Tesco - Retail Marketing Strategy - Assignment Example

Running Head: Tesco: Retail Marketing Strategy Tesco: Retail Marketing Strategy [The Writer’s Name] [The Name of the Institution] Tesco: Retail Marketing Strategy Introduction Tesco is in a rapidly changing dynamics of the retail industry, there are two order-winning factors that made Tesco win over other supermarkets in U.K.: cost and flexibility. For an operation such as Tesco, firstly, the cost objective can be seen as the most important objective, because all of the other performance objectives affect cost. Tesco's costs are dominated by the cost of buying its supplies. Tesco makes use of information technology running an effective supply chain to reduce cost. Secondly, flexibility is Tesco aims to be better than its competitors at this area. That means Tesco could offer their customers a wide range of goods, Tesco has an own team who works on creating new products and they do market research, decide the most appropriate form of packaging for a product, and test the new product. Tesco uses a differentiated market strategy. The company targets several market segments with separate offers for each of the targets. Tesco targets mainly consumers living in urban and suburban areas, but also consumers living out-of-town or in edge-of-town locations. The Tesco Metro stores are modern stores designed for consumers living in the urban areas, and especially office workers who want to buy lunch or do their shopping on their way home. These stores are located in a town centre and offer the buyers quality products. The superstores are located at the edge-of-town, usually with ease of access by car and public transport. The superstores offer the consumer both food, clothes, electrical goods and petrol. For consumers who are seeking more natural products, Tesco has a whole range of organic foods, which has lately been increased and introduced to more stores. All Genetically Modified (GM) ingredients are also excluded from Tesco's own products. For this sub segment Tesco has a range of economy products called "Value". (Slack, R. 2004, 169-74) These products come in large, lower price format packs. Tesco has a range of premium quality foods called "Finest" for this sub segment. Although these sub segments are small individually, altogether they constitute a significant part of Tesco's total customers. Overall, Tesco's operations strategy is its long-term goal. It is important for Tesco to have an operational strategy because it establishes the types of goods and services the company will offer its target market, and how Tesco are going to get advantages over its competitors. Tesco made good planning and control in its capacity, supply chain and quality. Besides, in order to make improvements in operation, Tesco measures quality, speed, dependability, flexibility and cost. Although they have made some improvements, there are still some disadvantages in its operation. The Retail Marketing Strategy and Tesco Britain's unemployment number is as high as it was 10 years ago, the interest rates are falling and the stocks are cheap. Food retailing is one sector that can make money on this. People do not have to travel or buy computers, but they do have to eat. Sainsbury’s, which is the second largest food retailer in the UK, might try to merge with Marks & Spencer to compete more effectively with Tesco. (Fernie, 2004, 277-80). This is a great threat to Tesco, and they will need to improve their services to keep the number 1 position in the UK food retailing market. Tesco designs its marketing strategy; the company distinguishes between five different service types: 1. Perishability Service perishability means that the service can not be stored. For a service company as Tesco the demand can be very fluctuating. Some of the products are seasonal products. This leads to a seasonal demand fluctuation. Tesco also experience demand fluctuations every day and every week. To cope with this, the company can vary its size of the workforce throughout different periods of the day or week. For Tesco to achieve this, the staff might have to work part time, over- and idle time. (Slack, N. et al, 2001, 115-20) 2. Variability Service variability is services that are affected by whom, when and where the service is provided. One of the staff at the checkouts might be quick and cheerful, but the person standing next to him might be slow and grumpy. To control this, the managers at Tesco train their whole staff. The staff learns to serve the customers the way they would have preferred to be served themselves. 