COURSEWORK: DEVISE AND JUSTIFY A MARKETING PLAN FOR TESCO WHICH WOULD IMPROVE THEIR PROFITABILITY

Marketing planning can be defined as the structured process of researching and analysing marketing situation, developing and documenting marketing objectives, strategies and programmes, and implementing, evaluating and controlling activities to achieve the objectives (Hollensen 2006, p.4)

The purpose of this essay is to explain concepts, influences and decisions relevant to marketing planning on the example of Tesco plc. Tesco become United Kingdoms leading retailer which dominates in all areas: offline and online. It is also considered as one of the Europes fastest growing company and one of the most successful internet supermarket in the world. Tesco has a well-established and consistent strategy for growth, which has allowed us to strengthen our core UK business and drive expansion into new markets (www.tescoplc.com). The main objectives of the strategy involve being a successful international retailer, growing the core UK business, being stronger in non-food retailing, developing retailing services (such as Tesco Personal Finance, Telecoms and Tesco.com) and having strong commitment on community and environment. However we will emphasis mainly on improving Tescos profitability within the UK. Environmental analysis will provide an insight into Tesco current market situation as well as assist in understanding and formulation of the new marketing plan. Economical factors such as changes in interest rates; high unemployment, earnings, inflation and consumers confidence have large impact on the retail sector. The UK economies suffered heavily from the credit crunch, as prices and consumers ability to buy stuff went drastically down. However the UK economy is expected to recover from the recession in next few years time, therefore consumers have become more optimistic, money have been again flowing from their wallets and retailers have slowly backed on the right track. With the current economic situation Tesco have not been as badly affected as some other retailers. Tesco has offered a wide range of products and services from Value to

Finest prices as well as launched 500 new products of its Discount Brands at Tesco thus appealing to all segments of the market. Technological factors such as e-commerce; loyalty cards, communication and IT, transportation, stock control system (etc) have shaped the map of modern retailing in the UK. One of the latest technological news is self service till. Richard Dood of the British Retail Consortium state In the distant future who knows what technology will make possible? We could well see the end of staffed checkouts forever. Technological factors have the largest impact on Tesco. Tesco has got market dominance because it was first to bring loyalty cards and e-commerce. The use of online shopping and providing delivery service throughout their website bring record profits and sophisticated use o Tesco Club card keeps an eye on the shopping habits 15 millions families in the UK. What is more, Tesco has opened a new store without staffed checkouts. Company has also a number of self-checkout throughout their stores all over UK. It obviously increases efficiency, speed up shopping and allows cutting staffing expenses thus driving the prices down. In todays environmental protection Tesco has played important role in helping to minimise climate change. Company has supported carbon reductions, encouraged customers to make low carbon choices, cut carrier bag use, minimised waste, helped with recycling, used fossil fuel in its transport, introduced Greener living brand which helps customer making greener choice among 200 products (such as energy saving bulbs, paper good or kitchenware). Furthermore Tesco has been concerned with efficiency & water consumptions. There are also sociological aspects of food behaviour and consumers tastes which impact on food retailing sector. Recent trends in UK in food consumption (based on National Food Survey) emphasis growth of healthy eating and changes in consumers taste. People are now concerned about being obese and they value being fit and trim rather than eating junk food. Testes were beginning to change due to a backlash against mass-produced food full of artificial ingredients. Customers are not just focused on the low fat food but also increasingly demanding of products quality, freshness, healthiness. What is more they appreciate how good their home-grown products are, therefore Farmers Markets become so popular.

