1.

0 INTRODUCTION
In our research report, we aim to understand how Tesco UK does their marketing activities.
The marketing activities include the way Tesco UK does their segmentation, targeting and
positioning (STP) so that they can know where to concentrate their commercial efforts. By
doing so, the organisations resources can be effectively and more efficiently utilised. Not
only that, we also look into Tesco UKs assessment of current situation with respect to the
marketing environment which consists of economic, competitive, technological, sociocultural
and political and legal forces. This assessment is done to enable Tesco UK to modify their
marketing strategies and plans so as to stay relevant in this ever dynamic environment.
Lastly, analysing the creation of Tesco UKs marketing mix: product, place, price and
promotion that strives to match with the needs of their customers in the target market.

2.0 COMPANY BACKGROUND

Tesco UK, United Kingdom, is one of the entities under the group, Tesco plc. The core
business of Tesco is in UK although they have expanded to all the other places such as
Eastern Europe and China, Malaysia, Thailand and Japan. Tesco UK is a British
multinational grocery and general merchandise retailer. Aside from groceries, household or
even electrical items, it offers also services such as banking, insurance and telecom. It started
trading in 1924 by Sir Jack Cohen. To date, it has 2715 stores with around 290,000
employees in the UK, making it to be the core business contributing to the group. Around
60% of the group sales and profits come from the UK operations. Since March 2011, Richard
Brasher was appointed to be the Chief Executive Officer for the UK operations. Tescos
philosophy is to deliver great shopping experience to its customers in every store that they go
to. They believe in Every Little Helps and reward its customers with more savings in Tesco
when they use its Clubcard (a Tesco customer loyalty program).

3.0 MARKETING MIX

3.0.1 Product
Product refers to the goods, services or idea received in an exchange (Hult, Pride & Ferrell
2012). Tesco UK provides goods such as clothing, groceries, baby products, toiletries, pet
products, health and beauty products and etc. As for services, Tesco offers financial services
(Tesco Bank), mobile service provider (Tesco Mobile), online shopping service (Tesco
Direct) and online bookstore (Tesco Books).
Nowadays, Tesco products are not just limited to their own retail brand-private store brand
such as Tesco brand itself but their products have expanded to include other product brands
such as F&F and go cook as well as their pillar brands such as Finest and Value.
In any company, they should place an emphasis on the importance to the product or service
as well as the other aspects associated with the products that capture the customer attention.
The elements in their product or service should contain the followings: Quality, packaging,
brand name, features, options, safety, repairs, support, services and warranties. The other
factor to consider when designing the product is whether the customer needs and
requirements are met.
Tesco Value
Quality: These range of products claim to offer the best price to its customers without
compromising on the quality. Stringent checks are also done on all its value products;
ensuring they are safe and good for consumption. Tesco Value products are aimed at people
with family and want better savings on products. The basic needs of these types of customers
are satisfied through the wide range of Tesco Value products being offered. To Tesco, Value
does not always mean limited options. An estimate of 800 types of Tesco Value products are
available for them to choose. With the wide variety of Value products, they are trying to beat
their competitors who are also selling budget items. The taste of their value mushrooms is
still good despite of their imperfect look. Besides that, their value cheddar cheese is still
cheddar but is just comes in less flavour options and different sizes compared to their more
expensive alternatives.
Packaging: The packaging of their Tesco Value product is simple so to reduce cost.
Tesco Value items are family packaged with a similar packaging for all of these products
with a common design element consisting red, blue logo and a white background with some
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pictures relating to the specific product (Refer to figure 2).This type of design or packaginguniformity and simplicity design gives their customers an easy way to distinguish their Tesco
products against so many other competitors products. Besides that, Tescos packaging is also
environmental friendly as the marketers pledged to fine the balance between minimal
packaging and the supply chain. Example: Tomato puree tubes no longer come in cartons,
reducing packaging by 45 per cent, the caps on two litre bottles of carbonated drinks have
been reduced, saving 603 tonnes of plastic a year and etc. Not only that, Tesco products are
effectively packaged to facilitate in storage, transportation and handling. Example: Double
concentrated squash (non-alcoholic syrup) enables Tesco to sell it in lighter, small and more
portable bottles - less packaging and less logistics to transport the product.
Labelling
The nutrition labelling is on the front of the product so that consumers can view it directly
instead of looking at the back for the product label. Their nutrition labelling uses Guideline
Daily Amounts (GDA) and tells consumers how many calories and how much sugar, fat,
saturates and salt they will eat in one serving, together with the percentage GDA for a typical
adult (Refer to figure 3). The marketers design this nutrition labelling to be clear & legible
with good font-size and type unlike some competitors nutrition labelling font size & type
being too small and difficult for viewing.
Branding
Tesco brand is constantly evolving and recently the popularity of their Pillar brands such as
Tesco Finest has pushed Tesco Value into second place as the largest food brand in UK ahead
of Coca-Cola. More and more people are buying the Finest range on a frequent basis thus
making it an important component of Tesco sales mix. Besides that Tescos branding has
extended to include financial services such as provided by Tesco Bank. Tesco wants to seen
as innovative to its customer and to build better confidence level in their customers by
delivering different kinds of products and services.

