Marketing Principles for Tesco: Segmentation, Targeting and Positioning

This report discusses the marketing principles applied by Tesco to meet the distinct needs of customers. It covers the influence of micro and macro environmental factors on marketing decisions, segmentation criteria, targeting strategy, buyer behavior affecting marketing activities, and positioning strategy for selected products.

MARKETING PRINCIPLES

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
TASK 1............................................................................................................................................1
TASK 2............................................................................................................................................1
2.1 Influence of micro and macro environmental factors on marketing decisions................1
2.2 Segmentation Criteria.......................................................................................................3
2.3 Targeting strategy for above segmentation......................................................................3
2.4 Buyer behavior affecting marketing activities.................................................................4
2.5 Positioning Strategy for selected product.........................................................................4
TASK 3............................................................................................................................................5
3.1 Product development to sustain competitive advantage...................................................5
3.2 Distribution arrangement for customer convenience.......................................................5
3.3 Price reflecting Tesco objectives and market condition...................................................6
3.4 Promotional activity integration with marketing objectives............................................7
3.5 Additional elements of marketing-mix.............................................................................7
4.1 Marketing Mix for above segment...................................................................................8
4.2 Marketing strategy for consumer and business organization...........................................8
4.3 Difference between international marketing from domestic marketing.........................10
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Marketing principles is a process of planning and executing the concept or idea for
successful launching of a new product or for re-launching of an existing product. These
principles are applied in order to optimize the market performances by identifying varied needs
and wants of consumers. Marketing acts as a crucial link between product and consumer desires
that result into a significant cost/benefit ratio.
Tesco is a British multinational grocery which is renowned as one of the 2nd largest
retailers in the world in terms of revenue. The report herein is conducted on Tesco which has
applied different marketing principles that has helped it in meeting distinct needs of customers.
Further, the report herein is divided into three segments where each segment reflects varied areas
of investigation in the light of marketing.
2.1 Influence of micro and macro environmental factors on marketing decisions
The macro business environment is external factors that have its due impact on one’s
business. These factors are uncontrollable yet manageable through cautious move. There are
different methods and tools that can be used to analyze the macro environment of Tesco. One
such tool is PESTLE which is described as below-
1. Political Factor- Government has placed a few stringent rules and regulations for all
types of businesses to practice fairly. There are rules in relation to taxation, competition
policies, sales etc. It is imperative for Tesco to be aware about such rules and regulations
and strictly abide by them to avoid penalty consequences (HO, TEMPERLEY, and
VIGNALI, 2007).
2. Economic Factor- This factor reflects the change in incomes, spending capacity, GDP
rate, rise in inflation rate, hit of recession etc. This could all effect the market position of
Tesco in the retail industry which in turn makes it important for it stay abreast of all such
economic changes.
3. Social Factor- There is often social and demographic changes which result in changing
perception, tastes, preferences, lifestyle, social values and morale of customers (Jiang,
2009). To combat these social changes into Tesco, it has to make adequate research and
stay in tune with such changes.
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4. Technological Factor- Technology has played a key role in this rapid era of
advancement. The technological advancement turns out to have more of positive impact
on firms rather than negative. Being updated with these technological changes, it will
help Tesco to effectively lead in its sector.
5. Legal Factor- The legal laws that are enacted by government to provide special
protection to an individual makes it abiding on company to bind by the laws. Laws in
relation to consumer protection, health and safety rules, monopoly restrictive laws etc.
must be duly complied by Tesco (Munusamy and Hoo, 2008).
6. Environment Factor- With the increased force on companies to address environment
issues and to adopt ways of operations that will benefit society, Tesco has clearly showed
its participation by committing to reduce their carbon footprint by 50% by 2020.
Micro environment reflects the internal environment of Tesco. It consists of factors that are
closely related to their business and have a direct consequence on the company’s operations
(Rust, Moorman and Bhalla, 201). The micro environment is the closest environment in which
company is operating and it affects the competitiveness of organization. For this analysis,
Porter’s five forces model may be applied-
1. Intensity of rivalry (Low) - Being in the retail business, Tesco faces rivalry from many
competitors who are striving to acquire the first position. In order to curb the competition,
company has exclusively pruned down its prices along-with providing facilities such as
24 hour shopping, loyalty cards, home delivery, advertising etc.
2. Threat of substitutes (high) - With the help of globalization, consumers are able to find all
types of food and services in all retailing stores. Since UK has a cluster of both big and
small retail outlets, there is a wide range of substitution (Hughes, 2002).
3. Threat of new entry (Low) - The desire to enter in new business and to gain a substantial
market share is most probably possible in case of retail stores. Considering the current
position of Tesco in retail, threat to it of new entrants is low.
4. Power of Buyers (High) - The buyer’s influence has the power to exert pressure on
company to drive down their price tags. Tesco has strong buyer power which forces them
to keep the prices low.
5. Power of Suppliers (Low) - Where the suppliers are few, demand is high or switching
cost is high. If Tesco would be limited to a few choices of supplier, then the power of
