Marketing Strategy of Tesco Report

About Tesco PLC

Tesco PLC is the most successful supermarket in the UK and boasts of a 22.7% market share in the UK. Tesco is rapidly becoming one of the largest supermarket chains in the world (Aaker and McLaughlin, 2010, p. 126). The company is ranked 8th among the top 10 groceries in the world.

Tesco has effectively matched competition from other rival supermarkets by offering its customers a variety of products such as fresh food, groceries, compact disks and clothing lines. Tesco’s remarkable achievements are attributed to several key areas such as customer service, price, e-commerce, distribution, own label products and loyalty cards.

Tesco strives to understand what the customers need and uses this information to add value to its products. Given Tesco’s success in UK, the company has diversified its operations to other countries. It currently has retail stores in several countries such as Taiwan, Japan, South Korea, Ireland and Thailand (Haerifar, 2011, p.11).

Tesco has launched aggressive marketing strategies to enter foreign markets (Dunn & Mason, 2004, p.2). The company’s international operations account for 15% of the group’s operating profits, 20% of the sales and 50% of the supermarket’s total floor space.

Most of the company’s international stores are located in Central Europe and East Asia. In addition, the company has acquired substantial market share in foreign countries using the take-over strategy. This strategy basically entails acquiring supermarket chains, getting rid of everything in the stores, recruiting local staff and improving the existing distribution channels (Seth and Randall, 2011, p.50).

Market Segmentation

Tesco segments its customer base by selecting, preparing and packaging daily products in various ways- from raw ingredients to ready-made meals, from value packs to gourmet treats, and from fresh products to frozen ones (Seth and Randall, 2011, p.26). Tesco continues to invest in new lines of products in order to create more choices for its customers.

For example, in 1999, it launched the Tesco Finest range which proved to be a huge success in the market. Tesco also re-introduced its Value packaging and launched new lines of clothing, Cookshop, groceries and stationery. At present, the company has over 1200 products in its Value range and approximately 70% of its clients purchase from Value brand (Morris, 2004, p.22).

The 10 million Tesco’s customers are segmented as follows: Up-market (24%); Mid-market (53%) and less affluent (23%). The supermarket has also introduced new brands to target these segments. Some of these brands include Tesco Finest, Tesco Organic, Tesco Kids and Tesco Value (Seth and Randall, 2011, p.26).

Although the private label products are labeled Tesco, the supermarket employs sub-brands to segment its market further. For example, Tesco Finest is made up of high value added products with super premium prices. This product label is designed to attract the up-market customers.

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Tesco Organic was launched to offer a complete basket for both upper and mid-market shoppers. In addition, Tesco brand is designed for the less affluent shoppers. The company aims to boost its profit margins from this product line. Tesco Value brand also targets low-end customers. Finally, Tesco Kids brand targets children aged between 5 years and 10 years (Morris, 2004, p.15).

Tesco’s Marketing Mix Strategy

According to Cate Farrall and Marianne Lindley, market mix refers to the amalgamation of several marketing strategies to sell a product. This strategy entails four key elements: product; pricing; place; and promotion (Farrall and Lindsley, 2005, p.1). Tesco has effectively used this strategy to attract buyers (Brassington, 2000, p. 6).

Pricing Model

Tesco remains dedicated to provide quality products at affordable prices. For example, Essential Savings was launched in May 2010 to enable consumers buy products at lower price and save money. Tesco has also launched several multi-buys programs to enable customers save money.

A case in point is the Price Check initiative that enables buyers to verify prices of individual goods as well as the entire value of their shopping basket. Tesco has thus been able to sustain its dominant position in the market by attracting more customers (Seth and Randall, 2011, p.50).

Convenient Shopping Stores

Tesco has launched new space to drive its sales growth. The company opened over 195 new stores in 2010 and already plans to open more stores in the near future. Tesco has particularly recorded robust growth in its convenient format (Tesco Express) with over 140 new stores. The company has also expanded over 400 stores this year alone and received positive feedbacks from its customers.

For instance, Tesco added 7000 sq ft to Wembley Extra thus enlarging its World Foods offer to serve the needs of its customer. This success is attributed to Tesco’s efforts to customize its product range in order to satisfy the needs of its customers (Tesco, 2011, p.18).

