Evaluation Of Tesco And Sainsburys In Direct Comparison Marketing Essay
This report will present a professional evaluation of Tesco and Sainsbury's in direct comparison of one another, both of which a rivals within the retail market. In addition, issues that influence the overall success of the organisation will be considered.
Tesco's History & Performance
Tesco started off as a grocery stall set up in east London and owned by Jack Cohen in 1919 and 10 years later they opened its first store in Burnt Oak. In 1947 TESCO's stocks were traded on the stock market and between the 1950-60's Tesco's grew organically until it owned 800 stores. In May 1987 Tesco completed a hostile takeover of the Halliards chain of 40 supermarkets. In 1994 Tesco fought Sainsbury's for the Control of 57 William Low stores. On the 21st March 1997 Tesco purchased the retail arm of Associated British Foods, later that year Tesco forged an alliance with ESSO the petrol filling station. Tesco obtained a 35% stake in Groceryworks through internet grocery retailing in the USA and in 2003 Tesco launched mobile phone & landline services to compliment their internet service. In 2007 Tesco was placed under investigation by the UK Office of Fair Trading (OFT) for acting as part of a cartel of five supermarkets including Sainsbury's.
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Sainsbury's History & Performance
In 1869 Sainsbury's was founded by John James Sainsbury's & His Wife, thirteen years later they started selling their own brand products. In 1896 Sainsbury's first store was opened on Drury Lane. During world war one Sainsbury's started recruiting women. In 1946 they started training schools for their colleagues in Blackfriars. Four years later the first self service store opened. In 1970 Sainsbury's stores introduced the first bakery, fresh fish counter, petrol station, & coffee shops. In 1975 the first Savacentre opened expanding into non- food products. In 1989 the first carrier bag was produced made from recycles materials and two years later the penny back scheme was launched to encourage carrier bag reuse. In 2000 Bell & Jackson, who sell Homebase products, joined Sainsbury's and in 2005 the 'try something new' scheme was launched.
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FACTORS OF RETAIL MANAGEMENT
Introduce macro and micro environment, retail location, retail image, positioning, reputation, store design, product assortment, own brands, retail promotion, customer service, customer loyalty scheme.
The Retail Environment: Macro and Micro
The retail environment is in essence the retail market. Factors of the retail environment are broken down and analysed internally and externally. The term used to analyse the internal factors of the retail environment is known as the Micro-Environment, and the term used to analyse the external retail environment is the Marco-Environment.
The Micro-Environment present factors within an organisation or that have direct connection to an organisation that can affect its performance and decision making practices. The most commonly known factors of the micro environment are the stakeholders of a business, which are generally made up of competitors, customers, employees, suppliers, the media, shareholders, and the general public. The most popular method used to actually analyse the micro-environment is through the marketing mix which involves the product, price, place, and promotion within a business.
The Macro-Environment consists of factors that may influence an organisation externally. This is usually outside of the control of corporations. Examples of factors that may influence a business are changes in interest rates, changes in cultural trends and tastes, more competitors in surrounding areas as well as greater regulations or changes to government laws. A popular method used to analyse the macro-environment is through a PESTLE analysis which stands for political, environmental, sociological, technological, legal, and ethical issues.
TESCO's & Sainsbury's Micro Environment
In recent times, Tesco have taken steps to expand the number and range of stores available from hypermarkets right down to Tesco metro stores and the location of these store is important when consider achieving maximum awareness which can be perceive through sales figures. The likely hood that prices will also fall in the run up to Christmas this year as it did last year are high as the UK has not yet recovered from the economic downturn. Tesco's not only promote their store through television adverts or posters but provide a shopping experience to encourage customer to return with the reassurance that Tesco helps save customers money with their slogan 'every little helps'
Sainsbury's products are high end positioned and are in turn perceived by consumers as being high quality goods. Similarly to Tesco, Sainsbury's has a number of stores which all vary in size from hypermarkets to Sainsbury's local, as well as this, Sainsbury's has an online presence but this has not been promoted as extensively as their store campaigns.
Despite this, Sainsbury's have lowered their prices to coincide with the level of UK disposable income of consumers which corresponds with the current economic climate. The impression customers have of Sainsbury's is that are trying to encourage the general public to try new things and cook more food which include their 5 a day, all of which can be achieved on a small budget. There was recently a huge campaign to try something new with Jamie Oliver (a celebrity chef) being the face of cheap healthy eating with the family, an example of this was the 'feed the family for a fiver' advert.