3.0.2 Place
Marketing channel
Since Tesco UK is a retailer, it uses this type of marketing channel - starting from producer to
retailers and ending with consumers (Refer to diagram 1). That means they buy directly the
large quantities of products from producers. This helps to pass more savings to Tescos
consumers because Tesco does not have to go through so many intermediaries like agents and
wholesalers before reaching to them.
Formats of stores & locations
Generally, Tesco UK is classified under general merchandise retailer. Their brick and mortar
shops can range from small sized convenience stores to big hypermarkets. They come in
multi-format to suit different customers need around UK like Tesco Express, Tesco Extra,
Tesco Superstores and Tesco Metro.
Tesco Express: A type of neighbourhood convenience store developed on Esso petrol
station forecourts. Their products are mainly food and everydays essential items.
Tesco Extra: A hypermarket that sells products in bulk so as to offer cheaper price to
consumers. It targets small business owners.
Tesco Superstore: A large retail outlet that carries all the products found in supermarkets
as well as most consumers products purchased on a frequent basis. It offers a wide a
complete food range but only limited non-food products. It is normally found in out-oftown location.
Tesco Metro: The size of store is between Tesco superstores and Tesco Express It focuses
on convenience food, takeaways and lunch items. Found in High Street locations and
targeting city centre office workers who wants a quick shopping either for food or
products.

Store image
The exterior atmosphere in Tesco UK especially in the element of parking spaces is good
with enough or large parking spaces for its customers. The exterior building is painted mainly
in a theme of white, red and blue. All stores carry the big, bold lettered Tesco signage in
bright red and blue which makes easy recognition for people even from a far. While the
interior atmospheric elements of Tesco consist of good, bright white lighting, air-conditioned
environment and an organised retail display with proper signage of many categories of
products (Refer to figure 4 for both the exterior atmosphere and interior atmosphere of Tesco
UK)
Direct marketing
Tesco UK uses direct marketing in their nonstore retailing such as e-commerce websites: (1)
Tesco.com (for groceries & fresh foods) and (2) TescoDirect.com (for non-food products)
and also the m-commerce (Tescos Android application for smartphone users). These are the
online retailing besides their traditional brick-and-mortar store. The move to do online
retailing is to be able to operate on a more massive scale with a larger distribution of network.
The Internet technology allows the customers to get their products easily and save time.
Besides that, Tesco UK can also save on the rental cost of its brick-and-mortar store. In the
direct marketing, e-catalogue is used to help the consumers to make selections and place
orders via the e-commerce or m-commerce. The e-catalogue consists of a list of products
available for purchase with complete pictures, prices and description of the products. Clear
shopping instructions to place order are shown in the catalogue marketing (Refer to figure 5).
Retailer plays an important role in the supply chain management because they are both the
marketers and customers for the producers (Hult, Pride and Ferrell 2012). Efficient
transportation of goods from the producers to the Tescos depot and lastly to the Tescos
stores is necessary. Tesco UK uses the railroad and lorries to deliver their products and
stocks. To reduce the carbon emission by their lorries, Tesco are using more of the trains
instead of lorries to transport the goods. It is a commitment by Tesco to be a zero carbon
when 2050. Tesco UK has a rail terminal with 1.5 km of rail in 3 rail sidings, capable of
loading and unloading 8 trains per day (Tesco-careers 2009). This service saves a lot of time
and cost of petroleum that are very expensive these days. It also helps protect the
environment.

