Meeting Customer Needs Tesco Case Study

Meeting Customer Needs Tesco Case Study

1. Introduction - Meeting Customer Needs Tesco Case Study

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Consumers are the most important factors of any business, which determines the revenue, growth and profitability of the particular business. The report aims to discuss the importance of consumer satisfaction in business operations. The report is going to discuss the process of meeting the needs of consumers in “Tesco” and “Marks and Spencers”. Both organisations are operating their business in the retail industry in the UK. The study is going to discuss the importance of Consumer Satisfaction and related issues. It will also compare the strategies of Tesco and M&S. However the report also consists of recommendations by identifying issues and challenges.

2. Importance of Needs of consumer

Initiation or understanding of consumers’ needs is a crucial key for the successful growth of the business. Understanding consumers’ needs are not only effective to create a stronghold on consumers but also making a competitive advantage. However, understanding is not sufficient for gaining a competitive edge in business; there is a need to meet the needs of the consumer (Hsu, 2018). Innovative and creative designs of products, which are able to meet the needs of the consumers, attract more new consumers. Customer retention has a direct relationship with marketing strategies. Consumers are the factors that illustrate the demand for products and consecutively revenue and income of the products.

Tesco is one of the largest retail sectors in the UK, which has established its business on a large scale (Tescoplc.com, 2021). Hence, consumer retention is becoming one of the major concerns of the sector. The study is going to discuss the issues in consumer retention and challenges in meeting the demand of the consumers. M&S is also one of the largest food and clothing retail sectors in the UK (Marksandspencer.com, 2021). The organisations need to meet the demand of the consumers to sustain the business growth. The emergence of the Covid-19 pandemic has highlighted the importance of understanding and meeting the demands of consumers. TESCO has an adopted a strategies known as “Clubcard Plus” strategy for scale up its business at a large scale. 

Tesco has a stronghold on its consumer base as a result the growth of the sector has been increased in the last periods. As figure 2.1 represents, the sales of Tesco have increased since 2020, due to good consumer retention strategies.

3. Theoretical perspective 

Disconfirmation paradigm model for operation

The report has considered “disconfirmation paradigm theory” for the topic of the report. The theory states that the satisfaction level of the consumers is based on the consumer's expectations and product performance (Serrano et al. 2018). That is, consumers compare products and their features with their expectations. Hence, if the features are able to meet the expectations of the consumer will increase the satisfaction level. Hence, the meeting of needs or demands of the consumer increases the satisfaction level. Increasing satisfaction level also enhances brand loyalty as well as enlarges the brand image. These two factors, directly and indirectly, influence the sales growth rate and enrich profitability. 

The theory also highlighted that there is a need for analysis of consumers’ behaviour. Consumer preference and taste are also effective to analyse its behaviours. It also facilitates the understanding of the needs of consumers. Understanding the needs of consumers is effective to meet the expectations of consumers. Moreover, consumer satisfaction level also determines consumer loyalty. An organisation with more consumer loyalty increases competitive advantages. In the competitive environment in business, consumer loyalty becomes one of the major concerns for sustaining in the market. Both Tesco and M&S can apply this theory to increase the effectiveness of the “Consumer retention policy” and business operations.

Model of Marketing Mix

The four PS of marketing mix is a model that is used by companies to develop effective marketing strategies. This model of marketing mix consists of four factors which a business must consider to be successful in their marketing approach which has been briefly explained below

Product

In order to make sure that the business of a company gets successful, the first necessity of marketing is that the product should have an existing demand in the concerned market or compel the customers to have a new product by creating a demand for it. The marketers should give due consideration to the product life cycle before the development of the concerned product or service so that it reaches out to its desired set of customers and generates expected revenue out of it. It is primarily the product that determines the profits a company will make (Al-Suraihi et al. 2020). It is the first stage of marketing mix which helps in the development of further strategies with respect to pricing of product, its placement in the market to position itself to right customers through appropriate segmentation and targeting strategy and the adoption of necessary strategies for its promotion among the desired customers in the market to generate maximum volume of sales. 

