Marketing Case Study Sem1 2021.

Tesco: A measurable marketing case study

KNOWLEDGE@AUSTRALIAN SCHOOL OF BUSINESS

The early 90s was not a good time for UK grocery chain Tesco. Sales were falling, profit growth was slowing, the share price was depressed and discount food retailers from continental Europe were beginning to enter the UK market. After a cost-cutting program things became even worse as competitors grew stronger. Drastic measures would be required to save the organisation in this most cut-throat of industries. But Tesco transformed itself.

Tesco, Building a Global Retail Brand Through Sustainable Marketing, a paper by Simon Knox, an emeritus professor at Cranfield Universitys School of Management in the UK, notes that since the turnaround program Tesco has transformed itself into a diverse international business with 65% of its selling space outside the UK. With 472,000 employees and 4811 stores worldwide, year-on-year sales have grown by over 6% in 2010. In the last six years alone, sales have more than doubled to 62.5bn, generating profits in excess of 3.39bn before tax and positioning Tesco as the third-largest supermarket group in the world.

Expansion has involved entering new markets in central and eastern Europe, as well as China, India and the US. Store numbers have doubled, and, in the UK, Tesco has more than 30% of the grocery market, Knox says, making it the market leader. What caused this turnaround was a stunning example of stakeholder management and targeted brand marketing.

The real change agent was the Tesco Clubcard that they introduced in 1995, says Knox, a recent international visitor to the Australian School of Business. Tesco had developed a range of own-label products, begun in-depth market research with shoppers, improved in-store facilities from bakeries and meat counters to baby change rooms and rolled out a first-class training program that empowered all staff to look after customers the way they thought best. So, a customer-centric culture was

taking hold, but the Clubcard was the jewel in the crown, although many felt it was doomed.

Knox reports that in a statement to the press the chairman of competing grocery retail chain Sainsburys, David Sainsbury, openly ridiculed the Clubcard scheme, saying: It will cost at least 10 million just to administer. Thats wasted money that brings no benefits at all to customers. We have no plans to go down that route.

The Clubcard would offer just 1% discount, which Sainsbury believed was of insufficient value to the consumer. The card also accrued points towards benefits for customers. But the real value wasnt in the discount and benefits, it was in the data made available by the Clubcard.

Tesco serves an ace

A group of people within Tesco, including retail, divisional and regional managers, said they would like to be part of the Clubcard strategy development and put together a team to trial it, reports Knox.

Tesco is very good at trialling, learning, adapting, then trialling again and moving forward. They adopted the Clubcard across a small number of stores and there was an immediate uplift in sales and commitment from customers. Suddenly everybody wanted to be part of the new regime. It moved from piloting and learning to a full-scale change management instrument, which has since been extremely successful. Six months later

Sainsburys started playing catch-up by introducing their own card.

Much of the success came from the wealth of information, constantly updated and refreshed as shoppers made purchases, about the supermarket chains customer base. Operational benefits such as refined stock selection, display and staffing levels could be derived from the data, but the primary purpose of the data gathering was to facilitate future micro-marketing activities, wrote Knox. It would allow Tesco to gather detailed information about individual consumers buying habits, while maintaining feedback channels through which the company could communicate directly with its customers to build loyalty.

One of the issues facing Tesco was how to manage all the data generated by Clubcard. To come to grips with that, a specialist marketing data analysis consultancy, dunnhumby, was brought in. By the end of March 1995, over five million people had joined the Clubcard scheme and Tesco recorded a 7% increase in sales, Knox notes. Independent retail analysts AGB confirmed the impact of Clubcard on sales when they announced that Tesco had surged ahead of Sainsburys for the first time to become Britains leading retailer of packaged goods; a market position it has enjoyed every year since. One year after Clubcards introduction, the company also launched the Clubcard Magazine, produced in five different versions to suit different lifestyle segments.

Case study questions

1. Explain what is meant by the marketing mix (2 marks)

2. Discuss the pricing strategies that have may have been used by Tesco and that you have learnt in this course? Define them and give examples from the case where possible. (8 marks)

1. Explain elements of the product brand identity, packaging etc., Tesco brands could use. Please consider course content and case study to give examples. (5

marks).

1. What do we mean by the term distinctive assets? Consider 3 distinctive assets which could have been used by Tesco clients suppliers in the store. (5 marks)

2. Explain 3 of the 9 empirical laws of shopping that you think would assist the marketing of this product (8 marks).

1. What is a media mix? Relate this to the article and give suggestions on what you think might work to promote Tesco? (6 marks).

Marketing environment (15 marks)

2. Explain why it is important to analyse the marketing environment when looking to enter a new market. Give examples from the case on how they could have done this (5 marks)

3. Give two macro-environment factors covered in the case study do you think are important for Tesco in this situation. Explain your choice. (5 marks)

1. Outline the role market research, define it and explain how Tesco used it in this case. (8 marks)

Marketing Strategies (43 marks)

2. Do you think Tesco has high-involvement or low-involvement purchase? Explain your choice with reference to consumer behavior concepts taught in the course. (6 marks)

3. Using the Ansoff matrix and think about how Tesco has grown, and the growth strategies Tesco may have used. Draw and describe the model. Look at each quadrant of the matrix and explain each of them and if they applied in this case. (6 marks)

1. Examine and explain the Product Life Cycle and give examples from the case. ( 5 marks)

2. As part of their market expansion strategy, if Tesco is considering entering an international market (Asia). Explain 3 key considerations for the marketing of in that country (pick a country of your choice). In your answer explain the difference between standardization & localization according to course content (3 considerations x 2 marks = 8 marks).

3. Identify potential segments in the market , use the consumer segmentation information on the course (6 marks).