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Tesco Marketing Strategy Position And Product Range Marketing Essay

Tesco is the largest grocery retailer in the Republic of Ireland operating 119 stores across the country. The grocery market in Ireland is comprised of three distinct types of retailer:

The supermarket multiples - those retailers who operate large supermarket chains such as Tesco Ireland, Dunnes Stores, Superquinn and Musgrave/SuperValu.

The symbol groups - retailers who own their store but who trade under a group name such as Spar.

The independent retailers - those who operate their own outlets independently. (The Irish Times, 2000)

Tesco is the leader of supermarket multiple sector as well as the whole grocery market. As a market leader, Tesco has held its percentage share of the grocery market at 26.1% compared to the same period last year (Callanan, 2009). Their core retail business has expanded to now include clothing, household, entertainment and other non-food ranges. They also offer customers an online grocery shopping service, financial services products and petrol retailing. They recently entered the Irish mobile market with the launch of Tesco Mobile (Tesco Ireland Limited, 2008).

In Carlow, Tesco operate a supermarket offer customers a wide range of food products along with a non-food range. There are 7 other main market players. however, Superquinn plays an important role in Carlow town. In addition, compare with the performance in country-wide, discounters Aldi and Lidl perform relatively strong. It is hard to tell the exact percentages of market share in Carlow but it can be observed that basically in line with their country-wide performance.

Marketing Strategies

Tesco Ireland set about developing a strategy based on a deep understanding of the Irish consumer and the Irish marketplace. This involved a number of activities including:

Understanding the needs of the Irish Customer.

Supporting local Irish products and producers at local and national level.

Establishing Tesco Ireland as an autonomous business, with its Dun Laoghaire Head Office developing decision-making accountability within the group.

Introduction of the Tesco Ireland brand identity.

Increasing Irish employment in Tesco Ireland stores.

Initiatives to attract and retain customers, to develop staff and to enhance the corporate image of Tesco in Ireland.

Gradual improvements in the grocery supply chain – an area of particular competence within Tesco. (The Irish Times, 2000)

In addition to efforts above, there are some promotion activities that customers can observe in Tesco of Carlow:

First one is the introduction of the Tesco Ireland Club card. It is a loyalty scheme to reward customers’ support and keep close communication with them. Customers collect points for money back and get discount with daily purchase. For Tesco, they collect buying information through club cards to build a customer database, so that they could understand customers’ needs and provide right products and better service.

Secondly, 4 types of price systems:

Promotion – Buy One Get One Free, 3 for 2, 2 for €5 etc.

Low price – a range of products are in low price every day.

Member price – special offer for members.

Ensure Lowest Price – provide the lowest price for a range of products in this area, if a customer buys an equivalent product cheaper in another store within one mile of their store, they will refund the difference in price.

Thirdly, to make their offerings cheaper, Tesco is driving their own brands. The finest, Tesco Value, and Tesco standard are three types of own-labels we can see, which both guarantee low price and as good quality as leader brands’. What is more, their Tesco VALUE price promise states that they will not be beaten on the price of their Value Brand products.

Finally, Tesco provides leaflets at the entrance. There is a price list which comparing the prices in Tesco with its main competitors and images for low price products which aim to stimulate shoppers.

Geographic and Customers

Tesco of Carlow is set in the FairGreen shopping centre in the centre of the town with convenient traffic and car parking. The town numbers about 20,000 people, 3,000 of whom are students. (Wikipedia, 2010)

Tesco target customers who get middle-income with young children. However, it still targets other segments like these people who are more interested in the quality. So Tesco targets people who want something reasonable in terms of quality and price as well. In Carlow which is not a big place, Tesco tries to target all most all the possible targets to provide products and service to citizens as many as possible.

Market overview

Cheese market review

Cheese in Ireland is one of the most important foods in their daily life. The cheese aimed at basic, nutritional, traditional, convenience, ready meals. Otherwise, cheese is a high source of saturated fat and health. Although the economy is recession, the cheese market in Ireland still has growth, mainly from the natural sector as grated and blocks continue to increase in sale (AC Nielsen, 2005). Cheese production in Ireland is projected to approach 130,000 tons per year (Datamonitor, 2009).

Cheese groups: The cheese market of Ireland is categorized into 5 groups (GIRA, 2007):

Natural cheeses

Hard and semi hard cheeses (cheddar, emmentaler, gouda)

Soft cheeses (camembert, Brie)

Blue vein cheeses made from cow milk

Fresh cheeses (unmatured: cottage cheese, mozzarella)

Goat/ewe/buffalo milk cheeses (Roquefort, Greek Feta)

Processed cheeses

The main distributions: Supermarkets and hypermarkets, they are the leading the sales channel in the Irish cheese market, which has 73.3% of the total value. In addition, convenience stores have a further 15.6% of the market's value (Datamonitor, 2009). Distributions are relatively high concentration of leading chains increasing customers. Such as Tesco, Superquinn.

Key suppliers: include dairy farmers, housemade family, and key manufactories.

