Value proposition of Tesco (Marketing Management)


Introduction

The delivering of higher value to the customers in continuing concern of the management in various business markets of nowadays. It has become serious for the suppliers to know where value lives from standpoint of customers (Ulaga and Chacour, 2001). Loyal customers are main factor of the success in every organization. They recommend to the other, they repeat purchase from same firm, and they spend money as long as consistent value is delivered by it. Delivering and creating values where needed in also not an easy task for the marketing planner (Hassan, 2012).

In order to understand better, customer supposed value, you must know about the value proposition. It is a comparison of benefits offered by the product of a company to its customer relation to the price company asks the customers to pay. Organizations can generally effect value proposition in 1 of two ways. Organizations can offer a low cost to increase value. They can also use long-term product building advertising in order to emphasize major trains of products and brand. Ultimately, the base is that the customers perceive that merits of the product exceedingly justify its value (Kokemuller and Media, 2013).

Tesco is the leading food retailer of Britain employing 160000 people in the United Kingdome and it has 702 branches in all over the world. From previous five years it has expanded its business from a traditional market of United Kingdom based into new products, countries, and services including a key personal finance, nonfood business, and the internet shopping. In all over the world Tesco is getting popularity due to its retailing and pricing strategies. The increasing internationalization and scale of Tesco purchasing and sales operations contributes to an important increase in profitability and efficiency (markedbyteachers.com, 2013).

Identify the customer perceived value

Though customer-perceived values are discussed widely in literature, a few realistic studies have also been conducted because of an absence of the operational measures. The reports on measures’ development and tests to customer-perceived value arrangements using the data collected from the industrial customers of industry of the information technology (Lapierre, 2000).

Customer-perceived value is a branding and marketing related concept which point out that the success of the product is greatly based on the whether customers trust it can fulfill their needs. This expression underline that when an organization markets its products and develops its brand, customers ultimately decide how to react and interpret to the marketing massages. Organizations spend an important time researching market in order to get logic of how customers feel and think (Kokemuller and Media, 2013).

Importance of Understanding Perceived Value

Recent marketing and theoretical approaches have placed focus on perceived value. The perceived value is realized a significant factor that influences the customers’ behavior. Customer-perceived value is thought to be source of getting competitive advantage.

The marketers deliver the advertising massages with different intents and through different media. The market research is critical in order to understand hoe special types of clients will respond to special massages in those means/media.   Organizations use focus surveys, groups and test markets with some other research tools, in order to get a logic for what customers need and do not need from the products in given industry. Getting knowledge of what customers want and think gives you a good ability to stimulate them along with your massages (Kokemuller and Media, 2013).

Benefits associated with perceived value

  • Emotional benefits: the effect gain to the customer just for buying specific services (for example a honeymoon package from the travel agent)
  • Economic benefits: the monetary saving when buying services (for example purchasing air tickets at the discount rates)
  • Relationship benefits: a condition when customer think service providers as valued source who appear to the expectation of customers and also fulfill their needs (for example a frequent teashop customer build up the trust on waitress or bartender and how consistent the services are, that’s why, building the long-term relationship with teashop).
  • Social benefits: the customer recognition of the services as referral choice, just as their relatives or friends recommends service to them (for example visiting an extremely recommended tourist destination).

Models and theories of Customer Perceived Value

The below depicted model show the customer perceived value in industrial contest.

Understanding the customer value by the perspective of “customer’s value to firm” has received attention from the researchers. This research steam focuses on customer value to firm; thinking it as output, instead of input, of the value creation. For itself, it focuses not on creation of value just for customer but on value outcome that may be derived from the delivering greater customer value. A main concept which forms portion of this viewpoint is that of ‘lifetime value of customer’. This viewpoint views customer value just as value that an organization can obtain by its customers (Landroguez, Castro and Cepeda-Carrión, 2007).

Gaining competitive advantage through value propositions

Customer perceived Value

 

Mass retailing’s Key dimensions (value propositions)
Social value/ Functional value

Right product (reliability, quality features and other attributes)

Product variety: number of stock-keeping units (SKUs) and the number of product categories
Functional value

Right Place ( accessibility, convenience ,environment)

Brands (retailers brand vs manufacture’s brand)
Emotional value

Right Time (circumstances, needs ,conditions)

Product assortments: ( one-time bundles or seasonal clothing, store layout ,standard products in standard size)
Economic value

Lowest price (discounts, price etc.)

