Abstract
This articles illustrates the Tesco marketing strategy, and explains all key marketing mix components by applying 7-P marketing mix framework. Strategic management and marketing students, teachers, researchers and industry practitioners may gain in-depth insights into Tesco’s marketing strategy by reading this article.
1. Introduction
Tesco, the retail giant, ranks among the world’s largest supermarket chains. This article delves into Tesco’s marketing strategies to explore the reasons behind the brand’s success.
2. Company Overview
| Company name | Tesco Plc. |
| Founding year | 1919 |
| Headquarters | Welwyn Garden City, UK |
| CEO | Ken Murphy |
| Industry | Retail |
| Number of stores | 4,752 |
| How many countries does Tesco operate in? | 12 countries |
| Tesco number of employees | 354,744 |
| Tesco market structure | Oligopoly |
| Tesco revenue 2022 | $84.139 billion |
| Tesco profit 2022 | $6.355 billion |
| Tesco market capitalization 2023 | $24.33 billion |
3. Tesco Marketing Strategy and Marketing Mix
The article presents the Tesco marketing mix by applying 4-P framework:
3.1. Tesco product strategy
3.1.1. Tesco product strategy
Tesco branding strategy focuses on trust, customer-orientation, product quality, value, and social responsibility. Products and services of Tesco are designed to align with the branding strategy, offering wide ranging product options, prioritizing quality, sustainability, and affordability to meet the customers’ diverse needs.
3.1.2. Tesco product mix
As of 2023, Tesco has more than 1,900 product lines, and stocks more than 90,000 products across 1,900 lines that are sourced from more than 4,000 major suppliers.
3.1.3. Tesco target market
Tesco operates a variety of stores to target the diverse market segments:
| Tesco superstore | Large format supermarkets |
| Tesco extra | Large hypermarkets |
| Tesco metro | Smaller supermarkets |
| Tesco express | Smaller convenience stores |
| Tesco mobile | Virtual network operator |
| Tesco neighbourhood market | Medium-sized stores to serve neighbourhood area |
| Tesco home plus | Non-food products |
| Tesco extra care home | Located near retirement communities |
| Tesco wholesale division | Serves business customers |
| Tesco bank | Financial services |
| Tesco petrol stations | Convenience shopping while refuelling vehicles |
Here is a brief Tesco segmentation, targeting, and positioning analysis:
| Segmentation criteria | Targeted segments | Positioning strategy |
| Demographic | Families with children | Affordable and convenient |
| Young professionals | Focus on quality and convenience for urban, busy dwellers | |
| Seniors | Convenience focused- tailored to their specific preferences | |
| Geographic | Urban | Convenient location, diverse range |
| Sub-urban | Emphasis on family shopping, diverse selection | |
| Rural | Local and fresh produce | |
| Behavioural | Health conscious | Healthy food options |
| Price sensitive | Value focused promotions | |
| Psychographic | Eco-conscious consumers | Focus on ethics and sustainability |
| Community oriented individuals | Focus on local community initiatives | |
| Brand conscious shoppers | Focus on exclusivity and prestige from premium brands |
Overall, the brand’s dominant positioning strategy focuses on the value for money that resonates well with most of its customers.
3.1.4.Tesco unique selling proposition
Tesco USP lies in:
• Convenience
• Quality
• Affordability
Tesco’s slogan ‘Every little helps’ reflects all three unique selling points.
Click here to know about the Tesco’s market share
3.1.5.Key challenges
Tesco is often criticized for poor food quality, and its inability to meet the quality standards.
3.1.6. Key lessons
• Tesco tailors the store formats to target diverse customer segments.
• Trust, quality, affordability, and social responsibility are keys to Tesco’s brand strength.
• Tesco’s “Every little helps” slogan emphasizes convenience, quality, and affordability.
3.2. Tesco pricing strategy
Tesco adopts different pricing strategies to make its product available to the end customers.
3.2.1. Every day-low pricing strategy
Tesco uses everyday low pricing strategy by offering consistently low prices on everyday products. It grabs the attention of price conscious shoppers.