Consumers benefit from products that are fresh, traceable, high quality, home-grown or made and information provided about the way the how the food is produced. This trend represents opportunities for retailers in terms of generating profits by selling and promoting healthy & good quality food. Tesco has already recognized its potential by extending its Healthy Leaving product ranges; launching Tesco light choice and Organic product lines; supporting Fairtrade range, providing health information and promoting healthy life style to its customers (GDA labelling; Change4life; www.tescodiets.com), working closely with its suppliers and farmers to protect wildlife (wildlife choice). In terms of social factors in UK there is also increase number of immigrants from East Europe and increase in young professionals. Therefore Tesco has launched a Polish Food range as well as has extended range of microwaves meals. Grocery Sales in UK are dominated by Tesco, Asda, Sainsburys, Morissons (www.en.wikipedia.org). These four largest food retailers had a combined share of 75.7 % of the UK grocery market in the 12 weeks ending 29 November 2009 (according to TNS Worldpanel).Tesco is well ahead with its competitors with a share show as 30.6 % , followed by Asda (17%), Sainsburys (16.1%), Morrisons (12.1%) and smaller and convenience stores such as Co-Operative, Somerfield, Iceland, Aldi, Lidl, Netto , Farm Food and others. Tesco with profits exceeding 3 billion is recently in very good financial health (strong cash flow position, increase turnover and trading profits , strong balance sheet, increase market share) so could very well afford to pay its development marketing plans.

Internal analysis of Tesco activities, core competences, resources and marketing mix will give us an insight into Current Marketing Plan. Tesco (Core UK) operate more than 2,300 and employ over 285,000 people. There are fife different store formats starting from Tesco Express (convenience store up to 3,000 sq ft), through Tesco Metro (small urban store approx. 7,000 15, 000 sq ft), Tesco Superstore (large store approx. 20,000 50,000 sq ft), Tesco Extra

(hypermarket open 24 hoursa day ; approx. 60,000 sq ft and above) and finally Tesco Homeplus ( non food store). Tesco stores have the same layout, with newspapers and magazine being by the main entrance, next to sandwiches and lunchtime snacks and alcoholic drinks positioned at the far end of store. The ends of allies are use for promotional offers (such as buy one get one free); and the back end of store is use for in-store bakery, meat counter and dairy products, so that customers have to walk throughout whole store to get their daily products such as bread or milk. Tesco.com is recognized as the UKs largest online grocer, and has over 1 million active customers. Its on-line service has revolutionized shopping hobbits for those people who lead a busy life or have no access to transport. Tesco widest range of non-food can be seen in Extra stores and Homeplus, including electrical, home entertainment, clothing, health and beauty, stationery, cook shop and soft furnishing, as seasonal goods such as barbeques and garden furniture in the summer. In 2006 Tesco launched Tesco Direct a new online initiative with over 12,500 products. It is now expanding its business with clothing by bringing fashion to wide audience at fantastic prices (www.tesco.com). In near future it plans to open an online clothing shop. Tesco has a strong brand name which is recognized and well trusted throughout the UK. According to McDonald A brand name is a name or symbol which identifies a product. A successful brand identifies a product as having sustainable competitive advantage. Therefore company offer wide range of products sold under its brand. There are three main tires of products Tesco Value (the cheapest range), Tesco (the middle range) and Tesco Finest (the most expensive and luxury range). There are also more sophisticated lifestyle product ranges like Organic, Free From, Healthy Leaving, Wholefoods and more as well as big bran names such as Coca-Cola. Tesco packaging again all depends on product range and are easily recognizable for its customers. For example packaging is simple (white and blue), eye catching for a value products and more appealing, sophisticated, luxury (black and silver) for a finest products. The Tesco Value range is placed at low level shelves,