3.0.3 Price
Nowadays with the economic recession in UK, many people are losing their job and this
makes their household income to drop. Their purchasing power of goods or services may be
affected by this problem. Those affected, would be constantly on a look out for any cheap
bargains and offers that might help them to alleviate the worsening problem. Tesco UK has
addressed this problem by listening to the view of 200,000 customers and decided to cut the
price to help the customers to cope with the economic recession (Tescoplc, 2011)
On 22 September 2011, Tesco had announced their pricing strategy which is Tescos Big
Price Drop. This pricing strategy brings exactly the help and benefits needed by many
customers and their families (Refer to figure 6). Tesco UK reduces the pricing for most of the
products that customer need to buy everyday such as milk, vegetables, fish, breads, fruits and
so on. With the price reduction, customers can buy more with the same value of money and
also focus on the products that families need most. Affordability is the key component that
the customers are looking for and not expensive or luxury products. In this situation, Tescos
own brand such as Tesco Value products became very popular as these products serve exactly
the needs of the customers.
Apart from this, Tesco UK also uses the everyday low price (EDLP) strategy. By the
everyday low prices strategy, it may attract many customers at low prices. This can let the
customers to endless price comparisons that mark shopping expeditions. EDLP also help the
customers to spend less cost in every day. (Refer to figure 7)
Besides that, Tesco also promoted bundle pricing strategy for the customers. This means
Tesco package two or more items, often complementary to each other to be sold at a single
price (Refer to figure 8). This bundle combination allows Tesco to push more of their goods
to the customers especially for the slow-moving products. Not only that, customer loyalty
can also be fostered in this way because customers needs are satisfied by providing them
with different bundles of products to suit them.
Furthermore, Tesco provides odd-even pricing strategy to their beloved customer. Odd-even
pricing is a strategy that sets the products price at odd number rather than setting at even
number. For example, the Olay Gentle Cleansing Face Wash sold at Tesco UK is priced at
0.97 instead of 1.00. Another example is the Robs Double Concentrated Orange squash is
also oddly priced at 3.65 instead of 3.70 (Refer to figure 9). Research suggested that buyers
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will be influenced by the odd pricing products as they consider it as a bargain- not 1.00 but
0.97 and there is still change after buying this Olay Gentle Cleansing Face Wash.
Not only is that, multiple-unit pricing strategy is also one of the pricing strategies that has
been deployed by Tesco UK. Customer can purchase two or more same type of products and
get a lower price for it than buying individual products. For example, Tescos wash up liquid
is priced at 0.85, but with multiple-units; any 2 of the Tescos wash up liquid cost only
1.20. Customer can save 0.50. (Refer to figure 10)
Tesco UK has also priced some of its products according to a special event. This technique is
called the special-event pricing. This is done to generate more sales by capitalizing on the
special event or occasion. An example is Tesco UK offering discounted prices or special
offers for some of its product just for the upcoming Mothers Day celebration. (Refer to
figure 11)
Price lining has also been adopted by Tesco UK as one of their pricing strategies. Price lining
is whereby products or services within a specific group are set at different price points. This
can be seen where Tesco UK offers gifts with different price range. (Refer to figure 12)
Buy one get one free (BOGOF) is one of the types of promotional pricing. Tesco is able to
win more customers by doing so as an industry survey shows that supermarket shoppers
respond very favourably to BOGOF. (Refer to figure 13)

