The
retail chain in the UK is dominated by four retailers who control more than 50%
of the market (Datamonitor, 2011). Tesco which is UK’s leading retailer holds a
30.6% of the market share followed by ASDA and Sainsbury which hold 17.2% and
16.4% respectively (Aroq Ltd, 2011). Morrisons hold a further 11.3% of the
market share (Aroq Ltd, 2011). This translates to over 75% of the market held
by only four of the leading retail chains. As analysts hold, the level of
rivalry in an industry tends to be much higher where a small number of
organisations hold the highest market share (Kotler, 2010). This presumably
translates into a stiff competition for the control of the market characterised
by huge marketing budgets and cut-throat price competition which limits the
level of profitability available to the organisations. With a diminishing level
of differentiation in the industry, products offered across the different stores
are similar hence raising the threat of brand substitution where consumers can
easily opt to change their choice of supermarket at any moment (Datamonitor,
2011). This heightens rivalry. Supermarkets have however sought to remedy the
situation by coming up with various reward schemes that reward loyalty among
shoppers that continue to shop with them for a significant amount of time. This
has more or less solidified the market shares of the various players making it
relatively difficult for other retailers to increase their market shares.
Sainsbury has been the market leader in the UK retail industry prior to the
1990s and has been embroiled in a supremacy battle with Tesco for decades
(BrandLoop, 2010). It has maintained a larger market share than Tesco until in
1996 when Tesco managed to capture leadership, a position they have maintained
to date (BrandLoop, 2010). Tesco currently boasts of a 30% market share, almost
double the amount occupied by their closest rival ASDA at 17% or Sainsbury’s
16% (Aroq Ltd, 2011). The food retail market has been on the verge of recovery
from the effects of the global financial crisis that had hit the UK in 2008
making them to have positive prospects for growth in the predictably growing
industry. The threat of substitution comes from small food stores, organic
shops and small convenience stores whose quality is well below the standards
set by the larger retailers hence reducing their level of threat posed by the
substitutes. On the whole, the level of rivalry in the industry is high.
The
marketing strategy may be described as the overall aim and approach that an
organisation embraces to advance its predetermined organisational goals
(Stanton, 1981).
Tesco
holds a market leadership position and are mainly focused on retaining this
market share by endearing themselves to their customers by promoting brand
awareness and brand loyalty (Tesco, 2011). Their marketing strategy is
therefore aligned to the objective of promoting brand loyalty. To this end, the
chain maintains a large database using their various loyalty cards which they
use to collect information on the shopping habits of their clients. This
information helps them to conduct a massive scale of direct marketing where
customers are approached with offers on products that they are likely to need
at any particular point (Humby, Hunt and Phillips, 2004). For instance, a
mother who has just given birth to a child is likely to need infants’ clothes,
formula milk, diapers and other items associated with infants. The company
would use this information to conduct a targeted marketing to create demand for
such products for such parents. The shoppers are therefore categorised into the
various mailing groups according to their anticipated needs and contacted
accordingly. Tesco therefore builds the image of being ‘all things to all men’
to portray them as a store that is keen to meet their customers’ needs at any
time. Brand enhancement campaigns are also conducted through advertisements in
televisions, radios, and through various social sites (Thomas, 2011).
Sainsbury
on the other had fight from a weakened market position having lost its market
leadership in the 1990s and dropped to its current third position (Baker, 2010).
Its marketing strategy is therefore more focused on growing its market share
though with a keen focus on ensuring that the customers gained are retained. With
this objective in mind, the chain has been mixing advertisement campaigns with
various loyalty card programs that have been of help in enabling them to
collect useful data on the shopping habits of their clients (Braue, 2005).
Having realised that most shoppers only tended to buy the same items over and
over, the company has recently embarked on a mission to encourage customers to
try consuming some new products. This approach was of course aimed at not only
stimulating new sales among existing clients, but also attracting an additional
customer base.
The
marketing mix is a set of controllable marketing variables that organisations
blend in proportionate proportions (in line with their marketing strategies) in
order to achieve the desired response by their target market (Mohammed and
Pervaiz, 1995). The marketing mix comprises of four main components which
include product, place, price, and promotion.
Tesco
provides a wide range of products that range from food to non food items which
literally cover all the shopping needs of an average shopper in the UK. Items
ranging from clothing, kitchenware, electronics, mobile phones, accessories and
others are offered (ADVFN, 2011). In addition, the chain offers a range of
products under their own brand. The company has recently embarked on increasing
its product portfolio on its online products hence enabling them to serve a
wide range of customers. This contributes to the level of contentment of the
shoppers making it unnecessary for them to look for other shoppers. Sainsbury
offers similar advantages to their customers giving them the required product
range to ensure satisfaction among different classes of individuals (J Sansbury
Plc, 2011). Like Tesco, Sainsbury also makes use of their loyalty cards to
gather information and gather intelligence on which products to develop and
offer to the market to ensure enhanced levels of satisfaction.