Two main types of cheese market value: higher proportion of cheese which is “processed” to ready meals or takeaway meals such as pizzas; the valorization of traditional cheeses as guarantee of origin or of production method attract an increasingly middle-aged customers.

Size of cheese market

The Irish cheese market grew by 3.5% in 2008 to reach a value of $155.6 million, representing annual growth rate of 2.8% for the period spanning 2004-2008. The Irish cheese market grew by 3.1% to reach a volume of 16.4 million kilograms in 2008. Market consumption volumes increased with 3.5% between 2004-2008 (Datamonitor, 2009).

Market trends

Substitution: As cheese is a consumer product, there are many potential substitutes in terms of other food types and alternate dairy products, such as yogurt (Datamonitor, 2009). It is possible for consumers to make cheese at home using milk and other household ingredients.

Price trends: Under the Baseline, dairy product prices are projected to decline by 7 percent for cheese by 2012 (Teagasc, 2003).

Cheese range: In contrast to the decrease in the number of cheese plants producing commodity cheeses, there is increase in the number of cheese plants producing specialty cheeses. Such as mold-ripened cheese, Havarti, Italian varieties, Gouda, Feta, Latin American, flavored, washed, or smear-ripened cheeses, and lower fat versions of many varieties of cheese (Lucey, 2006).

Demand: The customer demand for high quality cheese products is increasing. Consumers prefer to try new formats and flavors. And there is also fuelling new uses for milk-based ingredients, rising demand for cheese variety, an increase in niche product markets and increased product shelf life.

Main cheese brands

The cheese market in Ireland is highly concentrated with the three leading players, Kerry Group plc, Dairygold Co-operative Society Limited, and Glanbia. They collectively have 82.3% market share in Ireland. The primarily dominated is Kerry Group. It is headquartered in Ireland. (Datamonitor, 2009)

Cheese leaders

Market share

Key cheese brands

Kerry Group

52.6%

Golden Vale, Charleville, LowLow

Dairygold

22.6%

Dairygold

Glanbia

7.1%

Avonmore

Cheese consumers’ lifestyle change

It is considered that with Ireland deep in a recession, although many consumers will return to pre-recession spending patterns, but for some, their views on consumption and behaviour may never be the same again, which will require retailer to respond these shifts.

Searching for Bargains

Knowing that the economy impacts consumers’ ability and confidence to spend and influences what and where they buy, it is important for retailers to understand the customers’ shifts in shopping patterns.

As cheese market has developed with the economic growth, the Irish consumer has become more sophisticated and marketing literate. Whilst, the recent global economy crisis has heavily impacted the Irish economy, which had changed how Irish think, feel and behave. Consequently over the last year people become savvier and have shopped around more. Besides, Irish consumers’ enthusiasm and optimism was ebbing away somewhat. They became more selective in how to spend their money and kept looking for bargains. So equipped with the resource of knowledge many Irish cheese customers now are in efforts to economize on price and value, which means continue to pursue the best offers at a lower price (Bord Bia, 2009).

Thus, the major influence of recession is reflected in Irish’s desire for more choices of cheese products. As a result, private label has become more widely accepted due to improved quality and low price. More consumers have now been pushed to those private label cheese products due to the economic pressures. So, it will be more important than ever for retailers to respond quickly and creatively to the changing consumer needs and desires.

Rising awareness in relation to health

Irish are now increasingly concerned about modern health risks such as obesity and feel pressured to be more health-conscious. They would like to take control of their health and feel personally responsible for managing their wellness.

Focusing on health as the “real wealth” motivates increased Irish popularity to engage in a much healthier lifestyle and balance indulgence with healthy consumption. The interests in health and wellness tend to rise continuously especially in respect of products, such as organic food, diet and healthy eating. Accordingly, the growth in sales of natural cheese, which has perceived health benefits, has driven. The increasing sales have proved that natural cheese was considered to be the most profitable for the Irish cheese market (Datamonitor, 2009). Thus, how retailer effectively modifies its cheese category to give a clear signage for healthy cheese may exert positive impact on increasing sales.

Becoming Convenient-oriented

Irish consumers realized that time management is a constant challenge due to the intense and complex modern lifestyle. To cope with the fast life, they are seeking comprehensive strategies that go beyond buying convenience products and looking for retailers that provide a good shopping trip with convenient and fast environment (ACNielsen, 2009).

Looking for local products

Category definition

This category is named ‘cheese products’ which includes cheese related snacks, and ordinary cheese ranges.

Snacks: Dunkers, Cheestrings etc.

Ordinary cheese:

Natural cheeses

Hard and semi hard cheeses (Cheddar, Emmentaler, Gouda)

Soft cheeses (Camembert, Brie)

Blue vein cheeses made from cow milk

Fresh cheeses (unmatured: Cottage cheese, Mozzarella)

Goat/ewe/buffalo milk cheeses (Roquefort, Greek Feta)

Processed cheeses (Low fat)

Price, brands awareness, tastes, and purchase occasion drive the purchase of cheese category. The category of cheese can be segmented by:

Price: original price, promotion price.