Availability (all items are always in stock)
  Cost of goods ( cost of the items, price and supply cost like warehousing logistics, inventory, and the like)

Value proposition of Tesco

When introducing Tesco, there should be given some space to remark the success of loyalty card campaign that was awarded to the most successful superstore loyalty card scheme of UK. The loyalty card’s one benefit is that they give supermarket insights into what its customer desire to purchase. Tesco gives voucher to the customers and design offers on the base of their earlier history, so that clients receive goods that they prefer. Tesco is top ranking United Kingdom retailer and the 3rd in the world. Tesco’s website contains the most successful accessible grocery business of the world. As initiated by David Potts, logistics and retail director, it is very important to use statement: “each little help” giving customers every bit of efforts and help. He also explained that a little amount of work from member of staff may translate into great service in end. David highlighted that this topic is realer than ever before. The Tesco considers the environment, social responsibilities and community. They have introduced a lot of activities that must create customer lifetime loyalty that they pursue to achieve with the consistency (Hassan, 2012).

Understanding value that customers observe in an offer, generating value just for them and them handling it above time have been acknowledged as essential fundamentals of a business strategy of Tesco. Finding what the customer pursues from a service helps Tesco in order to formulate the value proposition of Tesco. The competitive advantage of Tesco stems from its capacity to generate value for customers that exceeds the organization’s cost of generating it.

 Competitive Advantage through value proposition:

Following are the ways through Tesco gain competitive advantage:

  • Tesco as a famous British retailer has got competitive benefits by creating for greater functional value of its customers.
  • Aim of giving functional value built on, e.g. buying the good merchandize, designing suitable shopping experiences, and teaching the personnel.
  • Customer of Tesco focused promise to giving functional value is précised in the value proposition of the company “Every tiny helps,” is efficiently communicated to employees as well as customers.
  • For customers:
  • Every tiny helps is précised by 5 promises:
  • Aisles are perfect;
  • I can find which I want;
  • Rates are the good; I don’t train
  • The faculty is great

Value perceptions according to the customers

It displays, Tesco has many cause of value to his customers. Tesco is predictable like a supermarket which is in great locations (great access to stocks, nearness and parking, loyalty cards, internet shopping range and quality of products. So this is a type of supermarket which transfers many feature of value. Waitrose has just two feature of value, first quality which is greater one, and second is location. So not including customers who workshop in a workshop because of his location. Waitrose is just single one which is giving quality attribute like his central value proposition (Hassan, 2012). Today, in the era of global competition customers have great value for marketers and companies. The value and tastes of customers are changing to the great extent so it is necessary for marketers to provide real value to their customers in order to satisfy them and to the long term sustainability.

Considering the strategic marketing approach of Tesco, its customers perceive expected value. The customers of Tesco are very loyal to brand. They see loyalty card scheme just as a major reason for them in order to keep shopping/buying with that chain of supermarket. About all respondents mentioned Tesco club card just as a source of the value to them (Barker, 2001). They also appreciate reward scheme, which provide them the offers based on the vouchers and shopping history of them, they get every quarter of year. They agree on some other value elements like, better quality, local store, and range of products. These elements were nearly standard answers from the all customers of Tesco. The 7/10 respondents agreed on these aspects. They also defined the products’ range as a diverse selection at the different prices. They saw store as English company and also support the home industries. The Tesco customers’ majority defined value just for the money as ratio between quality they perceive and price they spend. They acknowledged that there is no one who providing same quality as Tesco at low rates they offer (Danaher and Rossiter, 2011). About 1/3 of respondents mentioned the layout and attractive offers of the stores. The customers of Tesco see offers just as being attractive and reliable, and no other superstore/supermarket has same offers.

Some special factors were also initiated by some respondents, namely that recycling center is also available at certain stores, there are a little shop in every district and main super stores, and they also deliver good food in the form of freshness to the online customers than the other stores. The 2 respondents criticized of bas experience with a supermarket that supplies low quality and also expired-items, but; Tesco has freshest item and best quality products. One respondent initiated that the Tesco covers about all Southampton; it also has each thing he requires and provides him along with the reward scheme. He explained that there was no race in his opinion (Hassan, 2012).

