Analysis of the Influence of Price Differentiation on Customer Preference of Grocery Goods: A Study of Tesco And Asda, UK

Abstract

The research has attempted to stress on the impact of price differentiation on the UK’s grocery segment considering the case of Tesco and ASDA. The five chapters presented in the study have promoted various research aspects to address the problem statement. The research aim, objectives and purpose have been set that have been addressed in the rest of the chapters. Theories regarding price differentiation and its impact on customers’ preferences have been discussed in literature review section. The third chapter highlights research methods such as positivism philosophy, deductive approach and descriptive research design that have been considered during the research study. Adding to that, justifications for chosen research methods such as quantitative and qualitative data analysis along with the sampling mechanism have been thoroughly discussed. The fourth chapter depicts a detailed quantitative analysis and qualitative analysis considering the responses of several internal (managers) and external (customers) stakeholders of Tesco and ASDA.On the basis of the responses analysed, a summary of findings have been showcased in the final chapter. Recommendations including social media campaigning, cross selling and aggressive pricing policy have been provided that might help grocery stores in the UK to minimise the price differentiation and attract more customers.

 

 

Acknowledgement

While conducting the research study I had managed to gain a sufficient amount of knowledge regarding the impact of price differentiation on a customer’s perception. The conduction of a comparative analysis between the pricing policies of Tesco and ASDA has enabled me to not only assess the current situation of the UK’s grocery segment but also the perception of the customers towards the grocery stores. However, the completion of the research study might not be feasible with only self effort. I would like to thank my supervisor,  in this context who has helped me immensely in this context. I would also like to thank my colleagues along with my friends who were always there for me whenever needed. Finally, I would like to convey my regards to my parents who kept faith in me.

Thanking you all,

Yours sincerely,

 

Chapter 1

Introduction

1.0 Introduction:

Changing customer preferences could be an influential factor behind the change in market trend. Considering the words of Mitchell (2009), the demand supply scenario within a specific market sector alters based on the changing perception of the customers. While there is an ongoing argument regarding the factors influencing customers’ preferences, majority of the scholars are agreed with the fact that price differentiation is a substantial element in motivating customers to opt for specific products. Customers nowadays prefer quality products in competitive pricing. However, Alessandra (2007) stated that ensuring quality in stiff pricing policy might not be feasible and therefore, business organisations need to create a right balance between the product quality and product price. The scenario is quite applicable in the UK’s grocery segment as the increasing bargaining power of the customers is changing the market trend continuously. The study would try investigating the fact whether price differentiation is influential behind the customers’ perception on various grocery goods.

The grocery market across the UK has turned out to be highly volatile particularly with the emergence of several new players in the market. However, revenue generation process has been on constant rise. The net worth of the UK’s grocery market is £174.5 billion as far as the reports of 2014 are concerned which is supposed to be 2.8% improvement compared to the previous year (Berger and Nasr, 2008). However, reports also promote the fact that the pricing policy has also been altered drastically while the price differences between similar products have reduced. Blattberg and Deighton (2006) consider increased competency as a major reason behind the reduction of price differences in the UK’s grocery segment. The findings from the research would highlight whether price differences still influence customers’ preferences in the sector, comparing the case of Tesco and ASDA.

Research rationale:

The role of price differentiation is supposed to be pivotal in a highly competitive business sector as it can influence customers’ decision making process. Considering the current scenario in the UK’s grocery segment, customers have become more aware of the pricing strategy of the brands and the process is influencing the customers purchase behaviour as well (Govers and Go, 2006). Customers nowadays prefer brands that provide products in lesser price compared to the rivals. Therefore, the current research is investigating the extent to which pricing strategies could impact on the customers’ purchase behaviour. Findings from the current research study could help analysing the relationship between price differentiation and customers’ preference when it comes to grocery goods in the UK’s grocery market. The study considers a comparative analysis between the strategic initiatives of Tesco and ASDA, two of the leading brands in the UK’s grocery market. Thus, findings from the current study could help analysing the buying behaviour of the UK based customers and customers’ preferences when it comes to grocery products.

Research aim:

The current research study aims to determine the impact of price differentiation on the products provided by the leading grocery firms across the UK. In this context, the product lines along with the pricing strategies of Tesco and ASDA would be compared to analyse the attitude and buying behaviour of the customers in the region. Thus, the research would try to evaluate whether there is increasing price differentiation between the brands and whether such scenario is affecting the customers’ behaviour in the UK’s grocery segment. 

Research objectives:

Following objectives are going to be addressed in due course of the research study:

  • To understand how price differentiation influences customers’ preferences of grocery goods.
  • To compare the pricing policies of Tesco and ASDA for similar products and whether the strategies influence the buying behaviour of the customers.
  • To recommend how Tesco and ASDA could improve pricing strategies to positively influence customers’ preferences.

Research questions:

Following research questions are going to be resolved in lieu with the research objectives:

  • How can price differentiation influence customers’ preference towards grocery products?
  • How does Tesco’s pricing policy differ with ASDA for similar products?
  • Are the strategies influencing customers’ buying decision?
  • How can Tesco, ASDA and other grocery giants revise respective pricing policies so that the customers could be influenced positively towards grocery products?

 


 

Chapter 2

Literature review

2.0 Introduction:

The chapter attempts to evaluate a range of theories and past literature in relation with price differentiation and customers’ preferences. Thus, past literature regarding price differentiation, the reasons associating it and the consequence has been discussed at the outset. Accordingly, the factors influencing customers’ preferences have been determined. In due course of the chapter, attempts have been made to establish linkage between price differentiation and customers’ preferences. The propositions of various authors and scholars have been critically reviewed and the several examples have been considered to link theories and practice. The chapter aims to create a theoretical platform for the research project that could help comparing primary findings during later stages.

2.1 Price differentiation in business sectors:

Price differentiation in business sector has turned out to be a common scenario within the globalisation process. Considering the words of Tengand (2009), increasing competency in business sectors has been a major reason behind the increasing price differentiation issue. Business organisations have been utilising the efficacy of Porter’s generic model and majority of the organisations are emphasising on the product differentiation and cost leadership. However, Dowling and Mark (2007) argued that considering both product differentiation and competitive policy might not be feasible for business organisations. Despite the ongoing arguments, majority of the authors are agreed with the fact that price differentiation scenario can be influenced in the presence of a range of external business environment factors. Price differentiation also imposes significant impact on the market as well. As mentioned by Beaumont and Sparks (2009), increasing gap between the product price of two brands could determine the level of competency among the brands.  

2.1.1 Factors influencing price differentiation:

Considering several past literature, the price differentiation scenario is not influenced by a single factor but a combination of external business factors. Blois (2008) acknowledged that different international regions are likely to be different in terms of market nature and demand and therefore, alterations in pricing policy is a likely. Blattberg and Deighton (2006) proposed three general factors such as natural factors, market conditions and structural factors that could influence price differentiation in a specific market.

Natural factors:

Among the natural factors behind price differentiation there can be local preferences, transport cost and customer search cost. In the words of Cronin and Taylor (2012), natural factors might not directly influence the pricing policy of a brand but organisations need to prioritise such factors before setting appropriate price for the products. The preferences of the local customers and the local culture are supposed to be pivotal in influencing the pricing policy for certain products. For instance, the demand for butter is more in the North European countries than in the South European countries. As a result, the supermarkets in England would likely to stock more butters compared to the supermarkets in Spain or Italy (Perreault and Russ, 2006). The significance of local culture or local customers’ preferences is regarded as ‘Gerschenkron Effect’.

