Pricing Strategies of Tesco and Waitrose

Summary of the assignment content: The provided content is about the analysis of Tesco and Waitrose, two major retailers in the UK. The summary highlights their pricing strategies, customer service, atmospherics, market campaign, targeted markets, and reference lists.

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Executive Summary
This report covers external & internal environment, resources surrounding Tesco& Waitrose
Company. The core emphasis lies in the strategy planned& marketing mix involved key
analyzing company’s strength & competence.
Both Tesco PLC &Waitrose are the leading companies in retail segment particularly in super
market stores especially in food & drink industry. With know how techniques of handling
resources in manufacturing, management of supplies, trained staffs which becomes important
essence of retailing industry.
Introduction
As a background Tesco is a leading food & drink retailer with a 2,319 stores & employed a
workforce of over 325. While talking about Waitrose, as per February 2015 sources, it holds an
"upmarket" reputation & has a 350 branches across the United Kingdom which includes 30
convenience stores. Among the four leading UK retailer stores comes Tesco with a 28.1% share
of market & then remaining grocery market share is shared with other three which is Sainsbury's,
Asda and Morrisons which is approximately 28% of the UK grocery market. Waitrose comes a
way back at sixth largest market share & capturing only a 5.1% share of the market in the UK.
Tesco caters in various divisions such as it has a range of 40,000 food products which includes
its own labels from normal to finest levels, independent Britain’s largest gas stations & then
other categories includes ,non-food items, clothing, etc. While, Waitrose is a biggest employee
owned operated by JLP &opts for a different market strategy with Price commitment &
delivering best products to customers with a high grade quality. To optimize this strategy,
Waitrose has merged convenience supermarkets with best technical service and shop
management.

Marketing Plan
Tesco PLC is a third major global general merchandising company as per its revenue & second
largest in terms of profitability. It has diversified its business into six divisions which is Tesco
Extra, Tesco Superstars, Tesco Metro, Tesco Express, One Stop and Tesco Homeplus (Tescoplc
2009). Additionally, Tesco PLC also provides online services by the name of Tesco.com which
is also its subsidiary& its other retailing services Tesco Personal Finance. Apart from the home
shop supermarket experience in grocery & food/beverages division it also utilizes its know how
services & expanded in various non-food segments such as gas stations, consumer electronics,
clothing, telecoms, financial services, health, home and car insurance, dental plans& other
miscellaneous such as CDs, music downloads, retailing and renting DVDs, software and Internet
services operating globally. While Waitrose is a food retail division of John Lewis Partnership
parent company & a sixth-largest grocery retailer in the UK with a gross sales in 2010 of
about11.3%& profitability rose to +28.0% due to the restructuring & introducing fresh patterns
in sales. (John Lewis Partnership Reports, 2010) whereas speaking about TESCO it held a 30.7%
share of the UK grocery retail market & profitability of 14.9 % in the year 2010 (Euromonitor,
2010).Waitrose optimization strategy is to that allows it to target customers with specific,
tailored experiences. Waitrose also operates online business through Waitrose Deliver, Waitrose
Cellar and Waitrose Florist.
Objectives
The objective of Tesco is to expand globally & diversify, promote more of nonfood
section/divisions, while that of Waitrose is to provide quality groceries, wine, and spirits at a
lower price & maintain a customer loyalty. Both the companies’ objectives are suitable as per the
individual orientation.
PORTER competitive analysis for Tesco plc & Waitrose
These can be distinguished & analyzed on the basis of below points-:
Threat of new entrants: New entrants in various sectors delivering products & services at a
cheaper prices, breaking market share of Tesco PLC. While for Waitrose it is able to sustain in
the market & capture share since it provides better crème class products & services at same price
Sainsbury charge its customers. Waitrose unique essence of its product is high quality products
which keeps it class apart from other competitor M&S.
Rivalry among the existing players: For Tesco, Constant competition between Wal-Mart,
Carrefour, J Sainsbury, ASDA, and K-Mart & thinking of new strategies & techniques to keep
rivals at bay. (Peter & Donnelly 2002) while Waitrose competitors are M&S & Sainsbury need
of middle class delivering products with freshness & crème upmarket products.
Threat of substitute products: For Tesco, cheaper substitutes products are readily available in the
market while Waitrose caters to a specific domain of retail market hence levels of substitutes are
quite low. For Tesco. some existing players are big & dominant in the market hence entering into
a completely new domain will result in resistance & forces. Also, if Waitrose wants to enter in a
new market they should have a hands on experience & market knowledge (John Lewis, 2012).

