Price competition, backed by improved efficiency, is the main feature of the food retailing industry today. The UK food retailers fight for survival in markets faced with over-capacity. Within a rapidly changing environment, this kind of development ensures that long-term survivors are those firms who are more competitive and are better able to satisfy consumer needs and adapt to the new competitive environment. In 2004, consolidation re-shape the UK retailing industry and Hypermarket retailers (like Tesco) want to make sure they don’t miss out on this growing area of the UK market (Moreau, 2004. Desjardins, 2005).
The first marketing aim is to get the right goods to the right consumers, trying hard for customers. Another marketing aim is to build and promote a healthy living brand. Knowing what individual customers appreciate and what they want to avoid can add up to one of the differences that create a competitive advantage. Tesco customer groups are defined on the basis of their specific segments and buying potential whether they be country groups or individual consumer groups of potential customers with homogeneous attributes who are likely to exhibit similar responses to a company’s marketing mix. Tesco customers can be divided into five broad categories:
The first group of consumers is characterized by strong purchasing power. They need a high-quality product and ready to pay for them. This is a high-income group.
The second group of customers share universal wants, needs, desires, (for name brands, novelty, entertainment, trendy, and image-oriented products). This segment is attractive both in terms of its size and its multi-billion dollar purchasing power. This segment’s needs and wants are spread over various product categories: durable and nondurables goods.
The third group is characterized by share few family activities. they want build-to-order solutions. They do not need a specific brand or new product, but high service and product at a low price. This is a fast-growing segment.
Customers driven by product promotions are not usual visitors of Tesco being attracted by low price and discount for new products. They are deluged with passive information.
The fifth group includes people whose tastes are based on desired standards. Quality is the main purchasing criteria for this group. Their choices are made on the basis of price and product features. It is important to note that there are some customers who belong to two different groups. For instance, they can represent lifestyle (‘Basket typology’) group, but be loyal to specific brands. D) The main competitors of Tesco are Sainsbury and Asda. Minor competitors include Safeway, Somerfield, Morrisons. The relative ease with which Tesco emerges in a large market, suggests that the threat to existing is not essential because the company has a strong brand image. It replaced its main competitor, Sainsbury, and became number one in the UK.At the end of the 1990s, Sainsbury failed with price differentiation policy.