The local culture might not always be the major reason behind price differentiation as there can be price differences between two brands operating in same region. in this context, alterations in pricing for same products can influence the level of competency in the industry. As mentioned by Gale and Branch (2007), two brand quoting different prices for similar products could be differently perceived with the brand quoting lower price would likely to be more popular among the customers. 

Structural factors:

There can be several structural factors influencing pricing policies in a specific business sector and such factors could be legally implicated. Philip and Hazlett (2007) identified structural factors as VAT, income differences, excise taxes and cost of selling supermarket goods. While fixed elements such as VAT or excise taxes are standardised across the Europe. However, variables such as cost of selling in the supermarkets or income differences might influence price differentiation in the long run. These factors together might influence the pricing policy in a particular business sector. However, Govers and Go (2006) argued that there could be very little influence of structural factors as there the implication of a standardised and legalised provision. For instance, there could be differences in pricing policy of leading supermarket brands. However, the maximum retail price (MRP) has been fixed by the Government and brands need to comply with the policy. Brands managing to keep the pricing lower to the MRP are likely to attain competitive edge over the brands with relatively high product price.

Market conditions:

Alterations in market conditions might be a crucial reason behind the pricing policy of the retail brands. Due to the change of market conditions, wholesalers, retailers and producers are influenced to deviate from the standard pricing policy (Chiquanet al.2010). For instance, increasing industry competition is likely to influence brands to opt for a competitive pricing policy. On the other hand, Bettmanet al. (2008) acknowledged that shifting of bargaining power of either seller or customer could also influence the product pricing. Increasing demand of a certain product among the target customers could influence sellers to put a higher price tag knowing the fact that customers would still purchase the products. On the contrary, brands would prefer lower price tag for less demanded products as for clearing out the existing stocks (Philip and Hazlett, 2007). 

2.1.2 Impact of price differentiation:

When there is price differentiation for similar products, organisational business could be either positively or negatively influenced. While less price for a product compared to market standard could introduce competitive edge over the rivals, high price compared to market standard could affect the customer retention scenario. Govers and Go (2006) attributed that price differentiation could ultimately affect the customer loyalty scenario in the long run. Adding to that, Gale and Branch (2007) cited that price differentiation for similar products could influence industry rivalry situation and could impact on the organisational brand image. 

Customer loyalty:

Customer in a highly competitive market would prefer optimum quality in competitive pricing policy. The scenario is familiar in perfectly competitive markets such as the grocery segment of the UK. As a consequence, brands need to prioritise a competitive pricing policy so that the customer attraction and retention scenario could be influenced. Philip and Hazlett (2007) argued that pricing policy in a competitive business environment could influence the customer loyalty scenario. In contrast Branch (2007) stated that customer loyalty can be maintained not only by providing similar pricing in grocery items, but also a price discounting coupon or reward program to frequent buyers is required to be introduced. Since customers would prefer competitive pricing for similar products in the industry, organisations following a ‘cost leadership’ approach are likely to retain customers while at the same time attracting new potential customers. When it comes to UK’s grocery market, the leading brands prioritise the price differentiation scenario as it could influence the customer loyalty index. The likes of Tesco, Sainsbury, ASDA etc have a tendency to follow similar pricing for a specific grocery product to ensure desired customer loyalty.

Competition:

Pricing policy of two brands could influence the brands’ competitive rivalry. Different price tags for similar products could create confusion among the target customers and the customers would likely to opt for the brand quoting lesser price for the product. Though Govers and Go (2006) contradicted that lower price sell better than relatively higher products in the target markets. According to Pasco and Le Ster-Beaumevieille (2007), the price-quality equation could influence the perception of the target customers and the perceived value could influence the customers to opt for specific brands. The average price of the ‘White Bread’ offered by Tesco is £1.00 while ASDA quotes £1.5 for the similar product. As a consequence, customers are likely to shop from Tesco rather than ASDA. Considering the proposition of Brunneret al. (2008), modern day customers have a tendency to compare and contrast the available products and the most competitive products are generally popular among the customers.

Brand image:

Price differentiation could influence organisational brand image and customers’ perception could be pivotal in this context. The scenario can be evaluated considering two cases. Brands following competitive pricing policy could experience improved customer satisfaction and loyalty. As a consequence, positive word-of-mouth among initiated by the customers could positively influence the organisational brand image (Ghodeswar, 2008). On the contrary, brands following a higher price tag compared to the standard market price could experience dissatisfied customers and the negative word of mouth could significantly affect the brand image (Keller, 2003). On the contrary, Govers and Go (2006) argued that except from the competitive pricing policy, few features like rewarding the loyal customer can produce a better image to minimise the higher pricing effect in the market. Thus, it can be assumed that price differentiation has a direct impact on the organisational brand image.

2.2 Factors influencing customer preferences:

Although customers’ preferences for a specific brand depend on a range of variables, majority of the authors are agreed with the fact that some common factors such as price, quality, service quality, branding and brand reputation influence customers significantly. Tse and Wilton (2008) acknowledged that customers would rely on the self preference during purchasing specific products and therefore, brands need to prioritise on the factors that influence the customers’ preferences. Kimes (2004) in this context, suggests the brands to focus particularly on the pricing policy as customers compare the price of different brands form a similar product prior to actual purchase. In contrast, Pasco and Le Ster-Beaumevieille (2007) had also argued that except from focussing on the pricing strategy, the brands are also provide emphasis on creating positive word of mouth through various social media for creating brand awareness among the prospective customers.

Price is often regarded as a complex factor in influencing customers’ perception. Wood (2009) cited that customers would appreciate a bargain while shopping and often an economic pricing policy is preferred. A recent survey conducted by Office of National Statistics (ONS) highlighted the fact that the store traffic in the UK’s supermarket is dominated by economy segment and therefore, supermarkets have focused on economic pricing policy (McKnightet al.2008). Furthermore, the leading supermarkets nowadays are introducing added benefits along with the products such as particularly in the grocery segment. The approach helps in promoting a competitive pricing policy and the economic pricing helps attracting more customers.

Product quality, service quality, branding and brand reputation are also among the influential factors that influence the customers’ perception. However, Walker (2005) argued that while factors like quality, branding or brand reputation could influence customers, there could be several personal factors that might influence customers’ decision making process. The argument is well justified as customers’ self preference and behavioural attributes could determine the choice of brand. Although there might be little or no difference between quality of similar products, brand reputation or service quality still play crucial role in influencing customers’ purchase decision making process (Zeelenberg and Rik,2004). For instance, customers would like to purchase grocery products from a reputed supermarket such as Tesco or ASDA rather than buying from a relatively less renowned local grocery store.  

2.3 Price differentiation and customer preferences:

Pricing strategy is supposed to play a crucial role in influencing customers’ perception. Liddy (2010) discussed that retail pricing policy and customer loyalty can be aligned as there is supposed to be a proportionate relationship between the two key factors. Traditional pricing strategy can be classified into four categories including Hi-Lo pricing, Every Day Low Pricing (EDLP), Profit Up Front (PUF) and Access pricing (Urde, 2003). No matter what type of pricing policy is followed by brands, it could impose significant impact on the customers’ perception.

Kachelmeieret al. (2011) cited that brands have a tendency to follow specific pricing policy assessing the nature of target customers. For instance, EDLP pricing policy is followed where majority of the customers are money-poor or time-poor type. On the other hand, Hi-Lo pricing policy is appropriate where the target customers belong to niche market (Wellan and Ehrenberg, 2008). However, considering the grocery market, the brands have a tendency to follow the access pricing policy as such an approach is considered as a balanced pricing strategy considering the perception of a wide range of customers. As a consequence, brands manage to experience optimum loyalty.

