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After the analysis, we conclude that Tesco Extra Cheras, using Geographic segmentation to segment its market (Philip, K 2008). From the location of the Tesco store, we can see all its stores located in urban and sub urban area, so we believe that Tesco serve its customer based on density of population.
Effective segmentation criteria
Measurable- The size, purchasing power and profiles on the segment can be measured (Philip, K 2008). Target market of Tesco Extra Cheras has approximately 500,000 citizens and its average income higher than other suburban or rural area.
Accessible- Te market segment can be effective reached and serve (Philip, K 2008). Tesco Extra Cheras can easily reach to its target customers by using flyer, tv commercial, brochure, catalog, direct mail and the latest one is sms.
Substantial- The market segment is large and profitable to serve (Philip, K 2008). According to the trusted site, we knew that potential customer of Tesco Extra Cheras which includes Taman Tenaga, Taman Ikhsan, Taman Bukit Ria, Taman Pertama, Taman Kobena, Kampung Baru Cheras, Taman Bukit Mewah, Taman Midah etc around 500,000 people. Hence it's profitable enough.
Differentiable- The segment are conceptually distinguishable and respond differently to different marketing mix element and programs (Philip, K 2008). Tesco Extra Cheras using one marketing mix to reach whole market which is offer lower price and its location that located in densely populated area that surrounded by housing area.
Actionable- Effective marketing programs can be designed for attracting and serving the market (Philip, K 2008). "Cheapest price everyday" is the slogan of Tesco, and it successfully attracts lot of customer that look for cheaper product.
Tesco Extra Cheras is using Mass Marketing targeting strategy. Mass Marketing strategy is the strategy to ignore market segment differences and target the whole market with one offer, it focus on what is common in the needs of consumer rather than on what is different (Philip, K 2008).
It means Tesco didn't differentiate the type of customer to serve, they serve as many customer as they can. Most of the customers go to Tesco for a common need which is lower price product, hence Tesco as a discounted store, it strives to serve more customers that share a common need rather than differentiate the customers.
Positioning is the act of designing the company's offering and image to occupy a distinctive place in the mind of the target market. The goal is to locate the brand in the mind of consumers to maximize the potential benefits to the firm (Philip, K 2008).
In this case, Tesco has done a very good job. We can see that Tesco position itself as a low price retailer by using the advertisement "cheapest price everyday" for selected product in its store (refer to appendix). This strategy is very successful in the industry and attract lots of customer that come for these particular lower price products. Therefore, a perception like "Tesco sells lower price product everyday" will embedding into customer mind.
Besides that, Tesco has a loyalty program that rebate to customer after certain period of time. In this loyalty program, customer will gain point based on amount they purchase. After that, Tesco will sent out the cash voucher worth how much exactly same as the point the customer collected. Tesco using this strategy to position itself as a retailer that care for customer and rebate to them as the customers keep shopping in Tesco.
In conclusion, Tesco building Same for Less value proposition (Philip, K 2008)., it's effective and powerful since everyone likes a good deal. They don't claim to offer better or different product. Instead, they offer many of the same brands as department stores and specialty store but deep discount based on superior purchasing power and low-cost operation.
Marketing Mix of Tesco
Tesco as a full line discount store, it offers broad variety of merchandise, limited service and low price. Customers can found both private (Tesco Choice) and national brand. Most of these brands are value oriented rather than fashion oriented. To attract more customer and gain customer loyalty, Tesco offer lot of value added services such as free parking, customer service, full air condition, baby room, toilet etc.
Tesco Extra Cheras carry 18000-20000 SKU in its store and over 70% is food product whereas only around 30% is non-food products. The products selling in Tesco range from food to electrical product, furniture, and household goods. On weekend, a lot of sampling activities allow customers test the product before they purchase it. If the customer found the product was damaged after they purchased it, they can return this product to Tesco and exchange for new one, of course this is only for non-perishable goods.
Although Tesco not emphasis on the product quality or product design/packaging, but it still maintain the products quality on acceptable level. To maximize the value of product to customers, Tesco sell its own brand product ï¼ˆTesco Choiceï¼‰on broad variety at lower price compare to national brand. This strategy successfully grab the customers that emphasis more on the value instead of brand.
Price is the sum of all the value that consumer give up in order to gain the benefits of having or using a product or services. Historically, price has been the major factor affecting buyer choice. In recent decades, nonprice factors have gained increasing important but price still remain the one of the most important element determining a firm's market share and profitability (Philip, K 2008)..
Most of the products available in Tesco are available in other retailer store too. To compete with other firms, cost-plus pricing is the most appropriate pricing strategy for Tesco. Cost-plus pricing is the pricing strategy that adding a standard markup to the cost of product. For example, manufacturer sells a soup powder at RM20 to Tesco, Tesco may mark it up to RM30, its means a markup of 50% on cost.
Another type of pricing strategy Tesco using now is cost-based pricing. Cost-based pricing involved setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk (Philip, K 2008).. Cost-based pricing only applicable for Tesco own label products instead of national brand product(refer to appendix). This is because Tesco set its own brand products price based on its production cost. Therefore, Tesco brand products are cheaper than national brand product around 30-40%.