3.2.2. Tesco promotional pricing
Tesco frequently offers the promotional discounts on different products. ‘Buy 1 get 1 free’ is most commonly used offer that drives the seasonal sales.
3.2.3. Tesco private label pricing
Tesco also offers own label value tier. This strategy offers good value for money. However, Tesco has slashed over 100 own label product lines over last three years.
In 2022, Tesco announced price-lock commitment to freeze the prices of more than 1,000 everyday products until 2023
3.2.4. Tesco pricing comparison
Here is the pricing comparison of top supermarkets in UK:
Source: Which.co.uk
3.2.5. Key factors determining Tesco’s pricing strategy
Tesco pricing strategy derives influence from multifaceted factors, including:
• Market competition
• Consumer demand
• Cost structure
• Profitability goals
3.2.6. Tesco pricing challenges
• In 2023– Tesco faced criticism for breaking the law due to unclear pricing. Tesco was accused of taking unfair advantage of inflationary environment to raise the prices.
• Food inflation in Britain is making it hard for Tesco to keep its prices low.
3.2.7. Key lessons
• Tesco adopts a mix of pricing strategies to widen the market reach
• The pricing decisions derive influence from multiple factors like- market competition, cost structure, consumer demand, and profitability goals
• Tesco must maintain the transparency in the pricing strategies to maintain the customer trust in an inflationary environment
3.3. Tesco place (distribution) strategy
3.3.1. Tesco distribution strategy
Tesco distribution strategy is centred at well-developed supply chain network that encompasses a mix of distribution centres, advanced technology, and efficient transportation infrastructure to optimize the supply chain management processes. Tesco’s distribution strategy has played a pivotal role in making it one of the largest retailer in UK and beyond.
3.3.2. Tesco distribution channels
Tesco uses a multi-channel distribution approach that encompasses:
• Physical retail stores
• Online platforms (Tesco Mobile)
• Home delivery services
Multiple distribution channels reach diverse customer base. The Omni-channel strategy ensures convenient access for customers.
3.3.3. Tesco distribution level
Tesco operates at multiple distribution levels to efficiently move its products across the supply chain.
Primary distribution level
Secondary distribution level
Tertiary distribution level
Direct distribution of perishable goods
Tesco also directly delivers from suppliers to its stores (particularly in case of perishable goods).
3.3.4. Tesco distribution network- key statistics
As of 2023, Tesco has 24 distribution centres. More than 2 billion cases move each year through Tesco’s distribution network. 95% are distributed centrally, and 5% are directly delivered to stores.
As of 2023, Tesco has 4,859 worldwide stores, as shown in following graph:
Source: Statista
As the graph shows, Tesco total number of stores declined since 2014, and the main reason was its failure in China, Japan, and USA. Tesco opened 79 new stores in 2022.
3.3.6. Recent initiatives and distribution challenges
• In 2023, Tesco’s supply chain is considered ‘best-in-class’ and resilient to market conditions.
• Tesco is continuously investing in light-weight warehouse robots to combat inflation
• However, Tesco staff is staging protests against the automated checkouts- Retail Gazette
3.3.6. Key lessons
• Tesco’s multi-channel approach ensures convenient access to the diverse customer base.
• Tesco has a well-developed supply chain network that plays pivotal role in the business success, ensuring the smooth product movement at global stage.
• Tesco must address the employees’ concerns while investing on the automation technologies
3.4. Tesco promotional strategy
3.4.1. Tesco promotional mix
The Promotional mix used by Tesco tells how Tesco communicates with its customers:
Tesco promotional mix
3.4.2. TV advertising
Tesco is known for launching many successful ad campaigns. Its advertisement strategy is a creative blend of rationality and emotions. Highlighting community connections and family moments make an emotional appeal, while, rational messages are sent about product convenience, value, and quality.