The access pricing is often regarded as a loyalty based pricing policy as the initiative considers average mass. While it is the regular customers or the occasional shoppers, the access pricing policy is compatible for both and that is the reason majority of the organisations prioritise such technique particularly when the industry competition is high (Morgan and Shelby,2004). However, there could still be perception gap between the brands and the target customers. Two different brands can opt for two different access pricing policy and thus, the customers would get the flexibility to choose from a range of substitute products. In this context, customers would likely to opt for a brand quoting economic pricing for a particular product and thus, the customer loyalty scenario could be influenced. Wellan and Ehrenberg (2008) had contradicted this fact by stating the importance of two vital parameters such as the geographical location and the income level of the customers to create huge impact on customer loyalty scenario.

2.4 Customer loyalty improvement through pricing strategy:

Depending on the nature of market and the perception of the target customers, business organisations could follow different pricing policies. Among the popular pricing policies there could be cost-based pricing, value-based pricing, demand-based pricing and competition-based pricing (Maxwell, 2005). Hollensen (2004) acknowledged that the choice of pricing policy could be critical for brands as it could influence the customer loyalty index. A traditional cost-based pricing policy can be summarised as a sum of product cost and the fixed profit percentage. However, the strategy might not be effective in every scenario as the selling cost might differ from the perceived cost of the customers.

When it comes to value based pricing, organisations not only consider cost of products but also the several other elements such as market demand, preferences, financial resources and expectations (Tse and Wilton, 2008). In this process, the organisational managers are directed to find solutions of various queries of the customers so that optimum value can be provided. In this context, to maintain the level of optimum quality of brand value except from the competitive pricing policy, an effective customer relationship management plays a vital role (Wellan and Ehrenberg, 2008).However the strategy might not be suitable in every aspect. While increased value can motivate customers to purchase, expensive products could negatively motivate the customers during purchasing (Chiquanet al.2010). On the other hand, the value based pricing might not be suitable for a perfectly competitive market as customers would prefer optimum quality in competitive pricing in such scenario pricing strategy focusing on the customers’’ demand has been a popular approach in contemporary business environment. In this context, the selling cost is not dependant on just product cost and profit margin but the characteristics and behaviour of the customers (Chiquanet al.2010). On the other hand, a competition based pricing is followed based on the nature of competency in the concerned industry. Market competition could increase or decrease the price of a particular product and organisations need to follow similar pricing strategy to sustain competency in the industry. When it comes to the grocery segment of the UK, brands generally prioritise a combination of demand based pricing and competition based pricing so that a flexible pricing strategy could be feasible and optimum customer loyalty could be experienced.

2.5 Impact of price differentiation on grocery good preference of customers:

For purchasing grocery food items the general tendency of the customers is to select the brand which offers the best quality goods at cheapest price. In this context, if the price differentiation among the brand exists in small amount, the customers generally do not switch the brand for purchasing the grocery goods (Morgan and Shelby, 2004). In this case, the customers remain loyal to the preferred brand. On the other, in the case where huge price discrimination occurred by keeping the higher quality of goods, the customers then opt for switching the brand for buying of daily grocery goods. On the other hand, Tse and Wilton (2008) argued that in overall retail grocery industry, the customer income and demographics are the major factors which determine whether price differentiation can create at all any impact on the customers buying habit or not. Demographics occasionally produce demand differentiation in various geographic areas. At per this, price discrimination occurs for affecting customer preference. However, level of customer income also affects the purchasing strategy of grocery goods instead of competitive price.

2.6 Conceptual framework:

 

Natural factors
Market conditions
Structural factors
Price differentiation
Alterations in product price
Customer perception

Figure 1: Conceptual framework

(Source: created by author)

2.7 Summary:

Summarising the literature, it can be assumed that price differentiation could create confusion among the target customers that can ultimately impact on the customer loyalty scenario. There can be natural factors, structural factors and market conditions responsible for price differences between brands and such price discrimination could impact on the customer retention scenario. Majority of the customers would prefer optimum quality in competitive pricing policy and therefore, organisations could opt for a demand based pricing or competition based pricing so that an effective pricing strategy could be initiated and customer loyalty index could be improved.   

 

Chapter 3

Research methods

3.0 Introduction:

The research methods considered during the research project are highlighted in the chapter. The chapter depicts the research methodologies along with the core research methods that have been focused to conduct various research operations. Adding to that, proper justifications have been provided to justify the choice of particular research methods. In this context, the propositions of various authors and scholars have been considered to compare and contrast various research methods and accordingly, the appropriate research methods have been chosen. At the outset, the chapter highlights the type of investigation. Accordingly, methods research data selection, data collection process and sampling process have been highlighted. The chapter ends with highlighting ethical considerations, research limitations and timescale.

3.1 Outline of methodologies:

The overall research methodology section could be segregated into two sections. At the outset, methods relating to type of investigation have been identified. In due course of the study, methods relating to data collection, data analysis and sampling process have been discussed. A positivism philosophy has been chosen for conducting the research study. The chosen research approach is deductive and the research design is descriptive. The research study would consider a blend of primary and secondary data. Primary data is classified as quantitative and qualitative. A simple random probability sampling method has been prioritised during quantitative data collection while the sampling mechanism during qualitative data collection is non probability purposive sampling.

3.2 Research onion:

While conducting various research operations, following a research onion framework could be a viable option for the researchers (Bernard, 2011). As cited by Pring (2004), evaluating the layers of a research onion could help conducting a systematic research study. The layers of a research onion points various research operations and the transition from the outer layers to the more inner layers could help maintaining the flow of information throughout the research study (refer to figure 1). The approach is similar during the current research study as the researcher has attempted to evaluate outer layers of a research onion first followed by the evaluation of inner layers. Thus, outer layers such as research philosophy, approach and design has been assessed and more inner layers such as data collection, data analysis etc have been evaluated later.

3.3 Research philosophy:

Research philosophy is supposed to be the outer most layer of a research onion that is needed to be evaluated at the outset. In the words of Axinn and Pearce (2006), determining research philosophy at the outset could help researchers assessing the appropriate nature of the research study. Considering the past literature, research philosophy can broadly be classified into three categories including epistemology, axiology and ontology (Hair and Money, 2011). Epistemology philosophy is regarding the availability of acceptable knowledge within the domain of the research. On the contrary, ontology prioritises the reality aspect that might influence researchers’ assumption concerning various research activities. Axiology, emphasises on a social enquiry procedure that is prioritised to derive conclusion. Epistemology philosophy can further be segregated into three sub categories such as positivism, realism and interpretive philosophy (Cohen et al. 2003). Positivism philosophy focuses on scientific methods to evaluate various research scenarios while realism considers the authenticity of information. On the other hand, interpretive philosophy supports data evaluation process taking into consideration the responses of various human beings.  

3.3.1 Justification for choosing positivism philosophy:

The current research study is aiming to conduct a comparative analysis between the price differentiations between Tesco an ASDA’s pricing policies. In this context, several real life fact and figures have been evaluated to derive conclusion. Thus a scientific approach is followed which is compatible supported by positivism philosophy. As cited by Armstrong and Shimizu (2007), positivism philosophy prioritises a scientific approach to evaluate the problem statement concerning the research study. Adding to that, the current research study has considered quantitative data evaluation to address research objectives and therefore, positivism philosophy is supposed to be appropriate to the research context. Considering the words of Ellis and Levy (2009), positivism philosophy is compatible for quantitative data analysis. Considering such aspects, it is assumed that positivism philosophy is suitable for the current research study.

