Tesco Marketing Strategies Submit PDF

Preview

Summary

business 4.1...

Description

ASSESMENT: TESCO MARKETING STARTEGIES, POSITIONING AND SEGMENTATION

MARKETING REPORT

MODULE LEADER: MUHAMMAD KAMRAN

STUDENT NAME AND ID:

SUBMISSION DATE: Tuesday 11th August 2020

Content

1.0 Introduction.....................................................................................................................................5 2.0 Marketing strategies and Position....................................................................................................6 2.1 Brand Positioning........................................................................................................................7 2.2Diversification..............................................................................................................................8 2.3 Advertising and Promotions.........................................................................................................9 3.0 Market segmentation criteria.........................................................................................................11 3.1 Demographic Segmentation.......................................................................................................12 3.1.1 Social status........................................................................................................................13 3.1.2 Age......................................................................................................................................14 3.1.3 Gender................................................................................................................................14 3.1.4 Race, nationality and Religion............................................................................................14 3.2 Need-based Segmentation..........................................................................................................15 3.2.1 Problem solving..................................................................................................................15 3.2.2 Functional Needs................................................................................................................16 3.2.3 Emotional Benefits.............................................................................................................16 3.2.4 Value alignment..................................................................................................................16 4.0 Conclusion.....................................................................................................................................17

LIST OF FIGUR Figure 2.1 UK supermarket share ................................................................................................................5 Figure 2.2 Tesco Marketing strategies..........................................................................................................6 Figure 2.3 Total Sales...................................................................................................................................6 YFigure 3.1 Tesco Market Segmentation Criteria ........................................................................................8 Figure 3.2 Social class distribution.............................................................................................................11

LIST OF TABLES Table 1.1 Tesco Sales Growth.....................................................................................................................16

Abstract Tesco is a Public Limited Company in retail business operations. The company has seen growth since it was found from a group of grocery store to a British Multination retailing in diverse range of goods and services. The company has been in existence for close to 100 yrs. and this report seeks to find possible marketing strategies the company has adopted that have contributed to its success. The customer shopping behaviour has been constantly changing throughout its years of operation. There has been an ever-shifting change in customer taste and preferences. Tesco has been constantly adopting and changing its market segmentation strategies to reach potential customers. Demographic and Need based market segmentation strategies are examples of the strategies the company could adopt to continuously meet customer demand and increase its market. This are some of the factors that have contributed to the writing of this report to analyse Tesco Marketing strategies, its current market position and an evaluation of its market segmentation criteria.

1.0 Introduction Tesco founded in 1919 by Jack Cohen has over the last century it has established itself as Global Multinational trading in groceries and a broad variety of general merchandise. Its headquarters are located in Welwyn Garden City, England. Cohen had the intention of creating a number of stalls to sell groceries in surplus. The first Tesco shop opened doors in 1939. Business was booming and within the next ten years the company had over 100 shops spread across the country. In the 1970s the customer shopping behaviour evolved with establishment of supermarkets. Tesco strategically expanded and invested in opening up stores across England to meet customer demands. Tesco is rapidly becoming one of the largest supermarket chains in the world (Aaker and McLaughlin, 2010). Tesco PLC now boast as being the most popular supermarket retailer in the UK reaching 22.7% of the retail shoppers. The company 9th in ranking globally based on revenue amongst the big groceries retailers in the world with shops in 8 countries. Initially specializing in retailing of groceries, the company has diversified its products its and now retails in: banking services, stationeries, electronic hardware and software, furniture’s toys and clothing. Originally a high-end retailer the company in the 1990s re-strategize and repositioned itself as a low-cost retailer to expand its customer base. Tesco shares also trade at the London Stock Exchange with £18.1 billion in the market index. Tesco’s revenue in 2019 was close to 52 Billion Pounds an increase of seven billion pounds from the previous year. The company has experience a steady growth since 2016 Table 1.1 Final year

Revenue in Billion

2015 2016 2017 2018 2019

45 43 43.5 45 52

2.0 Marketing strategies and Position Tesco has become a household name in the UK and a big competitor in world retail. Tesco started from humble beginnings to grow to a big British Multinational. It has seen its growth from grocery stall gradually growing to supermarket stores in the 1970s and today establishing itself as one of the world’s largest retailers. The company has used strategies based on four key elements which are: pricing product, place and promotion (Farrall and Lindsley, 2005). Tesco has effectively adopted the strategy to lure in customers to its shops (Brassington, 2000).as at December 2019 Tesco Supermarket had a market share of 27% followed by Sainsbury 16% and Asda 15% in 2nd and 3rd respectively.