Price

The next stage of this marketing model is the determination of price of a product. The pricing of the product should be such that it is neither too overpriced that no one is willing to buy the product or service and the sales are not enough to have expected profits, nor undervalued that the product even fails to meet its involved production and distribution costs. The pricing in this respect should be such that it attracts enough customers with desired margins of profit. 

Place

Even the greatest of products can fail if the market or region they are targeting does not have sufficient demand. In order to generate sales, it is necessary for the product to have significant demand in the concerned market. Businesses thus needs to be aware of the place at which they are selling their product and choose regions that have high demand for the developed product among the concerned population

Promotion

Once the desired product has been developed with appropriate pricing and place for its sales, it is also necessary to promote it among the target population. If the prospective customers do not even know about the product then there is no possibility to generate sales out of it. This makes it necessary for companies to give importance to promotion for marketing their products.

4. Issues in services and operation 

1. Lack of understanding

Lack of understanding of the demand of the consumer is the factor behind the inability to meet consumers' needs. For example, fashionable clothing is one of the trending and most demanded products. The majority of the consumers are willing to stay fashionable. If a business organisation is avoiding the fact it will impact the growth of the business and it will also lose its consumers and market share. M&S has faced a loss and declining growth rate in sales as it has not focused on the demand of consumers, as a result, the revenue has declined and it went negative (Bbc.com, 2020). There was another factor, which were responsible for decline growth rate, the emergence of the Covid-19. It can be also argued that Tesco has faced less volatility as it was able to fulfil the needs of the consumers. Brand loyalty favoured Tesco to avoid losses.

2. Avoiding Consumer review

Avoiding consumers’ reviews also becomes an issue in consumer satisfaction. Avoiding consumer reviews increases consumer dissatisfaction which enhances the negative growth of sales. M&S has also suffered from the issues as it continuously avoided the reviews of the consumers that impacted the sales of M&S (Bbc.com, 2020). However, Tesco has enjoyed its profits by focusing on improvement according to the consumer reviews. 

3. Emergence of Covid-19

The outbreak of Coronavirus has impacted the growth of all business sectors. The emergence of the Covid-19 pandemic restricted face-to-face interaction as a result the consumer's habit and preference has also been charged over the period. It is being difficult for the business sector to track consumer preference. Hence, it becomes a challenge for the sector to understand the needs of consumers. Most of the consumers are performing online shopping rather than “High Street shopping”. Hence, business operation in digital platforms becomes one of the major concerns of the business sectors in the retail industry. If the business sectors have avoided digital business operation and face huge losses for example Marks and Spencer’s did not operate digital business as a result it faces losses as other businesses operate a business in digital platforms also reduces the market share of it (Bbc.com, 2021). 

Lean Supply chain

Lean Supply chain can be used by this organisation to reduce unnecessary processes from their overall supply-chain process, which will help to reduce expense of different resources and time. Regarding this approach it can be understood that it will help to reduce different resources, such as fuel cost, number of vehicle, and employees related to overall logistic operation (Núñez-Merino et al. 2020). This implication will help them to allocate these extra resources in other processes, which will help to improve the overall supply-chain process.

5. Strategies to mitigate issue 

Tesco and M&S are focusing on mitigating issues and increasing profitability in business and increasing competitive advantages. This section will discuss strategies adopted by these business sectors to mitigate issues and increase competitiveness. 

Tesco Club-card subscription

Tesco club card subscription is a subscription based service to the consumers. “Club-card subscription” provides its customers a range of varieties in shopping at Tesco. Consumers need to pay only £7.99 for getting subscribed for a month. It provides discounts up to £400 every year (Ft.com, 2019). It is one of the successful strategies of Tesco, which is effective to increase sales and revenue growth. Consumers are also being attracted by this offer as the gate number of a variety of discounts in shopping; therefore, the number of consumers increasing due to the subscription. Moreover, the retail sector provides discounts on various products rather than a particular product, which attracts the consumer towards shopping at Tesco outlays. Tesco provides a 10% discount on products after getting a “Clubcard plus subscription” (Tesco.com, 2021).