TESCO's & Sainsbury's Macro Environment
There are coinciding issues politically and economically within Tesco concerning the recent increase in unemployment due to the downward turn in the world economy, which has had an impact on sales. Despite this, the online technology used to improve consumers shopping experience has been a major factor in the company's recent success. With a social increase of migrant workers from Eastern Europe there have been demands for European products. This change has been raising concerns about the current UK environmental, and the lack of local produce in stores, as this leads to increases in the need for more transport links and journeys; to help address this issue Tesco now use fossil fuel for transporting and are putting in place practices to help reduce their carbon footprint.
Although, Sainsbury's and Tesco's are at an advantage politically as the Government plans to decrease the rate of corporation tax from 30% to 28%, which will save sizeable companies like these significant sums of money. Despite this, economical concerns for the global food crisis are rapidly increasing and have increased food prices all over the world, which will result in rising purchasing costs of Sainsbury's goods. Socially the government have emphasised the promotion of healthy eating due to the increasing level of obesity within the UK. Sainsbury's have a legal obligation to abide by the increasing number of packaging and labelling policies which are an additional financial burden on the company. Just like Tesco there have been a lot of emphases for western companies to help the environment by reducing their carbon footprint and increasing energy efficiency.
Retail Image, Positioning & Reputation
Within the UK, Tesco has a greater level of awareness compared to its rival Sainsbury's and both these businesses know that retail image, positioning and reputation play an important part in how its business operates.
Retail image is the perception that the general public and consumers have of an organisation, whether through a personal experience of not. Burt, 2007 suggests that 'for most customers the key contact point with a retail organisation is the store - it is through their experiences of the store and the interactions that take place within the store that customers build relationships, and form their perceptions of a retailer' pg 5.
There have been many attempts made to classify and measure the factors that contribute to store image. Martineau's, 1958 review identifies four core attributes which are layout and architecture, symbols and colour, advertising, and sales personnel; Lindquist built on this in 1974 and categorized the following nine elements: merchandise, service, clientele, physical facilities, convenience, promotion, store atmosphere, institutional factors, and post-transaction satisfaction (cited Burt,2000:436). In 1991, David Aaker devised a conceptual framework for measuring customer-based brand equity (Atilgan, 2005:238) these were brand awareness, brand association, perceived quality and brand loyalty.
Retail positioning 'is important because it is the means by which goods/services can be differentiated from one another' giving customers a reason to buy one rather than another (Baines, 2008:251). Brand reputation is the widespread belief that a business or its brand has particular characteristics.
Tesco's presently stands as being the leading supermarket distribution chain in Britain, having a market share of 30.7% in August 2009. Tesco's target market is people who have a lower middle class income which accounts for the majority of the UK population, but is specifically targeted at women particularly those with young children, and Tesco has been successful in penetrating this market, as Mitchell, 1998 indicated that 28% of Tesco customers are in this social band, followed by 21% of skilled working class people, then 19% of upper & middle class people, Pg 313. Mitchell, 1998 et al stated the attributes related to quality, time & convenience, and value.
The correlation was strongest with attributes relating to quality aspects of shopping within the quality factor for Tesco consumers; 'Primary-loyal Tesco customers perceive Tesco as a more up-market store, where they can have an enjoyable shopping experience and buy various fresh foods and speciality goods' (Mitchell,1998:314). Whereas, 11% of Tesco consumers where grouped as being secondary loyal consumers and their perceptions if Tesco varied. The majority of these consumers thought highly of the stores image and quality aspects, followed 'by being good value for money and subsequently being convenient with mentions of quick checkouts, ease of shopping and spaciousness facilitate time saving' (Mitchell, 1998:134).
Tesco's brand has been successfully built up around the modest slogan 'every little helps', which has aided it position so that it does not alienate anyone, so caters for all. This position is great for Tesco expansion as they begin to introduce more ethnic foods in their UK stores.
Sainsbury's was the best performing of the leading supermarkets for the 12 weeks ending April 19, 2009, with a growth rate of 8.1 percent. This lifted its share 16.1 percent a year ago to 16.3 percent.