In addition, the company operates multiple store formats (such as Tesco Express, Tesco Extra, Tesco Metro and Tesco Superstores) which provide shoppers with a complete range of products. The multiple store formats has enabled the company to adjust to changes in various local and international markets.

In addition, Tesco has developed mixed-use projects by constructing new retail stores in residential areas. Customers are thus able to access this stores anytime (Plunkett, 2007, p.5).

Customer Loyalty Program

Tesco Clubcard is an exceptional customer loyalty program (Tesco’s way of appreciating its customers). The Clubcard is now a very popular program among the 15 million customers that buy their products in Tesco’s stores. Many customers cite Tesco’s loyalty program as the main reason why they prefer to shop in stores operated by Tesco.

The Clubcard loyalty program has turned out to be a major driver of Tesco’s growth and ensures that the company’s customer base grows rapidly (Dubrin, 2008, p.507). In 2010, the Clubcard program was the main reason why customers switched to Tesco for their weekly shopping.

In addition, Tesco’s up-weighted Clubcard initiatives received positive responses from many shoppers. For example, over three million customers participate in the Big Clubcard Voucher Exchange promotion which offers new ways to get more value via category-specific deals (Seth and Randall, 2011, p.23)

Tesco’s Online Services

Tesco’s online business (such as Tesco Direct and online grocery) has performed exceptionally well. As a result, company’s online sales increased by 15% in Ireland and South Korea. Tesco has also achieved double digit growth in the UK grocery market as well as an additional 30% growth at Tesco Direct.

Since 2010, Tesco has consistently improved its online businesses in order to provide customers with a worthwhile online shopping experience. The company has also upgraded its tesco.com website and introduced the popular iPhone grocery app which accounts for over 10% of the online traffic to the tesco.com website.

Tesco has also introduced Click and Collect services which enable its customers to procure their groceries via online and collect them from any store operated by Tesco (Seth and Randall, 2011, p.23)

Tesco Direct also has an online platform which allows customers to procure electrical goods, clothing and general merchandize via catalogue and internet (Seth and Randall, 2011, p.26). As a result, Tesco Direct attained a robust growth of 30% in 2010.

This remarkable achievement reflects Tesco’s robust growth in online business in spite of the harsh economic climate that continues to restrict the purchasing power of many consumers. The company has also made notable investments throughout the year in order to boost its multi-channel shopping stores (Dubrin, 2008, p.507).

Conclusion

Tesco is committed to create value for its loyal customers and gain their lifetime loyalty. It also aspires to be an innovative and a modern company by creative more value for its different products. In order to achieve its objective, Tesco has segmented its market accordingly and developed international brands to satisfy the needs of its customers irrespective of their economic and financial status.

The company has also introduced a marketing mix strategy to draw more customers to its stores and boost its market share. Tesco aims to employ these strategies to add more value to its products and satisfy its customers in the domestic as well as international markets.

There is no doubt that, in the near future, Tesco will surpass Wal-Mart’s global prominence and become the largest supermarket in the world in terms of market share, sales growth as well as profit margins.

References

Aaker, DA & McLaughlin, D 2010, Strategic Market management: Global Perspective, John Wiley & Sons Ltd, Chichester.

Brassington, FS 2000, Principles of Marketing, 3rd edn, Prentice Hall, Harlow.

Dubrin, A 2008, Essentials of Management, 8th edn, Nelson Education, Ltd, Montreal.

Dunn, A & Mason, O 2004, Tesco in Switzerland. Retrieved from web.

Farrall, C & Lindsley, M 2005, The Marketing Mix, Cambridge University Press, Cambridge.

Haerifar, P2011, Performance Management in Tesco, Grim Verlag, Norderstedt.

Morris, T 2004 Tesco: A Case Study in Supermarket Excellence, Coriolis Research, Auckland.

Plunkett, JW 2007, Plunkett’s Retail Industry Almanac, Plunkett Research, Ltd, Houston.

Seth, A & Randall, G 2011, The Grocers: The Rise and Rice of The Supermarkets Chains, 3rd edn, Kogan Page Publishers, London.

Tesco 2011, Annual Report and Financial Statements 2011, Tesco PLC, Hertfordshire.