3.4 Research approach:

Prioritising a specific research approach is considered to be critical as the flow of information during the research study is maintained depending on the research approach. Considering the proposition of McGuire (2006), research approaches can broadly be classified into two categories including inductive approach and deductive approach. Inductive approach generally used in studies that aims to develop new theories on a specific research domain that is less explored. The inductive approach follows a staircase type of approach when it comes to research operation conduction (Gummesson, 2006). On the contrary, majority of the scholars are agreed that a deductive approach is more suitable for studies that consider testing of available theories with practical examples rather than development of new theories. The research approach is deductive for the current research study.

3.4.1 Justification for choosing deductive research approach:

In order to determine the price differences between Tesco and ASDA and its impact on customers’ preferences, the past literatures have been evaluated first to establish a theoretical platform. Accordingly, the researcher has opted for primary data evaluation to test the theories. The overall approach is similar to that of a waterfall model which is supported by deductive approach. Likewise, Lavrakaset al. (2005) acknowledged that deductive approach is ensures the applicability of a waterfall model framework to structure the research operations. On the other hand, the study is attempting to investigate the relationship between price differentiation and customers’ preferences considering a range of practical scenarios. Since there is a considerable number of past literature on the similar domain, the scope for new theory development is less. However, there is scope for theory testing which is followed throughout the research study. As a result, a deductive approach is assumed to be appropriate for the current research study.

3.5 Research design:

In reference to the past literature, research design can be classified into three categories including exploratory, explanatory and descriptive. Considering the words of Amitabh and Gupta (2010), the choice of research design as per the nature of the research study could help addressing the research aim. Exploratory research design can be prioritised if there are minimal data resources within the research context (Aldag and Steams, 2008). An explanatory research design can be suitable for researches if the existing theories might not address the problem (Binsonet al. 2006). A descriptive research design prioritises the strategy of evaluating the problem statement considering a range of research scenarios (Dubois, 2002). In the context of the current research study, a descriptive research design has been followed.

3.5.1 Justification for choosing descriptive research design:

Determining the price differences between Tesco and ASDA’s products and such impact on customers’ buying behaviour would require evaluation of various research aspects. Since descriptive research design allows to assess various scenarios concerning research domain, such initiative is applied during the current research operations. Kish (2009) acknowledged that descriptive research design often influence researchers to find solutions to various questions regarding various research aspects. A similar approach has been focused by the researcher as the researcher has established a number of research objectives and research questions that are supposed to be addressed during the course of the research. Due to the similarity of the research context with the descriptive research design, such initiative has been prioritised.

3.6 Research strategy:

In order to achieve appropriate findings, particular emphasis has been given on the type of investigation during the research operation. After the approval of the research proposal, the researcher has chosen appropriate methodologies to conduct the study. In reference to the proposition of Troldahl and Carter (2004), the choice of research methods could determine the outcome of the research. At the outset, a set of research objectives and research questions have been developed. The theories and past literature available in the research domain have been analysed and the research methods have been chosen. Accordingly, a blend of quantitative and qualitative data has been evaluated to analyse the viewpoints of the customers of Tesco and ASDA. The data evaluation process is coupled with a comparative analysis and the primary and secondary findings have been aligned to derive conclusion. As mentioned by Podsakoff and Dalton (2007), comparing primary and secondary findings could be a viable option for achieving appropriate research findings. Finally, a data triangulation process is followed to test whether the research findings have addressed the research objectives.

3.7 Data type:

The data type concerning the current research study is primary and secondary. A mix of primary and secondary data has been gathered to achieve accurate research findings. Toloie-Eshlaghyet al. (2011)complemented the approach of considering both primary and secondary data evaluation as the possibility of achieving accurate research findings is higher following the approach. Primary data used in the study can be classified into two categories including quantitative and qualitative data. The secondary data used in the research study are theories, past literature and past records of Tesco and ASDA. Quantitative data evaluated reflects the perception of the customers of the two organisations. On the other hand, qualitative data used highlight the viewpoint of the managers of Tesco and ASDA. Johnson and Onwuegbuzie (2006) acknowledged that considering a mixed method approach including quantitative and qualitative data could be an effective option in addressing the problem statement. Therefore, a both data types have been considered for conducting the research study.

3.8 Data collection process:

In order to collect primary and secondary data, the overall data collection process has been conducted in two phases. At the outset, secondary data has been collected and after deriving the research methods, quantitative and qualitative data collection process have been initiated. Larsson (2003) cited that the data collection process is needed to be prioritised as the approach could determine whether effective data being collected. In order to collect secondary data, the researcher has evaluated various journals and books while a range of informative websites has also been considered to collect past records regarding Tesco and ASDA. In this context, the online university archive has been utilised. The online library has been searched to gather e-journals and books regarding price differentiation and how could price determination impact on customers’ preferences.

After collecting secondary data from the online library, an online survey questionnaire mechanism has been followed in order to collect quantitative data from the customers of the chosen brands. Salmon and Nichols (2003) stated that collecting information from a larger population can be a major challenge although survey questionnaire approach can be a solution in this context. The email ids of the customers of the two brands have been collected from the official social media pages of the brands. Accordingly, formal invitation mails had been forwarded to the customers requesting for active participation in the online survey questionnaire process. The customers who replied back positively were sent a questionnaire and instructed to fill up the forms and reply back within one week time period. The responses of the customers provided the much needed quantitative data.

In order to collect qualitative data, some of the managers from the marketing departments were personally interviewed. As stated by Brannen (2009), considering experts onion can be a effective option to evaluate the research scenarios from different perspectives. Initially, fixing appointments with the managers were critical but after a constant effort, some of the managers were found to be agreed for the interview sessions. During interview sessions, the managers’ responses were stored using a traditional voice recorder. Later the voice information helped conducting qualitative data analysis.  

3.9 Sample size:

In order to collect quantitative data, 100 customers have been considered among which, 50 customers would represent Tesco while 50 would represent ASDA’s pricing policies. Thus, the sample size for quantitative data is 100. On the other hand, qualitative data has been collected from 6 managers among whom 3 managers represent Tesco and the remaining 3 represent ASDA. Thus, the sample size for qualitative data is 6.

3.10 Sampling technique:

During collection of quantitative and qualitative data, the sampling procedure has been particularly prioritised. Considering the words of Sale et al. (2002), based on the efficacy of the sampling mechanism, the accuracy of the data analysis operation could be determined. During quantitative data collection process, a simple random probability sampling process has been prioritised. According to Allen (2001), simple random sampling could be effective in case of larger population. Since the sample size for quantitative data is 100 for the current research study, simple random sampling process is supposed to be appropriate. On the other hand, Cameron (2009) acknowledged that simple random sampling ensures an unbiased data analysis process. Since the population is significantly high, attempts have been made to conduct an unbiased data analysis process.

When it comes to sampling mechanism for qualitative data analysis, a non probability purposive sampling process has been prioritised. In the words of Burnam and Koegel (2008), purposive sampling can be applicable if the respondents could provide experts’ opinion on the research context. The managers of Tesco and ASDA are supposed to be experts in the respective domains and therefore, purposive sampling process has been prioritised.

3.11 Data analysis:

In order to ensure the gathering of relevant research outcomes, particular emphasis has been given on the data analysis segment. As cited by Sale et al. (2002), the relevancy and accuracy of the research studies could be determined by the overall data analysis process. Considering the current context, a quantitative data has been analysed first followed by qualitative data evaluation.

Quantitative data analysis:

In order to analyse quantitative data, the responses of the candidates were first converted into numeric data. The process has been done by converting the responses into percentage responses. Accordingly, the numeric responses have been plotted in MS Excel sheet and the data has been represented in tabular and graphical format. Brannen (2009) acknowledged that data represented graphically, can be effectively evaluated and accurate findings can be assessed. Thus, each of the survey questions has been addressed separately and the results have been represented graphically during quantitative data analysis while the results have been interpreted separately to derive conclusion.

