Evaluation on Supermarket Price Wars and the Interaction of Customer Loyalty behaviour: Tesco

by

ACKNOWLEDGEMENT

For this research, I would like to thank my family, friends and specifically my supervisor, for supporting and guiding me throughout my journey of learning. Without their support, it would not have been possible for me to conduct this research.

DECLARATION

I, (Your name), would like to declare that all contents included in this thesis/dissertation stand for my individual work without any aid, & this thesis/dissertation has not been submitted for any examination at academic as well as professional level previously. It is also representing my very own views & not essentially which are associated with the university.

Signed __________________ Date _________________

ABSTRACT

This research provides a deep understanding about the current market conditions and trends followed by four market leading supermarkets and superstores in United Kingdom, Tesco, ASDA, Sainsbury's and Morrison's. It explores various pricing strategies that are adopted by marketers and provides an in-depth explanation about the price war strategy. Price war occurs when one company reduces its prices and in reaction to this the competitors cuts down its prices and then the company again reduces it prices. This price war has become the trend, which has helped Tesco in retaining its customers. Furthermore, this research evaluates the price war and its relation with the customer loyalty. It identifies and analyses whether the price is able to effect the customer loyalty or not. This analysis is conducted on the basis of the secondary and primary research. Data collected form various journals and articles and questionnaire survey has helped the researcher in analysing this impact of price wars.

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background of the Study1

Research Aim2

Research Objectives2

Research Question3

Elements of the Research3

CHAPTER 2: LITERATURE REVIEW4

Pricing and Promotional Strategy4

Price Wars4

Price War in the Supermarkets4

Customer Loyalty5

Pricing Methods7

Role of cost in pricing / Cost-based pricing7

Competition -Based Pricing10

Buyers-based Pricing / Customer Value- Based Pricing13

Marketing Approach15

High-Low Pricing and Loss Leaders18

CHAPTER 3: METHODOLOGY21

Research Methodology21

Sampling Technique21

Data Collection Method21

Secondary Data-Literature Search22

Primary Data- Questionnaire Surveys23

Research Strategy for Case Study23

Limitations24

Analytical Technique24

Ethical Considerations24

Validity25

Company Profile: Tesco Plc27

CHAPTER 4: DISCUSSION AND ANALYSIS29

Survey Result29

Discussion35

Pricing Strategies of different Supermarkets35

Tesco versus ASDA, Morrison's and Sainsbury35

Facts behind Price Wars37

Effects on Customer Loyalty of Tesco38

CHAPTER 5: CONCLUSION40

Conclusion40

Recommendations41

REFERENCES42

APPENDIX45

CHAPTER 1: INTRODUCTION

Background of the Study

“Creating value for customers, to earn their lifetime loyalty”

(Sir Terry Leahy, chief executive since the mid 1990s)

In order, for trading businesses to attract and solidify a powerful loyal relationship with customers, one has to offer a life time commitment of flexible; every improving of customers needs and wants. Tesco's mission statement has an underlining aim and objective in terms of generating increasing level of profit. However, there is an obvious focus in providing customer service at the highest level for Tesco.

In highly intense globally competitive industry, organisations try to identify organisational metrics that contribute towards leading the long term success. The concept of marketing has stipulated that for achieving a sustainable success, businesses and organisations need to increase customer loyalty by enhancing customer satisfaction (Solberg, 2007, 30). For this, organisations are highly focusing on identifying the needs and wants ...