An Overview Of Tesco Marketing Marketing Essay

In this report we have discussed briefly about the different strategies in marketing that are being adopted by TESCO for their sales across the global market. In the following report we have analyzed the four key aspects of marketing such as company orientation, competitive advantage, marketing mix and SWOT analysis. The segments of B2B and B2C of the SWOT analysis are being well examined. We have discussed the various theories that can be implemented by the organization.

“At Tesco, the philosophy behind Every Little Helps is at the very heart of everything we do. It’s not just a marketing slogan, it’s what makes us different.” – [TESCO]

Tesco is the largest giant in grocery retailing in UK and it stands as the third largest retailer across the globe and it is the largest e-supermarket in the world. It has started its carrier in United Kingdom and at present it has stepped into 13 other countries in Europe, Asia and currently USA in the name of” Fresh and Banner”. It has more than 4,300 stores in UK. It is known for its valuable product at low cost. It has its operation in food, clothing, financial service, telecomm, gas stations, insurances etc. Tesco is having more than 4.6 million people using their credit card and their insurance policies. Tesco apart from their business and is doing services for the welfare of the people.

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Tesco was founded by Jack Cohen in 1919 in the East End London stall. His first sales were £4 in which he made a profit of 1£. His carrier started like this and the brand name “TESCO” was formed in 1924 and it opened its first store in Burnt Oak. In 1932 it became a private limited company and in 1947 it s share price was 25p. It slowly expanded by buying some rival shops and expanded its conquer over the shops. AS a result in 1961 it was recorded in the Guinness book as the largest store in Europe. In 1970, revolution of supermarkets was developing, because people could get the entire product in a same place and saved their time. Tesco in 1974 has opened its first gas station and it was the largest retailer in petroleum where their sales were £1 billion in 1979 and by 1982 it was doubled to £2 billion.

Tesco launched the “ Value Range “ in 1993 and after two years it launched “Club Card Scheme” in 1995 , which got more popular in between the people .As a result, Tesco overtook Sainsbury’s which was holding the first place in UK as the largest food retailer till 1995. Followed by this Tesco stepped and launched its supermarket overseas.

In 2000, Tesco launched Tesco.com and where the revolution of online supermarket was booming. By 2001, it reached £1 million price cut and “Customer Champions” was introduced for the labours to develop the customer service. By the end of 2004 it stepped into some parts of Asia and they launched their own brand Fair-trade range. Simultaneously it entered the telecommunication sector and launched its broadband service, with a music download facility which was for the first time done by supermarkets. Tesco had a profit of £2 billion in 2005 and it launched ‘Tesco Homeplus’. Followed by this Tesco Direct was introduced for developing the online purchase.

USA has the launch of ‘Fresh and Easy’ by Tesco in 2007. In South Korea it has conquered 36 hypermarkets to its name. They launched Discount Brands and Personal Finance. In 2009 Clubcard was re-launched for the customers to double their points on vouchers by spending £150million.

Tesco in 2010, announces to save carbon by a new innovative packing. It has over a profit of £3 billion which was 5.5% higher compared to 2008 and it ranks third in the globe ranking behind Wall-Mart and France’s Carrefour.

MARKET ORIENTATION:

Market orientation is the core of retails brand strategy. Most retails, they sale same goods as their competitors, the key is they have to create their own unique market position, through their market orientation to distinguish with their competitors.

“Market orientation is concerned with the processes and activities associated with creating and satisfying customers by continually assessing their needs and wants, and doing so in a way that there is a demonstrable and measurable impact on business performance.“ (Uncles 2000: 1)

TESCO is a customer-oriented British retail giant. it is a prime example of a market oriented company. For TESCO, “customer-oriented” is their core objectives they always hold on, under this guidance, company’s overall strategy is committed to a long-term development, adhere to “create value for customers, win their loyalty for life”

Components of a Market Oriented Company:

There are three major components of a market oriented company,

1. Customers Focus

Tesco is popular for his price and service. If you visit Tesco’s web site, you will see such as “Happy shopping every day””you do not have to queue”

Listen:

Tesco gathers suggestions and requirements from thousands of customers, they know lots of people busy working whole day, with this in mind, Tesco use “you don’t have to queue” as their new advertising.

