Customer Value and Value Proposition in UK Supermarkets

This study investigates the concept of customer value and value proposition in UK supermarkets, with a focus on Tesco. It explores the factors that enhance customer value, such as quality, price, variety, and location. The study also provides recommendations for Tesco to improve customer value, including enhancing the online shopping system and improving customer support staff.

o BUMKT5902 Marketing Management
o Mt Helen, Semester 1, 2019
o Individual Assignment—Customer Value and Value Proposition
o Name
o Student ID
o The Due Date and Time —
o Submitted to — Dr. Moulik Zaveri

Executive Summary
In order to survive in a highly competitive business word it is important for business
firms to enhance customer experience. They can do this by giving better customer
value.
The following study tries to investigate into the concept of customer value and value
preposition of UK supermarkets in general and Tesco in particular. A major finding of
this study is that quality, price, variety and location are the major criteria which
enhances value for the customer. It has also been found that supermarkets like
Sainsbury and Asda give value to customer in form of price and quality. While Tesco
provides value in form of good location, good quality, variety and reward points. It
has also been found that Tesco creates value for its customers by focusing on
customer loyalty and online shopping facility.
The study also recommends certain value enhancing steps to Tesco. These include
improvement of online shopping system as online shopping is the next way to go for
the business world. Another recommendation is to improve customer support staff
and give more occasional discounts. Through these recommendations, Tesco can
improve customer value.
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Contents
Executive Summary.......................................................................................................i
Introduction...................................................................................................................1
Background of the Task............................................................................................1
Purpose of the Report...............................................................................................1
Format of the Report.................................................................................................1
Customer Value............................................................................................................1
Value Preposition..........................................................................................................2
Reasons Why Customer Value and Value Preposition Are Critical to a Firm’s
Success........................................................................................................................3
Deliverance of Value by UK supermarkets...................................................................3
Value Created by Regularly Visited Supermarket........................................................4
Segment Centric Value Creation by Tesco..................................................................4
Reviews of the Website and its Communication of Customer Value...........................5
Recommendations to Tesco for Improvement of Customer Value..............................5
References...................................................................................................................7
Appendix.......................................................................................................................8
Image of Tesco Website...........................................................................................8
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Introduction
Background of the Task
In today’s competitive business scenario, customers have varied choices, greater
expectation and a tendency to switch in case of brand failure (Nijssen & Frambach,
2013). In retail sector too the competition is extremely fierce. Therefore, brands need
to create means to satisfy customer expectations at all costs. Companies do this
through creation of value for the customer (Mahajan, 2016). Value is the satisfaction
the customer expectations from the consumption of a certain product.
Purpose of the Report
The following study strives to elaborate upon the concept of customer value and
value preposition. The study also trees to understand how retail super markets in the
United Kingdom create value for their customers. Additionally, this report assesses
the value creation of a single super market and recommends changes to it so that it
can enhance its value creation.
Format of the Report
At the onset the report introduces the concept of value creation and value
preposition. The report then assesses how various supermarkets in the UK create
value for their customers. In continuation it assesses the value creation by a single
supermarket- Tesco. Further, it assesses the value that a singe segment of Tesco
seeks and the way the company creates this value. It also assesses value
preposition that Tesco offers through its website and finally it recommends ways to
Tesco to enhance its value creation.
Customer Value
Broadly speaking customer value is the satisfaction that the customer expects to
derive from a given product (Kaul, 2017). Various researchers in marketing concepts
have given different interpretations of the concept of customer value. As per a study
by Zeithaml, customer value may mean meeting of customer’s desires and needs.
These desires and needs may include attributes like low process, good quality,
fulfilment of expectations etc (Furseth, 2016). This is an elementary definition which
discusses customer value in terms of customer satisfaction. This definition majorly
focuses on expectations of the customer from the company or brand and how the
company creates value by providing what the customer expects.
Another popular definition of customer value was given by R. B Woodruf in his work
on customer value. In his view customer value is a customer’s perceived preference
of a product and his evaluation of the attributes of the product in facilitation of
achievement of customer’s desires which could be satisfied by purchasing the
product (Vargo, 2012). In other words, value is created for the customer when the
company understands his desires and creates elements in the product which fulfil
these expectations. Therefore, this definition speaks of perceived benefits from a
product and the customer’s expectation from the product in fulfilling his desires.
The definition has two aspects desired benefits and perceived benefits which
comprise of customer value.
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As per Morar, (2013) the concept of value creation for customers occurs because
there is a difference between the customer’s expectation and the actual satisfaction
given by the product. Additionally, there is a cost that the customer has to pay to
experience the product. This cost can be the monitory cost, cost of reaching the
store and buying the product or the mental cost in terms of stress or anxiety of
purchasing. Therefore, customer value can be defined as the difference between
total customer value or expectations and total customer cost or cost undergone by
the customer to purchase the product.