Qualitative data analysis:

While conducting qualitative data analysis, the responses of the managers have been gathered in the form of a transcript. Accordingly, the managers’ responses have been evaluated comparing and contrasting with the propositions of various authors and the data triangulation technique has helped validating the findings from qualitative data analysis. Salmon and Nichols (2003) supported the approach by citing that a data triangulation technique is a proven mechanism of obtaining authentic data set. The findings from the qualitative data analysis have been evaluated in the final chapter in deriving conclusion.  

3.12 Ethical considerations:

Considering the nature of the study, the current research is emphasising a social research engaging human participants. As a consequence, several ethical considerations have been focused so that controversies could be avoided. As per Brannen (2009), research ethics are needed to be measured so that a socially acceptable study can be conducted. The questionnaire is free of any controversial elements such as race, ethnicity or religion. No participant has been forced to take participation during the primary research. Adding to that, the researcher has made sure to keep the company related data in privacy. Finally, the candidatures of the respondents along with the respective responses are made confidential so that an ethically approved study can be conducted.

3.13 Research limitation:

The chosen respondents are from the UK region. As a consequence, the research findings can be applicable for the UK‘s grocery segment. However, the findings might not be relevant for other geographic regions. The primary findings are relying significantly on the customers’ responses. However, a considerable number of customers might not be aware of the organisational strategies and that there could be biasness within the reviews of the respondents. Therefore, considering a survey questionnaire approach considering the responses of the organisational employees could have been more effective.

3.14 Timescale: Gantt chart

In order to follow systematic research approach and ensure proper flow of information throughout the research study, a time scale has been formed using a Gantt chart (refer to exhibit 3 in the appendix).

 


 

Chapter 4

Results, analysis and discussion

4.0 Introduction:

The chapter depicts a thorough quantitative and qualitative data analysis in order to compare the pricing policies of Tesco and ASDA and whether such policies influence customers’ perception towards purchase decision. At the outset, quantitative data analysis has been conducted taking into consideration the responses of the customers of the two brands. In this context, the filled up questionnaires have been evaluated to assess the perception of the customers. In the due course of the chapter, a qualitative data analysis has been conducted. In this context, the responses of several managers of the two brands have been evaluated that had been obtained through face to face interview sessions.

4.1 Quantitative data analysis:

Question 1: Is product pricing a major factor for you to choose your preferred grocery brand?

Table 1: Whether product pricing a reason behind choice of brand

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Strongly agree 100 12 24% 9 18%
Agree 100 26 52% 29 58%
Neutral 100 5 10% 3 6%
Disagree 100 4 8% 7 14%
Strongly disagree 100 3 6% 2 4%

 

Figure 3: Whether product pricing a reason behind choice of brand

Findings:

The findings from the above figure promote the fact that approximately 76% of both Tesco’s and ASDA’s customers have chosen the respective brands due to effective pricing policies. In this context, approximately 16% of the customers failed to provide proper responses. Finally, 14% of Tesco’s customers and 18% of overall ASDA’s customers provided negative responses.    

Analysis:

Since majority of the customers of both the brands provided positive responses, it is assumed that pricing policy of Tesco and ASDA is a major factor behind the customers’ choice of brands. Similar fact has been discussed by Keller (2003) as the author acknowledged that competitive pricing policy could influence the brand switching index (refer to section 2.1.2 in chapter 2). It seems both the brands have managed to deliver product as per customers’ perceived pricing scenario. As a consequence, the brands have been successful in luring more customers. However, there are a considerable number of customers who provided negative responses. Perhaps price is not the only factor behind the choice of brands for these customers. Similarly, Cronin and Taylor (2012) cited that there could be a range of natural factors that could motivate customers to switch brands (refer to section 2.1.1 in chapter 2). However, price is still supposed to be a significant factor in the UK’s grocery market as it could influence the switching cost. 

Question 2: Does the price drop in grocery products motivate you to purchase more?

Table 2: More purchase after price drop

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Strongly agree 100 14 28% 19 38%
Agree 100 17 34% 21 42%
Neutral 100 7 14% 4 8%
Disagree 100 7 14% 3 6%
Strongly disagree 100 5 10% 3 6%

 

Figure 4: More purchase after price drop

Findings:

In reference to the findings from the above figure, approximately 62% of the Tesco’s customers and approximately 80% of the overall ASDA’s customers are likely to purchase more if price drop policy is followed. On the contrary, 24% of the Tesco’s customers disagreed with the fact and the disagreeing customers of ASDA accounts 12% of the overall respondents surveyed.

Analysis:

A price drop for the daily grocery products could influence customers to purchase more as majority of the customers in the UK’s grocery market responded accordingly. A significant 62% of Tesco’s customers and 80% of ASDA’s customers would welcome price drop so that the customers could purchase more products from the respective grocery stores. Govers and Go (2006) supported the fact by citing that customers would always prefer a competitive pricing policy and alter the purchase decision accordingly (refer to section 2.1.2 in chapter 2). However, several customers (24% of Tesco’s customers and 12% of ASDA’s customers) have responded negatively while others (14% of Tesco’s customers and 8% of ASDA’s customers) were not sure in this context. However, considering the majority responses, price drop in grocery items is certainly going to influence the customers of both brands to purchase more.   

Question 3: Are you likely to purchase from other grocery stores if similar products being offered at less price?

Table 3: Likeliness of brand switching

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Strongly agree 100 9 18% 13 26%
Agree 100 24 48% 22 44%
Neutral 100 6 12% 8 16%
Disagree 100 9 18% 7 14%
Strongly disagree 100 2 4% 0 0%

 

Figure 5: Likeliness of brand switching

Findings:

Majority of the customers of both the brands are likely to switch brands if grocery goods can be purchased at a lesser price elsewhere. On the contrary, overall 22% Tesco’s customers and 14% of ASDA’s customers disagreed with the fact. 16% of overall ASDA’s customers and 12% of Tesco’s customers are found to be neutral in this context.

Analysis:

Customers are likely to switch brands if similar grocery products are being provided by other grocery stores at lesser price. This could be a major concern for both Tesco and ASDA since poor customer loyalty could be a possibility in such context. As mentioned by Beaumont and Sparks (2009), increasing price differentiation between two specific brands in the similar industry could influence the customer retention scenario (refer to section 2.1 in chapter 2). From the evaluation, it is clear that price differentiation could influence customers’ preference and attitude which could ultimately impact on the purchase decision making process. 

Question 4: Tick from the following the major factor influencing your purchase decision while shopping for grocery products.

Table 4: Factors influencing purchase decision

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Quality 100 12 24% 15 30%
Price 100 23 46% 31 62%
Convenience 100 9 18% 2 4%
Value added services 100 6 12% 2 4%

 

Figure 6: Factors influencing purchase decision

Findings:

Considering the findings from the above figure, quality, price, convenience and value added services are several factors that Tesco’s and ASDA’s customers consider before purchasing grocery goods. In this context, price is supposed to be the most influential factor as majority of the respondents (approximately 46% of Tesco’s customers and 62% of ASDA’s customers) voted price as a determining factor.  

Analysis:

Product price remains to be a significant factor in influencing customers’ perception in the UK’s grocery segment. Both Tesco’s and ASDA’s customers consider buying decision regarding a particular grocery product judging the pricing of the product. Similarly, Philip and Hazlett (2007) mentioned that customers prioritise product pricing prior to actual purchase and therefore brands need to focus on a competitive pricing policy to maintain competency (refer to section 2.1.2 in chapter 2). Since majority of the customers of both Tesco and ASDA acknowledged pricing as a major reason for chopping, it can be assumed that the brands have managed to address the price perception of the customers. 

