Segmentation and TESCO Case:
Segmentation is essentially the identification of subsets of buyers within a market who share similar needs and who demonstrate similar buyer behavior Using segmentation analysis helped Tesco PLC, Britain’s largest retailer stores to decide on their future marketing strategy and to appraise their competitive strengths Tesco realized the requirements for effective segmentation and that it must be Measurable, accessible, Differentiable, Substantial and Actionable To measure the size, purchasing power and characteristics of each segment Tesco used Club card program, giving cardholders discounts in exchange for their name, address and other personal information and optional questions about the size of their household, the ages of their children and dietary preferences they used this data to gain customer feedback which allowed Tesco to do further study on consumer segmentation on their purchasing behavior resulting from their lifestyle this make The Differentiability is very essential for an effective segmentation so TESCO offered different Benefits to the same Club card program is depending on demo & psychographic profile of each segment For the segmentation To be Sustainable TESCO target was homogeneous and large so it was always profitable enough to serve By analyzing the data that club card generates Tesco was able to group the customers into segments according to their similar needs and benefits those are examples of grouping the customers keyed to their buying profile in Tesco’s database TESCO concentrated on reaching the segment by all possible means as the Accessibility of segment is very essential in segmentation, and every program used was attractive and served the segment to make the segmentation actionable and here are examples of segmentation used by TESCO: -Using demographic data mixed by behavioral segmentation Tesco identified the segment of customers who buy diapers for the first time, and the analysis showed that new fathers tend to buy more beer because they are home with the baby and can’t go to the pub, they make segment positioning according to the needs and characteristics and make a mix strategy including product and promotion by sending coupons by mail for baby wipes, toys and beer -When some of Tesco customers were tempted by Asda they recognized that the attractiveness criteria of their competitor is Asda’s law prices, they set precise market objective and singled out shoppers who buy the cheapest available item they identified 300 items that these price-sensitive shoppers bought regularly. One was Tesco Value Brand Margarine this segmentation is based on buying behavior. They make product price positioning strategy and lowered the price of the margarine, along with other products with similar profiles.
As a result, shoppers didn’t defect to ASDA -Using Behaviorist segmentation based on customer’s usage rate Tesco grouped higher-spending customers, the analysis showed that those customers weren’t buying wine, cheese and fruit from TESCO as a result Tesco developed “Tesco Finest” line that includes duck pate and cashmere sweaters, they also send to them discount coupons every three months on particular products -Analyzing the data they were able to divide the market into groups on bases of “Value added benefit” by segment they developed different marketing programs for different segments (rifle) to attract both affluent and bargain shoppers; their several private labels, ranging from the “Tesco Finest” to “Tesco Value” brand, which offers baked beans and the like. Tesco increased her customer’s buying readiness by introducing new products to them as an example a customer switched from powdered laundry detergent to liquid capsules after receiving a one- pound-off coupon in the mail from. -They analyzed data on 15 million Tesco shopping baskets every week to use a loyalty-card program. Each product is scored on 50 dimensions such as price and the size of the package. The computer looks for customers whose shopping baskets have similar combinations of scores. And identified each segment and classifies shoppers in six segments this segmentation is based on actual customer behavior toward products and Usage rate. The “Finer Foods” segment, for example, is made up of affluent, time-strapped shoppers who buy upscale products. “Traditional” shoppers are homemakers with time to buy ingredients and cook a meal. They used mix strategy including product and promotion by sending coupons and send coupon package to customers includes three coupons for products they regularly buy and three for goods that they might like, or that Tesco wants them to try so segmentation helped them in determining their advertising and selling strategy. Because they succeeded in there positioning strategy Tesco percent of coupons redeeming (15% to 20%) exceeded the percent of all coupons ever get redeemed (1% to 2%) The package also includes vouchers through which Club card members can redeem their accumulated points. Due to the effectiveness of their strategy 95% of these vouchers are redeemed. Tesco use Psychographic segmentation to better understand customers When a customer mention using environment- friendly cleaning products and organic meat, their mail included coupons for new vegetables, cooking sauces, and nuts or seeds -Using behavioral segmentation Tesco grouped customers who buy Andrex toilet paper infused with aloe Vera, they identified this segment and determine the customer attitude towards product from their analysis they found they were also big buyers of skin-care this information was very useful to the product maker to determine their advertising and selling strategy, they sent a direct mail to 500,000 customers, offering them free beauty treatments if they could show that they bought the toile paper twice -Using Geographic segmentation mixed with demographic data Tesco realized that shoppers at a small store in the town of Slough weren’t buying full meals and that people in the town have South Asian or Arab roots, so the segmentation is based on buying behavior, region, religion and nationality this affect their decision making and strategy they started the World Foods line offering more than 800 foreign products, up from 150 in the previous store. It has a large halal butcher shop, the latest movies from India, newspapers in Arabic, Urdu, Punjabi and Bengali, and a jewelry counter with bangles in yellow 22-karat gold popular in India, Using demographic data mixed with usage rate to evaluate the success of world food line they found that more than a quarter of the World Foods customers were coming from largely white neighborhoods.
They decided to open 300 stores of world food line in immigrants’ areas as well as 25 stores in mostly white parts of the country Failing to analyze the segment you are dealing with can lead to great losses. When Wal-Mart the main competitors to Tesco decided to open its stores oversees its Japanese unit suffered big losses as the Japanese related low price to low quality and in South Korea its 16 outlets were sold as they misread consumer preferences while TESCO Korean stores made great success. Tesco PLC used the segmentation in a very effective way to appraise its competitive strengths, maintain its market share with its marketing strategy.