Bargaining power of suppliers: Low specific suppliers dealing in the market & price rise in
inputs result in producing products at higher costs while for Waitrose switching to the alternative
suppliers due to cheap supply are low since margin are quite low.
Bargaining power of buyers: Since companies like TESCO exists in a perfect market hence their
end products should be of same price while for Waitrose switching costs are readily available
due to many options available (Davey and Laurance, 2008).
Comparative SWOT Analysis of Tesco & Waitrose
A strengths, weaknesses, opportunities and threats (SWOT) analysis of Tesco & Waitrose has
been provided below.
Strengths
TESCO caters in various divisions & sub segments & has a 4,331 stores in the USA, Europe and
Asia.
After Walmart & Carrefour, Tesco captures a third largest grocery retail market share in the
world (Euromonitor, 2010).
Strong strategy adopted is the customization to products & services as per market demands &
customer needs.
Tesco introduced a loyalty scheme card as a ‘Tesco Clubcard’ for the regular customers.
While Waitrose main strength lies in-:
Waitrose Company has an exclusivity supply to Prince Charles.
With a 300 stores it’s able to capture 1/6th market share in UK.
Marketing & through strategy promotion of ‘upmarket’ it has penetrated into the minds of
consumers & proved to be a strong competitor.
myWaitrose loyalty card launch resulted in customer retention scheme.
Employee strength of 1,00,000 & got appreciated with many rewards & recognition for best
quality products.
Weaknesses
Cut throat competition resulting in changing alternative strategies & cost cutting.
Due to the tough competition certain Tesco products could not survive with peers competitors&
had to be recalled due failed strategies & losses. It deeply affected brand image of the Tesco as
they opted for the using cheaper alternatives with high quality.

Due to the lack of geographic diversifications & market knowledge TESCO main concentration
was from UK which highlights existing systemic risks of the UK market.
While Waitrose weakness lies in-:
Niche & focus on one segment of retail. It should diversify into more market segments.
High Price wars & cut throat competition in the market resulting in slashing of prices.
Negative feedback & bad image portrayed due to the magazine Waitrose Kitchen.
Opportunities
Since TESCO has secured a global place hence its commercial portfolio should widen up.
Focusing on the geographic diversification & opening up of more stores will capture more
market share customizing to the needs of the customer.
Due to the global presence the customer base has also increased & scope is to diversify into more
customer segmentation which will generate more per unit sales.
To expand in various countries & break barriers to entry they can tie up through joint venture &
franchise options. (Daily Mail, 2010).
Food retail market has already risen to £145 billion in 2014 (Euromonitor, 2010). Even after
inflation, recession or down turn people will still spend on food market.
While Waitrose opportunities lies in-:
Penetrate into more diversified segments & capture more market share.
Build heavy loyal customer base & launch more schemes & loyalty cards.
Threats
Aggressive competition in the market leads to revise strategy planning & invest more alternative
strategy to save market share.
Unemployment, market down turn leads to changing behavior of consumer for non food items
hence threat lies in cost cutting techniques.
While Waitrose threats lies in-:
Competition wars & penetration into new segments will result in price wars.
Poor economy & reforms in UK to sustain.

Comparative PESTEL Analysis framework of Tesco & Waitrose
Political
To penetrate into new global market segments it need a political support & permission of
targeted countries. For eg India penetrating into it needs to check political stability & favorable
reforms & then decide launch of new stores & products.
Globalization & checking peer strategy for the road blockage while entering into new market
domain & segments.
On the contrary, Waitrose captures majorly in UK & has penetrated less globally hence it
compliance with UK government rules & reforms.
Economic
Favorable Economic factors both in global & local is a big concern. Downturn in economy &
bad recession results in consumer changed behavior & tough reforms leads to price dropping &
no sales growth especially in non food items.
However food items are last dropped item form the list during high inflation & economic
downturns but still to sustain in existing scenarios & retain customer base TESCO should launch
more loyalty & warrant cards scheme (Euromonitor, 2010).
While for Waitrose its highly dependent on UK economic reforms as of now are stable but due to
the bad recession in 2008 it resulted in customer switching & heavy losses. Hence regular
schemes, promotions, cards loyalty should be launched to maintain customer database
Social
Change in lifestyle, buying behavior, improved health awareness leads to change in patterns.
Tesco should consistently foresee changed social behavior & choose alternative plans.
For example keeping more organic or non-organic food items for a health- conscious people.
Cheques, cash credit/debit card, bank transfer or payment through customer loyalty should all be
considered.
While Waitrose has adopted itself to changed mindsets of consumer behavior because of buying
patterns, new lifestyles, habits & preferences. Waitrose keeps an updated & follows the market
trend of food or non food items & has excluded outdated stuff. Keeping abreast with Waitrose
focus it came with an upmarket promotional activities.
Technological
Keeping stocks fresh, introducing latest technology, maintain logistics is all tricks to penetrate
easily in the market & cater to the needs of customer (Office for National Statistics, 2010). Tesco
upgrade itself to latest style & technology in order to sustain & compete with peers.
Customer Loyalty programs, cards, schemes, convenient payments system result in less changed
customer loyalty (Sun, 2009).

