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Brand Watch

Competitor-Oriented: Danger for Brands

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More than 20 years ago, I went to university. A marketing man from the start, I picked the oldest and biggest Marketing department in the country, at Lancaster University. It was in one of my first classes, Retail Marketing, that I learned about Tesco.

It sounds surprising now, but in 1989 Tesco was a case study in marketing mismanagement. I learned how it had committed the huge error of 'competitor orientation'. For most of the 80s it had been copying Sainsbury's tactics, and this, according to my lecturer, was why it was a second-class operation.

In 1993, I went back to Lancaster to do my PhD in Marketing. For the first time, I had to teach students. Once again, I turned to Tesco; but things were changing. A marketer, Terry Leahy, had been appointed to the board. I taught my students how rare it was to have a board-level marketer and then talked about why Leahy demonstrated the big advantages of a seat for the discipline at the top table. He had outlined a new direction for Tesco: it would start to build its service and merchandising around consumers. It was early days, but Tesco was an interesting example of attempted consumer orientation.

I secured my first faculty position, as an assistant professor at the University of Minnesota, in 1997 – the same year Leahy became chief executive of Tesco. For the first time I had to teach MBA students, so I picked the subject of Tesco. How the British supermarket was breaking the rules of the category by listening to consumers. How it had introduced a successful low-priced private label, even though marketing experts warned it was a bad idea, and had instituted a policy to ensure that if more than one person were waiting at the checkout, staff would open more immediately. We talked about what great consumer orientation means, and used Tesco to illustrate the point.

In 1999, I came home to London Business School to teach brand management. Tesco was the key case study during my class on private labels and its new Finest range, which was priced higher than manufacturer brands, was a big talking-point in class. The term 'good, better, best' was becoming associated with Tesco's three tiers of private label and by now it was the clear market leader.

By 2005 I was teaching a class in brand management at Melbourne Business School. Aussie supermarkets had lagged well behind in private labels, so the MBA students were particularly interested in how Tesco had achieved 50% of its sales from store brands. We reviewed how it had done it and looked at its exemplary focus on consumers as being the key success factor.

Now to MIT in Boston, where I am to teach brand management this term. Tesco will be a big part of my class, but the tenor has changed. We will explore the potential downfall of a giant, looking at its 'good, better, best' offer, then its 550 'Discount Brands', aimed at battling Aldi. I will put up a quote from Tesco's corporate and legal affairs director, Lucy Neville-Rolfe: 'If you take Tesco Value and the Discount range together, we have an Aldi within Tesco.'

Apart from demonstrating why corporate affairs people should leave marketing strategy to marketers, her comment also perfectly illustrates Tesco's problem. It is so worried about Aldi, it has forgotten the single most important lesson of branding: to thine own self be true. You can't be more Aldi than Aldi. In a tragic 20-year twist, Tesco has become competitor-oriented again, and the success it has become accustomed to will suffer as a result.

In my next post: why Tesco's Fresh & Easy venture is also struggling.

Courtesy of Marketing Magazine

Sponsored By: The Brand Positioning Workshop

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