Last pricing strategy Tesco adopted is Good-value pricing. Good-value pricing offer just the right combination of quality of good service at a fair price (Philip, K 2008).. An important type of good-value pricing at the retail level is everyday low pricing (EDLP). EDLP involve charging a constant, everyday low price with few or no temporary price discount. In Tesco case, they charge different products at promotional price in everyday basis. For example, Tesco sell fish cheap on Monday, but charge lower price at vegetable on Tuesday.
Tesco Extra Cheras located at Cheras, Kuala Lumpur. Kuala Lumpur is the capital of Malaysia and it's a densely populated city. As a capital of Malaysia, the income levels of citizen in Kuala Lumpur usually are higher than other cities, hence the consumption also higher. Besides that, Tesco Extra Cheras is surrounded by many housing areas which are Taman Bukit Mewah, Taman Billion, Taman Midah, Taman Desa Aman etc. Therefore the sources of customer are sufficient for Tesco.
Tesco Extra Cheras is a full air conditioned discounted store, hence customers feel comfortable when shop in the store. To increase the shopping experience of customers, there are restaurants and cafés available in the store such as Pak Hailam Kopitiam, The Chicken Rice Shop, KFC etc to allow customer take a rest and fulfill hunger. Indoor and outdoor parking lots with cover are available for customer who driving to Tesco and it's free of charge.
After our analysis, we conclude that Tesco is only available in store channel in Malaysia, but Tesco still has an official website which contain cooperate information and recent activities and promotions even though customer can't place order online.
Tesco is only available in physical store form and its offer lots of benefits that catalog channel and internet channel don't have.
Customer can browse in Tesco store to see what is available and purchase the product before they determine what to buy.
Customer can feel and touch the product when they shopping in Tesco. For example, customers can try sample of orange juice and see what it look like before they make the purchase decision.
Customers can choose to pay by using cash or credit card in Tesco and get the products immediately after they make payment.
Tesco provide entertainment and social experience to customer. For example, customer spending time in Tesco with family and friend can enhance their relationship greatly.
The perceived risk of customer will be reduced because they can check and test the product before they purchase it. Even though the product the malfunction or defective after the purchases, the customer can easily access to Tesco to return or exchange the defective item to new one based on 7days return policy and warranty.
Tesco has an official website that updated periodically but it doesn't provide online order service to customer. The official website only has the information about recent promotion, vacancy, corporate information, and customer service (to accept customer feedback).
Consumers today are bombarded by commercial messages from a broad range of sources. In consumer's mind, messages from different media and promotional approaches all become part of message about the company. Conflicting messages from these different sources can result in confused company images, brand position and customer relationship (Philip, K 2008)..
To communicate with customer, Tesco using few element of promotional mix which is sales promotion, advertising, and public relation to maintain its brand image consistently in consumer mind.
Tesco using lots of consumer promotion tools such as sample, coupon, premium, price pack and contest to accomplish sales promotion objectives.
Samples are offers of a trial amount of a product. Customer can try the sample such as orange juice, nugget, French fries before they purchase it.
Coupons are certificates that give a buyer a saving when they purchase specified product. Tesco often issue coupons to its clubcard member, with these coupons, customer can buy the goods at lower price.
Premiums are goods offered either free or low cost as an incentive to buy a product. In Tesco, the customer will get a free DVD player and free clubcard point when they purchase the 32" LCD flat Tv.
Price pack offer customer saving off the regular price of a product. In Tesco, a bottle of "Tropicana Twister" orange juice cost RM6.50, but it only cost RM12 when customer purchase twin pack of "Tropicana Twister" orange juice. It means customer can save RM0.50 when they purchase twin pack.
Contests give consumer the chance to win something, such as cash, trip or good by luck or though extra effort. Preciously Tesco has held a contest name Syok Bola Clubcard contest, as the customer purchase certain product in contest period, they are qualify to take part in the contest to win the prize.
Advertising can reach masses of geographically dispersed buyer at a low cost per exposure, and it enables the seller to repeat a message many times. Tesco advertise it promotion product at television, newspaper, brochure, and sms to create customer awareness.
Other than these advertising methods need cost, a type of advertising method didn't incur any cost call Word of Mouth also used by Tesco. Customer who already knew the promotion at Tesco usually will tell their friend or family about the great deal offered by Tesco. Although word of mouth is the most effective yet cheapest communication method but unfortunately it's hard to control.
Public relation is a tool to build good relation with the company's various publics by obtaining favorable publicity, building up a good corporate image, and handling or heading off unfavorable rumors, stories and events (Philip, K 2008).. Tesco using public relation tool to perform following function:
Press relation- Tesco often held press conference to announce future plan of the company and customer can get this information in the news media.
Public affair- The customer service department handing the customer complain and maintain customer relationship.
Development- Tesco has launched a campaign name "caring for the environment, together we can make different". In this campaign, customer can collect green card point when they reuse the plastic bags(refer to appendix). These campaign help Tesco gain more respect because they contribute to environment when they doing business in the same time.