Online retail shopping through Tesco.com also resulted in the customer retention & quick
deliverables.
While Waitrose keep itself updated & adapted patterns changed technology, storage, supply
deliverables, transportation in grocery food items segment.
Environmental
Government support & strategically encouragement results in Tesco promotions in the targeted
company.
Carbon footprint (Wood, 2009 resulted Tesco introduction in organic & non organic food items.
For Waitrose, reduce food waste, ban of plastics & using of more environment friendly
decomposable stuff (Yuthas, 2009).
Legal
Service tax in food items & VAT in non-food items has been applied as per targeted countries in
Tesco.
Minimum wages pay & gender equality has been implemented in the Tesco as per the specific
country norms.
While for Waitrose its more a pro UK oriented & hence domestically it includes all laws,
reforms, taxes etc. & globally it adheres to quality standards set by institutes reforms to
strategize penetrated markets.
Comparative Positioning, Targeting and Image of Tesco PLC & Waitrose
Tesco Waitrose
Positioning When it entered market it was
a focused only in grocery
food & beverages & soon
enough in order to sustain in
the market globally &
domestically it started
diversifying in the major
segments & sub segments
For the Waitrose Company,
through the word of mouth &
by tie ups with branded
companies.
Targeting It promoted aggressively &
now stand as one of the cost
leaders
Waitrose always choose silent
promotional activities & it
never advertise till 90’s. All
the promotional, in house
discounts & other cards
schemes were designed
through customer servicing
departments.

During the cut throat
competition & when Waitrose
started losing revenues it
realized it need to invest in
the aggressive advertising &
promotional activities.
Image From huge mega stores,
express stores to normal
convenience stores it has
imaged itself as one stop
shop.
In order to grow, improve
brand image & label itself as
par, fresh & unique it
strategies intelligent
promotional activity.
Waitrose promoted itself
through the strong brand
communication & improved
its brand image by many
marketing & promotional
intelligent activities.
Waitrose strategies through
suppliers & learned about the
core market knowledge since
they have their own farm
land.
Comparative Retail Mix
Tesco & Waitrose Retail Mix
It considers all the key factors which affect it internally & externally such as business strategies,
consumer preferences, management strategies to break competition & gain more consumer
database.
Product
Tesco has a variety of products to offer & has diversify in the various segments & sub-segments.
It has optimally utilized & imaged itself intelligently selling all the products & services under
one roof such as
 Clothing & jewelry
 Technology & gaming
 Health & beauty
 Home electrical

 Entertainment & books
 Home appliances
 Baby & toddler
 Garden
 Toys
 DIY & Car accessories
If the location high crème Tesco will also include high branded products & if its located in the
regional & health conscious place then it will try to also include organic food etc.
On comparison with Waitrose its product mix changes as per consumer tastes. For example, the
Carrefour store caters to the needs of all the consumers under the one shop store then some of the
stores just concentrating on grocery, food items or non-food items.
In mix with strategizing the core products & competing with the others keep their completion at
bay.
Additionally, Waitrose's product mix also depends on locations & stores sq. feet. Since keeping a
huge stock may result in the less selling in a low customer centric place & similar keeping a low
stock will result in spoiling of brand image due to shortages in stocks. Keeping a track of the
customer records & per sales unit sold of any labeled or non branded products helps in
identifying the supply & demand of the products.
Promotion & Visual Merchandising
Tesco plc, heavy promotional activities & offering per unit discounts result in increasing sales,
revenues & sustain in the markets, as it customer satisfaction. Offering & tailoring as per
customer’s promotional activities helps in keeping competition at bay. While opening new stores
focusing on promotional activities result in visibility & adding new customers to the database.
Different time levels of adjusting busy & non busy hours & introducing more discounts during
non busy hours will result in more customer entries.
While Waitrose promotion includes in house brands at par & launching it after studying new
products penetrated in the market which helps in visually appealing to consumers.
Some of the Waitrose launched products are labelled as inferior as compare to the branded
products promoted in the department due to price strategies.
Waitrose, make a note of customer surveys & recording customer feedbacks about products &
services helps in retailers assess market needs fast & substitute outdated stuff with preferred &
adopted life styles (take away, healthy eating, alternatives food, exotic, ethnic foods of people.
The retailers utilizes this feedbacks in the modification of brand, product packaging preferences
as per the consumer taste & preferences & act faster than manufactures. This helps in better
social connect with consumers.
Location, Store Design & Layout
Per unit sales sold, location (whether operating at high cost or low cost) per sq feet opening of
store etc. all is a part of strategy implied in marketing mix. The core strategy to be in tows &