Question 5: How much money do you need to pay for a pack of 4 apples?

Table 5: Price alterations for a pack of 4 apples

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
£1.00-£1.50 100 0 0% 0 0%
£1-50-£2.00 100 0 0% 50 100%
£2.00-£2.50 100 50 100% 0 0%
More than £2.50 100 0 0% 0 0%

 

Figure 7: Price alterations for a pack of 4 apples

Findings:

Considering the findings, there is price differentiation at Tesco and ASDA’s grocery stores for similar products such as a pack of 4 apples. Findings from the above figure suggest that Tesco’s customers need to pay an amount ranging from £2.00-£2.50 for a pack of 4 apples. However, ASDA’s customers pay something between £1-50-£2.00 for similar product. 

Analysis:

Referring to the above findings, ASDA has managed to maintain a more aggressive pricing strategy compared to Tesco for a specific product (a pack of 4 apples). Therefore, there could be a strong possibility of Tesco’s existing customers opting for buying products from ASDA’s grocery store. The fact can be supported by the proposition of Tengand (2009) as author cited that price differentiation could trigger more intense competency in the industry (refer to section 2.1 in chapter 2). Although there is increasing argument on the fact as a considerable number of authors argue that price might not be the ultimate factor triggering industry competition. However, it can be concluded that ASDA’s customers are getting more value for money while shopping for the particular product.  

Question 6: How much money do you need to pay for 800G of white bread?

Table 6: Price alterations for 800G of white bread

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
£0.00-£0.50 100 0 0% 0 0%
£0.50-£1.00 100 50 100% 0 0%
£1.00-£1.50 100 0 0% 50 100%
More than £1.50 100 0 0% 0 0%

 

Figure 8: Price alterations for 800G of white bread

Findings:

Tesco and ASDA quote different price for 800G of white bread. Tesco quotes £0.50-£1.00 for 800G of white bread while ASDA quotes £1.00-£1.50 for the similar product. In this context, Tesco is quoting less prices than ASDA when it comes to white bread. 

Analysis:

The price differentiation between the two brands (Tesco and ASDA) can be assessed evaluating the above findings. Tesco is quoting less price compared to ASDA for 800G of white bread. For a similar product the two brands is quoting different price. As a consequence, customers are likely to purchase from Tesco as the brand is providing the product for a lesser price. Beaumont and Sparks (2009) stated that increasing price gap between two brands could influence the competency level of the two concerned brands (refer to section 2.1 in chapter 2). In the current context, Tesco is supposed to be more competent than ASDA.

Question 7: How much money do you need to pay for 1.75L of Coca-Cola?

Table 7: Price alterations for 1.75L of Coca-Cola

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
£1.00-£1.50 100 0 0 0 0
£1.50-£2.00 100 0 0 50 100%
£2.00-£2.50 100 0 0 0 0
£2.50-£3.00 100 50 100% 0 0

 

Figure 9: Price alterations for 1.75L of Coca-Cola

Findings:

The above findings reflect the fact that the pricing strategy of the two brands is different for soft drinks such as Coca-Cola. While, Tesco offers 1.75L of Coca-Cola for £2.50-£3.00, ASDA offers similar for £1.50-£2.00. Thus, ASDA is following more aggressive pricing in this context.

Analysis:

The findings reflect different pricing policy of Tesco and ASDA for soft drink like Coca-Cola. ASDA is asking almost half the price for 1.75L of Coca-Cola compared to Tesco. Such an increasing price gap for a certain product could influence the brands’ competency in the industry. While ASDA could enhance the competency level for selling soft drink products, Tesco’s competency level could be affected. As cited by Liddy (2010), pricing strategy is directly proportionate with customer loyalty (refer to section 2.3 in chapter 2). In the current context, Tesco’s loyalty index could be negatively influenced as the brand is quoting more price than its competitor for a certain product.   

Question 8: How much money do you need to pay for 380G of Frozen Rice?

Table 8: Price alterations for 380G of Frozen Rice

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
£0.50-1.00 100 0 0% 0 0%
£1.00-1.50 100 0 0% 50 100%
£1.50-2.00 100 50 100% 0 0%
Above 2.00 100 0 0% 0 0%

 

Figure 10: Price alterations for 380G of Frozen Rice

Findings:

Taking into consideration the findings from the above figure, a price differentiation can be seen between the brands regarding a particular frozen food product. Tesco offers 380G of Frozen Rice for £1.50-2.00 while ASDA offers similar product in a price range between £1.00-1.50.

Analysis:

For frozen foods, Tesco and ASDA quote different price. For instance, considering the findings from the above findings, ASDA offers 380G of Frozen Rice at a more competitive pricing compared to Tesco. Therefore, ASDA is likely to experience more customer satisfaction and loyalty compared to Tesco. Adding to that, ASDA is likely to experience greater sales volume for frozen food products compared to Tesco. Kimes (2004) discussed that customers would compare pricing of substitute brands prior to actual purchase of desired products (refer to section 2.2 in chapter 2). As a consequence, ASDA could possibly be a more preferred store among the customers for purchasing frozen food products.  

Question 9: Are you satisfied with the current pricing policy of your preferred grocery store?

Table 9: Satisfaction regarding current pricing policy

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Strongly agree 100 11 22% 12 24%
Agree 100 17 34% 23 46%
Neutral 100 5 10% 2 4%
Disagree 100 12 24% 7 14%
Strongly disagree 100 5 10% 6 12%

 

Figure 11: Satisfaction regarding current pricing policy

Findings:

In reference to the above figure, majority (56% of Tesco’s customers and 70% of ASDA’s customers approximately) of the customers of both the brands (Tesco and ASDA) are found to be satisfied with the current pricing policy. However, a considerable number of customers are current dissatisfied with the current pricing policies (34% of Tesco’s customers and 26% of ASDA’s customers approximately) of the brand.

Analysis:

Since majority of the customers of both Tesco and ASDA are found to be satisfied with the brands’ pricing policies, it can be assumed that both the brands have managed to address customers’ perception. However, there are a considerable number of customers who are still not convinced with the existing pricing policies of the brands. Tesco particularly, needs to evaluate the current policy more effectively as the number of negative responses is more compared to that of ASDA’s. Considering the words of Philip and Hazlett (2007), organisational pricing policy can impose significant impact on the customer loyalty scenario (refer to section 2.1.2 in chapter 2). Therefore, both Tesco and ASDA need to evaluate the pricing policy to further improve the customer satisfaction index. 

Question 10: Are you influenced to purchase more grocery goods if your preferred grocery store introduces discounts?

Table 10: Increased purchase decision if discounts are provided

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Strongly agree 100 16 32% 9 18%
Agree 100 21 42% 31 62%
Neutral 100 7 14% 2 4%
Disagree 100 6 12% 6 12%
Strongly disagree 100 0 0% 2 4%

 

Figure 12: Increased purchase decision if discounts are provided

Findings:

The above findings highlight that overall 74% of Tesco’s employees surveyed, are likely to purchase more while 80% ASDA’s customers would increase purchase after application of the discount provision. On the contrary, overall 12% of the employees of both the brands would not alter the purchase decision even if the provision of discounts being applied. Remaining 14% of the employees of Tesco and 4% employees of ASDA were found to be neutral in this context.