Form: block, sliced, grated.

Brand: leader brands, owned brands

Benefits: ordinary, low fat

Taste: See ordinary cheese ranges above.

SKU of cheese category:

Form Brand

LowLow

Tesco

Block

Sliced

Grated

Customers use cheese products for cooking or as snacks and spreads. It is viewed as a substitute product of butter, cream, and other spreads. However, because of the special tastes of cheese, it is hard to be completely replaced by another product.

Cheese is interrelated with pizza, potato, bread, sandwich, and pasta & spaghetti in customers’ perspectives, while retailer of Tesco sees cheese as snacks, spreads, and cooking ingredients.

Category role

The whole cheese market of Ireland is steadily increasing nowadays, cheese demand of customers is rising too. Cheese is a kind of product that customers would buy frequently. Based on our focus group, cheese has high household penetration. Tesco wants to be one of the preferred category providers of this category. It is aim to provide consistent, competitive value in meeting the needs of everyday customers. So the cheese category plays the role of routine in the achievement of the Tesco’s overall goals and strategy.

Segmentation

Consumer decision tree

Based on the focus group and customer interview results and customer purchase decisions, the customer decision tree is created as the figure. During the lifestyle change and market trends, customers would like to consider about the function first while buying the cheese.

Price is one of the most important factors that will influence their consumption. Customers will think about the price before them buying product. They prefer to choose cheaper one. If Tesco has promotion activities, the promotion product will be their first choice, such as discount, buy one get one free.

Another important factor is flavors. Different kind of cheese has different usage, such as Cheddar, Mozzarella. Customers choose different flavors to cook sandwich, pasta, pizza and so on. Under the flavor segment, customers said they will consider about the brand, place of origin and whether it is healthy.

Healthy – an important trend in Irish food market. More and more Irish customers demand the healthy foods. Some customers prefer to buy the half or low fat cheese, or cheese that added extra nutritional ingredients such as calcium. These healthier cheese products will be more attractive to customers.

During the research, more and more Irish customers tend to buy Irish products. Compared with the foreign cheese brands, Irish own cheese brands have higher awareness and market share. They buy Irish cheese more frequently. Customers expressed that Irish food will be more natural and nutritional. It also present high quality guarantee.

Brand also is another important factor that will influence customer decision making due to some customers have brand loyalty. The last factors are form, package and healthy. Different types of cheese can deliver more convenience and functions, such as grated, sliced, and block. The size of cheese also impact customers’ mind. They need to consider whether use cheese once time or several times.

Chart 1Customer Decision Tree

Chart 2Current Segmentation in Tesco

Analysis of Segmentation

Based on the in store observation research of Tesco, the cheese are segmented by snack cheese and cooking cheese. The snack is placed in small area. Main products include kid foods, cheese cream and other cheese snacks. The cooking cheeses are placed in widely area. Tesco display cheese products base on the brand, types, flavors, and place of origin. There has another special area to place the discount cheese products, it is convenient for customers to look and choose the promotion cheese.

Despite Tesco has variety of the cheese products, their product display is clutter. Tesco does not categorize the products well. Cheese products in Tesco Carlow mainly are classified according to brand, but also in a mess. In addition, Tesco want to place the products base on all the forms with brand, such as types, flavors place of origin. It is not convenient to find the product which customers look for. The chart 2 illustrates Tesco’s current cheese product segmentation.

Category Assessment

A holistic look at the category condition in terms of market, consumer and retailers is critically important, which enables Tesco to determine where the opportunities exist and category improvements Tesco Carlow should use to prioritize acting on them. Thus, in order to get a true look at the monetary value of the opportunity within cheese category, assessment needed to be implemented.

Areas

Facts

opportunities

Market data

The performance of current cheese market is forecast to accelerate at a lower rate

Shoppers’ budgets were squeezed due to recession

Own label cheese products has slightly increased over branded products

Tesco could increase space allocation to cheese category.

Offer more rooms for Tesco private label to meet shoppers’ growing needs.

Consumer data

Cheese shopper in Carlow is 30yrs+ women and most likely to have children living in the household

Loyalty lost as consumers search for bargains

In pursuit of healthy lifestyle

Customers constantly looking for convenient and fast shopping environment

Refreshing cheese category range by introducing more natural and healthy cheese products.

Improving signage to guide buyer quickly locate products

Enhancing Tesco loyalty in cheese category.

Retailer data

Quick turnover of cheese stock

Low shelf placement efficiency, which display of cheese products is lack of discipline

Compared with other retailers, Tesco’s cheese pricing is slightly lower.

Improving product availability to avoid cheese out of stock.

Arranging product mix and shelf placement effectively based on reasonable principles

Irish customers is strengthened by the fact that storage/shelf space in retail outlets is limited, and larger retailers are widely diversified in terms of the products they stock, which make them less reliant upon the sale of cheese. But Irish customers’ profitability is reduced somewhat due to the requirement of chilled storage for cheese products.

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