Solve:

If you do not satisfied with the goods what you bought from Tesco, you can bring it back in 28 days, Tesco will pay back your money.

Impact:

Rather than make profit and competing, Tesco focus on environment protection, in2007, the fourth environmental store was opened in UK.

2. Competitor Focus

“Understanding the profit pool of your industry-where your competitors really make money-can open your eyes to new opportunities” (Fredman 1999: 201)

Tesco provide same quality products and services as his competitors, but their price will lower than his competitors, “low prices everyday” and “the price are good for you “are their advertising, there’s no rivals can be able to sale the same products with a lower price than Tesco, because they sent price inspectors every week..

To create a superior product, customer satisfaction is not the only requirement. We have to know the competitors and identify if the competitors are the alternate satisfiers for the potential and current customers. In competitor focus, we will look along the following lines:

· Product Differentiation:

Tesco provided some different products and services from his competitors. Tesco has effective use of club card to collect a lot of information with a variety of analysis, such as regional analysis, store analysis, product line analysis, these analysis of data help Tesco to segment the market more efficiently .also, they start to use new productions and services. More ever, according to some customers interested in net work, Tesco started their on line marketing, delivery goods to your home, just access the “tesco.com”, on line shopping is very easy and convenient.

· Product and Market Diversification:

Tesco was started his business with food. However, at the end of 20th century, Tesco’s business has accessed to financial, net working, telecommunications, tourism and other fields. For example, in 2003, Tesco cooperate with MMO2 which is a net work operator, to start their own branded mobile phone service. Because they know Britain is the second largest mobile phone market in Europe, there are 50million peoples use mobile phones.

3. Interfunctional Orientation:

The third and final component of Market orientation is interfunctional orientation.

” The achievement of customer satisfaction relies on integrated effort. The responsibility for the implementation of the concept lies not just within the marketing department. The belief that customer needs are central to the operation of a company runs right through production, finance, research and development, engineering and other departments.” (Jobber 2004: 5)

MARKETING MIX:

Marketing mix is one of the most important elements of marketing mix. It elements are basic, tactical components of marketing called as product, price, place and promotion or very well known as 4p’s. Every element of a product is very important from organisation point of view missing of element may harm the organisation a big deal.

PRODUCT:

Product is the most significant element of marketing mix, without which the process of marketing mix cannot begin. Product contains two elements tangible as well as intangible. Tesco as a retailer satisfies both the elements of product as the tangible product (book, wines, DVDs, fmcg, grocery etc.) as well it satisfies the intangible element of a product (brand value, customer satisfaction, etc). The company has various brands in products and also their own brand of products with good quality and quantity which satisfies the need of various costumers. Tesco is biggest threat to the other retailers of UK because of its diversification, expansion and improvement in the retailing which makes TESCO understand consumer needs and grab the maximum market share.

Core product is one of the important aspects of product. To differentiate the products from other brand it should have a bigger brand value (Tesco value) which has an input of both quantity and quality, and it offers better service to the costumers, by which the organisation makes the product to complete its cycle by transforming itself into augmented product

In addition to tangible products and services organisations have made an improvement in the concept of PRODUCT. Product marketing can be classified on the basis of ORGANISTION, PERSON, PLACE and IDEAS. (Kotler, Armstrong, Saunders, Wong 2002)

1) ORGANISATION:

Organisation for promoting their business carries out various nonprofits oriented activities this are done by the organisation in regular intervals of time which results them in promoting their brand which results in increasing their market share and costumer attraction in long run process of business.

“TESCO OPENS FIRST CARBON NEUTRAL STORE”

TESCO super market has opened its first zero carbon zone. (MINTEL 03-02-2010)

In the phase of this modernisation there are hardly any places left which are pollution free TESCO in regarding to this has taken a very important step to create people attraction and developing hygienic place for the people in the society.

