Fairfield Business School Unit 4 Marketing Principles

This Fairfield Business School Marketing Principles Assignment is about marketing principles followed by TESCO PLC and comparison with the standard elements of marketing.

TASK 1.  Understand the concept and process of marketing

1.1 Using Tesco for your examples, explain the various elements of the marketing process

Elements of the marketing process are the various marketing concepts that an organization makes use of to stipulate the demand of the products and services which it possesses. Here we would be focusing on the various elements of marketing processes for Tesco PLC (which is one of the largest grocery and general merchandise retailer of the world).

Marketing mix

Product
  • Tesco offers products ranging from kitchen wear, bathroom hardware, furniture, electrical equipments to cosmetics, clothing articles, jewellery, shoes, belts and other accessories.
  • It offers products of both national (well known and established) brands as well as its own private brands to the customers.
Price
  • It is considered to be a ‘value store’, ie, the store has adopted a ‘cost leadership’ generic strategy. It offers heavy discounts on everyday use products to attract customers.
  • Price refers to the total value that customers pay for acquiring a products or service. Tesco offers its customers with options like free parking, baby’s room, clean washrooms, fully air conditioned stores, etc; which attract customers.
  • For its own private brands, Tesco has adopted a ‘cost based pricing’ business strategy.
  • For national brands, the department store has adopted ‘cost plus pricing’ strategy.
  • It also makes use of ‘good value pricing’ like ‘everyday low pricing’, etc.
Place
  • It has stores in both urban as well as semi urban areas where the average income level of people is usually on the higher side (this indicates that they would have more demand and therefore would prefer buying in bulk).
  • moreover, the store offers a very comfortable shopping environment to the customers
Promotion
  • Tesco makes use of ‘integrated marketing communication’ to promote itself.
  • Various promotional tools used by the store are – advertising in electronic as well as print media, sales promotion, public relations, etc.

SWOT analysis

Strength
  • One of the largest and most popular retail stores of the world
  • Famous and preferred by customers for its ‘good value pricing’ like ‘everyday low pricing’, etc.
Weakness
  • Not a very well established distribution channel
  • Has presence in limited number of places
Opportunity

The income level of developing countries like India and China are increasing. There is a need for such value retail stores in these countries. Though Tesco has limited operations in these countries, the organization needs to strengthen its operations here.

Threat

Its biggest rival – Walmart is making new moves to make an entry in developing nations like India, etc which would affect the overall visibility and profitability of Tesco in these countries.

1.2 Evaluate the benefits and costs of Tesco’s adopting a marketing orientation

Companies nowadays rely heavily on ‘marketing orientation’ to be successful and popular among the customers. Same is the case with Tesco.

In case of marketing orientation, an organization examines or studies in detail the fluctuation in the consumption decision made by the customers and thereafter designs its offering accordingly. It involves two different approaches - product orientation and market orientation. These two orientations are made use of to design the offering or products that are needed by the customers the most at different times.

At Tesco, the research and development department is deeply involved in analyzing the consumption behavior of the customers, their buying pattern, etc. For example, the store offers heavy discounts on dry fruits, sweets, etc during Christmas season in United Kingdom since the festival is very common there; however, it offers similar discounts during Holi and Diwali in India since as compared to Christmas these festivals are more common in that part of the world.

Moreover, the store has been continuously widening its product portfolio to best suit the requirements of its customers. Marketing orientation has helped Tesco in a number of ways, such as –

  • Customer satisfaction – It helps the store to achieve better customer service and satisfaction since through this orientation; the customers are able to fulfill all their needs and expectations (since the store provides them with all what they need).
  • Customer retention – Satisfied and happy customers generally transform into loyal customers. In other words, customer satisfaction generally leads to customer retention which is good for any organization.
  • Cost saving – Customer retention leads to cost saving since it is much cheaper to retain existing customers than acquiring new ones. Moreover, in this case through marketing orientation the store would not unnecessarily waste money on products which are not desired by the customers it caters to.
  • More profits – All these factors ultimately result in higher financial returns for the store.

TASK 2. Be able to use the concepts of segmentation, targeting and positioning

2.1 Show macro and micro environmental factors which influence marketing decisions taken by Tesco PLC.

The major and minor external environment factors that have influenced Tesco’s marketing decisions are - Political, Environmental, Social, Legal and Technological factors. Since the store has no or very limited control over these factors, it keeps a very close watch on all these factors so that it could take appropriate measures/ steps –

Political

In order to operate effectively at a global a level, Tesco has studied the political systems of each country in detail so that it operates in accordance to the same. For example, different countries have different political hierarchies which need to be approached for making an entry in that particular country, so for this Tesco must be well aware of the same.

Environmental

Most of the countries today lay a lot of emphasis to ‘corporate social responsibility’. Tesco acknowledges its responsibility towards the society and markets itself as a retailer that is involved in fair trade practices and that operates itself ethically.

