This document discusses the marketing and management strategies of Tesco Plc. It explores the macro-environmental analysis, growth opportunity for a new product offering, segmentation, targeting, and positioning. The document provides insights into Tesco's marketing objectives, decisions, and strategies.
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1 Marketing Table of Contents Introduction.................................................................................................................................................2 Macro-environmental analysis (PESTEL)...................................................................................................2 Growth opportunity for the new product offering........................................................................................4 Segmentation, Targeting, and Positioning...................................................................................................5 Marketing mix.............................................................................................................................................8 Conclusion.................................................................................................................................................11 References.................................................................................................................................................12
2 Marketing Introduction Tesco Plc. is a leading retailing organization based in England, UK. Its headquarters is in Welwyn Garden City, Hertfordshire, England, UK which was founded in 1919 by Jack Cohen. The company serves products and services across several countries like United States, China, India, Malaysia, Thailand and many more. Currently, it is regarded as the third largest retail organization in the world. It specializes in selling products like internet related services, software, electronics, financial services and so on. The paper will design a new product offering within the UK market. It will help in creating specific market space for the new product with a clear strategy and target audience. To determine the current trends in the UK market, the paper will provide macro-environmental analysis. It will help in developing positioning and strategy of Tesco related to its new product. It will also present the marketing mix strategy of Tesco and provide recommendations to attract customers and enhance their experience. Thus, it will discuss marketing objectives, decisions, and strategies of Tesco. Therefore, the paper will help in critically evaluating and understanding market research based on the principles of environmental and organizational activities. Macro-environmental analysis (PESTEL) Political factorsEconomic factors UK government adopted a tax measure UKgovernmentincreasedtherateof VAT from 17.5% to 20% Increased VAT rate adversely affected the sales revenue of Tesco (Wood, Coe and Wrigley, 2016) TocontrolobesityUKgovernment adopted a fat tax Import duty on products can affect Tesco as it imports some inventory outside the UK like East Asia and China TescotaxproposedbyTescowas TheUKeconomyshowspositive signs of recovery from the financial crisis The UK forecasted higher economic growth rate Thegrossdomesticproductis expected to be 2.7% UKeconomicgrowth isbeneficial for Tesco as it leads to growth in the supermarket industry (Hood, Clarke and Clarke, 2016) Labor cost, profits, prices, and cost
3 Marketing refused by the UK government Suchinitiativesmaynegativelyaffect Tesco may affect Tesco in the UK Tesco possess a 27.7% share in the UK grocery market Tesco is highly reliable on the UK market Social factorsTechnological factors In the UK the number of older adults is increasingbecauseofbabyboom generation There was an increase in life expectancy and a decrease in birth rate This results in a shift in tastes of people which creates an opportunity for Tesco Tescoadoptsonlineshoppingfor groceryproductstoovercomethe mobility issues In the UK Tesco was accused of not offering high-quality products This negatively affected the customer's perception of Tesco (Bilińska-Reformat, 2016) This leads to a decline in sales and also affected its image 65% of UK shoppers are regarded as loyal shoppers It is an opportunity for Tesco to stay connected with customers and develop close ties with them TheUKshowsadvancementin technology Advancement in technology provides various opportunities for Tesco Firstly,introducinganddeveloping online shopping and home delivery facilities Secondly,self-servicecheckout pointshaveprovidedeaseand convenience to consumers TheUKimplementsdisruptive technology within the market UKconsumersgivepriorityto presenttechnologythandisruptive technology Disruptivetechnologywillbe unattractive to Tesco Tescoadoptsavailableretrial technologies (Grivaet al.,2018) Environmental factorsLegal factors