2) PEOPLE:

Many of the organisations perform people marketing which helps the organisation to develop, maintain or transform the behaviour of the consumer. This even helps the organisations in living their impact on the people in society.

“TESCO TO OFFER FREE EYE CHECK UP IN 131 STORES”

Choosing glasses with optician TESCO intension regarding the people eye safety is a way of marketing a product looking from the people’s point of view. Tesco has launched new range of spectacles and promise to make the cheapest form of spectacles compared to other spectacles chain in United Kingdom.

(http://www.which.co.uk/news/2010/03/tesco-to-offer-free-eye-tests–204904

3) PLACE:

Place is a form of marketing where the decision is restricted in the hand of the government or the high range officials of a particular state or a country. Government of a particular country takes a step to change the behaviour of the people, have a positive impact on the economy, even to attract the tourists etc.

”INDIA CALLS ON TESCO TO REFORM FARMING INDUSTRY”

This step was taken for the benefit of farming economy in India and TESCO being among the top 5 retailers of the globe had to play a vital part. This would help the local farmers by getting good rate for their agricultural produce.

4) IDEAS:

IDEA is also a form of marketing. All the marketing activities which follow “Idea”, is a narrow concept of marketing. It can involve health campaigns, environmental campaign and donation for a growth of society. This marketing can also be called as SOCIAL MARKETING.[Kotler, Armstrong, Saunders, Wong,2002:465]

“RETAILER TESCO IS FIRST AT THE FOREFORNT AMONG UK GROCERS TO BE GREEN, AND PROVIDE GBP25 MILLION OF FUNDING TO UNIVERSITY OF MANCHESTER TO SETUP A SUSTAINABLE CONSUMPTION INSTITUTE” .(MINTEL 03/02/2010)

Social Marketing (IDEA) performed by TESCO is wonderful step to implement education in regard to sustainable consumption. This will have a positive impact on the people living in the society and develop a hygienic standard of leaving.

PRODUCT LIFECYCLE STRATEGY:

“The course of a product’s sales and profits over its life time, it involves five distinct stages: product development, introduction, growth, maturity and decline.” [Kotler, Armstrong, Saunders, Wong 2002:518]

Each and every company when they launch a new product they don’t expect their product to last in the market for ever. The product follows five stages.

Sale and profits over the products life from inception to demise

1) PRODUCT DEVLOPEMENT:

This is very first stage this can be also called as pre launching stage. At this stage companies Investment (cost) start mounting at that particular period Company expects future profits.

2) INTRODUCTION:

This can be also called as launching period. Introduction is a stage where the company expects limited sales with fewer profits which cannot cover the maximum investment (cost). In this stage company invests by knowing the peoples opinion and increasing the awareness of the product. (Advertising, Promotions)

“TESCO FIRST AMONG THE SUPERSTORES TO LAUNCH FAIR TRADE COTTON KNIT WARE AND DOUBLE THE RANGE OF FAIR TRADE COTTON SCHOOL UNIFORMS”

Tesco introduces a fair trade cotton clothes. This is an introduction stage of Tesco and it is also spending on promoting a product which specifies the price of the product and social cause behind producing the product, this will help them in creating the value for their suppliers and also increment in sales.

3) GROWTH:

This stage can also be called as the post launching stage. The company expects growth in sales and growth in profits as well.

“ONLINE SALES AT TESCO HAVE ROCKTED ALMOST GBP1BILLION, HELPING THE SUPER MARKET CHAIN TO POST A PROFIT OF GBP2.25BILLION THIS WEEK”

(25/4/2006)

Tesco has nearly 750,000 regular costumers and it takes order of 200,000 costumers per week. The number show the capacity of market share and this has been the reason for opening of a tesco.com warehouse in south west to full fill the needs of the costumers.

4) MATURITY:

Maturity is a very interesting period where we have immense of competition in a market different companies entering with the same of product where we find price wars this indirectly results in decrease in sales. To cope with this, the company starts diversification and might launch a new product or enter into different fields or find a different market for a similar product.