These is no singularly accepted definition of customer value as various researchers
have given their own interpretation of the concept. These definitions point out certain
different attributes of customer value like perceived value, desired value, total value
and elements of value creation. However, all of them affirm that customer value is
the expected benefit or perceived satisfaction that the customer can derive from a
product. Firms try to maximise value so that they can get long term loyal customers.
Value Preposition
All organisations require loyal customers for success (Baker, 2012). Customers shop
from the same organisation as long as that organisation creates value for them.
Customer value along with customer insight drives the company’s marketing
activities in the modern day (Hassan, 2012). Hence, companies spend lot of money
in researching what drives customer value. In view of this, companies try to make a
promise to its customer that they will fulfil their desired goals in terms of purchases
and create value. This promise is known as value preposition (Hassan, 2012). In
other words, value preposition is a statement of intent of the company through which
it intends to create customer value.
In research study Fifield defines value preposition as a written statement regarding
the marketing activities of the company with respect to creating a significant
difference to the customers decision process so that the customer purchases the
company’s product over a competitor (Sukoco, 2018). In simpler words, a value
preposition is any set of marketing activity that offers a customer some desired
benefit so that customer makes a purchase decision. These can include emphasis
on better pricing, better placement, better variety or better quality.
As stated by Cuevas, (2015) in a study by Anderson in 2006 three types of value
proposition exist. First among them is, all benefits which include all the positive
features of the product. Next is, favourable points of difference which comprises of
feature which differentiate the company product from all competitors. The third one is
resonating focus. This type of value preposition occurs when suppliers focus on most
appealing element of their product and communicate them clearly and frequently to
the customer.
It can be deduced from the above that value preposition consists of all benefits that a
customer can get from a product, the competitive advantage points of the company
and the way in which the created value gets communicated to the customer.
In a study by Lanning it is suggested that, value preposition is an offer of superior
experiences to customers which may be an improvement over experiences offered
by others (Żyminkowska, 2019). This means that value preposition can be
interpreted as superior benefits provided by the company vis a vie the competitor.
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All these definitions point out similar aspect of value preposition. That is, value
preposition is an offer or a promise by the organisation to offer better products to the
customers which will create value for them. Additionally, it is also a promise of
offering better benefits than the competitor.
Reasons Why Customer Value and Value Preposition Are Critical to
a Firm’s Success
Modern business world is extremely competitive and customers would purchase
something only if it satisfies some need or desire (Buhamra, 2013). In other words,
they would buy if a particular product creates value for the customers. Otherwise
they may switch to the competitor.
While making purchase decision customers compare the perceived value of
different products or similar products of different companies. For example, while
deciding on choosing a super market store to visit, customers would compare the
variety offered by the store, the distance from their house to the store, the service
offered and the offers like discount etc (Luo, Chen, & Kai, 2018). Therefore, it is very
important for an organisation to try and create superior value for the customer
through their product features. This will help in attracting customers as they will
perceive the benefits offered as meeting their needs.
It is very important and critical to understand the things which create value as only
then the company can get loyal customers (Kaul, 2017). The company can loose its
whole business by wrongly reading customer value. Customer value creation can
enhance long term customer loyalty because customers will continue to purchase
from a company if they continue to perceive them as providers of their expectations.
Value preposition is the promise of value that the company gives to the customer
(Hassan, 2012). A good and well thought out value preposition is critical for the
growth of business for a company. A good value preposition can create a good
differentiating factor between the company and its customers (Mahajan, 2016). It
helps in attracting competitive advantage and the cutting edge required in the
modern business world.
A good value preposition also helps in acquiring the right target market as the
customer would also be clear on the company’s offer (Nijssen & Frambach, 2013).
Value preposition is also critical in increasing the market share as it can help in
attracting new customers. A good value preposition also helps in creating clarity of
vision with in the firm which can help in improvement of operational efficiency for the
business (Mahajan, 2016). Value preposition is critical because it can enhance the
image of the firm and help in its long-term growth.
Deliverance of Value by UK supermarkets
There are many supermarket chains in the UK of which five are most popular. These
are Tesco, Sainsbury, Waitrose, Asda and Morrison. All these firms try to generate
customer loyalty through value creation methods so that they have an edge over the
competitors (Hassan, 2012). Tesco has its stores located in areas where customer
can visit them with ease. It also offers parking areas and internet shopping facilities.
The firms have a range of products in good quality (Hassan, 2012). Therefore, Tesco
creates value through location, quality and products. Another value creating element
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of Tesco is the discounts and reward programme which induces customer
relationship and enhances value.
On the other hand, Waitrose offers quality as the most important value creating
preposition. The firm also offers its stores in major locations so that shopping can be
made convenient for the customers (Hassan, 2012). Cheaper pricing is also a value
creating preposition of Waitrose supermarket stores.
Major value creating element for Asda is cheaper pricing (Hassan, 2012). They
proclaim to save the customer’s money without compromising on quality. The firm
offers many sales offers to the customers like buy one get one free and other forms
of discount.
Sainsbury offered location, variety, quality and customer service as major value
creating elements (Hassan, 2012). Sainsbury chain is also popular because of its
easy locations.
