Ad campaigns don't come cheap as Tesco battles discount giant Aldi

 

MEDIA & MARKETING:Tesco believes it has the advertising firepower to beat Aldi and Lidl at their own game

SHOWING OFF your latest Aldi or Lidl bargain, whether it’s the imitation Pringles or the cut-price chocolates, has almost become almost a badge of honour for middle-class recessionistas these days. It’s 10 years since Aldi came to Ireland; now it and the other German discounter Lidl have achieved over 7 per cent market share of the Republic’s €8.5 billion grocery market.

Until now, Aldi has shied away from television advertising to build market share but this week the multiple has launched a TV campaign centred on its Super 6 fresh fruit and vegetable offering.

That campaign will reinvigorate efforts by Tesco and other rivals to position themselves as price discounters too in an attempt to stem the relentless German advance.

In its latest advertising, Tesco announces itself as “Ireland’s Biggest Discounter” and, as market leader, Tesco has the advertising fire-power to drive home its claim to consumers.

According to the IAPI Base advertising spend report, which monitors rate card advertising spend, Tesco spent €22 million on advertising in 2008, followed by SuperValu on €18 million, Dunnes Stores with €12 million, Lidl with €6.4 million, Superquinn with €2.8 million and Aldi with €2.5 million.

Kenny Jacobs, marketing director of Tesco in Ireland, is very familiar with the operations of Lidl and Aldi, having worked in Germany for a number of years. He said: “There is a great German phrase, ‘Cheap is good’, and Lidl and Aldi are definitely having their moment in the sun. They are limited range price discounters and they are in the right place at the right time. But we are all reacting by reducing our prices on own brands and the premium brands that customers want.”

Supermarket price competition is a much-needed bonus for newspapers, as much of the advertising has been directed into full page and double-page advertisements in the press. However, Jacobs is no longer convinced of the effectiveness of those blockbuster special offer advertisements and is looking at other ways of advertising in 2009.

“We have researched our change in strategy very well,” said Jacobs. “Those big Sunday newspaper ads are more about advertising to the other retailers. It doesn’t make a customer go out and buy a leg of lamb on Sunday morning for their dinner. We will be using different style press ads, such as the strip ads on consecutive pages that we ran in many newspapers last weekend.”

Jacobs added that Tesco will be advertising on television for the rest of the year while also adding online banner ads, e-mail and even YouTube to the marketing mix

“This is a big change for us. It’s not a once-off price reduction campaign but a sustained campaign. This year will be about building Tesco as a brand for lower prices. My objective is to establish Tesco as a source of everyday lower prices in the minds of Irish consumers. You can get a lot of people into your store at the weekend if you discount a lot of product. But to get customers to switch to you because they trust your long-term low-price proposition takes time.”

Jacobs says the retail environment now is similar to that in the 1980s. “People are spending less and looking for bargains. Our job as retailers is to be sellers. We have to sell our offers to the customer. Price has never been as important as it is now. The once-a-week shop has come back into fashion. Customers are now shopping around for value like they never did in the last 10 years.”

Tesco got credit recently for introducing euro for sterling price parity on all clothing products, and Jacobs said the company is working on ways to introduce a similar initiative in its grocery business.

Meanwhile, most of the multiples have gone down the route of bundling products in a “value” offering. In recent weeks, Marks Spencer’s dinner-for-two offer has gone down a treat, so well in fact that Dunnes launched its own dinner-for-two for €10. Superquinn went one better with its offer of a meal for four people for €9 and now Tesco is promoting a main meal, side order, dessert and wine or orange juice for two people for €11.50.

Says Jacobs: “Marketing now has to be smart marketing. You have to find out exactly what your customers want and change your offer based on the changing needs of the consumer.”

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How much of your advertising budget should be online? That depends on what you’re selling, but for mass market advertisers in America, the web is still a niche medium. The Internet Advertising Bureau estimates that web advertising accounted for 13 per cent of the $190 billion advertising market in the US last year. Television had 36 per cent market share of total spend, while ailing newspapers still garnered 18 per cent.