Sainsbury's is the most established supermarket between the two. Sainsbury's brand has a strong resonance with the UK public. The brand has strong link to expand into the home furnishings sector and through their alliance with Homebase, Sainsbury's brand strength is evident, as Homebase customers can collect Sainsbury's clubcard points from their purchases.
Sainsbury's has launched a zero waste programme, which by the end of the year will see Sainsbury's stop sending any waste to landfills, instead Sainsbury's stores throughout the UK will be sending their unsold waste food to (unspecified) biomass plants.
Sainsbury's brand is positioned in the upper end of the market, as they emphasise the quality of their products through advertising and branding. The branding of Sainsbury's products has allowed them to charge premium rates for their products which opens the opportunity for Sainsbury's to extend into high margin areas like home furnishings as mentioned earlier.
Promotion is the communication between an organisation and its audience. 'Marketing communication is a management process through which an organisation attempts to engage with its various audiences. By understanding an audience's communications environment, organisations seek to develop and present messages for its identified stakeholder groups, before evaluating and acting upon the responses and by conveying messages that are of significant value, audiences are encouraged to offer attitudinal and behaviour responses' (Fill, 2005; cited Baines, fill, page, 2008:445).
The aim of retail promotion is to: differentiate, reinforce, inform, and persuade, this is also known as DRIP. In order for an organisation to differentiate themselves they must create images that brands can be told apart and positioned to encourage positive attitudes towards the brand and purchasing decisions; The reinforcement occurs when an organisation reminds and reassures their customers of the benefits of the products/services they had purchased; Informing potential customers is one of the most common methods of marketing communication, as this makes then aware of an organisations products/services and retail image; the final aim of retail promotion is to persuade current and potential customers to choose one organisations products/services over their competitors.
TESCO's and Sainsbury's promotion methods
As Tesco's and Sainsbury's are in the same market and have a similar target audience, their marketing techniques are very similar. Both these companies advertise though their shopping websites, television adverts as well as through direct selling to their clubcard holders, as well as this, both these companies spend the same amount on advertising (retail management slides, page 14).
Both Sainsbury's and Tesco television adverts are generally information based, as their messages have a 'slice if life' element which means that they 'use people who are similar to their target audience and are presented in scenes to which the target audience can readily associate and understand' Baines, 2008:448, but include aspects of humour to grab the attention or viewers, stimulate interest, which puts audiences in a positive mood as well as music which both these companies use to help tell between the brands.
Both these businesses want to successfully implement the hierarchy of effects within their market and in store. The stages of the hierarchy of effects are:
When Tesco's and Sainsbury's promote products in store it is usually designed to influence existing shoppers by encouraging impulse purchases, they often use several methods some of which are:
Point of Sales (POS) displays which are usually banners and posters that are used in store to promote products. As both these companies are in the food retail industry they often offer free samples of their products in stores, rather like a try before you by opportunity for customers.(Lines,2006:208)
Personal Selling is a more expensive but effective method of promoting, as this involves informing existing and potential customers about products, an example of this is Tesco's sending their clubcard customers vouchers that are addressed to them making the connection more personal. (Dransfield, 2004:94)
In store sales promotions main purpose is to create the initial surge of demand to persuade shops to stock a newly launched products, these stores use these short term incentives to encourage a purchase, through free offers, sampling and selling, competitions and self-liquidators.
When Tesco's and Sainsbury's promote their products in their market the aim is to reinforce the company's corporate message, several methods are often used some of which are:
Advertising, which is a paid for communication through different modes of media such as television, newspapers and radio. As mentioned earlier both these companies use television to communicate.
A good example of Sales Promotion being used is in recent Tesco's television adverts defending their brand against a competitive attack from their rivals ASDA.
Direct marketing, is targeted directly at the markets consumers though direct mailings, door to door selling, or leafleting.
Sponsorship which is where funds are provided in return for prominent displays of the sponsor's name. Something similar to this can be seen in Homebase stores, as there are many Sainsbury's banners promoting the fact that customers can use their Sainsbury's clubcard here, indicating a clear connection between the two companies.
Public Relations (PR) is the process of obtaining favourable publicity via the editorial columns of press media, or in television or radio broadcasts.
Customer Loyalty Scheme
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