Tesco must learn the difference between value and price

Tesco's profits fell 23.5% in the six months to August
Tesco's profits fell 23.5% in the six months to August

The savvy shopper is voting with their feet (and their wallets) as Tesco loses out, writes retail expert Kate Jones, director of Mash Strategy and a former Mars marketer.

Today the UK’s biggest supermarket chain, Tesco, posted a whopping 23.5% drop in profits during the first half of this year. Looking closely at the UK and the like-for-like sales (stripping out the impact of new stores) there was a drop of 0.5%.

Not a pretty picture particularly when you look at arch rival Sainsbury during this period – reporting a 2% rise in their like-for-like sales. In fact, according to Sainsbury’s chief executive, Justin King, Sainsbury is the only major supermarket increasing its market share over this period.

So what has happened?

There are obvious commercial and economic factors at play here. We’re in recessionary climate and people just don’t have the money to spend like they used to - hard for Tesco as they have a much greater mix of non-food items than rivals, which is where consumers are cutting back the most.

Another key factor is that Tesco has been most affected by the growth of so-called "hard" discounters such as Aldi and Lidl. Interesting when you think that the position Tesco has taken for many years is that of the consumer champion of low-cost value.

The Every Little Helps campaign has repeatedly told us not to worry: Tesco is looking after our interests and doing everything they can to deliver the best value for money to us so we don’t have to worry. It has also delivered a message that value is about low cost and low price.

Value doesn’t just mean "lowest-price", it means experience, it means provenance, it means a whole host of other things.

But shoppers are much more savvy now, a combination of choice, readily available information and need. Value doesn’t just mean "lowest-price", it means experience, it means provenance, it means a whole host of other things.

When you boil it down to just price, what you are trading on is purely something functional that can be offered by anyone and everyone – so what sets you apart? What do you really stand for that you are delivering to your customers?

A quick reference to Sainsbury and we see a very different, much more emotional message that is chiming with consumers and winning sales. Sainsbury’s are leading with "Live Well for Less".

The copy runs like this: "Living for less isn't just about great food. It also means making the most of the good things in life, sharing fun moments or maybe cooking memorable meals together. All without paying the earth for it."

See the difference? The value message is still there – you are not going to ripped off - but the focus is much more on what is important in life, the real things. After all, no-one want to be reminded that they are poor. Remember the savvy shopper is in control.

A strength for Sainsbury’s has been this ability to make emotional connections and build strong brands. Tu, the clothing range, is growing at twice the rate of food; and their own-brand food offers, such as Taste the Difference are in turn growing at twice the rate of branded goods.

Small things, too, make a difference emotionally, things like welfare and provenance, are much more resonant in the light of the horsemeat scandals of the first half of this year. All fresh pork sold in Sainsbury’s is British and for the fifth year in a row they are the number-one retailer for fresh fruit and veg, selling more than 200m British apples and pears. This matters to people.

So what should Tesco do?

Start by examining value and thinking beyond price to the things that are important in consumers’ lives today. What does the very core of Tesco stand for?

Make that emotional connection, tell your story, invite consumers in and make them feel valued and loved. They will love you back, again.

Discussion

Before commenting please read our rules for commenting on articles.

If you see a comment you find offensive, you can flag it as inappropriate. In the top right-hand corner of an individual comment, you will see 'flag as inappropriate'. Clicking this prompts us to review the comment. For further information see our rules for commenting on articles.

comments powered by Disqus
Brand Republic Jobs

subscribe now

Latest

Waitrose boosts content strategy with 'Weekend Kitchen with Waitrose' C4 tie-up
Hottest virals: Cute puppies star in Pedigree ad, plus Idris Elba and Fruyo
Amnesty International burns candles to illuminate new hope
Toyota achieves the impossible by calming angry Roman drivers
Tom of Finland's 'homoerotic' drawings made into stamps
YouTube reveals user habits to appeal to 'older' marketers
Ex-M&S marketing chief Steven Sharp consulting at WPP
Wolff Olins reveals new CEO after Apple poaches Karl Heiselman
Glasgow offers £30,000 prize to best digital idea for 2014 Commonwealth Games
Google's revenues surge but shares drop as it grapples with transition to mobile
Facebook beats Twitter to most 'marketing friendly' social media site crown, says DMA
Fableists believe children like Finn should be outdoors enjoying life
Homebase, Baileys and Camelot join the line-up at Media360
MasterCard renews Rugby World Cup sponsorship to push cashless message
Lynx unleashes £9m 'Peace invasion' campaign
Social Brands 100 Youth: Pizza Hut most social youth brand in UK
Cheryl Cole is wild and arresting in new L'Oreal work
Morrisons told not to show alcohol ads during YouTube nursery rhymes
O2 head of brand Shadi Halliwell departs after 23 years at company in restructure
Tesco hit by further sales decline as it turns to digital Clubcard and social network
Branding guru Wally Olins dies aged 83
Duracell short film captures epic Transatlantic voyage
Ash runs Tinder experiment to show smokers are less desirable to opposite sex
British Airways teams up with Gerry Cottle Jnr for summer of rooftop film screenings
Arklu says 'girls can be superheroes too' with doll design competition
Coke enters squash market with Oasis Mighty Drops
Virgin Galactic signs up Land Rover as space flight sponsor
Motorola marketer Andrew Morley departs as Google gears up for sale to Lenovo
US Airways apologises after tweeting obscene image at a customer
Mumsnet admits users' emails and passwords accessed via Heartbleed bug