Social

Earlier Tesco was involved largely in sales of edible products only but in the past few years it has increased the number of non-food items available for sale with them. The store did so keeping in view the changing social makeup; where in the customers now prefer ‘one solution to all problems’ shop. They do not prefer visiting different stores to purchase different products.

Moreover, Tesco has now started keeping promoting, even do advertising and promotion for more healthy food due to the changing attitude and behavior of the people towards health.

Legal

Different countries have different aspects of contract laws/ legislations that govern how organizations must function. Tesco has always tried to abide by all these laws and legislations. For example, it does not employ children below the age of 18 years, gives equal pay for equal work to all the employees irrespective of their gender, origin, religion, etc.

Technological

Technological has helped Tesco to improve upon its current processes, have a better supply chain management, develop new products, etc. the store makes use of the following technologies –

  • Wireless devices
  • Intelligent scale
  • Electronic shelf labeling
  • Self check-out machine
  • Radio Frequency Identification (RFID)

2.2, 2.3 Propose segmentation criteria to and targeting strategy to be used for products in Tesco and Easy Jet

Tesco makes use of the following segmentation techniques for the sale of the products it is involved in –

  • Geographic segmentation – Tesco has stores in urban and sub urban regions where people have incomes large enough to engage themselves in bulk buying.
  • Psychographic segmentation – Tesco attracts customers who are price sensitive. They do this by following ‘good value pricing’ like ‘everyday low pricing’, etc that attract customers who look for cheaper products.

Segmentation refers to dividing the market into appropriate groups so that the company could select the segment/ segments it wants to cater to and position its products in a way that could attract majority of the people in that segment.

2.4 Demonstrate how buyer behavior affects marketing activities in different buying situations in reference to Tesco.

The key to success for most of the big organizations today has been the fact that these organizations have always been very active in sales planning  for their strategies in accordance to the changing preference of their customers. Same is the case with Tesco.

The retailer giant has always tried to examine/ detect any change in the pattern of its customer’s behaviors so that it could plan an appropriate change in its strategy. The various dimensions of customer buying behavior are –

  • Demographic variable – Most of the time it is the children now who determine what brand/ product they and their parents would use. Due to this most of the advertisements today are produced in a way that they appeal to kids.
  • Sociological variable – Recently, Tesco increased the share of non food items in its product portfolio (and is planning to continue doing the same). The organization did so because now customers prefer to shop for all the products they want under one roof rather than visiting different stores for different products.
  • Psychological variable – Customers are always looking for options wherein they could save money. That is the reason why Tesco has always made use of ‘cheapest price everyday’ strategy in its advertisements.
  • Perception and attitudes - Customers are now more heath conscious and desire for products accordingly. Looking at this scenario, Tesco in its latest advertisements apart from giving emphasis to ‘cheapest price everyday’ has also highlighted the healthy and fresh products it offers to its customers.
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TASK 3 Understand the individual elements of the extended marketing mix

3.1 Explain how products are developed to sustain competitive advantage using any mobile phone seller.

Product development has become necessary to stay in competition now. No company can expect to excel without indulging in innovation and creativity. For this let us take the example of Nokia – There was a time when Nokia was at its peak. Every household in India had a Nokia phone since Nokia was better than other phones (or had a competitive advantage) with respect to battery life, looks and quality of the components used. However, when companies like Apple and Samsung came up with new and better ‘Smart phones’, Nokia ignored the development and continued with its same design and type of phones. Within a very small time frame, Nokia lost whole of its market to Apple and Samsung (and other Smartphone companies). It was then that Nokia realized that in order to sustain in the market and maintain ones competitive advantage, the company needs to indulge in product development (or in other words, it must take support of innovation and creativity).

In this particular case, companies like Apple and Samsung by developing Smart phones adopted a ‘Differentiation strategy’ (one of the Porter’s generic strategy); which now Nokia too is trying to adopt. That is the reason why the company is introducing unique features in its Smart phones so that the same could act as a ‘differentiating factor’ for them.

3.2 Explain how prices are set to reflect a Tesco’s objectives and market conditions.

 Tesco’s objective is to provide its customers with ‘quality products at the lowest possible prices’. Largely, Tesco follows three different pricing strategies; the sole purpose of which is to encourage customers to buy more (which is done by charging minimum possible amount for each product from the customers). The three pricing strategies are –

  • Cost-plus pricing – Most of the products that are sold at Tesco are branded, i.e., these products are available at other stores as well. Now in order to gain a competitive edge over other stores and encourage customers to purchase the same product from Tesco rather than other stores, Tesco would have to charge the minimum possible price. The store does so by adding a standard minimal markup to the cost of the product.
  • Cost based pricing – Tesco is involved in sales of its own products as well (private label). The store sells these products at a price which covers all the basic cost involved in producing, distributing, and selling the product. It also includes a small amount of fair rate of return. Because of this reason (or strategy), the prices of products manufactured by Tesco are way below the prices of products manufactured by national brands.
  • Good-value pricing - It includes strategies like everyday low pricing (EDLP) where a company charges differently for different products on different days. For example, Tesco sells fish at the cheapest rate on ‘Mondays’, vegetables on ‘Tuesdays’, etc.

