Discuss about the Marketing Strategy Development of Tesco.
Marketing is always an integral business tool that elevates a business position in a competitive market. Perception around marketing has varied expression. To some firms marketing is a total concept of promotion business while others consider marketing as an inseparable division of corporate which look marketing as a vital discipline. Based on marketing several strategies branch out and therefore marketing is sometimes viewed as strategy. Whatever be the expression based on marketing the focus remains to promote business to drive it to achieve more sales aiming for a stable profitability (Belz and Peattie, 2009). This report is based on Tesco with focus on the overall strategy and their development for the firms ‘success in the retail industry.
Brief description of organisation Tesco
Tesco is a multinational grocery based in England. Across the world this company is regarded a third biggest retailer in terms of profit earned. The company was founded in the year 1919 and from the early period of 1990 the company started diversifying its business. It had huge shift from high volume low cost retail firm to most appealing organisation through numerous social groups by the large range of products. Tesco is listed with London stock exchange.
The mission statement of the company is synonymous to the aim of business with its caring attitude towards the environment and community in equal measures. Mission statement identifies the company a most conscientious for the all stakeholders (Chaffey et al, 2009). The mission and goals of the company are interconnected. The mission statement of Tesco is “We make what matters better, together”
The company has its values which assist to keep the core principles into practices. In presenting the values of the company in statement arrangement, that looks as below
‘Tries harder for customers, we treat people how they like to be treated and every small help makes a big difference’’.
Tesco offers large ranges of products to markets. Products are grocery products, home electronics, wine, dvd rentals. Tesco’s diversification moves included retailing of items such as clothing, electronics, books, toys, petrol, furniture, software, internet services and telecom (Chandra, Styles and Wilkinson, 2009).
Tesco has its own orientation that caters market places with focus on marketing. The marketing concept is an orientation of the company that relates its brand effort and product values to the expectations of the potential and existing customers. In the products of the company, marketing as an orientation justifies its value proposition. As an example, retail industry has several competitors. Marketing efforts keep them thriving. Holistic approach is the part of marketing efforts of Tesco and this approach has kept the company on the frontal view among customers (Czinkota and Ronkainen, 2013). Tesco’s marketing concept of orientation considers that customers’ needs and expectations are always kept in mind while devising strategies. The holistic approach of Tesco is taken to all layers of the company culture to improve customers’ experience better in retail industry. In the year 1990, while severe competition crept into the industry of retail, some marketing moves initiated by Tesco strengthened its position in the market. Customers kept coming back to Tesco stores as the company launched reward system for customers against their purchasing of items (Douglas and Craig, 2011). Tesco stressed on venture brands and one of the most remarkable was ChokaBlok ice-cream. The aim behind venture brands was to disassociate the products from Tesco brand so that these could be sold to non competing retail firms. These venture brands were meant for keeping at Tesco stores only and there were some degrees of exclusivity in the products increasing the brand appeal of Tesco although the products were not under the Tesco brand. In 2015 Tesco had launched a scheme named ‘brand guarantee’. Under this scheme the customers were promised a refund if some products were more expensive as compared to the competitors.
Brand reveals a bundle of emotions which a company like Tesco enables its customers to associate their emotions with. Therefore brand becomes foundation of all marketing efforts (Dow and Larimo, 2009). Therefore brand names attract customers and if the the brand is strong then marketing revolving it becomes effective and possibly helps much for market development.
Analysis of 5Cs for the company
- a) Company
Strengths- wide presence in market across north and South America, Asia and North Africa, operational effectiveness, high numbers of products sourced locally, diversified product line, high level of brand equity.
Weaknesses- profit levels were affected from bad debts and claims on household insurance, few controversies dented the brand image.
Opportunities- brand emergence in emerging markets, capacity of rebranding some stores via promotions through digital media, ability of acquiring small firms of retail chains.
Threats- costs of raw materials are increasing, increase in competition from other retail companies, needs of maintaining low cost operation as per requirement during economic downturn if any arises.
- b) Customers
Tesco has huge numbers of customers regardless of age. But they fall into categories of having high and low or moderate spending capacity. This division of customers enable Tesco to personalise its websites for persuading them to search for items suitable to their needs (Ferrell. and Hartline, 2012). Customers are upmarket buyers and hard-up buyers. Upmarket customers are those who hardly wants to cut on expenditures while selecting and purchasing Tesco’s products and hard up buyers are more considerate in picking costly items and they prefer less costly products to purchase..
