How Dave Lewis has changed Tesco one year on

His first year was about stability, his second should be about rekindling brand love.

It is now a year since Dave Lewis took over as boss of Tesco. In that time he has brought some stability back to the UK’s largest supermarket chain but his second year will need to be about setting a real strategy for the future and shouting louder about the changes to boost love for the brand.

Lewis joined a supermarket in turmoil. Its previous boss Philip Clarke had been fired unceremoniously just as he was preparing for a party to celebrate his 40 years at Tesco.

However, worse was still to come. Within weeks of starting, Lewis and Tesco were embroiled in an accounting scandal and then reported a £6.4bn loss, one of the worst in UK corporate history. With that background Lewis’s first year in charge has been about getting the basics right rather than setting out a new strategy.

As Kantar Retail analyst Bryan Roberts puts it: “This first year has been about mending the business, not launching a new sophisticated strategy to win back shoppers but getting the basics right and getting rid of loss making areas.”

The first year

On the basics, Tesco has hired more shop floor staff to serve customers, cut prices to bring them more in line with the wider market and reduced its range, meaning less duplication and more space for brands and products that consumers are actually buying.

The hope is that more people will use Tesco for their full shop rather than doing smaller shops at various different stores depending on the products they want to buy.

As Lewis said at a press event in April: “People have been going to more than one shop because nobody has excelled across the board when it comes to the in-store experience. We want to change that.”

On the loss makers, Lewis has got rid of a number of non-core assets such as its Blinkbox music streaming and video service and is in the middle of selling off its Korean business and Clubcard, although both look set to generate less than Tesco might initially have hoped.

Then there is the marketing. So far there have been only subtle changes since the supermarket hired BBH as its main agency.

There has been a lot more talk of product and food, for example with its Flame Academy, and less about price.

That is true across the supermarket sector, however.

Nielsen’s UK head of retailer and business insight Mike Watkins says: “In a renewed attempt to gain market share, retailers are starting to differentiate themselves by highlighting their range and service credentials – not just lower prices and value for money, which are fairly homogenous offerings in times of price deflation.”

In store, Tesco has introduced an element of its personality while also highlighting reasons to shop with it, rather than with the discounters – talking up its full range of herbs and spices, for example.

The problem, says Grocery Insight analyst Steve Dresser, is that Tesco does not have much to shout about yet.

“There has been some nice tone of voice usage and brighter advertising. Reasons to shop at Tesco would be a good, logical next step. So far, so good – but there is a lot more work to do,” he says.

Is there any love left for the brand?

tesco-store-2014

Despite the corporate troubles, in-store improvements are slowly giving a boost to consumer perceptions of Tesco. According to YouGov BrandIndex, Tesco’s brand metrics are up across the board, albeit from some of the lowest levels ever during the accounting scandal.

Its BrandIndex rating – which combines a range of metrics such as quality, impression and value – is up by a statistically significant 1.8 points over the past year to 11.4. Buzz (a measure of the positive and negative things said about a brand), quality, satisfaction and recommendation also saw statistically significant rises.

However Tesco is by no means the most loved supermarket brand. Its best scores are on quality and value, where it comes out seventh in a list of 26 supermarket brands.

It scores worst in terms of Buzz, a metric where it sits bottom of the table with a score of -7.2.

Despite its brand troubles, Tesco still remains the biggest supermarket group by some stretch. The latest Kantar Worldpanel figures put Tesco’s market share on 28.3%, its lowest level in a decade.

Yet that is some way above its nearest rivals Asda and Sainsbury’s. It also remains top on YouGov’s BrandIndex scores for purchase intent and consideration with neither metric having seen a dip over the past 12 months.

A marketing boost

That Tesco is yet to shout about its brand through marketing is no surprise. It has a new marketing boss in Robin Terell who was only given the job in December. Its group brand director Michelle McEttrick only joined in April.

This is a new marketing team still bedding in. They need to sort out internal issues before talking confidently externally.

However marketing is one area where Tesco should be concerned. YouGov’s BrandIndex says Tesco’s ad awareness has dropped by a statistically significant figure over the past 12 months to give it a score of 25.

That puts it in third position behind Aldi and Lidl. Both the discounters have spent millions talking up their proposition to consumers while Tesco has cut its spend.

The latest Nielsen figures show Lidl was the biggest spender on TV and press advertising for the sixth consecutive month for the four weeks ending 15 August at £3.7m, up 261%. That has led to a 9.5% increase in shoppers – equal to 850,000 extra people.

Tesco by comparison spent £3.5m in the same period, down 15% year on year. It needs a new message, and to shout about it, if it wants to distract consumers from the discounters’ message.

Restoring affection

Lewis brought BBH on board to come up with a new marketing strategy for the retailer. The first major fruits of that are not expected until Halloween at the earliest.

However it is Christmas when all eyes will be on BBH and Tesco. The general consensus among the marketing industry is that Tesco hasn’t had a decent marketing campaign in some time, not through the fault of its previous agency W+K but due to a lack of clarity over what the brand wanted to say.

BBH has the chance to take Tesco in a new direction. It has been mooted that the agency will get rid of Tesco’s strapline ‘Every little helps’.

“Whatever strapline they use has to ring true throughout the business – just like ‘Every Little Helps’ did when it was incepted.”

Steve Dresser, analyst, Grocery Insight

If it does that, it will need to come up with something that once again explains what the business is about in order to get beyond the basics, fix brand trust and affection, and lure shoppers back.

Tesco needs that now more than ever. The decision it faces is what identity it wants to claim for its own – should it lead on value or quality, be fun or serious?

“There has to be a clear choice now. Is Tesco a price leader, a quality leader or back to the 1980s and all things to all people?” Kantar’s Roberts asks.

“There is space for return to Tesco as an innovator; it has not been that for some time. They are too reactive. You can’t beat discounters on price but you can beat them on depth of range, service and in-store environment.”

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