3.0.4 Promotion
Many organisations are using the promotion variables to attract the customers. Promotion can
be defined as activities used to inform the society about their organisation products. The main
purpose of promotion is to attract the publics attention about an organisation and their selling
products and any new products available. Besides that, the main purpose of promotion is to
give information about the products to their potential or loyal customers. Therefore this
increases the quantity demanded of a product and distinguishes a product from their
competitors. There are many ways to promote a product for instance, sales promotion, public
relations, direct email, trade fair and exhibitions, advertising, viral marketing, street teams
and etc.
The Clubcard has being provided by Tesco UK under the membership scheme which helps
the customers to save money while shopping (Refer to figure 14). Customers will get a point
on every pound they spend while shopping at any branches of Tesco. Customers can convert
their points into Clubcard vouchers when the customers successfully collect 150 points which
help the customers save a lot of money while shopping. Actually the other retailers also have
the similar loyalty programs. Nevertheless it is intriguing to note that about most of the
loyalty schemes and relationship marketing strategies which are similar to the Clubcard have
often failed by the other retailers, only the Tescos Clubcard has worked well and managed to
succeed. In fact, the Clubcard will indirectly motivate and encourage the customers to buy
more products at Tesco and Tesco can earn more profits in this way.
Sales promotion is being thought of as all promotions apart from advertising, personal selling
and public relations. For instance, buy one get one free (Refer to figure 15), coupons,
competitions, free sample products and gifts. Every sales promotion should be compared and
well planned with the next best alternatives. Tesco UK has held many promotional activities
to attract potential customers and their loyal customers, such as discount up to 70% on
clothing sales with F&F, Half term bid day out (2 for 1 offer), 10p Off Per Litre. In addition,
when customers spend 60 on groceries, fantastic half prices, Tesco store clearance up to
50% discount, 10 off when spend 40 on clothing, save 15% off entertainment and etc.
Fair trade is an international trade movement that focuses on providing better trading
conditions for poorer producers in developing countries, protecting them from volatile
markets. The fair trade collection will be priced the same as the current range, with T-shirts
retailing at 4. Tesco UK will also launch an organic cotton range under its Cherokee fashion
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label. They offer the opportunity for companies to meet with both the trade and the consumer.
Through this, Tesco UK is promoting its own image as a responsible retailer who does fair
trading. This indirectly encourages more customers to come and buy products from Tesco if
they want to also show their support for fair trade (Refer to figure 16).
Communication was paid by advertising. Advertising is the way of transmit information to
consumer. There are many advertising being implemented such as newspapers (Refer to
figure 17) (local, national), online news portal, magazine, television, cinema, outdoor
advertising etc. In magazine, that have voucher inside for consumer such as Dolls House
Magazine and Esquire magazine. Those magazines have Clubcard voucher worth 16 to 117
as gift. Tesco has advertised many promotions in the newspapers for instance Tesco
broadband triple Clubcard points exchange 40 in Clubcard vouchers for a 4 hours driving
lesson package with RED Driving school.
Besides that, Tesco UK advertises their products through the Internet. For example Tesco
Direct.com is a secure, easy website that offers lots of great deals. Customers can enjoy free
delivery or the next day delivery that charges a small fee from customers who need the item
urgently. Consumers can also take advantage of a huge range of discounts on not just the
groceries, but on electrical equipments, wines, books and much more by shopping online at
Tesco UK.

