Retailing Management Strategies and Practices - Tesco case

Tesco marketing: unclear, irrelevant and not very successful

Tesco began in 1919 with one man, Jack Cohen, a market stallholder selling groceries in London. TESCO was formed out of a merger with T.E. Stockwell from whom he purchased tea for sale on the stall. The first store opened in 1929. Since then, Tesco has expanded across the world. It now has over 2,200 stores including hypermarkets and Tesco Express outlets to meet different customer needs. As a conglomerate Tesco also offers alternative goods and services such as insurance, banking and online shopping. With net profits of around £3.4 billion worldwide Tesco has become the largest British retailer and one of the world’s leading retail outlets on three continents. Tesco’s growth has resulted in a worldwide workforce of over 468,000 employees. However, the last years were not such a success for the Retailer giant. Recently, Tesco's UK profits fall for first time in two decades.



Tesco's CEO Philip Clarke announced £1bn makeover and admited supermarket has taken 'a little bit too much away from the shopper'. Tesco has pledged to make its marketing "better, clearer and more relevant" as part of a turnaround strategy to reverse recent fortunes, but in the absence of any details all that the supermarket has proved is that over the past year its marketing has been unclear, irrelevant and not very successful.

Clarke the group CEO was cagey on the future of the Big Price Drop, introduced in September 2011, refusing to be drawn on whether it would continue to play a part in Tesco’s marketing and promotional strategy or whether it would be abandoned. There will be little surprise, however, if it is jettisoned in favour of a more holistic, brand-led approach designed to engender more trust in the brand’s overall values. Sainsbury’s has done well in recent months to promote both its values and a price message within the framework of its "Live Well for Less" brand proposition. Another of Clarke’s pledges is to return Clubcard developer Dunnhumby to the heart of the business. This is a worrying admission that Tesco ever relegated the insight and data gleaned from its Clubcard program from the core of its marketing and decision making. The fact that Tesco has been under using its Clubcard data, not just in terms of the loyalty programme, but in terms of decision making and strategic planning, goes some way to explain why its marketing became unclear, irrelevant and unappealing to shoppers.

Clarke in his preliminary results speech, outlined plans to better use the insights to create a more personal and localised business, more closely aligned to the kind of shoppers in the local area. By better tailoring products and promotions in stores to the local shoppers, Tesco will go some way to shifting the perception that it is a giant faceless corporation. The same can be said for the investment in more staff, "warmer" stores and better service that will go a long way to giving Tesco back some of the soul and human connection that it has lost in its relentless quest for growth and more stores. In fact, Tesco considers that the business depends on two groups of people: customers and staff. It appreciates that staff are unique and have diverse lifestyles outside of work. Tesco has discovered that it is important to create trust and respect among its various publics. It has found that by valuing employees, providing realistic goals and an interesting environment for them to work in, it increases employees’ motivation that has a direct impact upon performance. An indeed warm and caring business environment that a customer is looking for during his purchases endeavour. Most pragmatically, customers visit a retailing outlet primarily to buy what they desire in "optimal prices" and hence to spend some of their leisure time. In this sense, I would appreciate to enjoy my stay as much as possible. I want to have as much good time as possible during my stay at a retailer. I truly do not want to rush my "shopping therapy". This is all basic, generic to my marketing, business philosophy. We need to take good care, love both our employees and the customers. Happy and satisfied Human Resources essentially mean Happy and satisfied customers.

Retailing Management Strategies

Strategy 1 – Pursuing Geographical Expansion

Napoleon, 1811
1) Acquiring real estate at the right price - good positioning will eventually facilitate various stakeholders' accesibility.
2) Developing the Supply Chain – logistics in facilitating smooth operations. Supply chain development represents a sustainable competitive advantage for a retailer.
3) Recruiting, selecting and training the store personnel
4) Building the Brand – store equity.

Zara - the Spanish clothing brand - is a clear example of a global retailer that has gained growth and profits based on an effective supply chain approach into markets (Devangshu Dutta, 2002). Zara in fact is the flagship brand of the Spanish Retail Group Inditex SA one of the super-heated performers in a soft retail market in recent years.