whilst Tesco and Tesco Finest range are at eye level (to encourage consumers to spend more money). Pricing strategy is divided between cost leadership and differentiation strategy (depending on quality and range of products). Tesco is well known as a cost leadership among its competitors. Therefore company is very keen on promoting its low prices by projecting sign throughout the store comparing the Tesco price for certain products to Sainsburys or Asdas price. There is also the UK market trolley war in advertising which store has the lowest price basket. Tesco promotes its products through TV and radio advertising repeated at regular intervals throughout the day, advertisement placed both national and local papers, billboard campaigns and direct marketing to known customers (loyalty cards). Most of Tescos marketing strategy is now based on its Clubcard scheme. Tesco Clubcard is a world-leading loyalty card scheme, with around 15 millions of active cardholders (www.tescoplc.com). Over the next seven days, 20 million people in the UK will visit Tesco store. At the checkout, most will present their Clubcard an in return receive two points for every 1 spent, which they can covert into money-off vouchers on their favourite products and discount on travel, theme parks, RAC membership and more (www.timesonline.co.uk/business). Furthermore there are double Clubcard points now on. Use of loyalty cards has been very successful, mainly in addressing different customers segments and in attracting customers of all types and of all ages. Tesco has introduced various clubs such as Tesco Baby and Toddler Club, Tesco Kids Club, Tesco Healthy Living Club, Food Club, Wine Club, Green living Club. The Clubcard has helped Tesco in understanding of the customers needs as well as increased its profit as company can use gathered information in sales forecasting, measurement and control (on regular bases).

New Marketing Plan for Tesco

Having analysed current climate and internal situation of Tesco it is clear that company has the resource capabilities to successfully enter the market with a new product line. Being a competitive leader in the low cost market, Tesco should now enter the high-end market with a differentiation strategy. In this case, I would strongly recommend launching a new products range, called Tesco Farmers delicacy (both in store and online). These products will differ by its very high quality, freshness, healthiness, home-grown or home-made origin, thus Tesco can charge a premium price at luxury high end market. Due to change in consumers tastes caused by backlash against mass-produced food full of artificial ingredients, healthy life style and friendly approach to environment, Tesco Farmers delicacy range will potentially boost sales and improve Tesco profitability.

Marketing plan for Tesco Farmers delicacy will consist following components:
1. Situation Analysis (External & Internal) 2. Objectives 3. Target Market 4. Marketing Mix Product Price Promotion Place

5. Budget 6. Timing 7. Limitation 8. Contingency Plan 9. Measurement and Evaluation

Situation Analysis (External & Internal)

External & Internal analysis will help to determine demand for Farmers food and help management in making the correct strategic choice in terms of launching a range of Farmers food into UK market (both in-store and on-line). We have already looked at some factors that could influence on consumer choice. Sociological Recent trends in UK in food consumption emphasis growth of healthy eating and changes in consumers taste. People are now concerned about being obese and they value being fit and trim rather than eating junk food. Testes were beginning to change due to a backlash against mass-produced food full of artificial ingredients. Customers are not just focused on the low fat food but also increasingly demanding of products quality, freshness, healthiness. What is more they appreciate how good their home-grown products are, therefore Farmers Markets become so popular. Consumers benefit from products that are fresh, traceable, high quality, home-grown or made and information provided about the way the how the food is produced, Environmental consumers seeking for products more friendly to environment, Economical UK economy is expected to recover from the recession in next few years time, therefore consumers have become more optimistic, money have been again flowing from their wallets and retailers have slowly backed on the right track, Technological The use of online shopping and providing delivery service throughout their website bring record profits.

Objectives
Tesco must ensure that it sets SMART objectives for its new marketing plan (specific, measurable, achievable, realistic and timed). To improve Tesco profitability through Tesco Farmers delicacy range by December 2010

Target Market
Once the situation analysis is complete and the marketing objectives are determined, Tesco should decide on its target customers. Company will conduct market research to find out what their prospective customer segment is. Potentially, this segment will be chosen because of its higher buying power, taste for products that others may perceive as luxury, healthy life style etc.

Marketing Mix
The marketing mix is the most crucial stage of the marketing planning process. It refers to the combination of the four factors (four Ps) product, price, promotion and place, which make up the core of business marketing strategy.