3.3, 3.4 Illustrate how promotional activity and other additional elements of the extended marketing mix are integrated by Tesco to achieve marketing objectives

Tesco has been very actively making use of ‘integrated marketing communication’ right from the beginning to attract customers (pull strategy). For this, it knows that all its advertising strategies must be in sync with each other and must communicate one single message (to avoid creating confusion among the customers). Moreover, its advertising campaign must communicate the vision and mission of the organization effectively to the customers (which is to provide quality products at least possible price).

Tesco also realizes that it needs to make use of different communication vehicles or sources to advertise itself and therefore remain in competition. Some of the ways that the company has been using are –

  • Public relations – In this case, the company organizes quizzes, dance shows, special events, award functions, etc at public places.
  • Print media – The company makes use of newspapers, magazines, etc to advertise themselves.
  • Electronic media – In this case, the company uses television, radio and other related vehicles to gain popularity.
  • Direct marketing – The company here sends text messages, promotional letters, mails, etc to its customers to make them aware of all the discount or special offers the store is offering.
  • Other sources – The company also advertises itself by making use of internet and other related technology. For example, it uploads all the information related to its promotional schemes, discounts, etc on its websites.

TASK 4. Be able to use the marketing mix in different contexts

4.1 Using a product and service offered by Tesco, plan marketing mixes for two different segments in consumer Markets

Marketing mix strategies for customers in fast developing country like Brazil, India, China, etc -

  • Product – People in these developing countries consider acquisition of branded products as a matter of respect and therefore Tesco must concentrate on provision of national brands here.
  • Price – The ‘premium pricing’ strategy of national brands must be followed to maintain the same brand value and image.
  • Place – The company must start by establishing stores in commercial locations and then slowly move to other densely populated areas.
  • Promotion – Premium newspapers, television channels, etc must be used by the company in this case.

Marketing mix strategies for young buyers in the age group of 15-35 years -

  • Product – The products must be good blend of taste and health.
  • Price – Premium pricing strategy for national brands and cost based pricing strategy for local brands must be used.
  • Place – The company must start by establishing stores in commercial locations and then slowly move to other densely populated areas.
  • Promotion – Social networking sites, websites and other new technology vehicles must be used by the company in this case.

4.2 Illustrate differences in marketing products and services to businesses rather than consumers in relation to Tesco PLC.

            Buying behavior, requirements and nature of business markets differ largely from consumer markets. Because of this, the marketing efforts that are put in for these two different segments are absolutely different. Some of the major differences are –

  • Business buyers have to be assured more about the ‘after sale service’ options/ availability.
  • Business buyers must be given a credit period.
  • Business buyers are generally provided with corporate discounts (since they purchase in bulk).
  • Though maintain good relationship is necessary with both business buyers as well as individual buyers; however, the same must be given more emphasis in case of business buyers.

4.3 Show how and why international marketing differs from domestic marketing in relation to Tesco PLC

International marketing differs from domestic marketing in the following ways -

International Marketing Domestic Marketing
Here all the marketing efforts lead to movement of goods and services from one country to another. In this case, all the marketing efforts are directed towards movement of goods and services from one part of the country to another.
Cultural issues must be taken care off in this case. For example, Tesco is not involved in sale of beef or other related products in Hindu countries (to avoid hurting religious sentiments of people). Cultural barriers or issues are not of concern in this case.
Most of the times international marketing leads to intense competition and rivalry. In this case, the level of competition is comparatively lesser.
Benefits in this case are more (incentives associated with foreign currency, larger customer base to serve, etc). Benefits in this case are comparatively lesser.
This type of marketing faces huge risks like political risks (change in government policies), risk associated with foreign exchange, risk associated with bad debt, etc. In this case, the number of risks involved is comparatively lesser.
In this case, there are a lot of restrictions like tariff and non tariff barriers. Here there are no such restrictions.

References

Adcock, D., Halborg, A., & Ross, C. 2001. Marketing: principles and practice. New Jersey:  Pearson Education. Assael, H., & Schnaars, S. P. 1990. Marketing: principles & strategy. Chicago: Dryden Press. Bearden, I. 2006. Marketing: Principles and perspectives. Ventura: Academic Internet Publishers, Inc. Belch, G. E., Belch, M. A., Kerr, G. F., & Powell, I. 2008. Advertising and promotion: An integrated marketing communications perspective. London: McGraw-Hill. Cannon, T., & Sc, B. 1992. Basic marketing principles and practice. Cassell. Enis, B. M. 1980. Marketing Principles. Culver City, CA: Goodyear Publishing Company. Grönroos, C., 2000. Service management and marketing: a customer relationship  management approach. Hoboken, New Jersey: John Wiley & Sons Incorporated.

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