Inditex is one of the world's largest fashion retailers, welcoming shoppers at its eight store formats -Zara, Pull & Bear, Massimo Dutti, Bershka, Stradivarius, Oysho, Zara Home and Uterqüe - boasting 5.527 stores in 82 countries. The Inditex Group is made up of more than 100 companies operating in textile design, manufacturing and distribution. The group's success and its unique business model, based on innovation and flexibility, have made Inditex one of the biggest fashion retailers in the world. Their approach to fashion – creativity, quality design and rapid turnaround to adjust to changing market demands - has allowed the company to expand internationally at a fast pace and has generated an excellent public response to their collections. The first Zara shop opened in 1975 in A Coruña, Spain, a city in which the Group first began doing business and which is still home to its headquarters. Its stores can now be found in prime locations in more than 400 cities in Europe, the Americas, Asia and Africa.Zara contributes around 80% of the sales of the group concentrates on three winning formulas to "bake" its fresh fashions:
A) Short Lead Time = More fashionable clothes
B) Lower Quantities = Scarce supply
C) More Styles = More choice, therefore more chances of hitting the right customer, at the right time with the right type of merchandise.

It is pretty amazing but Zara as a global brand instead of producing more quantities per style, produces more styles-roughly 12,000 per year (Devangshu Dutta, 2002). This is indeed a Service-Dominant (See, Vargo and Lusch, 2004, 2008a, 2009) business approach. The company's management proactively listens to the customers' needs and wants and prepares new styles to fit every possible requirement. In this sense, even if a style sells out very fast, there are new styles waiting up in the line to take up the space. Observing the strategy from a services marketing point of view, it looks so much customer-oriented that it has attracted my attention.

Strategy 2 - Improving Product Selection

1) Understanding Category Profitability
2) Eliminate unprofitable products
3) Manage the product offering

Strategy 3 – Increasing Customer Value

1) Understanding Customer Profitability
2) Targeting desired customers – CRM and CVM approaches
3) Managing Customer Value

Working with a "passion for the customer" is somehow the edge of a customer-oriented business philosophy.

Should a dynamic retail organization select one of the above mentioned strategies in sustaining growth and profitability or should they develop their own "success business receipe"?

Let's be honest not all retailers - all around the globe - are interested to become a "breakthrough retailing firm".
My business advice to a mid-sized retailer is to:
A) Maintain a clear, systemic business orientation,
B) Invest human and financial resources incorporating a sound marketing infrastructure - the supply chain management is part of it and
C) Be confident that innovative marketing pays off.

TNT TV channel in Belgium Drama commercial

To launch the high quality TV channel TNT in Belgium marketers placed a big red push button on an average Flemish square of an average Flemish town.
A sign with the text "Push to add drama" invited people to use the button.

AND THEY DID.

See what happened in the video and judge for yourselves the power of marketing...

Why segmenting globaly?

We all need somehow to consider market segmentation as a business alternative. The rational for an effective market segmentation lies on two major issues:

We cannot sell all products/services to all customers and obviously we cannot afford to do that on a long-term basis.

The mass marketing definition of Anderson and Vincze (2004,pp.226) covers me theoretically to a great extend: "attempt to sell to everyone in the market assuming that demand is homogeneous; one marketiong mix is used for all customers".

A number of organizations though are getting a strong global presence in expanding their international portfolio of business. In this sense, marketers strive hard to accomodate a macro or micro perspective in their global segmentation variables.

Complicating the segmentation issues in global markets is the need for internationally perfoming companies to make strategic positioning decisions in an increasingly competitive and transparent marketplace in order to leverage brand equity and achieve economies of scale.

In short, the strategic necessity does not stop at the selection of desirable market segments, but also includes the need to position brands effectively relative to the market segment (Hassan and Craft, 2005).

Levitt (1983) introduced the concept of “segment simultaneity” in his thought-provoking article describing the globalization of markets. He described this phenomenon as the "proletarianization" of global markets where everyone, everywhere wants to have and enjoy world brands - for example, consume McDonalds burgers in China or regularly wear/buy clothing from the Spanish retail giant ZARA. What he described, in fact, was the existence of similar market segments and consumers in different countries for whom low price and high quality would be common criteria for making buying decisions. Is that though the case?
Do we think globally and act glocally?
Can we convince global consumers of the necessity to buy P&G products worldwide?

In fact, market segmentation strategy must be examined to determine the best bases for global brand positioning. Global consumer markets are best understood as groups of buyers who share the need and desire for a product and the ability to pay for it, not just those who share a national border (Hassan and Craft, 2005). We should not forget that buyers in a given - clearly defined market segment seek similar benefits from, and exhibit similar behavior in buying a product. Although these consumers may live in different areas of the world and come from very different backgrounds and value systems, they have commonalties in association with a given global brand. Many of these similarities are associated with the brand image and the lifestyle it projects (Luqmani et al., 1994).

To be continued...