The McGraw-Hill

Companies.

CMM115

Niall Byrne

B00660103

Principles of Marketing

Reference List Suttle,R Ries and Trout Gray,D Yankelovich Blackwell and Talarzyk Wortzel

CMM115

Niall Byrne

B00660103...