“TESCO SLIPS TO PLACE FOUR AMOUNG GLOBAL RETAILERS”

(THE TIMES 11/1/2010)

All the retailing giants showed a growth in their sales revenue but they got caught up at their profits they invested more to ensure that the shoppers kept spending. Tesco ended in 4th rank.

5) DECLINE:

Decline is stage where we have very less demand which results in less sales followed by less profit. The product might decline slow, rapidly or might stick at the same place for a very long period. The current society is habited for new quality of products and the manufacturer has to deliver it if he fails to do so than his organisation may find itself in the decline stage of the PLC curve.

BCG MATRIX

Tesco introducing fair trade cotton clothes act as a question in the market as the product is just introduced in the market. Tesco in grocery is cash cow for them. An online sale of Tesco performs as a star. This strategy is used by many companies which help them to determine market place for their products. This also allows organisations to analyse their competitor’s strategy as well.

PRICE:

Price is most important element of marketing mix without price revenue cannot be generated. Price of the product helps the company in gaining back the all the efforts which are implemented to develop a product. Other three elements of marketing mix are just cost. Managers should understand how to charge a price both over charging and under charging will result in loss to the organisation.

(KOTLER, ARM STRONG 598)

THE DEMAND CURVE

Price plays an important role in the market as it is specified in the diagram. When the price is high for a product demand is low because it is not affordable by every consumer and organisation practicing this kind of strategy focuses to a group of consumers whose income level is above average. When the price is low demand is high for a product because the product is priced taking all section of consumers in mind. Tesco as an organisation uses strategy where the price is low which increases demand in the market for their products.

Pricing strategy for a new product:

Pricing strategy usually changes as the product passes through different stages in PRODUCT LIFE CYCLE. Product can be priced in four different strategies as shown in the above diagram.

While positioning a product managers have to look at different aspects of the product ie quality, quantity price demand etc. PREMIUM PRICING STRATERGY the quality of the product is high and charged lower price where as on the other hand side ECONOMY PRICING STRATEGY low quality product are sold at lower price. These pricing strategies can exist in the market where we find two types of buyer first one who are quality conscious and the second one who is quantity conscious. People who like to save money buy from 1GBP shop on the other hand people who are quality conscious buy from TESCO.

GOOD VALUE STRATEGY high quality products are sold at a premium price. This kind of strategy is developed to setback organisation using premium pricing strategy. This pricing strategy develops good market share of a organisation. OVERCHARGING STARTEGY low quality products are charged at a very high price. Organisation using this kind of strategy doesn’t last in the market for a longer period of time.

Further pricing strategies are divided in two parts:

MARKET SKIMMING STRATEGY:

It can be defined as “setting a high price for a new product to skim maximum revenues layer by layer from a segments willing to pay the higher price the company makes fewer but more profitable sales”

(KOTLER, ARMSTRONG 598)

When companies invent a new product with high technologies they cover their production cost by charging higher price. Charging higher price shows the product uniqueness and also allows the organisation to cover the investment cost in small period of time.

MARKET PENETRATION STRATEGY:

This can be defined as “setting a lower price for a new product in order to attract large numbers of buyers and large market share”

(KOTLER, ARMSTRONG 599)

Organisations which follow this strategy charge very less price for their product which facilitates the organisation to increase their market share with more revenue and no profit or more sales and less profits. This strategy helps the organisation in cost cutting of a product in long run and increase in sales which indirectly results gain of good profits.

“TESCO EXTENDS DOUBLE CLUBCARD POINT OFFER”

Tesco retail giant in UK industry also follows the market penetrating strategy. Double club card point launched by Tesco encouraged more than 1 million new buyers to sign up and receive the club card benefit. This strategy helps the organisation in cost cutting of their products and also increasing their market share.

PROMOTION:

Promotion is also called as promotion mix. Promotion can be defined as “The specific mix of advertising, personal selling, sales promotion and public relations that a company uses to pursue its advertising and marketing objectives.” [Kotler, Armstrong, Saunders, Wong-2002:624]

In this modern world way of marketing a brand the companies approach towards the consumer has changed a big deal. Companies are using advertising agencies to know behaviours of costumers, intermediaries etc

Promotional mix is also called as communication mix. This consist specific blends of advertising, personal selling, sales promotion, public relations and direct marketing.