Figure 2.1

%Uk Supermarket Market share

23.00%

27.40%

7.80% 14.80%

11.00% 16.00%

Tesco Asda Sainsbury Morrisons Aldi Others

Tesco has aggressively and extensively adopted marketing strategies to reach foreign markets (Dunn & Mason, 2004). It now operates in 9 countries around the world. Successful marketing strategies have made the company a global player. Figure 2.2

Tesco Marketing Strategies

Brand Positioning

Diversification

Advertising and Promotions

Customer Retention

2.1 Brand Positioning. Tesco through the Founder Jack Cohen initially branded itself as a company retailing in groceries. Customers easily associated themselves with the brand which saw the company open up 100 shops in 10 years. Tesco retailed in large quantities of goods at low prices but repositioned offering low-cost products “Tesco Value” but also its premium priced products “Tesco Finest”. Tesco Value had been launched in the early 1990s the company had over 1200 products which saw 70% of the annual customers purchasing from the brand (Morris, 2004). However, the names were dropped and rebranded in 2012 to “Everyday Value” with

the company offering new product packaging and a wider range of products. This policy enabled the company reach customers with high and low incomes. Tesco launched Tesco Kids which is for kids between the ages of 5yrs to 10yrs (Morris, 2004). Tesco kids retails kid’s products ranging from: toys, clothing, stationery and snacks. Customers have been able to associate with the Tesco brand to deliver a wide range of quality products. In 2015 after a crisis period the company launched a Brand Guarantee scheme that would see the company refund its customers goods bought in a basket of 10 if they were found to be more expensive than in rival stores. The company wants customers to associate with it as a retailer that: saves them money, biggest range of products, best quality and with the best shopping experience. 2.2Diversification A big part of the company’s success is attributed to its ability to diversify to meet the everincreasing and changing demand in the market. Initially specializing in groceries the company increased its range of products to include household and clothing items. The company has continually expanded its products and today trades in: electronic hardware and software, clothing’s, furniture, kids toys, petrol, and banking services. The diversity of its products has enabled the company to evenly match competition. The company has increased its ventures by opening up subsidiaries under it. The main aim of the company to diversify was to fill existing market gaps and increase on sales. Tesco’s sales in 2015 were£177.5bn form its line of major supermarkets, convenient stores, discounters, online business and other business ventures

Figure 2.3

Total %Sales 8.00%

7.00%

5.00%

20.00%

Majoror Supermarkets Convinience Stores Discounters Online Business Other 60.00%

. Some of its subsidiary companies include: Tesco Stores ltd in retailing of groceries and household good., Tesco Bank for financial services and Tesco mobile for mobile services are some of its subsidiaries selling its range of products. It launched successful venture brand that included ChokaBlok Ice-cream, Yoo yogurt and NutriCaat cat food. Its shops have diversified to supermarkets, Hypermarkets Superstores, and Convenient Shops. Tesco ha for over the years experienced success in the United Kingdom and has seen I open shops I other countries such as Taiwan, Japan, South Korea, Ireland and Thailand (Haerifar, 2011). This has seen an exponential growth in the company’s size and revenues. 2.3 Advertising and Promotions Tesco has from the beginning used print and media forms of advertising to reach the market. Adapting the forms of advertising enabled the company do systematic targeting to reach potential customers. Most of the people today are often online and the company has in the recent years has opened social media account in Facebook, Twitter and Instagram some of its post have garnered over 2million likes in: Facebook. Social media pages have improved on

customer relations by providing a channel for customers to order goods ask questions, raise queries, and provide feedback. The company has had seasonal adverts and promotions like during the Christmas period where adverts in print and media are designed specifically for the celebrations to boom sales. During this period Tesco has had sales promotions for its customers. Customers can enjoy: free gifts, reduced prices, and club card points. The cost on company’s gross revenues for customer gifts and promotions is negligible compared to what a company stands to gain (O’Dea, 2001). 2.4 Customer Retention After creating market awareness through its various forms of advertising and attracting new customers, there’s was need for creating customer loyalty. Studies have shown a company can increase its profits from a range of 25% up to a high of 85% by reducing a 5% loss of its customers (Reichheld and Sasser, 1990) to achieve this Tesco adopted strategies to ensure it acquires and retains its customers. The company initially launched the Green Shield Stamps which rewarded customers’ points on every shopping. The card did not collect any customer shopping behaviour records. To solve the problem, the company launched Tesco Club card which not only rewarded customers’ points but also collected their shopping data. The Club card reward system for customers turned out to be a very successful move that has become a major driver for Tesco's company increasing successes it ensures that there is an everincreasing customer base (Durbin, 2008). Tesco had adopted Club cards which gives shoppers points each time they shop in Tesco or its associate outlets. The points can be redeemed in to cash shopping vouchers. Digital Club cards are now in use and are more customer-friendly. Loyalty programs and reward systems have been found to improve on customer loyalty behaviour (Sharp and Sharp, 1997).