3. Intangibility Because Tesco is a service company, where the customers cannot evaluate the services until after purchase, it is important to make the stores give the right signals when it comes to price, quality, place and people. Through advertising, Tesco promises its customer quality goods for a low price. The staff is trained to be helpful and friendly. Tesco is a member of The Institute of Customer Service, which trains the staff to improve their customer service skills. All staff also wears uniform so the customers can recognise them. 4. Inseparability Tesco offers their customers a service when the customers are paying for their goods at the checkouts. This service cannot be separated from the person helping the customers or the payment system, so this service is inseparability. All the customers who are queuing and waiting to be served will affect each individual customer's satisfaction. If there are lots of customers at the same time in the store, this might create long queues and dissatisfaction. To handle this problem, Tesco aims to reduce the checkout times at each checkout. If a customer has more than one person in front of them, a new checkout will be opened until all of them are open. To make the process at the checkout more effectively and organised, Tesco uses supermarket scanning systems. The scanner identifies the bar codes and the price and description of the product is registered. Customers can also easily pay their goods with credit/debit cards and cheques. 5. Lack of ownership Tesco is a service company where the customers only have access to the services when they are being done. This fact makes it important for Tesco to strengthen their brand identity and to give the customers and impressions of ownership. They have done this by introducing a personal Clubcard for their customers. This card gives their loyal customers a discount on products. Every time a customer buys goods for pound; 1, 1 point is earned. In February, May, August and November a Clubcard statement with the Clubcard Vouchers is sent to the members. These Vouchers can be used to buy special Clubcard deals. (Ferrell, & Luck, D. 2007, 175-78) Technology and Quality Tesco develops own-brand products, because they believe that it is an essence of retailing. To be successful in this it is important to meet their customers' high expectations of their products. Tesco has its own packaging design department, which consists of packaging technologists and technologists. The packaging technologists are responsible for choosing the most appropriate design and packaging for the products. The technologists are responsible for the quality of the products, which consists of checking and testing the ingredients. Before Tesco used many different company logos on their products, but after 1995 they decided to use one single Tesco logo everywhere. They feel that this logo change has strengthened their identity. The different lines of products that Tesco offers its customers form the product mix. The product mix consists of width, length, depth and consistency. Tesco sets its prices based on going-rate pricing. Tesco aims to be the cheapest supermarket in the UK. The two most important campaigns for retailers to spend money on are loyalty promotions and own brand advertisements/ above-the-line advertising. Tesco has experienced difficulties with affording money for the two different promotions. Tesco knows that retailing is an extremely competitive market in the UK, and therefore they need to make their potential customers aware of their products. Tesco advertises on TV, in the press, on radio and on outdoor advertising sites. Tesco has two main messages to the public: "Ever Little Helps", which focuses on customer service and "Unbeatable Value" that reminds about Tesco giving value for money. Public relations For Tesco to create a good relationship with the community, local projects and charity sponsorship are important to consider. When doing this they also create a good relationship with the community through media, which is a part of public relation. Tesco has an own campaign called Computers for Schools where they provide local schools with computers and accessories, such as software. Tesco is UK's largest supermarket chain with 640 stores in the UK and around 180 stores overseas. (Krajewski & Ritzman, 2002, 44-50) Tesco knows that many people today are working long hours and do not have time for shopping during the day. To solve this problem 87 of Tesco's stores are open 24 hours a day, 6 days a week to meet the needs of those who prefer night time shopping. (Johnston, 2003, 90-92) As the largest Internet grocer in the world, people can do their shopping over the Internet 24 hours a day, 7 days a week. Their customers' orders are sent to their local branch, which do the home delivery. Tesco knows that all the supermarkets offer very similar products, prices and facilities. To win the battle about the customers, Tesco provides customer service training to all its employees to provide a better and more personal touch so they are winning customer's loyalty. The employees learn how to think from a customer's point of view and serve them based on how themselves would like to be served. They should be positive and helpful. The staff should also listen to the customers and make them feel welcome. The process part of the marketing mix is concerned with the whole buying process from the customer's view. The customers would like to get to the store, buy the product and arrive back home again as quickly as possible. Tesco's stores are often located in an easy accessible area for those driving cars and those using public transport. Tesco tends to make the process at the checkouts as quickly as possible. Conclusion Tesco focuses more on building efficiency and maintenance costs than store design. When a group of