Morrison offers good quality as a major value preposition to the customer. They
claim to be best in fresh fruits and vegetables (Kaul, 2017). Other value creating
element they use is location, variety and compatible prices.
Therefore, all the major supermarkets of UK try to create value through major
elements like price, quality, variety and location.
Value Created by Regularly Visited Supermarket
Tesco is a very large and popular supermarket visited by many customers including
the author. For the author the most important value creating element of Tesco is
location. Tesco store is located near to both house and college of the author. Hence
Tesco creates value through convenience and ease of access. Tesco also provides
car parking facility, thereby creating additional value.
Another desired value is online shopping facility which is provided by Tesco.
Additionally, Tesco provides a large variety in grocery, fruits, vegetables and other
stuff so that all the customers can do one stop shopping of these items. Moreover,
quality at Tesco is very good and the company offers loyalty reward points for
frequent customers which leads to discounts in long term purchasing. Therefore,
Tesco creates value through a range of elements like quality, variety, location and
convenience.
Segment Centric Value Creation by Tesco
Segmentation is a marketing tool through which companies divide the target
customers based on perceived similarities (Armstrong, 2012). Segmentation helps in
providing the product to the customer groups as per choices and desires. In other
words, it helps in creating better value for the customer.
Tesco uses various segmentation strategies (Tesco, 2019). One of the most
important of them is psychographic segmentation. Psychographic segmentation is a
form of segmentation under which a company groups the customer based on their
life style needs, patterns and personality (Baines, 2011).
There are many customers who like traditional shopping and enjoy tradition food
items. Such customers expect the retail store to create value for them via offer of
traditional food and grocery items. Tesco offers all grocery items required for
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traditional cooking (Tesco, 2019). Additionally, the mannerisms of staff and its
customer service appeal has a traditional element to it.
There are also customer groups who do not have much time due to their busy life
style. Such customers require ease of access as a value creating element. Tesco
offers easy locations, parking areas and convenient store placement to assist these
customers so that the value of convenience can be created (Tesco, 2019).
Additionally, Tesco has online shopping facility which adds to the convenience
element of customer value. (Tesco, 2019)
Therefore, Tesco tries to create the sought value of the psychographic segment to
which it caters.
Reviews of the Website and its Communication of Customer Value
Tesco creates value for the customer through convenient locations, variety, good
prices, quality and reward programmes (Tesco, 2019). Tesco’s website is a well
organised place from which it tries to create a value preposition. The website is
simple yet attractive and at first glance the major discounts on offer on special
occasions can be seen (Tesco, 2019). This helps in creating a perceived value of
lower prices for the customer.
A major value creating element of Tesco is its Clubcard reward point system.
Customers consider this as a major value creating feature as it helps them to get
lower prices of high quality products (Hassan, 2012), The Tesco website explains the
entire Clubcard system and helps the customer in solving their doubts. Additionally,
online assistance on reward points is also provided to the customers.
The website provides a list of products available in stores and online to the
customers (Tesco, 2019). This helps the customers in shortlisting the products that
they need and enhances the convenience aspect of value creation for them. The
website has various pictures of products so that the customers can see and relate to
these items. Additionally, the website includes store locator facility through which
the customer can locate the nearest store and can save time (Tesco, 2019).
Therefore, Tesco tries to communicate through its website, a value preposition of
convenience, ease of access and variety.
Recommendations to Tesco for Improvement of Customer Value
Tesco is doing a good job in creating value for the customer. However, it is a
competitive world and constant improvement is required to stay ahead of
competition. Following are a few recommendations made to Tesco through which it
can provide better value to the customer and improve their loyalty.
1. Making the website more user friendly- online shopping is the way to go in the
future. More and more people are turning towards online shopping as it is
convenient and simple. Tesco should add more sorting and filtering features
on the website so that people can access and sort the products more easily.
Tesco should also enhance website imagery. Better and more product images
should be added. This will add value for the customer as they will be able to
analyse the product in a better way
2. In order to improve customer loyalty, Tesco should offer more seasonal and
occasional discounts. For example, discounts during Christmas or Easter
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would help in increasing customer footfalls and would enhance customer
value elements of low prices.
3. More advertising regarding the reward programmes and the product variety
would help in enhancing the brand image of Tesco which in turn would create
awareness in the minds of the customer and they would perceive the
company as creating value of quality and variety.
4. Tesco should improve its customer support staff. There should be more
friendly interaction between staff and customer. Staff should be trained to be
more friendly with the customers. This will help in improving in-store customer
experience and they will feel like repeat buying and visiting the store again.
This will also improve customer loyalty.
5. Tesco should focus on home deliveries. These days people are very busy and
they do not have much time. Home delivery of order above a particular price
point will help in creating more value for the customer. Tesco already offers
good quality product. Added to this element if it will deliver it home then
customer will perceive it as a value enhancement and will become loyal
customers.
Through the implementation of these recommendations Tesco can evolve
competitive advantage and enhance customer value.
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References
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Appendix
Image of Tesco Website
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