Tesco Utilising the Marketing Mix Essay.
Tesco is one of the world’s international retailers and is recognised as the market leader in the UK supermarket sector. Tesco state that their core purpose is ‘to create value for customers to earn their life time loyalty’ Evaluate how Tesco and other supermarkets utilise the marketing mix to compete in the market place.
Tesco is the leading retailer with a market share in 2010 of 29.7% (Wright, 2012), a reason they have proven to be such a successful business is because of their well thought through slogan ‘every little helps’ which is simultaneously used to shape their core values, the slogan is now embedded throughout every aspect of the organisation.
Tesco along with many other business use the marketing mix model, otherwise known as the 7 P’s to set effective business strategies in order to provide a good quality of service to their customers. To compare the broadness of the way the marketing mix works for different businesses another leading supermarket chain should be chosen.
Asda in 2010 had a market share of 16.9% (Wright, 2012) also applies the marketing mix in considering any values or goals. Consequently their slogan is ‘Asda, always cutting prices’ Asda’s slogan is used similarly to Tesco’s as a means of shaping the business. This ethos is used in order to sell their brand effectively to get a higher amount of Revenue. In a highly competitive market, Tesco and Asda need to make sure the marketing mix model is considered effectively to ensure the business is strong enough to survive in the supermarket sector, meaning all core values must be relevant and work effectively for these profit orientated businesses allowing them to reinvest and develop their brands.
Price is a section of the marketing mix, when considering prices if a product is priced too low or too high, it could mean a loss of sales for an organisation. Tesco attempt to meet the consumers in the middle by having lower prices that still give them a reasonable amount of profit. One of their aims is ‘continually increase value for money’ they did this by completing a basket scheme where they then implemented individual prices per product line to insure no major price difference between them and Asda (Anonymous, 2000). However the problem Tesco are facing is that 80% of consumers fell into the “squeezed middle” bracket (Wood, 2011), consequently Tesco is having to cut the price of essentials and enforce a psychological pricing strategy to attract customers who are now below the middle class category to ensure they keep their revenues high.
Compared to Asda’s more laid back approach where their policy is to have ‘permanently low price through a rollback scheme’ research shows that their prices are on average 5-10% cheaper than the market average (Anonymous, 2000), after looking over Asda’s pricing methods it seems the favoured pricing strategy is the Economy pricing (Anonymous, 2003) where all costs are kept low to insure cheaper products and to make sure a mass market of consumers can afford various products due to the lower prices.
Product is a key part of the marketing mix, it involves the brand itself and the service a business is providing to gain a large amount of capital and attract customer loyalty. Tesco’s have expanded into many different markets with their range of products from petrol to food and clothes. It’s become clear to Tesco now that it’s value or basic range has become considerably popular and Tesco’s Value brand is now one of the biggest grocery brands in the UK, even bigger than large popular businesses such as Coca-Cola and Walkers (Anonymous, 2008). This break through has allowed Tesco to focus on other aspects of it’s product portfolio leading them to introduce over 2,000 new and improved food products after looking over customers reviews about product quality being increasingly important to them (Tesco PLC, 2011) as well as looking closer at it’s newer ventures, like Tesco bank and the Tesco’s in Korea.
However, when considering all the ranges of products Asda’s would find it difficult to compete with all their products as they are mainly focused on cheaper products which shows as around half their products sales are own label products (Walmart, 2010) Asda mainly focuses on their own brand products as they are the higher sellers and so they ensure there’s a continuous flow of new product innovation so that they are ahead of the consumers needs (Walmart, 2010). Place in the marketing mix looks at where the product/service is sold whether it’s on the internet, a small corner shop or a massive shop. A new place for the supermarket sector to sell at is the internet, because more and more consumers are working longer hours to get money it is simply much easier for them to do an online shop rather than having to go to the shop, which is shown well in Tesco’s new advert.
Tesco’s have made the internet shopping experience their own as they are currently the fastest growing online retailer in volume terms in the clothing, footwear and accessories market (Tesco PLC, 2011) as well as a 15% growth in the online business (Tesco PLC, 2012) proving that when they invested in the internet shopping experience they have helped ‘to create a value for customers to earn their life time loyalty. As well as this, they understand the local market of stores where some local stores have lower prices on a limited range of goods (Anonymous, 2000) building up customer relations to create higher quality services and increase the customer loyalty. Asda has also advanced onto the online shopping hype and has found that in 2009 the home shopping growth was around 40% (Walmart, 2010) Asda understand that this is a growing trend and so have invested into developing new channels and finding innovative ways of reaching customers whether they are at home on the move or in store (Walmart, 2010), one of the new creations for Asda is an app store which shows they are modernising with the times.
Promotion is a vital way in advertising a company, product or service as a means of branding, as well as offering money off deals to make consumers feel like their saving money. A way Tesco’s has managed to keep customer loyalty as well as creating lots of promotional deals is the Tesco club card, which was launched in 1995 (Tesco PLC, 2011). The clubcard allows a customer to collect points for money vouchers which consumers can then spend in store or online. This method allows consumers to get money back from their purchases therefore convincing them to revisit the store to get a return on their spending, this helps with improved customer loyalty as well as high brand awareness. Asda take a different approach and chose not to create promotional deals, but instead highlight their cheaper products this is the Asda rollback scheme.
