Tesco waited too long to revitalise the core

Tesco's troubles show what happens to a leader brand who waits too long to revitalise their core business.

UK same-store sales dropped 2.3% over Xmas and have fallen for four straight quarters, according to Bloomberg. The new CEO, Philip Clarke said "We need to do a bigger and better job in the UK" in the Sunday Times (subscription needed).

There's lots to learn from Tesco's troubles, and what they need to do to fix them.

Waiting too long to change

It was painful to read Tesco's "blueprint for change" in The Sunday Times article, as many of the issues described were highlighted back in 2008, on a brand vision project for Tesco. But if the writing was on the wall almost four years ago, why weren't changes made sooner?

At the time, back in 2008, the brand was still growing, and so the company saw little need to change. Perhaps it wasn't in enough pain. However, its when things are going well that leader brands need to revitalise, to avoid the need for more drastic changes further down the line when business starts to decline.

Revitalisation not revolution

Yes, Tesco needs to change. But the challenge is one of revitalisation, not revolution. After all, Tesco is still the clear brand leader in the UK, with a 30.1% share. This is only 1% pt lower than it was in 2008, and still almost twice the size of the next biggest brand. The brand has a huge advantage in terms of "physical availability": more stores in more places than anyone else. And the brand is appreciated by the people who shop there for being efficient and offering a good balance of quality, price and range. There are lots of supermarket snobs who turn their noses up at Tesco. But many millions more who like what the brand does.

Refresh the core

Tesco's revitalisation will start with the stores themselves. Over the last 10 years the brand has stretched into categories from banking to diets. Now its time to re-focus some innovation on the core supermarket business.

As the Sunday Times article says, "Over time the machine created sterile and soulless stores. Recently they have started to put off shoppers. Clarke is already looking at improving the 'shopping experience'. This will involve a huge store refurbishment programme". Importantly, Tesco shouldn't try to become too fancy or upmarket. The brand should remain focused on making shopping easy and efficient, but add back a bit of warmth.

Back in 2008 there were also signs that customer service levels were dropping versus the competition. The drive for efficiency was starting to reduce effectiveness, as staff numbers were cut. The plan now is to employ more staff to serve customers.

Revitalisation also means innovation on the core. As one analyst quoted in the article says, “Tesco used to lead the market in innovation. It’s not famous for anything any more.” Tesco should look to bring in a stream of innovation on the core shopping experience, as it did when it re-launched back in the late 1990s' with the "Every Little Helps" brand idea. At the time this included "One in front" (opening new tills if queues form) and The Clubcard. Hopefully we will see Tesco back leading the way in service innovation.

More distinctive marketing

For many years Tesco has lacked a consistent and distinctive communication campaign. Apart from the endline, Every Little Helps, the brand has not really built any real "memory structure" in the form of distinctive brand properties. In contrast, Sainsbury's used chef Jamie Oliver in 100 commercials over 10 years. And Morrisons has built its "Market Street" in-store concept into a brand property, grouping in store fresh food sellers like bakers, fishmongers and cake makers.

Tesco shoppers still recall the last really memorable campaign the brand did, starring "Dotty" and her long suffering daughter, played respectively by Prunella Scales and Jane Horrocks. This ran for 10 years until it was pulled in 2005. One of the strengths of this campaign was the way it communicated service features, or "sausage", with emotional appeal, or "sizzle". It also did a great job of making the store staff look good, as they could handle the difficult Dotty. My personal favourite was this one featuring the ability to take back products you're not satisfied with. You can click below on the blog to watch it.

In conclusion, the Tesco story shows that leader brands need to constantly upgrade their core offer to retain their leading position, delivering a stream of innovation on the core business, and communicating this with a consistent and distinctive campaign that creates "memory structure". And whilst Tesco is having a wobble, I'm confident they will get back to this recipe for success in the next couple of years.

For more on the success of the Dotty campaign from 1995-2000, see this fantastic case study video on Thinkbox.com.

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