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4 Marketing UK government is putting tremendous pressure on the supermarket industry to overcome environmental issues Tesco enhances its customers to shop at tesco.com Tesco created Van Drivers Vandriverswillcollectunnecessary plastic bags and use fuel-saving routes from consumers and recycle them Tesco is highly committed to utilizing renewablesources(DibbandSimkin, 2016) It ensures if using 100% of electricity by 2030 It promises to reduce 50% of carbon footprint by 2020 UK government is restructuring the agricultural policy The government is redesigning the way where direct subsidies will be assigned to farmers Such laws affect Tesco as it produces a wider range of services or products Theagriculturalpolicyresultsin lowersubsidies(Končarand Leković, 2016) Thisinfluencesfarmersabilityto meet agricultural values created by Tesco UK government has implemented the Financial Services Act Tescoisinvolvedinfinancial services products such as mortgages, loans, savings and cards (Jones and C. Runyan, 2016) Tesco needs to operate its financial services products based on relevant regulations Growth opportunity for the new product offering Tesco aims to replace its value range with a new product known as Home electrical product. The product will ensure 100% customer satisfaction. The product will be designed to sell valuable as well as meaningful power protection. The home electrical product will be designed by a contract manufacturer and will be sold to customers under the Tesco brand name. With this new product, it will employ and design strict financial controls. The product will be designed as it is a user- friendly product that will fulfill the needs of the customers (Lordet al.,2016). The product
5 Marketing contains more attractive packaging which will be softer and colorful. The packaging will be more convenient as it will be available in resealable bags and easy-open packets. The packaging of the home electrical product will consist of a strip coated with natural product. To sell this particular product in the UK market, the company will get the opportunity to gain profitability by upregulating from the significant generation of power. It aims to become a profitable company within one year. The company will utilize this business as an effective model for selling the home electrical product to a wide range of customers in the UK. It can be seen that Tesco will get some opportunities in the UK market that will help in understanding customer expectations. As a result, the company will create useful and innovative home electrical product where it will guarantee complete customer satisfaction (Mehta and Bhanja, 2018). Tesco will give preference to outsource production as it possesses a strong relationship with contract manufacturers. The production of the home electrical product will generatemajorcapitalcosts.Theleveragingofresourcesandutilizationofcontract manufacturers is the beauty of this particular business model. The marketing of this product in the UK is safe and stable where Tesco always works hard to serve its consumers (Sharma, Davcik and Pillai, 2016). These home electrical product will accurately influence the brand equity of Tesco. This will help in gaining sustainable sales growth in the UK market. Thus, Tesco will make use of both sales and marketing tool to promote and sell its product in the UK market. The company will create a website that provides relevant information regarding the product to its target audience. The site will encourage UK consumers to make repeat visits. Segmentation, Targeting, and Positioning Segmentation of Tesco The most efficient and effective mixture of operational assets in targeted market segments possess a huge return on investment marketing. To promote its new product, Tesco makes use of various strategies related to consumer databases that constantly send direct marketing messages and reward their consumers cataloged (Stocchi and Fuller, 2017). Tesco will be more focused towardstwosegmentssuchassinglehomeownersandfamilyhomeowners.Thesingle homeowners adopt the technology by utilizing lots of gadgets at their home, whereas family homeowners possess a massive number of electronic devices.