serving customers at the earliest & readily available opportunity. Tesco has two modes to
broadcast its products and services: online and offline.
Online sales of Tesco helps in better connect with consumers & delivering quickly. Since its
easily available & accessible hence popularity is increasing rapidly among consumers. As per
stats 2014/15, Tesco’s online grocery business captured 20 % of market.
In comparison with Waitrose, its stores are located in south east & far north of the UK &
Newark. Some stores are located high profiled shopping areas. The average Selling Space of a
Waitrose Store is under 1500 sq. meter, which is fairly small. Stores sq. feet preferences are
between 1500- 2000 sq meters & if at good location they prefer 2500 sq metres.
Price
Sine Tesco is considered as highest profitable hence it is marked pricing leader. Tesco needs to
keep its pricing as per its business strategies. Due to the high economies of scale & low operating
costs, Tesco can keep completion at bay through smart & uniformed pricing offered to
consumers. It should still lower its operating costs since it purchases at bulk from the buyers &
can negotiate in great depth. The company also uses economy pricing, psychological pricing,
product line pricing and geographic pricing strategies.
While Waitrose is known globally & domestically it has to keep prices stable & uniform. But
judging price wars in specific segment, location or places it needs to keep it minimum or at par
to sustain competition. Sometimes due to discounts, promotions & giving club points also helps
in pricing the product intelligently. Any differential pricing or variation is only due to the various
factors involved. For example, a Waitrose store at center of London operating at higher prices as
compared to a Waitrose store in Newark. One of the factor can be due to the high operating cost ,
transporting , logistics & stocking the products can all add to the per unit cost of product.
Globally as compared with domestic & regional pricing there can be variation in pricing due to
the changed lifestyles, customer preferences, new entry into the market & change of habits. All
these factors have to be considered when Waitrose prices it products. Within a region, segment
or division Waitrose will operate at same cost & have same pricing but if its regionally in
different location it might have changed prices.
Communications
Tesco has a strong marketing team & uses a competitive marketing communication
correspondence with peers, customers, clients & with investors & on the contrary Waitrose needs
to have more aggressive marketing campaign for more promotion/ visibility activities & should
strengthen its communication standards with the clients & investors.
Atmospherics & Customer Service
Guide customers proactively & prefers self-service & While Waitrose caters to customers but
prefer they should be aware about know how services
Conclusion

Tesco Waitrose
SWOT/Pestle/Porter Understanding strengths &
optimizing opportunities
result in the strategizing &
forsee barriers. (Kotler et
al., 2013).SWOT analysis,
PESTLE & Porter 5 forces
highlights that Tesco is well
placed globally/ domestically
& stands at par with other
existing competitors such as
Walmart & Carrefour due to
its thoughtful planning and
economic market knowledge.
Penetrating market through
online shopping portals,
customer & employee centric
policies, introducing more
friendly loyalty cards &
schemes, heavy promotional
& discount activities on
products and services has all
resulted in capturing a major
market share globally &
domestically. As per the stats,
Tesco stands 2nd in terms of
profitability after Carrefour.
Even during turbulent times
for e.g. recession in 2008,
Tesco leadership was able to
sustain the market due to the
diversified strategizing,
identifying potential markets
& capturing market through
product/services
differentiation & highlighting
uniqueness.
Understanding business
virtues, Swot analysis & retail
mix of Waitrose it was able to
optimize its costs & benefits
analysis of pricing strategies
adopted.
Analyzing PESTLE, Porters
five forces analysis & various
other parameters of Waitrose
it is well read that it should
diversify more, which help in
capturing more market share
& should expand in various
horizons globally or
domestically.
Strategy Major challenges are faced by
the tough competitors & to
break the stereotype image
one needs to retaliate to
accept it just like Tesco faces
(Ruddick, 2014). Opting for
an alternative strategies to
compete with the competitors
Taking customer feedbacks,
fine tuning products as per
the customer feedbacks,
applying know how services
resulted Waitrose capturing &
positioning itself as an
upmarket company.

& diversify to sustain during
economic & business
downturns.
Market Campaign & Targeted
Market
Tesco unique strategy to
diversify & promote more of
non food items helped it
retained its position &
visibility. Also, its aggressive
visual campaigning across the
world helped them capture
more of market share. Risks
& mitigation of risks needs to
assessed beforehand &
necessary actions should be
taken (Kotler et al., 2013).
While for the Waitrose, it
needs to have an aggressive
marketing campaign for more
promotion & visibility
activities. It has just market
itself as m an upmarket,
focusing on one retail grocery
segment & then
understanding customer
needs, fine tuning to the
preferences of them &
delivering in accordance to
expectation resulted in
Waitrose growth & capturing
major revenues.
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