The five main promotional tools are as follows:

Advertising:

“Any paid form of non personal presentation and promotion of ideas, gods or services by an identified sponsor” [Kotler, Armstrong, Saunders, Wong-2002:626]

Tesco performs advertisement where medium like television, news papers etc to promote the product and also develop consumer attractions.

Personal selling:

“Personal presentation by firm’s sales force for purpose of making sales and building costumer relationships” [Kotler, Armstrong, Saunders, Wong-2002:626]

Tesco having cash and carry outlet is personal presentation of a firm for making sales of the product and club card is the form of developing relationship with the costumer.

Sales promotion:

“Short-term incentives to encourage the purchase of a purchase or sale of product or service” [Kotler, Armstrong, Saunders, Wong-2002:626]

Tesco providing double point club card offer to the costumers is a form of short term incetives where as Tesco providing bonus during Christmas to its employees is a form of short term incentives to its employees.

Public relations:

“Building good relations with company’s various public by obtaining favourable publicity, building up good ‘corporate image’, and handling or heading off unfavourable rumours, stories and events”. [Kotler, Armstrong, Saunders, Wong-2002:626]

Direct marketing:

Direct marketing is a key element of promoting a product. Direct marketing promotional strategy is used to sell a product to the targeted costumer.

Tesco is a best example of direct marketing of a product it target the costumers of each and every segment in terms of various product offered.

Communication:

Communication plays a vital role in promoting a product or a brand. Effective communication between the consumer and organisation helps to know the costumer expectation from the company and also organisations image in the mind of costumer. There are certain steps which have to be followed, in order to communicate and promote the product effectively in the minds of the customers. They are

* Communicating Based on the Audience

* Identifying the Objectives of Communication

* Developing the Message

* Medium of Communication

* Customers Feedback

Ø Communicating Based on the Audience:

The first and foremost thing which has to be followed in promoting a product is that a set of audience has to be clearly targeted in mind and then the process has to be started. The targeted set of audience can be their existing customers, potential new buyers and can even be a single. The targeted set of customers can also be grouped on the basis of their age group, sex etc which is related to the type of product that has to be promoted. The communicator should make a heavy impact in the minds of the targeted customers about the product which will be the considered as the first step of success in influencing the customer to purchase the product.

TESCO targets its audience based on its products, for example the retailing giant targets the females for its grocery products which is a huge success in terms of the promotion of the products.

Ø Identifying the Objectives of Communication:

The objectives of communication has to be determined by the communicator after deciding the type of audience they are targeting. The primary objective of the communicator should be to make the customer buy their products. The secondary objective of the communicator should be based on the following aspects,

The communicator should try to make the customer aware of the product and about the organisation. Even though the buyer has a prior knowledge about the company and its product but might not have a deep knowledge about it. So the communicator should make them understand the positive things about the products.

The third objective should be that the communicator should impress the customers by effectively communicating with them and make them purchase the product. The communication with the customer should be in a way that they should prefer the organisation products then the others.

Tesco is one of the few retail industries in the world which has some key objectives which helps them to market the products. Their objectives are,

§ To offer the customers the best value for their money

§ Satisfying the needs of the customer continuously.

§ Returns for the shareholders

§ Safeguarding the environment.

Developing the message:

The next step in the process of communication is developing the message which should get proper attention in the minds of customers, make them interested in the product, they should desire for the product and should take the appropriate action in getting the product. This process is called as the AIDA process which means

A – Attention

I – Interest

D – Desire

A – Action

The diagrammatic representation for the product is given below,

AIDA model

AIDA Model (http://www.davedolak.com/advtg.htm)

Attention: The product should get the interest of the people by the effective means of communication made by the communicator with the customers.

Interest: By gathering the attention of the customer the product should be promoted in such a way that it gains the interest of the people by its features.

Desire: The next step is to make the customer feel that he wants the product so badly which is a great success for the communicator.