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supplier will be high. Currently, Tesco is having high position in the market and as such,
it is having key advantage over suppliers. Thus, supplier’s power to dictate prices is low.
2.2 Segmentation Criteria
Looking on the growing market of retail industry, Tesco needs to bring in change that
will help it to sustain its competitive position in the market for upcoming years (Jobber and Ellis-
Chadwick, 2012). There are mainly 4 types of key segmentation criteria for any sector-
1. Demographic Segmentation- It is done on the basis of age, sex, income, occupation etc.
2. Geographic Segmentation- It is done on the basis of area, climate, population density etc.
3. Behavioral Segmentation- It is done on customer's brand loyalty, occasions etc.
4. Psychographic Segmentation- It is done on the basis of taste, preferences, values, social
class, morale etc.
Tesco can target on the two key segments which are-
1. Behavioral segmentation- This segmentation is done to attract customers who prefer
quick shopping and habitual as well as loyal to Tesco supermarkets (Rust, Moorman and
Bhalla, 201). Such consumers can be named as Fast and Furious consumers who are keen
at making quick purchases and do not like to wait for long.
2. Psychographic segmentation- This segmentation is done to gain focus of those customers
who prefer premium quality products and are willing to pay a premium price for it. Such
consumers believe that they show out their social status through such purchases and they
can be named as Elite group of Consumers.
2.3 Targeting strategy for above segmentation
Company is looking on gaining attention of consumers which is possible only by
employing correct marketing strategy for a particular segment- Concentrated or niche- Here, firm exclusively focus on a specific segment where there
are only few customers but they often turn out to be of high value. Tesco has ready to eat
food also in their product portfolio that been marketed by applying concentrated
targeting. In this regard, company only targets office going professionals and students. Differentiated- It indicates different marketing tactics for a whole diversified segment
according to their demand. In this context, apparels section of Tesco applies
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differentiated targeting in which three types of target markets are developed. These are
kids, men and women.
 Undifferentiated- The firm here uses a common marketing strategy with the same
promotional message to attract customers (Mohr Sengupta and Slater, 2009). Within the
context of Tesco, it practices undifferentiated strategy for grocery products so that large
set of customers can be attracted towards it.
Tesco can follow differentiated strategy for its Elite group of consumers and
undifferentiated strategy to attract their Fast and Furious consumers.
2.4 Buyer behavior affecting marketing activities
As inferred by Van Raaij, (2005) a consumer behavior is influenced by number of factors
like preferences, attitudes, motives, tastes and different factors which help to shape consumer’s
final decision in relation to a purchase. There are personal variables like age, income, social
values, status etc. that motivate and persuade one to make a purchase only after complete
satisfaction of these factors. Often a buyer also makes a suitable choice only after considering the
feedback or through personal experiences.
Segmentation made above by Tesco for Elite class of groups is possible by bringing an
exclusive range of premium priced products in its stores. For fulfilling the fast and furious
consumers who prefer quick shopping, clear segmentation and separate lane of counters for
customers with less than 10 items (Peck and et.al., 2013). Other factors that can affect the buyer
behavior are personality, perception and financial condition of the customers. Customers that
belong to elite group are don’t want to wait in queue and therefore separate lane in made for
them. This is because of their personality. Also, they are financially sound and are able to pay
extra for better and quick services.
2.5 Positioning Strategy for selected product
Positioning assists in enhancing the brand recognition for the selected product. To ensure
a positive impression on the minds of their targeted consumers, the positioning strategy will help
Tesco continuously in providing a competitive edge over others by giving their product a distinct
image from others (Sheth and Sisodia, 2015). Tesco can position their Elite group of consumers
by providing them premium priced products from exclusive brands with friendly staff services.
This will helps in developing differentiated market from which company can able to attract more
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of elite customers. On the other hand, concentrated market can be developed by Tesco by
providing with a fast and effective check out systems to fast and furious customers. Separate
lanes can be made for customers who carry items less than 10.
CONCLUSION
It can be seen from the above report that Tesco is among the leading retail stores that
make use of different strategies in order to meet the competitive edge. It is planning to launch
separate lanes for Fast & Furious customers and bring a special and premium class of products
for their Elite class of group of consumers.
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REFERENCES
Books and Journals
Bearden, I., 2006. Marketing: principles and perspectives. Academic Internet Publishers, Inc.
HO, C. W., TEMPERLEY, J. and VIGNALI, C., 2007. TITLE: RETAIL BRANDING
MODELS IN TAIWANESE RETAIL GROCERY MARKET. International Journal of
Management Cases. 9(3-4). pp. 305-314.
Hughes, T. J., 2002. Marketing principles in the application of e-commerce. Qualitative Market
Research: An International Journal. 5(4). pp. 252-260.
Jiang, X., 2009. Strategic Management for Main Functional Areas in an Organization.
International Journal of Business and management. 4(2). pp. p153.
Jobber, D. and Ellis-Chadwick, F., 2012. Principles and practice of marketing (No. 7th).
McGraw-Hill Higher Education.
Mohr, J. J., Sengupta, S. and Slater, S. F., 2009. Marketing of high-technology products and
innovations. Pearson Prentice Hall.
Munusamy, J. and Hoo, W. C., 2008. Relationship between marketing mix strategy and
consumer motive: an empirical study in major Tesco stores. Unitar e-journal. 4(2). pp.
41-56.
Peck, H. and et.al., 2013. Relationship Marketing. Taylor & Francis.
Rust, R. T., Moorman, C. and Bhalla, G., 2010. Rethinking marketing. Harvard business review.
88(1/2). pp. 94-101.
Sheth, J. N. and Sisodia, R. S., 2015. Does marketing need reform?: Fresh perspectives on the
future. Routledge.
Van Raaij, E. M., 2005. The strategic value of customer profitability analysis. Marketing
Intelligence & Planning. 23(4). pp. 372-381.
Online
Campbell, P., 2012. Two Reasons Why Pricing is the Most Important Aspect of Your Business.
[Online]. Available through: <http://www.priceintelligently.com/blog/bid/157964/Two-
Reasons-Why-Pricing-is-the-Most-Important-Aspect-of-Your-Business>. [Accessed on
15th October 2015].
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