6 Marketing The segmentation of Tesco is based on four segments such as, geographic, demographic, psychographic and behavioral. Geographic segmentation Tesco will target the country that contains a high demand for retail items and consumer buying power. It aims to target a few of the countries such as Thailand, South Korea, the US, and the UK. The density of the population depends upon urban and suburban locations. The urban location consists of Tesco Metro whereas, sub-urban location possess Tesco Express, Tesco Extra, and Tesco Superstore (Quinnet al.,2016). The division of the market is entirely based on the country running, and huge attention is given to particular requirements of each geographic segments. Furthermore, a subdivision will be made between local markets and cities of each country to implement the promotional packages and products to local conditions. Demographic segmentation Based on a new product offering the company seeks to target different customers depending upon their age, stage of life, social class, family size, sex, education, occupation, income and many more. It aims to target both females and males of different categories. Based on the income group the company targets middle and low-income category. Moreover, based on occupation it is going to target professionals, employees, and students and from education, it will target bachelors, technical and high school students (Donnellyet al.,2015). Whereas, by social status, Tesco will target the middle class, lower middle class, skilled working class, and working class. The family size of the customers must be extended and nuclear families and single individuals. The implementation of Clubcard will give Tesco an ability to characterize consumers better and place the product on the market as per their particular requirements (Booth, 2019). For instance, initially,Tescogeneratedmoredisposableincomeforlow-incomeconsumerswithhuge sensitivity to price. Psychographic segmentation Tesco will acknowledge the real psychological needs of the customers based on the home electrical product. It will create multiple lifestyle magazines to target different people with different tastes and personality (Anesbury, Winchester and Kennedy, 2017). The lifestyle
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7 Marketing magazine will be created to target contended conformers and traditionalists. The personality of the customers must be determined and easy-going. Behavioral segmentation The company must implement Clubcard which is a tool that will help Tesco to get appropriate knowledge regarding the buying behavior of customers. To sell Home electrical product Tesco aims to target active users who are regularly using Tesco products. Tesco will be targeting customers who are positive and skeptical (Ieva and Ziliani, 2017). This involves knowledge of when and where consumers shop, the commitment of certain brands, the rate of utilization of products and where customers spend their time in the shop. Targeting of Tesco Tesco's targeting strategy is entirely dependent on its behavioral, psychographic, demographic and geographic segmentation for offering a better direction. However, Tesco will implement a similar marketing strategy because retail markets are focused on producing products that fulfill allthe requirements.Tesco seeksto createeverythingand anythingthatcustomersfind appropriatetothemselves.Moreover,consideringgeographicsegmentationTescowill concentrate more in the UK as it is their major business. In demographic Tesco will be focusing more on the home electrical product as it will provide huge amounts of profits. Based on psychographic segmentation the organization will be concentrating more on different lifestyles of people; Tesco fits all types of preferences and tastes of the customers (Cabras and Bamforth, 2016). By considering behavioral segmentation, Tesco aims to grab customer loyalty. Therefore, the company will always seek to improve their marketing strategy. The buying behavior of customers has direct implications on Tesco’s marketing activities towards a huge range of purchasing situations. For example, the current economic crisis and global financial possess certain implications on the buying behavior of customers in the UK. This has led to a reduction in customer spending level (Tadajewski, 2018). A specific change in customer behavior related to the home electrical product will be addressed by the marketing management team of Tesco. This will be done by emphasizing cost-effectiveness into the practices of integrated marketing communication. Positioning of Tesco
8 Marketing The organization has effectively positioned themselves in the perception of customers as the brand that provides a wide range of high standard products at relatively low costs. On the other hand, by having an online store, Tesco has gained benefit as the online stores are convenient for shopping and extremely time-consuming. Tesco has also developed itself as a focused customer organization by creating and providing unique products. The labels of the organization are divided into finest, normal and value (Sanders, 2016). To sell home electrical product Tesco offers online services through its e-shop, Tesco.com. To promote the new product, Tesco deals with each element of the marketing mix to grab the attention of target consumers efficiently and effectively. The organization will make use of a huge range of positioning strategies to attract a wide range of target consumer segment. Marketing mix The marketing mix strategy of Tesco is followed by 4Ps as follows: Product Tesco manufacturers a wide range of product offerings at different stores. To fulfill the preference and needs of consumers, Tesco aims to create a home electrical product. To promote this particular product it will target different segments within the market. It will offer this new product to different types of stores. Recently, Tesco has reduced the product lines by 18% by reviewing 33 product categories (Joshi, 2016). To sell its new product Tesco bank will provide financial services like insurance, mortgages, credit cards, savings accounts, and loans. Price To manufacture home electrical product Tesco will follow a smart pricing strategy. It will offer the product at a relatively affordable cost to compete with the international and domestic market and attract UK customers as they are very price sensitive. Tesco always competes with giants such as Morrisons, Asda and Sainsbury's and emerged as the largest retail chain in the UK market.Theorganizationwillchoosethepricingstrategysuchasproductlinepricing, competitive pricing, and penetration pricing to become a leader in the supermarket industry. It aims to provide high-quality products with lesser costs as compared to its competitors. However, in the pricing strategy, Tesco follows a cost leadership strategy. With the new product offering, it aims to provide a high-quality product at an affordable price (Yamoah, 2016). It makes use of
