In larger stores and more than half of new Tesco’s stores opened this year, the product range of the supermarkets is expanding continuously and non-food products were produced and offered to customers and the result has been to grow Tesco’s market share 5% during the last year. Below there is an interesting diagram that shows the turnover and the number of stores that Tesco’s have in conjunction with the selling space of their stores around the world.
Distribution management or consumer relationship marketing as it is also known, is all about what happens to products between the producer and the customer. The relationships between producers and customers have been changing rapidly during the last thirty years and it is getting more and more known, that producers now spy on consumers to see what they are buying and what they need and want, in order to satisfy them. It's fairly easy to change many of your marketing tactics and strategies in order to satisfy consumers, on a periodic basis, pricing, packaging, and product mix are among these flexible choices that Tesco’s have. However, distribution and sales decisions, once made, are much more difficult to change and also distribution affects the selection and utilization of all other marketing tools. There is a wide variety of possible distribution channels, for every company that includes:
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retail outlets owned by Tesco’s supermarket chain
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wholesale outlets of Tesco’s or those of independent distributors or brokers
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sales force compensated by salary, commission or both in some circumstances
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direct mail via Tesco’s own catalog or flyers that are published very often
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telemarketing through a contract firm, Tesco’s is keep advertising its new products
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cyber-marketing, surfing the company’s web-site and offer on-line shopping
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TV and cable direct marketing and home shopping channels through UK TV channels.
It is not always possible for a company, in general, to take advantage of all possible channels that match the marketing strategy it wants to achieve. Financial considerations mainly, as the costs of a marketing strategy could be very high, so on it may be wise, for Tesco’s to prioritize the orderly development and attack each distribution channel in order of easiest entry and least competitive resistance during the next crucial period.
Other factors such as geographic proximity, ability and availability of management to control many different channels at the same time, availability of experienced sales reps within each store, marketing experience by channel, and competitive strengths by channel, manufacturing capacities, and product life cycles by channel should be considered thoroughly before deciding what marketing channel the company is going to follow.
One of the methods used by Tesco’s is price cutting, where more than 350 products, will be reduced up to 46% on some products and an average 12% on all of the 350 products. Businesses based on the idea of providing less expensive products and services to customers can be extremely competitive, in order to gain some customers from the other supermarket chain companies, while they are trying to collect the funds for the biding of Safeway. One problem such companies face is that the customer base is not loyal and will rapidly switch to another company depending upon what is on sale, in a specific period of time. This type of customers, are very hard to keep on, as the same way they changed to Tesco’s, during the price cutting period, they will change to another supermarket when the prices are better somewhere else. So the marketing director of Tesco’s, should try and find a way, not only to attract customers for a short period, but to convince customers to stay at Tesco’s even after the price cutting strategy stops. This is going to be a very important part for all big supermarket chain companies, as during this period of uncertainty, many customers will move from one supermarket to another in order to find the best value for the products they purchase. So on, Tesco’s needs to make sure, that they will offer customers what they want in order to satisfy them and make them loyal customers of Tesco’s during this bumpy period and increase their market share and the profits of the company. With this type of strategy, the best protection for long-term success, where low price is a cornerstone of the product differentiation, that Tesco’s have followed are:
- Tesco’s being the first company to preempt this low-price niche, in the market, has an advantage over its competitors.
- Tesco’s have a unique idea as the basis of non-food development, where they are promoting their own clothing brand.
- They have surrounded low price products and services with as many secondary sources of product and service differentiation, with their competitors as possible, in order to be able to satisfy customers and offer them what they want.
Another important aspect for Tesco’s is to position their products and services in the correct way, in order to attract the type of customers they want. "Positioning" is adding brand value to this collection of differences of a product or service, in the mind of the buyer. In other words, Tesco’s marketing manager must solve the problem of how to communicate a meaningful difference about Tesco’s ideas and development plans, to the people who are most interested in buying the products and services. Meaningful differences in a product or service, compared to that of a competitor, should be created and communicated to the target buyer via packaging, pricing, features and benefits, product design, colors, advertising and promotion mediums, public relations events, and even spokespersons. Everything should work together to promote a consistent image of the products or services that the supermarket offers to customers. Correct positioning can be thought of, as solving the marketing mix problems of a business, known as the "Four Ps of Marketing":
- product (innovation)
- price (price cutting to attract new customers)
- promotion or advertising (continuous promotion through all channels)
- place (distribution)
As well as the "Four Cs" of marketing:
- company definition ( Tesco’s is the largest supermarket share company )
- competitors' identification ( industries involved in the Safeway auction )
- consumer target definition ( customers that are looking for better value products )
- channels ( distribution, again )
By looking ahead, predictions state, that highly customized supply chains will become less common, as companies seek greater supply chain efficiencies and higher service levels through more standardized outsourced solution offerings. Also it has been noticed, that a combination of four software technology trends will radically change how supply chain software is purchased in the future:
- Tighter Scrutiny and Greater Selectivity
- More Powerful Customers
- More Complex Supply Chains
- Supra Software Providers
Supply chains are often extensive and complex, involving many different stages, processes and companies until a product ends up to the customer. Tesco’s for their grocery division of the supermarket, for example, they agree with their suppliers and they buy the raw materials for the products from a variety of other suppliers, producers, growers or farmers. Then they process the product in some way to produce the finished product that Tesco sells in its stores exclusively, Tesco does not buy directly from any primary producer, grower or farmer. Tesco buys finished products, washed packed and ready for sale from suppliers to customers, as they believe, according to Mr. Tim Mason that the grocery market is going to play a very important role in the future, so they are investing in it by paying attention to this division of the supermarket.
Of course it is obvious that all supermarket chain companies will follow a similar type of strategy, in order for them to gain more, out of this bumpy period and not Tesco’s. The winners of this situation, is firstly the customers, as the companies, in order to satisfy us, they will offer a huge range of products in their stores and with competitive prices. Except customers now, the business that will be successful will be the company that:
- Clearly demonstrates proves and has rapid returns on investment, as a result of a successful strategy.
- Successfully integrate new capabilities with existing technologies, that keep improving continuously.
- Fully understand the customer's supply chain strategies, particularly emerging product, and of course market and channel requirements.
Each one of the above three points are essential, but the last one is the most crucial. Long-term vendor survival demands that more resources need to be devoted to understanding and meeting the evolving customer needs with new product and service offerings, in the stores. Tesco’s could remain the market leader in the market, if the strategies that it follows, end up to be successful, they have the chance to attract customers and improve the company’s performance, but time will make the verdict, if Tesco’s is going to remain at the top, or if another company is going to be the leader in the market, the next few years.
BIBLIOGRAPHY:
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Pelton L, Strutton D. Lumpkin J, Marketing Channels-A Relationship Management Approach, International Edition (2001)
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Philip Kotler , Marketing Management, The millennium edition, Prentice Hall (2000)
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Kotler, P&Armstrong G, “Principles of marketing” 6th Edition Prentice Hall (1993)
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Lehmann, D & Winer, R, “Product Management”, McGraw Hill (1995)
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Doyle P., “Marketing Management and strategy”, Prentice Hall Edition
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Rosenbloom B & Ulrich B, “Marketing Channels”, 6th Edition, The Dryden Press, (1999)
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