Here are highlights of recent TV ad campaign (2023):
Smile-style horror for club-card prices campaign
3.4.3. Print advertising
Tesco print advertising strategy includes ad placement in different food related and lifestyle magazines and newspapers. Tesco also has its own monthly magazine. Here are some highlights from ‘Tesco Magazine’ September 2023 edition:
3.4.4. Billboard advertising
Other than magazine advertising, Tesco posts billboard ads to increase the brand exposure:
3.4.5. In-store promotions
Tesco actively engages in the in-store promotions. Aisle-end displays, eye catching signage, and digital screens capture the visitors’ attention:
3.4.6. Club card loyalty program
Tesco’s club card loyalty program offers personalized promotions based on consumers’ purchase history. Following table compares the loyalty program features (2023) of top retailers:
Source: Which.co.uk
3.4.7. Sponsorships and partnerships
Tesco enhances its brand visibility through sponsorships and partnerships. For example, Tesco has partnered with WWF to address the climate change issue. Such partnerships portray a positive brand image, and act as an indirect promotional tool.
3.4.8. Social media marketing strategy
Tesco has opened official accounts on different social networking sites:
| Social networking sites | Number of followers (2023) |
| 337K | |
| 551K followers | |
| TikTok | 197.2K followers |
| YouTube | 161K followers |
Social media advertisements
Tesco social media marketing strategy aims at engaging the customers through interactive content, including- customer stories, recipes, and product promotions:
Above snapshot is taken from Tesco’s Instagram account. The digital advertising strategy foster the sense of community and loyalty.
3.4.9. Influencer marketing
Tesco partners with lifestyle and food influencers to create the engaging and authentic content. The hired influencers showcase the Tesco products in their daily lives, expanding the reach, and creating resonance with customers.
In 2022, Tesco launched largest digital ad network (100 out of home digital screens) in UK to decrease the ad-spend wastage.
3.4.10.Tesco ad spending
In 2020, Tesco spent around £81 million on advertising. Following graph shows the Tesco’s ad spending from 2018 to 2020:
Source: Statista
In 2019, Tesco recorded biggest advertising budget in the UK grocery market, followed by Sainsbury.
3.4.11. Key challenges
• In 2022, Tesco advertising campaign received customer backlash for using foods names as substitute for expletives- BBC reports.
• Another Tesco greenwashing ad was banned in 2022 for misleading customers about environmental benefits of its plant-based food items.
• In 2021, Tesco’s TV ad featuring Santa Clause bearing Covid-vaccine passport was banned after getting over 1,500 complaints- The Guardian.
3.4.12. Key lessons
• Tesco successfully engages the customers over social media through interactive content
• Tesco needs to avoid making misleading claims in its advertisements, as it can harm the customer trust
3.5. Tesco people strategy
Tesco has developed an inclusive and diverse workplace. The company empowers the employees to innovate, grow, and deliver exceptional customer service. However in 2023, Tesco is planning layoffs that can affect the company’s internal operations.
In 2022, Tesco launched “My Tesco” app for its employees. The app can be used to take extra hours, view the schedules, and avail training and development opportunities.
3.6. Tesco process strategy
Tesco process strategy involves streamlining the business operations through data-driven insights and advanced technology. The customer-centric orientation drives the process efficiency and delivers exceptional shopping experience.
In 2022, Tesco partnered with Starship technologies for robot delivery trial, and has partnered with Ocado as well for warehouse automation.
3.7. Tesco physical evidence strategy
Tesco invests on creating the attractive store layouts to enhance the overall shopping experience. The overall store theme offers a trustworthy, pleasing, and comfortable environment that instils confidence in customers.
Have a look over Tesco’s exterior that creatively blends different shades of green:
4. Recommendations
Based on analysis of Tesco marketing strategies, the article proposes following recommendations:
• Continuously expand and innovate the product range to meet the consumers’ evolving needs
• Integrate transparency in the pricing strategies to foster the trust
• Prioritize employees’ well-being and address their concerns while investing on the automation
• Leverage the power of technology and data to enhance the customer experience
• Integrate ethics and sustainability in the product and marketing offerings
• Avoid making misleading claims in advertisements that may hamper the viewer trust
5. Conclusion
To conclude, Tesco marketing strategies revolve around affordability, convenience, quality and trust. By embracing the diversification, innovation and customer orientation, Tesco continuous to thrive in the competitive global retail landscape.
Click here to read our article ‘Tesco SWOT Analysis’