Analysis:

Considering frequent discounts for the customers purchasing grocery goods, could be an effective option for Tesco and ASDA as it could positively influence customers’ purchase decision. However, Pasco and Le Ster-Beaumevieille (2007) acknowledged that the price-quality equation could be emphasised so that optimum customer satisfaction could be experienced (refer to section 2.1.2 in chapter 2). Discounts could promote more value for money provision and lure customers to purchase products. However, both the brands are required to emphasise on the price-quality equation so that a balance between quality and price could be ensured.  

Question 11: Do you think customers’ feedback evaluation could be an effective option for the brand to improve loyalty?

Table 11: Improved loyalty after customers’ feedback evaluation

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Strongly agree 100 8 16% 5 10%
Agree 100 23 46% 32 64%
Neutral 100 6 12% 4 8%
Disagree 100 8 16% 5 10%
Strongly disagree 100 5 10% 4 8%

 

Figure 13: Improved loyalty after customers’ feedback evaluation

Findings:

Approximately 62% of the Tesco’s customers and 74% of the ASDA’s customers responded that prioritising a customers’ feedback evaluation process could be beneficial for the brands to improve loyalty. On the contrary, approximately 26% of Tesco’s customers and 18% of ASDA’s customers provided negative responses while the remaining respondents (12% of Tesco’s customers and 8% of ASDA’s customers) were neutral in this context.

Analysis:

In order to improve pricing strategy and enhance customer loyalty, considering customers’ feedbacks could be an effective option. It can be assumed that customers of both the brands perceive the brands have not fully addressed the perception of the customers and the customers believe that focusing customers’ feedback on a regular basis, could be helpful in this context. As cited by Chiquanet al. (2010), a pricing strategy emphasising on the customers’ perception could be helpful in generating greater revenue (refer to section 2.4 in chapter 2). Such an initiative could help the brands getting the insights of the customers and following pricing policies accordingly.

Question 12: Among the following, what possible services could the brand consider to make you a loyal customer?

Table 12: Strategies to improve customer loyalty

Options Total responses Employees of Tesco Employees of ASDA
Frequency Percentage (%) Frequency Percentage (%)
Price drop 100 13 26% 16 32%
Discounts 100 11 22% 7 14%
Loyalty discounts 100 15 30% 19 38%
Cross sales 100 11 22% 8 16%

 

Figure 14: Strategies to improve customer loyalty

Findings:

Assessing the findings from the above figure, both Tesco and ASDA could emphasise on strategies such as price drop, discounts, loyalty discounts and cross sales in order to improve the pricing policy and enhance customer loyalty. In this context, majority voting has been accounted for loyalty discounts. Therefore, Tesco and ASDA could particularly prioritise the loyalty discount provision to improve customer loyalty. 

Analysis:

Tesco and ASDA could prioritise strategic initiatives like price drop, discounts, loyalty discounts and cross sales as the customers of the brands recommended accordingly. According to Tse and Wilton (2008), customer loyalty index could be influenced by factors such as market demand, preferences and customers’ expectations (refer to section 2.4 in chapter 2). Therefore, both Tesco and ASDA are recommended to emphasise on the above highlighted customers’ insights so that the existing loyalty index could be influenced.

4.2 Qualitative data analysis:

Question 1: Are you convinced with the fact that price differentiation could influence customers’ perception towards grocery goods? If so, then why?

All three managers of Tesco and ASDA are convinced with the fact that price differentiation could influence customers’ perception towards grocery goods. One of the managers cited that “customers in the UK’s grocery segment are price focused and therefore increasing price differentiation could affect loyalty in the long run”.  Summarising the perception of Tesco’s managers, the brand has experienced increased sales volume following the newly adopted ‘Price Check’ policy. According to the managers, Tesco’s customers are now assured of best price for the grocery products. Therefore, the managers agree that the transparent pricing has helped the brand luring more customers. Similarly, ASDA’s managers also experienced greater sales with competitive pricing policy. One of the ASDA’s managers has revealed the fact that “ASDA has managed to deliver products at cheaper price compared to Tesco for the last two quarters and the strategy has helped increasing store traffic”. All the managers acknowledged that ASDA’s store traffic is on the rise with competitive pricing policy. 

Question 2: What factors does the brand consider in order to determine pricing policy and influence customers’ buying behaviour?

Considering the responses of the managers of Tesco, the brand considers customers’ expectation, market trend and competitors pricing policies to develop the pricing policy. One of the managers acknowledged that “changing market trend has been top priority in the firm’s agenda” while another one suggested that “Tesco has been continuously monitoring rival’s pricing policies”. In the similar context, the summarised opinion of ASDA’s managers promotes the fact that the brand prioritise changing trend in the industry while monitoring various online blogs prior to the development of pricing policy. As per one manager, “social media channels are some of the most crucial resources that have helped tracking the changing perception of the customers”. Assessing the responses of the managers, both the brands prioritise industry trend and customers’ insights while considering pricing policies. 

Question 3: Would you like to emphasise on some strategic initiatives regarding pricing policy that your brand can consider to improve customer loyalty?

Summarising the responses of Tesco’s managers, conducting interactive social media campaigns could help analysing the customers’ perception while emphasising on more aggressive pricing could be more effective in improving customer loyalty. A manager cited that “virtual marketing campaigning remains a top priority that could help getting customers’ insights and develop pricing policies accordingly”. ASDA’s managers emphasised on strategic initiatives such as loyalty discounts for the customers, discounts on bulk purchase and quoting less price compared to the competitors so that the customer loyalty index could be improved. A manager cited that “Although ASDA has introduced several lucrative discount policies, focusing on more value added services could help influencing customers purchase behaviour”. Summarising the thoughts of the managers, aggressive pricing strategy, virtual marketing initiatives and loyalty discounts could improve the existing pricing policy and attract more customers.

4.3 Summary:

The quantitative and qualitative findings highlighted in the chapter promote the fact that price differentiation could directly influence the customers’ perception towards grocery products. Quantitative findings pointed that ASDA and Tesco are quoting different price for similar products. Customers of both the brands are found to be fairly satisfied with the pricing policy. However, there is scope for further enhancement of the brands’ pricing policies. Considering the quantitative and qualitative findings, the brands could focus on customers’ feedback evaluation regarding pricing policy while emphasising on greater value proposition. Since customers expect greater value for money services, emphasising on an aggressive pricing could be considered as a feasible option for both the brands to achieve greater competency in the UK’s grocery segment. 

 

 

Chapter 5

Conclusion and recommendations

5.0 Summary of findings:

Summarising the findings from the entire research study, it can be stated that price differentiation can significantly influence customers’ preference in the UK’s grocery segment. Customers in the UK’s grocery segment are likely to buy grocery products from a store that is quoting lesser price for a similar product in other supermarkets. Comparing the pricing strategies of Tesco and ASDA, both the brands have competitive edge over the other when it comes to product pricing. For instance, 800G of white bread can be bought at Tesco supermarket as a lesser price compared to ASDA. On the other hand, a pack of four apples is cheaper in ASDA compared to that in Tesco. However, overall, the pricing strategy of ASDA is found to be more appreciated by the customers since the brand is focusing on more aggressive pricing strategy.  

5.1 Linking research objectives and research findings:

Objective 1: To evaluate the impact of price differentiation on customers’ preferences and the attitude towards grocery products.