Sainsbury's shoppers were sent into Tesco stores, they found the stores to be too stimulating, noisy and aggressive. Recommendations on how the marketing mix may need to be altered in order to maintain Tesco's competitiveness. As mentioned earlier, Tesco is the market leader in the UK. To maintain this place it is important to improve its services all the time. Tesco will need to improve its product range by offering more non-food items. To keep the prices low, it is important for Tesco to cut costs in all of its activities. Tesco has a programme called "Building for the future", which aims to make sure that new stores are built and run at the lowest cost possible. More and more grocery retailers are getting online, and Tesco needs to improve its online service to maintain its number one market place. Tesco's Internet programme can be improved by offering more customers the Home Shopping service. Currently only customers with a local Tesco store can order products over Internet. Tesco can expand this service by offering people all over the country home delivering. Many people still do not trust the Internet. They do not like to give up their credit card details. Tesco could. Some people also think that the software is difficult to use. Tesco can offer these customers help with the software and can run more campaigns about their web site, which can make the customers more trusting toward Internet. To expand their place of the marketing mix, Tesco should also forge more alliances with other companies. Tesco should also improve their international market by building more overseas stores. It is important for Tesco to understand its customers, achieve higher efficiency through better forecasting and understand better the sales on a store-by-store basis. By doing this the stores can make sure they always have the right goods in the stocks at the right time. Although Tesco have chosen not to spend lots of money on store-design, the stores do not have to be noisy and aggressive. Tesco should consider the findings in the research mentioned above and make the shopping environment convenient for every customer. Tesco could use more personal selling to attract more customers. This tool is seen as the most effective and expensive tool of the promotion mix. Personal selling is effective because both the seller and the buyer can easily understand each other's needs when having a conversation. When using personal selling it is easier to establish loyal customers because of the personal relationship one creates. Fully employed new technologies are also the advantages of Tesco, which has revolutionized Tesco's operations management. Although Tesco has two factors superior to other competitors, the rest of performance objectives still need to be improved. The quality inside the operation is important. If someone makes a mistake within the operation, time and money must be spent correcting this makes. Speed is also important inside the operation. According to the customers, in Tesco metro, some products are often sold out but it is not as quickly as possible to deliver the materials, so made customer disappointed about the service and go to other supermarkets. Tesco's dependability objective is not satisfactory, in Tesco metro, it is not open 24 hours a day and customers often can not buy the expected food in the evening. There is some drawbacks of capacity planning and control, for example, they keep output on one level, which means that the same number of staff would operate all the time, so that they produce the same output period. For instance, many people are shopping in the store on Friday and weekend, customers are waiting in the long queue and 6 staff serving them, however, Sometimes there are few people in the store, it still have the same number of staff, it would be a waste of resource and influence efficiency of service. Tesco has a wide of operation and wants every one to buy their products. Tesco's aim is to get full time loyalty from their customers and to carry on increasing the value of their goods. Therefore, they should perceived and applied the five performance objectives properly, not only pay more attention to cost and speed, but also quality, speed and dependability. To increase the values and improve service, Tesco should improve and train staffs at all levels. This helps them run operations more efficiently as all staff is fully trained and therefore they will do their best to do their jobs. References Fernie, J., and Sparks, L. (ed.) (2004). Logistics and Retail Management Insights into Current Practice and Trends from leading Experts, 2nd Ed., London: Kogan Page. 277-80 Ferrell, O.C., Hartline, M.D., Lucas, G.H., & Luck, D. (2007), Marketing Strategy. Dryden Press: Orlando FL. 175-78 Johnston, R., Chamber, S., Harrison, A., and Slack, N. (2003). Cases in Operations Management. London: Prentice Hall. 90-92 Krajewski, L. J. and Ritzman, L. P. (2002). Operations Management. New Jersey: Pearson education, Inc. 44-50 Slack, N., Chambers, S. and Johnston, R. (2001) Operations Management, 3rd Ed., London: Pitman Publishing. 115-20 Slack, N., Chambers, S. and Johnston, R. (2004) Operations Management, 4th Ed., London: Pitman Publishing. 169-74 Read More