- c) Collaborators
Suppliers- Tesco works with suppliers who are reputed manufacturers of products which are kept in Tesco stores. Therefore suppliers of Tesco ensure products quality and meet the quest of Tesco in terms of search of excellence. Tesco’s suppliers are highly reputed and distinguished from the countries like USA, Japan, Germany, France, and Sweden (Fletcher and Crawford, 2013). Suppliers and distributors are the parts of the wide network Tesco has to encourage collaboration, knowledge sharing and innovation. Tesco is famous for its producer network who serves fresh food makers and the Tesco knowledge hub that was open to branded manufacturers. Tesco’s distributors are big firm who keep the supply chain network of the business effective. Suppliers and distributors of Tesco look for strategic relationship and unhindered supply chain. There are numerous partners of Tesco including suppliers and distributors who are inspired by the partnership approach of the company along with ethical trading policy to satisfy needs, the customers do have (Freng Svendsen et al, 2011). The names of the suppliers of Tesco are Tata motors, secureseal, Verizon, RedPrairie, IBM.Amscreen, Samsung, Vanderlande, Facebook, and Cancer Research UK. They are all collaborators and share strategic relationship for materialising the dreams of excellence of Tesco.
- d) competitors- The company faces tough competition. Retail companies always confront with competitors which are Sainsbury, Wal-Mart, Marks and Spencer’s. Retail market is full of competition and initial investment for a new venture is costly. But the aspect is promising for aspiring business firms that the industry offers great growth. Innovations and knowledge are the important metrics which can create differences. A new entrant can be potential competitor if innovations and knowledge about markets and customers are developed by it. Still the threat of new entrants in this industry is not so high and is only moderate (Hollensen, 2015).
- e) Context- the business of Tesco are bit affected by some factors which are not within the control. These are the following
Political- Political instability has become a concern in many countries of operation.UK is also not an exception. After the phenomenon like Brexit there are some uncertainties policy formation and implementation affecting the operation of Tesco. UK government does not want its people to be extravagant and they need to be careful about their spending. There are factors like rate of interest and inflation which altogether influence the customers purchasing ability and willingness (Leonidou, et al, 2010).
Legal-Legislations have great impact. Employment rules, trading policies, legal aspects, tax structure are all influential in affecting the business of Tesco.
Economic-rate of unemployment is not a big concern but still there is absolute economic austerity encouraged by UK government. Interest rate is a big deciding factor which has influence on customers’ mindset. The cost, price and demand are three elements which have their gripping on Tesco and accordingly business gets affected. Slowdown on food market globally is another factor beyond control of Tesco (Mitchell, Wooliscroft and Higham, 2010).
Social- the growing heath awareness among customers has forced Tesco to think for more improvement in quality. Consumers are more focused on non food items while making their purchase decisions.
Technological- Technological improvement and its requirement in business process have helped the company to initiate efficient customer response and RFID as two vital systems for ensuring innovation and customers’ satisfaction (Morgan, Vorhies and Mason, 2009).
Environmental- Concerns for environment leads the company to think for sustainable practices for protecting environment. This is also driven by law relating to environment. Tesco in its corporate social responsibility has included policy for environmental protection by reducing degree of pollutions.
How does Tesco collect information?
Thus need for data collection for understanding customers, competitions, business contexts is strongly felt by Tesco although the company has a firm position in the market. Tesco opts for market research and market intelligence to understand the mood of business environment.
Observation-super markets or hypermarkets come to know about the mind frame of customers by directly monitoring their behaviours. They observe how customers do react to a product, what are their sayings about the products, if any store display or product features catch their fancy. This offers them the direct knowledge about customers and competitors as customers often talk about competitors and their refusal to accept products or their dislikes throw some hints about competitors (Morgan, Katsikeas and Vorhies, 2012).
Test marketing- This is a bit costly method but is used by Tesco to know the market conditions. Tesco prior to launch some products with a purpose to prejudge the popularity targets a market wherein the products are launched. This helps the company to understand the popularity of the products.
Survey-Tesco opts for survey for directly interacting with customers at high street stores. Customers express their answers in a questionnaire which helps the company to judge the market conditions. This also helps Tesco to understand the choices and spending patterns customers do have and the further evaluation of their feedbacks help to understand the external factors affecting the spending capacity of customers and to what extent company is affected from the factors (Murphy, 2010). As an example low spending capacity is caused by some economic factors and these can be understood when customers express it as a concern through their feedbacks.
Tesco’s market intelligence acknowledges the essence of understanding competition and in this effort the company puts stress on competitor analysis. This includes evaluation of competitors’ objectives, competitors’ strategy, competitors’ assumptions, competitors’ capabilities to have an edge over competitors in market.
Suppliers of Tesco are among its collaborator and their behaviour forms a set of knowledge for the company to understand market and business environment. Suppliers’ bargaining capacity and their importance on business get evaluated so that business can be managed more efficiently. Supply market assessment puts Tesco ahead in competition as supply arrangement and market situations become understandable (Nijssen and Herk, 2009). Also suppliers who the firm has strategic relationship with, help to know the important changes and aspects in the market and competition along with market trend and consumers’ behaviour.
