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Has market leader Tesco lost its way in the UK?

It’s always dangerous (indeed almost unheard of) to write off the mighty Tesco, the UK’s biggest retailer, but in the UK anyway the company does not seem to be able to pull the marketing levers with the same precision it used to.

It has just reported a like for like sales drop of 0.9 per cent in the UK despite ploughing a heavily-trumpeted £500m into its ‘Price Drop’ price cuts. Tesco says this means it has beaten the market (it claims other stores’ sales are dropping by more) but it surely wasn’t the outcome new CEO Philip Clarke hoped for when he launched the scheme back in the autumn.

The UK is a hard place to do business at the moment of course with customers cutting back on even food purchases for the first time since they started adding up the figures. Competition in the supermarket sector has increased too with new regimes at Asda and Morrisons tweaking Tesco’s tail and even grocer-to-the-middle classes Waitrose expanding out of its southern heartland on the back of its Essentials range, which delivers sales if not necessarily more profit. Justin King’s Sainsbury’s has arguably been the cleverest of the lot, resuming its old position of quality and value.

Tesco’s marketing problem is that its offer just doesn’t seem exciting any more. Its spin on ‘Price Drop’ is that the price cuts had a ‘deflationary’ effect for grateful consumers, reducing the cost of living for them. But people don’t really buy this, Tesco is a business after all and a pretty ruthless one at that.

The company urgently needs some marketing magic. Its hugely successful re-positioning to offer quality as well as value in the 1980s under Ian MacLaurin (thereby stealing long-term market leader Sainsbury’s clothes and then the top spot) was driven by some brilliant advertising from Lowe Howard-Spink. That was made possible by Lowe boss Frank Lowe (pictured) and his matchless ability to persuade MacLaurin and his marketing director Terry Leahy (later to become CEO) that not being bold was in fact the riskiest course of action.

Tesco is still with basically the same team at Lowe breakaway The Red Brick Road but Frank, alas, has retired. Maybe Phil Clarke should give him a ring (he’s almost certainly in Gstaad).

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Asda deflation Frank Lowe Ian MacLaurin Justin King Lowe Howard-Spink Morrisons Philip Clarke price cuts price drop Sainsburys sales drop Terry Leahy Tesco the red brick road Waitrose

About Stephen Foster

Stephen is a former editor of Marketing Week and London Evening Standard advertising columnist. He wrote City Republic for Brand Republic and is a partner in communications consultancy The Editorial Partnership.
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