M&S and Ocado partnership

“Marks and Spencer’s” has also made a partnership with OCADO to introduce technology in food production and food delivery (Ocado.com, 2022). Ocado is efficient in artificial intelligence and automated business process management. The partnership aims to introduce an automated warehouse that would be efficient to manage marks and Spencer's food processing outlays. It has also facilitated the food delivery system which is efficient to increase productivity and large scale operations. It has also provided an edge over its competitors as it is efficient to manage food production and delivery with automatic machines. It has increased the growth of sales in the retail industry, particularly, in the food. The sector has grown by more than 10% in 2021 (Bbc.com, 2021). Introduction of automation would also reduce cost of production. 

Tesco and “Marks and Spencer’s” both have taken strategies to recover losses and increase market share. However, the “club-card subscription” concept is not a new concept to Tesco. It was an old strategy, which was taken by Tesco earlier that was effective to increase its sales in the long run. M&S has made a partnership after facing losses in business. It signifies that Tesco has a stable business growth as it has focused on consumer retention more than M&S. 

6. Recommendations 

On analysing issues and challenges, the report has presented some strategies which would be effective in understanding the needs of consumers and meeting them.

1. Understand Trends 

Understanding trends is one of the effective ways to identify the needs of a consumer. For instance, a fashion retailer needs to identify fashion products in trend and develop its own product according to their needs. Moreover, it will facilitate the sector to understand the demand trend of the market. Demographic, geographic and other factors also need to be considered as this factor affects demand for products. M&S has previously ignored trends of fashion that impacted the sales growth rate in 2020 (Bbc.com, 2020). Hence, following trends is one of the crucial factors for product development. 

2. Develop a common platform 

The Covid-19 pandemic has highlighted the importance of the emergence of online platforms for the business operations such as sales and marketing. It has also highlighted that the change in consumers’ purchasing patterns, which is not tilted towards online shopping as an online platform effectively represents a variety of products and their details. Consumers prefer to see more products for purchasing as it increases the satisfaction level. M&S and Tesco need to develop online business operations for increasing sales of their products.

3. Reduce the cost of production 

Competition in the UK market is also higher as compared to other markets. Hence, there is a need to reduce the cost of production as the cost of production increases the prices of products. Reducing production costs would be effective to reduce prices, which will help to attract new consumers towards products. M&S and Tesco need to reduce the cost of production and operations to increase profitability and number of consumers. However, M&S has already taken a strategy to reduce the cost of production by adopting automation (Ocado.com, 2022).

4. Gather Feedback 

Feedback of services is also provided with the opportunity to make improvements and identify faulty products or services. There is a need to collect feedback from the consumers to understand consumer satisfaction levels. It would further help the organisation to improve products. Moreover, it would also help manufacturers to know which features are preferred by consumers. Avoiding feedback may lead to a decrease in competitive advantages and market share as well. 

5. Initiate Improving according to reviews

Samsung reviews are one of the important features, which help to identify weaknesses and strengths of a product. It also helps an organisation to understand potential opportunities and scopes of improvement. M&S previously did not follow and respond to the consumer reviews as a result the business faces a loss in revenue (Bbc.com, 2020). Hence, there is a need to prioritise consumer reviews for developing products and improving services. It would provide an edge to the organisation to gain competitive advantages.

6. Implementation of Lean management

Implementations of lean management will this organisation to reduce overall additional expenses efficiently and allocate these additional resources to different processes.

7. Implementation of Data technology

Implementation of data-related technology to track warehouse management activity activities will allow them to reduce additional expenses and help their supply-chain processes in a flow.

 7. Conclusion 

It could be concluded that consumer satisfaction is a result of meeting consumer expectations. Customer satisfaction determines sales of products as well as revenue. A consumer is purchasing a product when it meets consumers’ expectations. The study has reflected strategies of Tesco and M&S and analysed the issues in strategies and provided recommendations. The recommendations are aiming to fulfil the gaps. Collecting feedback, understanding trends and initiating amendments as per review of consumers helps consumers to build consumer loyalty. It increases brand image as well as competitive advantages. Tesco has initiated a “Clubcard plus” subscription which is efficiently increasing the shells of Tesco as the subscription offers its consumers a 10% discount at a £7.99 monthly subscription price, whereas, M&S is providing automated food production and delivery services through a partnership with Ocado. It can be stated that consumer satisfaction is one of the essential factors that determines market share, profit, revenue and others. 

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