Tesco Clubcard vs Nectar, Essay Example

Executive Summary

I have taken Tesco Company for my consumer behavior assignment. Tesco is one of the leading retailer stores around the world. They offer variety of products to its customers. This report is divided into three sections. In the first section, I have explain the decision making process of consumer and how external factors affect the decision making process of consumers.

In the second section, I did detail analysis on the marketing strategies of Tesco. The major emphasize is on the Segmentation, Targeting and Positioning strategies of Tesco.  Tesco is segmented its customer on the basis of geographical and demographical segmentation. As Tesco is offering its products to mass market, the targeting strategy of Tesco is undifferentiated. Tesco offer its products at lower price which allow them to position as value brand in the mind of customer

In the third section, I have explained the Maslow’s hierarchy theory of need. This theory explains explain the need of consumer and assist the managers to provide such product which fulfill customers need. I also explain the big five personality theory and related to differ aspects which affect the purchasing decision of consumer and positioning strategies of Tesco.

Section 1

Consumer Decision Making Process

Consumer decision making process is very necessary to understand as it helps to understand the consumer decision making process and then company can influence their decisions. The first step is the need recognition, where consumer finds out a need or wants that he wants to be satisfied. If a company understands when the need develops, it can target it through advertisement. The second stage in this process is the search process where consumer uses different sources to find out the ways his needs can be satisfied. He should be available with lot of products at this stage. In the third stage of decision making process, he would evaluate the different alternatives by based on quality, price or other factors. Customers search for many reviews and compare prices, and ultimately reach to a product that satisfies most of his parameters. In the next step consumer has to decide what to purchase and from where. After the purchase of product customer evaluate whether the product has satisfied his need or want. Evaluation of customer is very important as one good experience of buying can make the customer loyal to company and also bad buying experience can tarnish your brand perception forever (Flekel, 2013).

Internal Factors Affecting Customer’s Decision Making Process

Customer decision making process can be affected by different factors which are categorized as external factors and internal factors. In this report we have to discuss the effects of different internal factors on the customer’s selection of retail store for shopping decision. The internal factors which are to be use are motivation, personality, self-concept, perception, consumer imaginary, learning styles and attitude of customers towards selection of retail store. Here is given the detail discussion.

Section 2

Segmentation, Targeting and Positioning of Tesco

Tesco is retail store which offers grocery and FMCG goods to its customers. The level of involvement of customers in purchasing the grocery and FMCG goods in Tesco is low. It is because these products are not much expensive and purchase on the regular basis. As Tesco is one of the top most retail stores. They are running their store in different geographical locations in order to serve different set of people from different background. They are using Geographic and Demographical segmentation Tesco offers its wide range to customer to different demographical customers. This helps Tesco to attract and serve customers from different geographical and demographical customers. Tesco is using undifferentiated targeting strategy because they are serving large market and ignoring market segment different. Tesco is suing this strategy in order to serve the customer as much as possible.

Tesco offers wide range of products to its customer at lower than market price. Tesco position its self as value brand. Now days, they are moving toward the premium brand. This positioning allows Tesco to serve large portion of market. The above fig shows the conceptual mapping of different formats of Tesco.

Section 3

Motivation

Maslow’s theory states that a person does not feel a higher need, if the current level need is not full filled (McLeod, 2014 ). So Tesco is also implementing this theory to fulfill the customers need and give fully satisfaction. The first level of need can evenly be full filled by a normal retail or grocery store. Tesco is targeting a higher level of need. The world largest second superstore is providing sense of safety to its customers by providing better, well lit and safer environment. They feel comfort about the packaging, price and quality of the purchased goods from Tesco. After full filling this stage customers of Tesco move to the next stage i.e. belongingness and love need. This is what the company is targeting to get the loyalty, belongingness of customers. Tesco is also making efforts to fulfill customers this need

Company is giving customers loyalty cards to its customers. These cards which are generating loyalty of customers are Tesco club cards, Sainsbury Nectar cards and boots advantage cards. Apart from these biggest loyalty cards company is also giving Morrison Miles (which give fuel off offer to customers of Tesco from Morrison’s petrol stations) and Superdrug beauty card (Christie, 2013).

From this stage, many of the customers are promoted to the next phase of “self Esteem”, the marketing and promotion of the Tesco mirrors this a lot. Specific promotions and offers are run to cover the high end customers and give them fully respect, accomplishment through high valued products. The customers is also giving high value and feel of self-actualization through its high valued brands.

Personality (Factors that affect decision making and positioning)

In the psychology, the big five personality explain the five major traits which explain the human personality. The factors of big five personality theory are: extraversion, agreeableness, neuroticism, conscientiousness and openness. Now days, marketer uses this theory in order to assess the personality of their target. This theory assists in understanding the traits of customer which help in developing the marketing strategy for the target market.

