A Detailed Analysis Of Tesco PLC In Regard To Its Operations

Contents

Store Format. 2

Store Design. 3

Advertising/ Promotions. 4

Customer Segmentation. 6

Customer retention strategy. 8

Challenges and threats. 9

Changes that Tesco needs to make in order to remain successful in the future. 10

Conclusion. 12

Tesco PLC is an international food retailer with headquarters in United Kingdom. it has more than 2316 supermarkets, superstores and convenience stores located in 14 countries across Europe, Asia and North America (Telegraph media group (2011). it is the leading food retailer in the U.K. with 1,878 retail stores located through the country. It is currently the third largest retailer globally in terms of revenue earning after Wall-Mart and Carrefour and according to Nwagbara, (2011, p. 56), the second-largest in profit making after Wall-Mart. Tesco group of companies operates four store formats: Tesco Superstores, Tesco Extra, Tesco Metro, Tesco Express and One stop. Tesco has expanded all of its grocery stores to include non-food items such as books, software, electronics and music. It operates an e-commerce site with over 450,000 registered users in U.K.  One of the key drivers to success of this global supermarket chain is that it has an efficient Customer Relationship Management (CRM) system that many people envy, (Shajahan, 2006, p. 208). In order for it to best target its diverse customer base, Tesco divides the target market into various specific segments. Specifically, the target market for Tesco is divided into different groups of customers with distinct similar product or services requirements or needs. This paper provides a detailed analysis Tesco PLC in regard to its operations. The specific areas discussed in the paper are Tesco’s store format, store design, advertising and promotion strategies, customer segmentation, customer retention strategy and the current and future challenges and threats. Finally, the paper proposes various changes Tesco needs to make in order to remain successful in the future.

Store Format

Tesco executes its marketing strategies through various formats. Most of the formats for Tesco have been there for many years and innovations and adjustments are introduced through formula development. The firm currently operates five types of formats, four of which are branded Tesco. These are Tesco Extra, Tesco Superstores, Tesco Metro, Tesco Express and One stop. Tesco Extras have a hypermarket format and are primarily located in Asia (Zentes et al, 2011, p. 181). These stores serve large and densely populated catchment areas such as city suburbs and they offer both food and non-food items

Tesco Superstores mainly offer food but have a few non-food items with sub-brands (Zentes et al, 2011, p. 181). This format has two sub-brands namely; Tesco Supermarket and Tesco Compact. Tesco supermarkets take the format of a standard supermarket. Tesco Compact on the other hand is smaller than a supermarket and it mainly targets smaller communities. Tesco superstores mainly provide traditional grocery items as well as banking, insurance, telecommunication products, flowers, books, movies rentals and uniforms. Recently, the firm has expanded all of its grocery stores to include non-food items such as electronics, books, software and music (Zentes et al, 2011, p. 181).s.

Tesco Metro is a city centre supermarket that targets walk in customers (Zentes et al, 2011, p. 181). The products offered in Tesco Metro are designed to target the needs of the local community. They sell a range of everyday products catering for increasing number of city dwellers and professional people looking to do important shopping near to their workplace.  Tesco express on the other hand takes a convenience store format. They focus mainly on the needs of the local residential neighbourhood, selling fresh and convenience foods. Some are located on Petrol forecourts and they offer gasoline as well (Zentes et al, 2011, p. 181). One Stop is also a convenience store formats resulting from Tesco acquisitions. One stop stores are similar but smaller than Tesco Express. Among the different formats, Tesco Express has been the most dynamic of all the brands in recent years with gigantic development off the brand in 2000 (Krafft & Mantrala 2010, p. 76)

Store Design

Store design is central to the efforts for developing the image and establishing efficient retail operations. The objective is to design a layout that is easily and natural for shopping and that which enables a firm to display products and categories to be able to effectively influence customer purchasing behaviour and customer experience (Cant, 2005, p. 59). A superior store design should enhance a firm’s store image. Store image is the overall perception that the overall perception that the customer has of the store environment. Store layout should provide space and arrangement of the facilities according to the desired image objectives and it has to be supported by the merchandising. The store layout, design and visual merchandising reinforce the image, products and services of a firm. There are different design layouts that a firm can adopt to display its products such as the grid store layout, free-form layout and loop layout.

According to Krafft and Mantrala (2010, p. 76), Tesco adopts a grid layout, which is a linear system of shelving where fixtures are arranged to form vertical and horizontal isles throughout the store. The fixtures are placed mostly at right angles. The Tesco’s largest stalls such as Meadowhall located in Sheffield stock a full range of products. Customers enjoy a full day of shopping with the stores having various vital facilities such as car packs, toilets, food halls and even changing facilities (Krafft & Mantrala, 2010, p. 77). Substantial city centre stores offer a wide range of products which are placed in different departments. On top of the products offered by the aforementioned stores, smaller stores located in suburban and small town locations store the core boots products (toiletry, Beauty and perfumes) and in many instances incorporate pharmacy. Tesco makes modifications in the standard layout in the different chain stores to conform to local requirements and customer needs in different locations.

