Strategic marketing management analysis for Tesco and Sainsbury’s

Strategic marketing management entails implementation of communication approaches that can effectively be implemented to not only protect the market share held but also cut into other competitors’ market shares. This is very strategic in sectors such as the UK retail sector which is dominated by large players keen on protecting the market shares held. 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 strategic management approach 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). On a rough estimation, this disparity can be used to conclude that Tesco’s strategic management approaches have been more suitable and more effective than those at Sainsburys. 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.  

Overall marketing strategy

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

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.

Product

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.

Price

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

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 tools and their effectiveness

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. 

Conclusion

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.

References

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