9 Marketing best channels and economies of scale for procurement to maintain low cost. It constantly works with suppliers to make and improve the efficient supply chain to minimize cost. It has been observed that massive competition with organizations like Lidl and Aldi in the UK market will put an impact on Tesco's pricing strategy. Place Tesco possesses 7,599 stores along with franchises situated all over the world. It operates its business across 12 countries in USA, Europe, and Asia. It possesses manufacturing offices, sales outlets, and units across all these countries. The company aims to market its home electrical product to the retail chains present in all the leading countries worldwide. They will be directly providing the product to the customers. Tesco comprises of four types of stores such as Tesco Superstore, Tesco Extra, Tesco Express, and Tesco Metro (Lacey, 2015). It will use Tesco Extra to sell the new home electrical product as it provides a huge range of products under one roof to offer convenience to its customers. Promotion Tesco possesses a strong brand image that significantly helps its promotional activities. It will make use of various strategies to promote its home electrical product across the world. The strategies are given below: Club cards for loyal customers Interactive websites Media campaigns such as TV commercials Text messages Email messages Mobile applications that will enable customers to order the home electrical product through their mobile handsets Tesco will also make efficient use of charitable events, television ads, and hoardings as promotional channels. It will use huge promotional discounts as well as promote and sell its new product online (Witek-Hajduk and Grudecka, 2018). Along with advertising, the organization also makes use of various forms of sales promotion.
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10 Marketing Figure: Marketing mix of Tesco (Source:Reformat, 2016) Recommendations To become successful in the UK market, by manufacturing the home electrical product, Tesco must maintain its current pricing strategy of offering cheaper products than its competitors. The organization must have a better understanding of the price-sensitive market in the UK. If the cost of the product is too high than the consumers will go to Tesco rather, they will visit the competitors like Asda, Morrisons, and Sainsbury. It must come up with new ideas for product development and innovations. Such innovation and creativity will help the organization to receive more popularity in international and domestic markets. The organization must open some retail outlets and stores to grab the attention of the customers. This will help the customers to have more access to their wide range of products. This will also lead to an increase in revenue. It is essential for Tesco to implement a unique advertising plan to provide relevant information to its customers regarding their product. Advertising plan includes different types of loyalty programs, email services, SMS services, and attractive website with details of the company, media advertising in the newspaper and catchy hoardings. The loyalty programs involve Club cards concept that could be developed to retain and attract some customers. The company must develop effective strategies to build team members to create new levels of excellence to customers and work. It must invest in serving additional equipment and training to employees to
11 Marketing better equip them with tools and skills to serve consumers. Such changes should be targeted in the fresh food department and larger stores. Besides this, the company must make efficient plans to redesign its existing stores by giving an attractive and warmer look. They must efficiently assign their capital by reducing capital investment and by focusing their expenses on increasing their existing stores with priorities provided to express stores. It must double its offering range of products to enhance customer experience. It must upgrade the online industry by generating new Click and Collect points for providing convenience to its customers. Conclusion The paper demonstrated the fact that Tesco will design a growth strategy and competitive marketing to promote its new home electrical product in international and domestic market. Tesco is determined to be the market leader in food retailing in Britain and beyond the removal price for money products. The company has created pioneered network of branches and developed strong links. It focuses on its effective marketing strategy to develop a good relationship with its consumers. The company has constantly, faced tough competition from the competitors such as Asda, Lidl, and Aldi Morrisons and Sainsbury’s. While dealing with such competition the company has effectively maintained its line of operations with norms of Corporate Social Responsibility. It has manufactured and procured ethical services and goods to its consumers. The organization seeks to expand its market globally by creating a new home electrical product. As a result, the organization is following some clear and strict marketing plans that will ensure long-run success. The planning and corporate strategy of Tesco are determined to be the benchmark that could be followed by any multinational organization to gain success in international as well as domestic market. Based on the new product the paper provided segmentation, positioning and targeting of Tesco to grab the attention of more number of customers to buy their product.
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