4.0 RECOMMENDATION
Tesco should consider the importance of another segment which is the high spending
customers. Examples in UK Waitrose, John Lewis (parent company of Waitrose), Selfridges
and Marks and Spencers rely on this trade or segment to thrive. These companies are still
making a profit. Tesco could also concentrate more in this area for further growth in their
business.
Tesco UK can emulate its Korean counterpart, Homeplus (A joint venture between
Tesco & Samsung) in having virtual supermarket in bus stops and train stations. The bus
stops and train stations are plastered with images of products offered in Homeplus (Refer to
figure 18). Interested buyer will just have to scan the QR code found on each image of the
products that they want to buy using their smartphones and place an order and later the
groceries will be delivered straight to their home. All the customers have to do is just
download the special Tesco application to their smartphones and they can start shopping
already.
Aside from venturing into financial services (Tesco Bank) or the telecommunication
services (Tesco Mobile), Tesco UK could probably venture into the higher education sector.
They could partner with other reputable academic institutions to provide with cooking course
or even business course such as retailing. For examples Tesco can use their unsold vegetables
and food products to be used as ingredients in the cooking school. Today, higher education is
highly valued in this globalised world. More and more people are in the rat race to get a good
paper qualification.
Although Tescos concept is self-service but they could still hire some knowledgeable
or well-informed personal assistants to help customers make selections on the especially
expensive products such as electronic products sold at Tesco.
Tesco can hire more talented people to work for organization. The skills needed from
them are to help the organization to come out with better strategic plans for further reducing
operating costs, advertising cost and marketing cost and etc. They can also offer bright ideas
to improve on the current inventory control system of the organization and on how to provide
excellent service to its customers.
Since Tesco is a large private employer, Tesco can create a happy working
environment for its employees by providing more benefits and always care for employees.
Happy employees can serve the customers better. This helps to boost Tescos image as a
great employer and as a grocery retailer that provides excellent service to its customers.
Although, Google is in a different industry, but Tesco can still follow some of Googles way
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of keeping their employees satisfied. Always keeping customers happy and fully satisfied
would help make Tesco to be the market leader.
Tesco should also really consider its objective on whether to attract more customers to
benefit or whether to make every effort to keep its existing customers. It is more costly to an
organisation to attract new customers than retaining their existing customers.

5.0 CONCLUSION
Despite Tesco UKs claims on having the worlds class operations and processes which
include marketing, the reality is the market environment is very volatile. This can be seen
from their most recent marketing strategy of Big Price Drop which unfortunately did not go
well with their strategic plan because Tesco UKs share price fell sharply. Competitors such
as Asda and Sainsbury were quick to respond to such scheme by hatching up with similar
plans. Customers did not respond well to Tescos Big Price Drop as they had hoped for.
Sometimes, we think that we might have the best marketing strategies but external forces
from the environment does not allow us to have total control of what we want to achieve.
Contingency plan is necessary when things do not go well. The contingency plan should
address the current problem that they are facing as winning back customers should be a
priority even if it means to give up on the profits in the near term, if we were to look at, how
Tesco might benefit in the long term. Along with contingency plan, they should always strive
to resolve any long-standing business issues if they want to remain as one of the leaders in
the retailing position in UK.

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APPENDIX

Figure 1

(The promotion 2012)

Figure 2

(Mysupermarket 2012)

Figure 3
12

(Tescoplc 2012)

Figure 4
Exterior atmosphere

Interior atmosphere

(Soult. G 2009 )

(Randstadstaffing 2009)

Figure 5
Catalogue marketing (in e-commerce)

Catalogue marketing (in m-commerce)

13

(Tescodirect 2012)

(Charlton. G 2010)

Figure 6 ( Big Price Drop)

Figure 7 (Everyday low price)

(Chapman. M 2011)

(Tescowindow 2012)

Figure 8 (Bundle pricing)

Figure 9 (Odd-even pricing)

14

This special edition Xbox 360 comes with the

revolutionary Kinect motion control device at a
single price of 289.00 pounds.
(Tescodirect 2012)

(Tesco 2012)
Figure 11 (Special-event pricing)

Figure 10 (Multiple-unit pricing)

(Tesco 2012)
(Tesco4flow 2012)

Figure 12 (Price lining)

Figure 13 (Buy one get one free)

(Tescodirect 2012)

(Tesco4flow 2012)

15

Figure 14

(Media Center
2012)

Figure 15

(Mail Online 2011)

16

Figure 16

(Abingdon Fairtrade Group

2007)
Figure 17

(Sutton, M 2011)

Figure 18
17

(Becker. P 2012)

Diagram 1

(Hult, Pride and Ferrell 2012)

18