In order to address the research objective, findings from question 1, question 2, question 3 and question from section 4.1 and question 1 from section 4.2 can be evaluated (refer to chapter 4). Considering the findings from question 1 (refer to section 4.1), pricing policy is a major reason behind the choice of brand in the UK’s grocery segment. Findings from question 2 (refer to section 4.2 in chapter 4) suggest that customers are likely to purchase more if the grocery stores consider a price drop policy. In reference to the findings from question 3 (refer to section 4.2 in chapter 4), customers would consider brand switching if substitute products become available at a cheaper price in other grocery stores. Findings from question 4 (refer to section 4.2 in chapter 4) promote the fact that factors like quality, price, convenience and value added services are considered by the customers while shopping for grocery products. The authorities of leading grocery stores in the UK are also convinced with the fact that price differentiation could impact directly on the customers’ perception in the UK’s grocery segment (refer to question in section 4.2, chapter 4).  

Objective 2: To compare the pricing policies of Tesco and ASDA for similar products and whether the strategies influence the buying behaviour of the customers.

The concerned research objective could be addressed evaluating the findings from question 5, question 6, question 7, question 8 and question 9 from section 4.1 in chapter 4. Evaluating the findings from question 5, the price for a pack of 4 apples in less in ASDA compared to Tesco. In reference to the findings from question 6, 800G of white bread is cheaper in Tesco than in ASDA’s grocery store. In reference to the findings from question 7, 1.75L of Coca-Cola cost less in ASDA’s store than in Tesco’s grocery store. Findings from question 8 highlight the fact that customers would require to pay more for Frozen Rice in Tesco’s grocery compared to ASDA’s grocery store. Considering the findings from question 9, customers of both Tesco and ASDA have been motivated to purchase grocery products following brands’ pricing policies.

Objective 3: To recommend strategic options to Tesco and ASDA for improving pricing policy and customer loyalty.

The objective could be addressed following the findings from question 10, question 11 and question 12 of section 4.1 in chapter 4 and question 3 from section 4.2 in chapter 4. In reference to the findings from question 10, customers would increase purchase activities if the brands would consider frequent discounts for grocery products. Results from question 11 highlighted that grocery brands could experience improved loyalty considering the feedback of the customers regarding pricing and service provisions. On the other hand, findings from question 12 promote the fact that grocery brands in the UK could consider strategies like price drop, discounts, loyalty discounts and cross sales so that pricing strategy could be greater loyalty index can be experienced. Finally, findings from question 3 (refer to section 4.2, chapter 2) suggest that interactive social media feedback evaluation process, aggressive pricing and loyalty discounts could be focused by Tesco or ASDA to improve the pricing policy and enhance customer loyalty index. 

5.2 Recommendations:

Since price differentiation has a strong influence on customers’ preference in the UK’s grocery segment, Tesco and ASDA can emphasise on following recommendations. 

Feedback evaluation through interactive social media campaigns:

More customers in the grocery segment of the UK have turned out to be active social media users. In order to assess the changing preferences of the customers, both Tesco and ASDA could consider conducting various interactive social media campaigns. The customers could be encouraged to place opinions regarding organisational pricing policy that the grocery brands could consider to ensure customer loyalty. The customers’ insights can be gathered assessing the ‘likes’, ‘tweets’ and comments of the customers. Accordingly, the pricing policies could be evaluated on the basis of the customers’ insights.

Cross selling:

Leading brands in the UK’s grocery store like Tesco and ASDA could consider cross selling mechanism so that more customers could be influenced to purchase more. The strategy promotes the concept of selling a combination of products while the combined price remains cheaper than the actual combined price. For instance, the brands could consider a common promotion event for bread and butter since the usage of the products are meant for similar purpose. The cross selling mechanism is supposed to enhance the competency in the UK’s grocery segment as majority of the customers are more influenced to value for money provision.

Aggressive pricing:

Aggressive pricing is a proven mechanism to improve customer loyalty and the one both Tesco and ASDA could consider to enhance the competency level. The brands are recommended to keep the price of the products below the market standards so that more customers could be motivated to purchase more grocery products from Tesco and ASDA’s supermarket. In this context, the brands could emphasise on providing locally grown products so that the unit cost of the products could be minimised and the selling price could be minimised to some extent.    

5.3 Limitations and future scope:

One of the major limitations concerning the current research study is that the study emphasises on the situations of Tesco and ASDA. Therefore findings from the study might not be relevant for other grocery stores. On top of that, the research findings reflect the nature and trend of the UK’s grocery segment. Therefore, findings might not be applicable for other geographic regions. However, future researchers in similar domain, could be benefitted from the research findings as the study reflects the impact of price differentiation on customers perception. On the other hand, the research findings could help leading grocery brands in the UK such as Tesco and ASDA to evaluate the existing pricing policies and consider necessary changes accordingly. 

 

 

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Appendix:

Exhibit 1: Survey questionnaire for the customers of Tesco and ASDA

Question 1: Is product pricing a major factor for you to chose your preferred grocery brand?

  • Strongly agree
  • Agree
  • Neutral
  • Disagree
  • Strongly disagree

Question 2: Does the price drop in grocery products motivate you to purchase more?

  • Strongly agree
  • Agree
  • Neutral
  • Disagree
  • Strongly disagree

Question 3: Are you likely to purchase from other grocery store if similar products being offered at less price?

  • Strongly agree
  • Agree
  • Neutral
  • Disagree
  • Strongly disagree

Question 4: Tick from the following the major factor influencing your purchase decision while shopping for grocery products.

  • Quality
  • Price
  • Convenience
  • Value added services

Question 5: How much money do you need to pay for a pack of 4 apples?

  • £1-£1.50
  • £1-50-£2.00 (ASDA)
  • £2.00-£2.50 (Tesco)
  • More than £2.50

Question 6: How much money do you need to pay for 800G of white bread?

  • £0.00-£0.50
  • £0.50-£1.00 (Tesco)
  • £1.00-£1.50 (ASDA)
  • More than £1.50

Question 7: How much money do you need to pay for 1.75L of Coca-Cola?

  • £1.00-£1.50
  • £1.50-£2.00 (ASDA)
  • £2.00-£2.50
  • £2.50-£3.00 (Tesco)

Question 8: How much money do you need to pay for 380G of Frozen Rice?

  • £0.50-£1.00
  • £1.00-£1.50 (ASDA)
  • £1.50-£2.00 (Tesco)
  • Above £2.00

Question 9: Are you satisfied with the current pricing policy of your preferred grocery store?

  • Strongly agree
  • Agree
  • Neutral
  • Disagree
  • Strongly disagree

Question 10: Are you influenced to purchase more grocery goods if your preferred grocery store introduces discounts?

  • Strongly agree
  • Agree
  • Neutral
  • Disagree
  • Strongly disagree

Question 11: Do you think customers’ feedback evaluation could be an effective option for the brand to improve loyalty?

  • Strongly agree
  • Agree
  • Neutral
  • Disagree
  • Strongly disagree

Question 12: Among the following, what possible services could the brand consider to make you a loyal customer?

  • Price drop
  • Discounts
  • Loyalty discounts
  • Cross sales

 

  

Exhibit 2: Interview questions for the managers of Tesco and ASDA

Question 1: Are you convinced with the fact price differentiation could influence customers’ perception towards grocery goods? If so, then why?

Question 2: What factors does the brand consider in order to determine pricing policy and influence customers’ buying behaviour?

Question 3: Would you like to emphasis on some strategic initiatives regarding pricing policy that your brand can consider to improve customer loyalty?

Exhibit 3: Timetable

Topics Week 1 Week 2 Week 3 Week 4 Week 5 Week 6
Introduction            
Setting of the aims and objectives.            
Determination and accumulation of secondary data            
Evaluation of the secondary data            
Research Methodology      

 

     
Gathering of the primary responses.            
Evaluation of the primary responses.            
Linking with the objectives and the recommendation of the strategies.            

 

 

 

 

 

 

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