Asda is Britain’s lowest cost to operate supermarket (Walmart, 2010) and so their promotion is the brand and the fact that Asda have a permanently low prices policy, which means consumers feel they would save more money allowing them to have more disposable income and spend more money on extravagant products in Asda if they wish. People are an essential part of the marketing mix, as it relates to the consumers, labour, suppliers, and stakeholders anyone who helps the business stay afloat. Tesco invest in their staff skills to insure a high quality service, as well as being dedicated to providing a diverse career opportunity for all their staff worldwide (Tesco PLC, 2011), this would provide employees with greater job satisfaction and the opportunity of being promoted. As well as internal affairs, Tesco also thinks about the people externally of the business, as there is increased demand for locally produced food, therefore Tesco now supports the local economy to assist in sustaining the community and so has increased the local buys from £850 million in 2009 to £1 billion in 2010 (Tesco PLC, 2012) to ensure local suppliers are support after the shake of the financial crisis.
This is also better for the consumers as imports are more expensive so product costs can be cut. Asda has an ‘everyone matters’ approach demonstrating that colleagues are a vital resource, to ensure the staff are content Asda has flexible working practices and world class reward packages which since it was launched in 1999 has given out £129 million in bonuses. Asda also likes to help the community so a lot of the suppliers are local, consequently products are cheaper and they have less environmental impact reducing their carbon footprint (Walmart, 2010). Process relates to delivery and the responses to any complaints, for example customer services. Tesco wanted to get customer feedback so introduced ‘every comment helps’ the feedback was based on customer service and product range the got over 20,000 positive responses which reflects on the business well. Tesco has since train around 80,000 staff as a means support them to give helpful advice, be friendly and efficient.
Also keeping up with technology and providing the self service system which currently accounts for around 10,000 transactions per week, this makes queue times shorter as well as being a quick and easy option to make shopping a more pleasurable experience (Tesco PLC, 2011). Asda has provided 1,100 vans, from 160 vans and one dedicated home shopping center that provides coverage for 97% of the UK, therefore a large consumer base is met with only a few people not being able to be delivered to providing a very efficient service (Walmart, 2010). Physical evidence considers the atmosphere of the business and the effect the business has on consumers whether it’s good or bad. Tesco puts staff through training to provide consumers with the best possible service, because of the high levels of engagement customers are able to enjoy the benefits of Tesco’s having confident and experienced staff on hand to help at any given moment (Tesco PLC, 2011).
This provides the Tesco shopping experience with a more relaxed experience for consumers who can be comfortable to ask employees for help. An ex-employee for Asda said how it was a ‘fun and vibrant culture to work in, and how there were regular meetings at the start of shifts to keep all staff updated. How he was lucky enough to be accepted in the stepping stone scheme which trains up employee to promote them up levels in the business,’ (Tasda123, 2007) after analysing the employee review you can really feel how positive the experience is working at Asda, and a positive employee attitude would rub off on a customer meaning they will have a good experience too. As long as the feelings of the employees of businesses are positive then the shopping experience can be enjoyable rather than a chore. After looking over two of the largest supermarket retail you can see how well thought about the individual parts of the business is, every part has been considered.
It may be that for some businesses one or multiple sections of the mix has more relevance to their main aims, for example if Tesco wants ‘to create value for customers to earn their life time loyalty’ they may primarily look at promotion and process to enable the best service they could supply to their customers. The supermarket sector is competitive and so utilising the marketing mix has helped Tesco and Asda to develop their own individual take on the sector, to form their own unique business strategies from what they may have researched using primary or secondary data. Looking closer at Tesco and Asda, you can see some similarities, but in the end, they are different in order to compete to gain a higher market share and increase market share.
The different parts of the mix will show the effectiveness of the business to increase capital, Tesco has a large range of products at varied prices whereas Asda has a more limited amount of products and the prices are cheaper with the idea that customers can afford to buy more of their products and spend more. After looking over how two businesses in the same sector apply the marketing mix you can observe that they compete from the start in order to gain an increased brand awareness, to do this they must look at each part of the mix to discover it’s overall ethos for which Tesco’s is ‘every little helps’ and Asda’s is ‘Asda, always cutting prices’ both are completely different to attract consumers.
Currently statistics show that Tesco’s mix is more effective than Asda, this is because they have invested capital in expanding all parts of the mix to appeal to a mass market. If used efficiently the marketing mix is useful for competing, to show a business what it’s internal and external running’s are like so that they can establish their ethos to market the business effectively to gain a larger holding in the sector it works in, therefore insuring the marketing mix is thought through properly will help in establishing a business.
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-‘Our Food’, All About Asda, p. 10.
-‘Our Story. and today’, All About Asda, p. 3. -‘Our Suppliers’, All About Asda, p.7.
-‘What We Love About Asda’, All About Asda, p. 6. * Wood, Z. (2011) -‘Tesco declares war on rivals with £500m price cutting offensive’, The Guardian, September. (Journal) * Wright, C. (2012) Tesco market share at its lowest since May 2005, The Grocer. (journal)