Action: The final step in the process is the appropriate action taken by the customer to purchase the product.

Ø Medium Of communication:

The communicator must select the medium of communication through which he can communicate with the customers. There are two types of communication mediums which are Personal communication channel (Kotler, Wong, Saunder and Armstrong 2002: 639), Non-personal communicating channel (Kotler, Wong, Saunder and Armstrong 2002: 641).

* Personal Communication Channel: In this type of communication the communicator communicates with the customer one on one through telephone, email and even face to face communication can be done.

* Non-personal Communication Channel: In this type of Communication the communicator communicates with the customers through the medias such as television, news papers etc.

TESCO being one of the largest retailers around the globe communicates to the customers through the Non personal medium of communication.

Ø Customers feedback:

One of the main factors in the process of communication is to hear the feedback from the customers and trying to rectify the mistakes. If the customers feedbacks are heard and worked accordingly it makes the customer happy which drives the customer again in to the organization which helps to increase the sales revenue of the organization.

TESCO always hears the feedbacks from the customers and tries to rectify it which has helped the retailing giant to be one of the global leaders in the field of retailing.

PLACE:

This entails transferring products from manufacturers to intermediaries till it reaches the customers. It is defined as the process of functions that are involved in the clearly movement of products, accessories and finalised products from manufacturers through some process and the final customer. [Jobber, Fahy 2003: 236]

According to Tesco distribution is not just lorries and lots of box, they consider it as a more complicated thing, where it lies as an important aspect of today’s Tesco. They have a good distribution chain where they deliver the products into the shelves of their supermarket so that the customer need not wait or miss a purchase. http://www.tesco-careers.com/home/you/distribution

[http://www.bandk.co.uk/sectors/distribution/tesco-distribution-centre-goole/]

[http://www.dailymail.co.uk/home/moslive/article-1020934/The-terror-Tescos-finest–forklift-driver-Leicester-Somalias-feared-general.html]

Physical distribution is geared at providing channels and consumers with the desired materials and in the desired quantities, in the desired place, at the most appropriate time. It is the topic of managerial focus in the sense that it focuses on cost savings and enriching consumer satisfaction. Cost savings is gained by reduction in inventory level, by means of lower methods of transportation and shipping in larger portion than lower quantities. Major elements in physical distributions are customer service, order processing, inventory control, warehousing, transportation and materials handling. [Jobber, Fahy 2003: 237]

Customer service

This entails prompt delivery service and consistency within a specified time frame where goods are meant to be delivered. Customers satisfaction should always be considered at this point. Ways in which customers service standards can be enriched through availability and maintaining a demand time frame. [jobber, Fahy 2003: 237]

Tesco has several methods for serving their customers, they accept good not received in condition and unsatisfied products. They have the ‘Return Policy’, Tesco direct help, etc for the customers to review their products. A card fraud and return policy help the customer to get their money back if a card fraud occurs of if you are not satisfied with its products, can be return or complained within 28 days of the purchase.

Order processing

This involves how customers order are attended to .Minimising the time where a consumer places an order and the delivery time where the product would be delivered. Electronic media is a major fastener in this process where availability, consumer’s credit status, ordering the warehouse, debiting the consumer and updating records of inventory. (jobber, fahy 2003: 238)

Tesco PLC had a massive increase in its customer since 1996; it added many products in its non food products. To manage this massive growth it built the Tesco.com Service, where the customer could place their order online and this increased the order processing capacity. Tesco was the first ones to introduce online shopping in UK. This increased the sales by 25% until 2006. After the introduction of Tesco Direct it had 5000 orders per hour. To sustain and manage the online shopping it introduced the Tesco Direct.com in 2006, which have home delivery option from 2 hours for small items and from 2 days delivery time period for large items.

Inventory control

This involves the number of inventories that needs to be in place. There should be a balance between the need to have sufficient products that would meet consumers demand and at the same time meeting up with the cost of holding larger amount of inventories. The cost of having all products available might be relatively expensive and at the same time conclusions has to be reached as to when to order new products and this should be done before goods reach out of stock, because of time frame between placing order and receiving orde