Value proposition of Tesco & Wall Mart

To effect value perception, both the companies Wall-Mart and Tesco try to deliver the massages that research specifies should generate desire sense of the value with the customers. A few organizations make the low cost/price a priority. It is a very simple massage strategy because it only requires the regular communication of the low cost/price benefits and also delivery on that particular commitment (Kotler and Armstrong, 2007). Some other express massages like best service, best quality, environmentally friendly or unique features to influence customer value perception, the marketing massages should be consistent and delivered via the right media.

There are methods to evaluate the customer value perception:

  • Compare the organization’s value proposition with major competitors on measure whether organization is capable to achieve the competitive advantage.
  • Check whether the organization fulfills/delivers the promises in value proposition of them and at what degrees.

A major challenge in inspiring a value perception with the customers exists at the time when you product or brand doesn’t stand out comparative to the competition. The differentiation by the other products is a very important marketing emphasis. Moreover, when the organizations do not use the market research, or at the time when they have imprecise market research, they track marketing risk false expectations on what massages/manipulations will influence customer value perception.  It is necessary for both organizations to understand the customers’ perception of value position. Better customers’ perception can contribute greatly in the long term success of the organization.

Compared to, for instance, that of the Wal-Mart, the competitive advantage and value perception of Dollar General is founded on being located near the clients/customers however still being capable to give low cost solutions just for the most weekly shopping wants.

Mass retailing’s Key dimensions of (value propositions)  Tesco Wal-Mart
Product variety  wide range and Variety of product Variety and wide range of product
Brands Brand of manufacturer and own brands –lower price Brand of manufacturer and own brands –lower price
Product assortments expensive due to demand uncertainty-Fixed assortment retailor Fixed assortment retailor-expensive due to demand uncertainty
Availability High level of product availability High level of product availability
Cost of goods Low price Customer can find Colgate size tooth paste at the lowest price at Wal-Mart

New value proposition

Delivering and creating value proposition are two critical problems that marketing planners must consider in planning the strategies. These days, rapid changes in technology and market, and a very high competition make it very complex for an organization to sustain the momentum without concentrating on deliver value that customers need. Value proposition changes across industries and also across the various market segments in an industry (Kaplan and Norton, 1996).

To achieve competitive advantage, the customer value proposition should:

  • Expand the profits and/ decline the detriments that the client observes as relevant;
  • Build on abilities and means that the firm is talented to consume more efficiently than his competitors;
  • Be recognizably changed (unique) from race; and
  • Output in competitive benefit.

The customers can receive offers they desired to receive, however not as it must be. The organizations are responsible for shaping and designing their tactical and strategic approaches in many aspects. These elements should define in the marketing according to the customer feedback. They should be promoted, advertised and communicated clearly to the all customers, in order to make them know that what the whole offer is. It is also recommended that applying a customer value transfer strategy based on the value learning process of customers. The learning process initiates by emerging marketing info system to the complement inner performance and also operation-oriented info systems. The learning about the customer value may be made via a customer value/worth determination framework that is designed to assist managers with answers to the critical questions related to their customers, specially related to how they give value to service or product than a company offers. The process starts with what objective customers’ value, and that shows all stages of the collection of data about the customers and also analyzing them in order to identify a relation between service or product attributes and values. The 2nd step is to exploit those dimensions of value to what are significant attributes needed by the customers and to examine the weakest and strongest position of the company in providing the value needed by targeted customer. Apparently, organizations must predict future and also shape their prediction in order to define what values object customers are probable to have in future. After gathering the information of customer value, a process of converting these into the actions is required. It is simple to create value strategy then convert the strategies into the internal processes, implement strategy of value delivery on the customers, and also track performance of value delivered in ongoing process. For example, a result of the successful achievement of these processes, organizations will generate clear value centered on the customer perceptions. Effective marketing strategy can contribute greatly in the best interest of the value position of the organization.