The common feature of the Tesco store design and layout which is evident amongst both the food and non-food items is the concept of experience space (Krafft & Mantrala, 2010, p. 77). Formula design for Tesco has moved beyond the traditional variables associated with the marketing mix to create stores in which the customer is more involved. Customers help in the value creation exercise by being part of the formula. Further, according to Krafft and Mantrala (2010, p. 77), the grid layout is quite methodical, efficient and convenient. It enhances better visibility of merchandise. It also enables customers to go directly to the merchandise where stores are arranged in self service formats. Further, this design is cost efficient and enables customer tracking process to be efficient and traffic control to be more effective. Lastly, it leads to easy maintenance of selling areas. One demerit with this design layout is that it forms a linear repetitive pattern which may not be very appealing to customers since it creates formal and monotonous environment. Customers may not like to spend much time. The secondary isles get less exposure compared to the primary ones (Plunkett, 2006, p. 133).

Advertising/ Promotions

The most successful marketing campaign approach adopted by Tesco is the use of clubcard. Tesco club card is a membership scheme established by Tesco, which enables customers to save money on the shopping they make through providing them with price-off vouchers (Turner & Wilson, 2006, p. 958). The scheme offers customers with one point for every pound that they spend in any of the store of Tesco as well as the stores of their partner companies. When a customer accumulates 150 points, these are converted into vouchers which give the customer chance to save money on shopping.

Tesco established relationships and partnerships with well established companies such as Beefeater is a group of restaurants, Powergen which specializes in supplying electricity and gas, Marriott Hotels, Avis car-hire, Johnson’s dry cleaners, Marriott Hotels, MFI and National Tyres among others (Turner & Wilson, 2006, p. 958). This link makes it possible for customers to earn points from shopping on any of these companies. Further, customers can earn points by shopping at any of the Tesco petrol stations and by online shopping to purchase available products such as books, electrical goods, music and flowers. Also, the customers can earn points by using Tesco mobile a home phone which is product of Tesco. Another way to earn points is by purchasing Tesco credit card and other Tesco financial products. Generally, this makes it easier for customers to accumulate the required 150 points and take advantage of the price-off vouchers. This single reason explains the fact that Tesco has managed to increase and maintain the interest of its customers to the scheme and to the products associated with the Tesco group of companies.  According to Turner and Wilson (2006, p. 958), many other retailers have in the past tried relationship marketing strategies and loyalty schemes similar to Tesco’s clubcard, but they hardly succeed. But Tesco’s clubcard has worked quite well and helped the firm to surpass its competitors in many aspects especially in the local market.

On top of the products displays in the many different stores, Tesco operates an e-commerce site (www.tesco.com) with over 850,000 registered users in the U.K. alone (Doyle, 2009, p. 105). In this site, Tesco displays the different items that are displayed in its different stores. Additional details and options are provided regarding modes and suitable time of delivery to their homes and payment methods. Customer registers for the service and can browse through the selected items from a range of more than 20,000 product lines. They are then are sent keys and other details over the internet to enable them to pay by credit card (Doyle, 2009, p. 105). Customers only pay a fixed charge of £5 for the delivery, which is included in their bill. The delivery service is available over quite a wide area in the vicinity of the store. The e-commerce division of this firm makes more than 250,000 home grocery deliveries every week in U.K. By delivering items in the right form and quantities as requested by customers, the e-commerce strategy adds existing customers’ loyalty for Tesco  (Kornum &  Bjerre, 2005, p. 66). Further, it attracts new customers and adds the probability for them to become loyal customers in the future.

Customer Segmentation

Tesco targets consumers depending on different demographic variables such as sex, occupation, age, religion, level of education, and income characteristics of different segments of people, (Myers 2004, p. 1). This helps the firm to determine potential ability of each consumer to purchase their products. As noted earlier, the firm has designed different products and services for every member of a family through the use of different club cards. One of these is Tesco Kids Club which is designed to cater for the needs of children between the age of five and eight, (Humby, et al, 2008. P. 184). In this club, Tesco provides members with Disney Clubzone Magazine for kids. On top of that, the Tesco offers parents with a pack that has free information based on issues such as how the price-of vouchers can be used to purchase various products from the company and healthy eating habits and safety for children.

Tesco Baby and Toddler Club on the other hand targets to provide the needs of pregnant people or people who have become parents recently (Humby, et al, 2008. P. 184). The members are offered with free magazines containing information from experts about safety tips for pregnancy and other childcare issues. They are also provided with free entries into prize draws and are allowed to park their cars near Tesco’s stores.  Tesco Healthy living Club focuses on middle and old aged customers who want to maintain a healthy lifestyle. Members here are provided with a free booklet on ‘40 Steps to a Healthier Life’ and regular magazines containing exercise, diet and health issues. Price-off coupons are also offered to the club members on food products such as organic food s and daily items. World of Wine Club provides the members who like to drink wine with information about the different wine available at Tesco stores and all over the world. As well, they are offered with price off coupons for shopping with Tesco. Tesco also it provides members of this club with information regarding the wine that goes with certain kinds of foods, (Humby, et al, 2008. P. 184).

Apart from the above club cards, Tesco has in the past introduced cards to cater for specific needs of various groups of customers. For instance, in 1996, Tesco introduced a card for mothers and a student card suited to their needs. Later, Tesco came up with strategies to add value to its products and servic.............