From information collected on Club cards the company has been able to analyse customer shopping behaviour. This has enabled the company make not only targeted adverts and promotions but also to ensure they are able to meet their customer demands. The selling of good quality products by Tesco has also ensured it retains its original customers as the quality of goods and services so not compromised. 3.0 Market segmentation criteria Market segmentation in Tesco has enabled the company to understand and analyse the industry and characteristics of potential customers. Tesco should adopt the best marketing strategies in the market to reach customers. An effective market segmentation strategy will enable an easy understanding of consumer needs. Market segmentation criteria should be based on the geographical, demographic, psychological, and behavioural variables. Shoppers' behaviour is different influenced by varying taste and preferences. However proper market segmentation criteria groups’ people with common needs together for easy customer analysis and satisfaction of needs. Tesco understanding its market segment will give it a competing advantage in promotion of its products. Communication among different market segments can power up sales and popularity of a product within groups Companies that have proper market segmentation strategies enjoy increased sales, better products and good customer relations as customers can easily identify themselves with the company.

Figure 3.1

Market Segmentation Criteria

Demographic Segmentation  Gender  Age  Social class  Age, Race and Nationality

Need-based Segmentation Problem Solving Functional needs  Emotional benefits  Value alignment  

3.1 Demographic Segmentation. Demographic market segmentation is a form of market differentiation based on: age, gender, levels of income, occupation, education, religion, race and social status. Demographics can be used by Tesco to target customers more accurately. Tesco serves 8 countries and this sees a

change in tastes and preference across in populations. Demographic segmentation ensures you can easily get market data and adopt the best marketing strategies to reach the targeted group. A big part of Tesco’s success can be linked to its efforts to satisfy customer needs (Tesco, 2011). It also ensures customer loyalty as the organization gets to understand its customer needs and with customer’s satisfaction brand loyalty is achieved. 3.1.1 Social status Segmentation based on social status is very important to a company as it greatly influences pricing. Manufacturers now produce a high end to low price goods. Tesco had 0ver 10million customers and the market was segmented with 24% having upper incomes 53% middle income and 23 % with low incomes. A further analysis and evaluation of the data on customers that visit Tesco shops showed that 35% of the correspondents had a full time job , 20% partly employed ,15% pensioners,105 students and 20%others. Figure 3.2

Distribution according toSocial Class

20.00% 35.00%

10.00%

15.00% 20.00%

Full time employed Partr time employed Pensioner Student Others

Tesco introduced the different brand to satisfy the different market segments.it introduced brands like Tesco Organic, Tesco Kids, Tesco Value and Tesco finest (Seth and Randall, 2011) Segmentation based in income has seen Tesco Adopt Tesco value products to reach lowincome consumers. Tesco finest is for premium customers who would identify with luxury over price. This has enabled it to reach low and high income markets. 3.1.2 Age Segmentation based on age is one of the main critical ways of market segregation. It groups people born around the same period and growing up with similar trends and experiences together. An example is Tesco kids which was launched for kids aged between the ages of 5 to 10 years. This enabled the company to systematically target the age group by availing a ray of products like toys. Age will also influence the company’s marketing strategy as different generations associate with different media tools. A younger generation could easily be reached through social media while an older audience would be reached through tools like newspapers, TVs and radio stations. 3.1.3 Gender Men and women are different in manty ways both physically and mentally. This creates a diverse difference in their tastes and preferences. Male and female products vary in range and there is need for Tesco to meets needs of both genders. A change in taste will vary in certain goods including perfumes, electronics, clothing, and footwear. Segmentation on gender grouping can be a big boost for the company as it will be able to easily associate with gender and availing their most preferred products. 3.1.4 Race, nationality and Religion Demographic segmentation based on religion race and nationality also is important. Customers have different set of beliefs and practices. Tesco being a global company has a

different set of customers from region to region. An example is alcoholic drinks. Which in some cases is not an accepted beverage especially in the Middle East countries or Muslim communities. This variable would also affect Tesco marketing strategy especially in advertising. Adverts should also be designed in accordance to the norms and traditions of different cultures and people. Different religions accept different goods with some being strongly condemned. Religion segmentation will also ensure that the company is able to meet customer demands during religious celebrations like Ramadhan and Christmas. 3.2 Need-based Segmentation. In need-based segmentation an audience is groped together based on its needs. In the past it was assumed med that customer behaviour was influence by fixed personality traits such as age, social status, and gender, Studies have shown that more complex factors play a role in determining demand depending on the need product fills, Tesco through extensive market research should carry out studies to enable them have the right products based on underlying needs. Need-based segmentation is divided into four categories: 3.2.1 Problem solving. Products and services are designed to solve a problem a customer group is experiencing. A range of products Tesco company offers has solved many market problems Poor services, a lack of variety to choose, and high prices are some issues consumers had constantly complained about. Tesco has tried to solve the providing a variety of goods of best quality and prices while offering customers the best shopping experiences. For Example, Tesco offers a range healthy diets recipes and groceries to meet increasing consumer demand for healthy goods The Company has also established convenient shops in residential areas which allow customers to access sh...