The
average consumers in the UK are price sensitive. This is due to the fact that
there is very little level of product differentiation in the market making it
easier for consumers to easily switch from one retailer to the next with the
determinant factor being the price in most of the situations (Datamonitor,
2011). Both Tesco and Sainsbury use the competitive pricing strategy where the
price deals at their possession are undertaken to avoid loss of customers to
the other retail chains (Tesco, 2011; Baker, 2010). The commitment to remain
affordable to the bulk of the consumers is contained in Tesco’s mission
statement where they play the lead role in setting the product prices with
Sainsbury and other retail chains seeming to follow soot. In order to restore
faith in their pricing strategies, Sainsbury came up with a money back coupon
available at the till in case the shopping baskets would be found to be more
expensive than similar baskets at Tesco or any of the other leading
supermarkets such as ASDA (Baker, 2010). This exercise was mainly targeted at
the Nothern Ireland stores where the chain had lost its image as a
‘pocket-friendly chain’. This guarantee was aimed at giving consumers the
confidence that their pricing was fair if nor fairer than their competitors’
and was aimed at capturing the consumers keen on making some good savings when
shopping.
Place
in the context of a business mostly refers to the distribution network and the
strategic positioning of such a network. Retail chains must of necessity ensure
that their products can be easily accessible by their target customers. Tesco
maintains over 1800 stores across the UK (Tesco, 2011). These stores are
distributed across the different sections and designed differently in order to
meet the preferences of the targeted customers. The stores are accordingly
categorised into express stores (735), metro stores (162), superstores (433)
and extra stores among others (Tesco, 2011). Similarly, Sainsbury maintains a
total of 934 stores which include 557 supermarkets and 337 convenience stores
which are strategically distributed across the UK (J Sansbury Plc, 2011). As
can be seen, the distribution network for Tesco is wider than that of Sainsbury
and probably accounts for Tesco’s leadership over their rivals in the market.
In
order to ensure more effective distribution, Tesco operates an online store
which enables them to reach more and more customers. Sainsbury also does the
same even though their online shops are yet to be as developed as Tesco’s.
Promotional
activities involve the choice of communications styles that the organisations
choose to use when creating demand among the targeted consumers. The
promotional methods most prevalent include direct marketing, sales promotion,
public relations, advertising, and personal selling (Kotler, 2010).
The
predominant approach taken by Tesco has been the use of a modified style of
direct marketing where the information collected from their loyalty cards are
used to anticipate the needs of their consumers who are then contacted with the
offers for products that they may need (Humby, Hunt and Phillps, 2004). The
customers are batched up into different groups depending on their shopping trends
and contacted through personalised means such as emails and postal boxes. The
loyalty cards offered by Tesco are categorised to target the market segments
and include the Tesco Kids Club, Tesco Baby and Toddler Club, Tesco Healthy
Living Club, Tesco World of Wine Club, and Tesco Airmiles Travel Company
(Humby, Hunt and Phillps, 2004). The direct marketing has been viewed largely
as quite effective with the loyalty levels for Tesco remaining very high. Tesco
has maintained a 30% market share for a period of 4 years with signs that the
levels would remain in the next two or so years (Aroq, 2011; Datamonitor, 2011).
Other promotional tools used by Tesco involve the use of advertisements which
are posted on the TVs and radios, cinemas, newspapers, magazines and other
means. The advertisements are seen as important tools that help solidify the
brand image for Tesco and therefore contribute to its stable performance in the
market.
Sainsbury
on the other hand conducts limited level of direct marketing when compared to
Tesco. However, they also make use of the Nectar loyalty cards which not only
help them to retain customers but also allow them to collect useful information
about the shopping habits of their clients for the purposes of product
development and effective marketing (Lepitak, 2011). Sainsbury has recently
revamped its advertisement efforts on television, radio and field marketing
with the running theme being to encourage customers to try something new (J
Sansbury Plc, 2011). This message reflects on their effort to communicate to
customers that they have a wide array of products which the customers should
try out for a new and exciting experience. These messages have propagated done
through mass media, online social networks, magazines, and field marketing.
In-store advertisements have also been used widely. Sainsbury has also
displayed brilliance in their marketing strategies with initiatives such as
‘Feed your family for £50’ and the use of seasonal campaigns (Lepitak, 2011).
These initiatives have been very effective helping Sainsbury to gain on the
market share from 15.9% to 16.2% in 2010 and a further growth in pre-tax
profits by 12.8% in 2011 (Lepitak, 2011; Aroq Ltd, 2011). The effectiveness of
a marketing process is determined by the resultant financial performance and
Sainsbury’s marketing campaigns must be ranked as highly effective.
Tesco
and Sainsbury have been engaged in a battle for supremacy for decades with
Tesco seeming to have the upper hand in the battles. However, with the
brilliance of Sainsbury’s marketing initiatives, they may be able to recover
some of the lost grounds. Tesco on the other hand commands impressive levels of
customer loyalty: a fact that would make it difficult for Sainsbury to make
more than proportionate gains. The marketing campaign adopted by Sainsbury of
encouraging new consumptions is bound to wear out consumers and in the absence
of an equally brilliant campaign; the growth momentum may be lost. The battle
for supremacy in the market is therefore likely to be won by the organisation
that will pursue the right marketing strategy and implement it effectively.
For more theory and case studies on: http://expertresearchers.blogspot.com/
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