Development of market strategy
Choice of target market
Tesco has core components in the business. One is to provide its consumers with good quality items at prices that suit their financial capacity. This means the quality is not compromised but some products are priced higher thinking about the premium customers. Another one is that local peoples are put first in the business tactics by the company. Accordingly Tesco choices its target markets. The target market is classified into the segments to reach out to the diverse customers. Tesco targets high street customers and at the same time wants that it must not be perceived that the company caters to wealthy customers only (Papadopoulos and Heslop, 2014). The company must asserts that the customers are in categories of high income with needs of good quality and low incomes with also need of good quality. Because quality remains intact for both types of consumers, Tesco looks at the quality aspect with higher importance. Tesco must view its products as value for money and also needs to ensure the customers that expenses they make to purchase products are justified. Finally, Tesco needs to target its customers who want good products of good value in terms of price and quality.
Value proposition for the target market
Tesco assumes three vital quadrants in its value proposition concept for target market. These are cost, quality and delivery. Among these the company always thinks on some metrics for increasing the overall brand value than its competitors. The company needs to have some core functional aspects in its value proposition. These are thought on competitive advantage which keeps priority on reduction in cost and competitive cost, innovative resolution including knowledge amalgamation, innovative ability, improved innovation, and reliable design process (Papadopoulos.and Martín Martín, 2011). It is also recommended that Tesco needs to cultivate long term engagements with customers and collaborators like associates and suppliers to improve competitive abilities. Use of talents reputed across the world, achievement of productivity advantage and cost advantages are good options. A systematically powered design as well as development including analysis of product design, reduction in time of product launching could be of help to increase the effectiveness of value proposition for the target market (Shaw, 2012).
Positioning statement for the target market
In practice, Tesco uses functional and symbolic positioning for its target markets. Functional aspects and qualities are the core elements in this positioning. Improved functional ability is the basis that keeps the products at the fore and customers are informed based on this. Symbolic positioning adopted by Tesco targets to reach at emotional level of customers. An example of this is refusal of using cotton in clothing as cotton industry employs huge numbers of child labour. This promotes the company’s fair-trade practices and also brand appeals get improved to customers. The recommended positioning for the company is to lay focus on price positioning. Price positioning is likely to help the brand to reach to the maximum customers to whom price plays a decisive factors in making purchase decisions (Varadarajan,2010). The company needs to convey the brand message that quality is always kept intact even prices is cut down. This will help Tesco to reach to both high and low income people as price as an element is always vital to customers regardless of their income and financial status in society.
Recommended positioning statement of Tesco
Here in Tesco, value, quality, price factors and satisfaction criteria for customers are blended in all products which are uncommon among other brands in the industry. This is ensured by efforts, thoughts for customers and innovation and pricing strategy Tesco puts into practice for serving the valuable customers in the retail industry.
Developing marketing tactics
Retail marketing mix for Tesco (7 Ps)
The each component in marketing mix relates to a better marketing tactics for Tesco.
Products- products are diverse which are appealing. Tesco needs to put stress on products which are locally sourced and need to be kept on display accompanied with tag of being locally procured. But the relationship with collaborators must not be affected. Tesco has many products under its own brands like Tesco Kipa, Tesco Lotus, Tesco Bank and others. Availability of products will depend on kind of stores Tesco has (Varadarajan, 2010).
Price- It is more vital element and therefore Tesco must keep it price adjustable with the capacity of customers to pay for purchasing products. But low cost strategy for all will not be suitable for the company. High priced luxury products aimed for premium customers is a good option as it will not affect the low income group customers. And also the vanity of premium class customers will be maintained by the pricing.
Place- Tesco has different sized stores from Tesco super store, Tesco metro, Tesco extra, Tesco express. Efforts must be there to accommodate all types of products in these stores so that customers will access to the products always at the time of requirement. In Tesco Extra which is a hyper store, all products must be properly displayed for attracting customers’ attention (Shaw, 2012).
Promotion-Tesco club card is a loyalty card which can be promoted to attract more customers. Therefore Tesco club cards need to be advertised along with other products to boost sales. Online advertisements particularly social media advertisements are good promotional platform for the company.
People- Tesco employees are key resources to improve the quality of service marketing. Thus a good focus on their motivation is always important. Proper manpower selection and their training remain vital as these will determine their performance and success for Tesco in the retail industry.
Process- This is the centre of the services and flawless operation. A viable business process is dependent on integrated information technology and automation process with online and offline selling options (Shaw, 2012). These can ensure most advantageous position for the company.
Physical evidence- stores layout, colours of interiors and products positioning must be attractive for attracting customers. These all need to convey the evidence of brand and the truthful presence of brand Tesco to customers at the time of their visit at the stores.
Tesco is a giant retail organisation with its dominance in the retail sector for long. A successful marketing strategy is a key contributor to the overall organisational development. In this report several essential factors relating to the company has been discussed. A well developed marketing plan includes marketing mix as a viable strategy which is also important for Tesco to stay in the competition with success.
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