Marketing shows an identifiable role in sending value, first of all investigating the right customer’s needs, after this introducing services or a product which is suitable for these needs. Secondly, decide the pricing strategy which sends value from equally sides, the side of customers, shareholders value and corporate side. The role of marketing is significant in customer needs. Marketers better satisfy the organizational customers and create the value for the customers as well as for their organizations. The most serious element of marketing is price, because this is the just one which produces return, although all others create costs (Doyle, 2004):

 Three principles of effective pricing:

  1. Price should be decided according to customer’s mind or customer’s satisfaction level.
  2. Pricing must be included with overall firm’s goals and strategies
  3. Deciding prices after observe the competitors

Customer will pay price according to his mind, customer don’t have any concerned service or cost of product. Firstly they judge the service or product after this they will comparing prices with competitors. Customer will also judge whose offer is suitable and best for him. Marketing should differentiate the service or the product of a firm from competitors; customers can set suitable price based on different advantages (Doyle and Stern, 2006).

Implementing value proposition

Tesco should focus on value proportion in order to increase the perceived customer value. It is necessary to consider both internal and external environment. Responsiveness and flexibility plus two service-related benefits-are main values create for whole business client surveyed. Relationship value assessed the greatest differently in 2 of 3 sectors studies (Lapierre, 2000). The greatest organizational successful strategies are to offer greater value. However, this is hard to understand worth due to 2 reasons. Firstly the term has commonly linked with issues of price and secondly it has difficult meaning for difficult people.

There are two main views on value. Business value is establish in vision statement and mission and firm’s objectives, and needs to identify customer value, what they have need, what they purchase, when they purchase, how regularly they purchase, why they have favor on offering between competitors. Companies are suggested to usage the client value creation procedure to get the best occasions for growth inside change in marketable environment. This procedure is built on operational excellence and on client value analysis. Willingness and perceived value to pay interrelated.

Various specific models with respect to food consumer behavior have been developed in all over the world. As occurs with the greatest general and traditionally models, food models get a cognitive method to user behavior, where the process of decision-making and the marketing stimuli’s information pressing are keys to precise consumer behavior. There is identification of external factors like economic factors and product availability, most food selection models focus on the interaction between food product and the individual.  However, the decision process in facilitated by processing conditioned and mechanisms by social and psychological factors that normally are role of peripheral (Marreiros and Ness, 2009).

Throughout the entire life cycle of value the value proposition must be studied. This includes the stages of value like creation, appropriation, consumption, renewal and transfer. However, Tesco is free to utilize the better framework in order to develop and deliver their value proposition to customers, like framework of value strategy.  Further, the value creating process is integrated if this process is not only a role of marketing. Marketing provide understating regarding the production process in market orientation. The more customer contact and active market research is that the more value the created by the company. Tesco customers want to see the value’s source in their shopping so it is the responsibility in order to identify what they are searching. Marketing has a greater impact on pricing strategy. Today, price the factor that tremendously impact on customers. It is necessary for Tesco to provide prices that more affordable to customers. Moreover, pricing also provide the competitive advantage to the company. Customer can only purchase products on affordable prices. Marketing supports to recognize new channels of distribution in order to make shopping easier for customers on long term basis.

Conclusion

In conclusion, value proposition has no any typical definition so the term is used in widely. It may be defined entire set of experiences that a company brings to customers, comprising value for money. The value propositions are of three types, namely entire benefits, resonating focus and favorable points of differences. In order to get the best value combination there must be connection between the internal perspective which meets the values of shareholders and the external perspective which represented by value of Tesco customers. Today’s customers define value in a different way according to the product features; they match between negative and positive outcomes of product usage. Further, customers seen value by matching the benefits they get with the secrecies they perform, and that comprises effort, price, and risk. Superior customer value can develop a competitive advantage via the unique capability of a Tesco to shape, reshape, configure and reconfigure the assets of company to serve needs of customers. To deliver that, Tesco managers must think like its customers and listen to them attentively. Tesco and wall mart must choose between offering generic more differentiated or low cost products for specific segments of market. Further, they must provide reliable value in the entire geographical networks to support sustain the value. Finally, value proposition can improve the effectiveness and efficiency of the internal processes of Tesco, resulting in more satisfied customers and shareholders.

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