The Big five personalities are directly related to the brand personality. It has been shown that the person which have conscientious trait in their personality showed significant preference towards the trusted brands. However, those people who have extrovert trait in their personality are attracting towards the social brands.  The gender differences play a significant role in the purchasing decision making.  The male who have strong trait of Neuroticism prefer the trusted brand. On the other hand, female who have conscientiousness trait in their personality are attractive towards the trusted brand.  This shows that personalities of different gender vary in choosing the brand.  Tesco also focuses on the personality of their target market and implement those strategies which assist Tesco in attracting and retaining their customers

Personality and self concept is self evolution of customer in order to judge himself. This factor plays a vital role in buying behavior of customers. Before the purchasing, customer builds image of product/ service which is attractable to its reference group or its surrounding. There are three variable of self concept. These are: actual self image, ideal self image and social self image. In actual self image, customers evaluate its self. In ideal self image, customers want to see themselves and in social self image how consumer want other to see themselves. The self concepts of customers are dependent on the personality traits of customers. Now days, companies are focusing on this behavior because it directly influence the buying behavior of consumer. The self concept is based on the social interaction of customers and regular purchases. These factors act as main pillar in the self concept. On the other hand, personality plays a major part in this whole self concept. Tesco use different strategies in order to position its self according to the self concept of its target customers. They develop their distribution and pricing strategies which assist the Tesco to position its self according to their self concept and personality of their target market.

Perception is refers as the stimulation of consumer. It is important for the marketers to understand the mechanism behind the response of customer regarding the products or its characteristics (price, place, promotion or product).  The perception and customer image also play important role in the position of product and purchase decision making. Tesco focus on the perception and customer image of their target market.  The major portion of Tesco’s target market belongs to SEC B class. These people are price conscious and Tesco build value brand positioning in order to attract those set of customers. Tesco’ distributional strategy also helps in meet the perception and customer image.

Tesco Positioning Strategy

Tesco is the UK based company making business globally. UK is the largest market for Tesco. In the resent years there was a recession and economic fall in European countries including UK. So the company has positioned itself as the value brand in this market, this shows that company is giving high value at lowest price. The purpose of this strategy is, to maintain its loyal customers and market share and support their valued customers at bad days. Now the UK economy is again going to stabilize its position, and the financial position of the customers is strengthening. So the company is planning to reposition itself as the premium brand (Baker, 2010).

Company is also running several loyalty programs to position itself as the most nearest to the customers. The purpose of these programs is, to develop the belongingness of the valued customers with company. The one of the loyalty program provided by the Tesco is the launch of Club cards or Tesco point’s card. It is the reward program for the high valued Tesco UK resident customers to earn points every day. For each day when they shop from retail store, one line or physical store, they will get some points, For example if a customer spend £ 1 for purchasing groceries, video, CD or any stationary, two points will be added to his card. So adding these points would help customers to shop future on the basis of these points that would act like money (Loyalty Program Tesco Club Card, n.d.). Company is also some other offering to accomplish its positioning strategy.

Learning and Attitude

Attitude is the relationship link between customers believes, thoughts or feelings and the response action, this shows the customers positive or negative approach towards the product (Dean, 2010).  It is one of the important internal factors that make the individual choice. The attitude of customers can be the results of predisposing factors like values, beliefs, knowledge and cultures i.e. the cognitive component of attitude. This also can be affected by the learning process like the customer’s ability to see the differences, imitate from others and consumer individual experience. For example the customers has the past experience of good quality with high price. Tesco is targeting its customers to get their positive attitude towards the retail store. They are not only trying to get positive attitude, but also the loyalty of customers. The promotion campaign, loyalty programs, promotions and discount, giving comfort and facilities are the part of the programs to get customers favor as liking by them. The company is also focusing on the online retailing to give customers convenience and save their precious time (Tesco PLC, n.d.). All of these activities are done to get the loyalty of customers so that whenever they will think of any retail store, Tesco will be their first priority.

Conclusion

Tesco which is the second largest retail stores in the world is affecting the decision making process by targeting internal factors. The company is targeting the customers each level of needs discussed in Maslow hierarchy need theory by providing them the needs and wants, security, belongingness with company and creating loyalty and also targeting the self-esteems of customers through its products and campaign.

Tesco is targeting its customers with different products, qualities and prices to target all type of personalities and build the self-concept of customers more strong. The major portion of the Tesco is the SEC B, but they are also targeting other social classes. Tesco has positioned itself as the value brands in the economic crisis of UK and now again reposition itself as the premium brand. The company is also targeting the customer’s attitude to get the positive attitude and even loyalty of customers. So that in making purchasing decision, they will give priority to Tesco on other retail brands.

References

Baker, R. (2010, April 21). Tesco expected to look to premium positioning. Retrieved from marketingweek: http://www.marketingweek.co.uk/tesco-expected-to-look-to-premium-positioning/3012471.article

Christie, S. (2013, August 30). Tesco Clubcard vs Nectar: Best loyalty schemes. Retrieved from telegraph: http://www.telegraph.co.uk/finance/personalfinance/consumertips/household-bills/10273842/Tesco-Clubcard-vs-Nectar-Best-loyalty-schemes.html

Dean, G. (2010, July 10). Understanding customers attitude. Retrieved from marketography: http://marketography.com/2010/10/17/understanding-consumer-attitudes/

Flekel, A. (2013, April 29). 5 Steps of customer decision making process. Retrieved from smallbusiness: https://smallbusiness.yahoo.com/advisor/5-steps-decision-making-process-194509349.html

Loyalty Program Tesco Club Card. (n.d.). Retrieved from points: https://www.points.com/loyalty-program/tesco-clubcard

McLeod, S. (2014 , January 12). Maslow’s Hierarchy of Needs. Retrieved from simplypsychology: http://www.simplypsychology.org/maslow.html

Tesco. (2012). Retrieved April 15, 2014, from http://adbrand3.wordpress.com/: http://adbrand3.wordpress.com/

Tesco PLC. (n.d.). Retrieved from proactiveinvestors: http://www.proactiveinvestors.co.uk/companies/news/66133/tesco-sets-sights-on-online-and-convenience-shopping-66133.html