Product
In the initial stage Tesco will offer 250 products around its new Tesco Farmer delicacy brand (including some existing products), but it expects to increase product range up to 400. New offer will include local and very high quality products such as fresh meat, fresh fish ,smoked fish, local oysters ,cheeses, milk cheeses, oils, eggs, jams, honeys, pickles, fruits, vegetables, milk, sausages, mushrooms, flour, fresh juices, bears, whisky, ciders as well as home made breads, cakes, soups and more. Products will be positioned on traditional wooden stalls (virtual stalls in online version) in natural wicker baskets, and ice counters. Both packaging and labelling will be limited to minimum. There will be big pressure on local, traditional and natural look of products, so that distributors will have large room to display their talents. Each product will have small Tesco Farmers delicacy sticker, previously designed by Tesco. Tesco Farmers delicacy will be a friendly product to environment, thus getting an advantage among some segments.

Price
Price is one of the most important factors in a consumer decision to buy. Good pricing strategy is based on an analysis of what target customers expect to pay for a good quality products, therefore six months before new product line will be launched; Tesco should have developed a forecast of customers demand at different prices. This will help to determine adequate price of products as well as help to allocate resources for distribution and promotion of the products. When developing pricing strategy, the external factors such as economic condition, social trends and competitors should be taken in to account as well as break even analysis (Fixed cost/Selling Price Variable Costs). Although Tesco generic strategy is concentrated on being a cost leadership, we can successfully differentiate our Tesco Farmers Delicacy thus charge a premium prices. By setting the high price in the introductory stage of product life cycle; Tesco will maximise profits available in the initial stage and then consistently lower the price during maturity stage in order to draw more price-fussy customers. When a company adopts price skimming strategy then demand of the products is high, the high price will not attract early competition, the high price gives the impression to the buyer of purchasing a high-quality product from a superior firm (Hollensen 2006, p.196)

Promotion
Having decided to enter high end of Farmers food market it is important that such as entry will be supported by a high profile marketing campaign. The promotional side will be expensive but Tesco analysis emphasised on its financial security. Such a campaign will run through TV media, Tesco website, national and local paper, billboards, direct marketing to known customers (throughout Clubcards and setting up a new Farmers delicacy club), as well as more sophisticated ways such as advertising on Facebook webpage (which has more than 350 million active users"(www.facebook.com) ). Social ads can appear either within a News Feed or in the ads space along left side of the site(www.imediaconnection.com ).

Camping should be based on tryvertising, which allow consumers becoming familiar with new products by trying them out. Tesco will have sale promotion stand in each store (during first 2 months period) with a food samples, so that customers can make up their minds based on their experience, not just a promotional message. The offer will stimulate and motivate customers to buy during this period.

Place
Tesco will sell its new Tesco Farmers delicacy range using two major formats: store format (Tesco Extra) and online format (Tesco.com). Products will be distributed from farmers living within 50 miles from Tesco hypermarkets. Due to innovation in self-checkout service, there will be more space on the shop floor to set up approx.10 wooden stalls on the model of real Farmers Market. Also the website will employ 3D technology to bring virtual market into life. This will allow customers to stroll around virtual stalls and choose their products. Customers will have ability to watch video of Farmers (distributors of Tesco Farmers delicacy) to connect better with the products. The theory behind it is that customers want to know where their products come from and who the people behind them are.

Budget
Tesco will need to use their financial resources to launch and promote its new range of Tesco Farmers delicacy. However, with profits exceeding 3 billion Tesco is in very good financial health so could very well afford to pay its new marketing plan.

Timing
The marketing plan for Tesco Farmers delicacy has been decided for one year period. Tesco expects to launch its new product range on 1st of January 2010. Depending on the profitability results (measured by the end of December 2010) Tesco will make a decision on expanding or withdrawing its new range.

Limitation
Tesco may encounter some difficulties in getting enough number of farmers so that variety of products can be offered throughout all season.

Contingency Plan
The contingency plan must be in place to ensure that if new Tesco Farmers delicacy range fails there is another portfolio which can be launch.

Measurement and Evaluation

Tesco must have a plan in place for both financial and strategic controls. In terms of profit targets and performance appraisal, company will measure Tesco Farmers delicacy results through scanning products barcodes, Clubcards, on-line sale and customers surveys.

Reference List

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