How to win with Tesco's 'Great Prices Every Day' strategy?

Tesco's Great Prices Everyday (GPED) is a promo/price and loyalty strategy has changed the UK's grocer retail landscape. It has major implications for suppliers and the time has come to evaluate the first results.

How to ensure, as a supplier, that Tesco wins, but your brands win as well? 

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Understand Tesco's Source of Business® for your category

How does Tesco generate revenue in your category? How much of sales and profits are generated by loyal shoppers, shoppers who buy promotions but are part of the base, shoppers who switched from other retailers to Tesco, shoppers who switch between brands, shoppers who are infrequent buyers or new to the category, etc. 

Tesco's revenue sources tend to be highly different by category. In some categories Tesco may indeed get the bulk of its revenues from loyal shoppers, who will be rewarded with Clubcard promotions. Other categories may see a lot of switching between retailers. Tesco will cut itself off these revenues if it stops promotions for non card holders.  

Accuris Source of Business visualisation

Visualisation of Accuris Source of Business(R) - Figures are illustrative

Action point

Analyse revenue sources in your category for sales at Tesco. Track how the new Tesco strategy potentially shrinks revenues from new shoppers and hopefully increases revenues from loyal shoppers. Recommend adjustments of the strategy accordingly.  

Read more about Accuris Source of Business(R) here


Defuse the price war

One-third of all calories are consumed out of home. Households shifted their spend to the grocery channel and are only slowly returning to out-of-home spending. Demand for food and many non-food categories will remain strong throughout 2020 and likely well into 2021. A price war may lead to Tesco gaining share, but may not benefit suppliers and will shrink the profit pool. 

Base and promotion price elasticity Accu

Visualisation of Accuris standard and promotional price elasticity matrix - Figures are illustrative

Action point

Continuously monitor standard and promotional elasticity at Tesco and where required question Tesco's initial strategies. Educate your buyer on why and how price decreases are counter-productive. Share pricing opportunities and prove the profit pool impact. Reserve lowest prices for brands and packs with a high retail switching profile only.   

Read more about Accuris price optimisation here


One size fits all

Tesco's new "Great Prices Every Day" strategy will see the elimination of multibuy promotions and a quest for the lowest possible everyday price for many products. Not all categories, brands and products lend themselves well to this model. Any price/promo strategy should reflect the specific characteristics of a category or a brand. With the absence of classic (multibuy) promotions, there is a risk that some shoppers will see the offer at Tesco as more generic, less exciting, and take their shopping baskets elsewhere. Ad suppliers, too, may find that developing category value can be done more effectively at other retailers. 

While for many products the GPED strategy will be beneficial, for others it may actually be counter-productive. Retail is detail. One size rarely fits all. 


Price elasticity varies widely across categories

Price and promo elasticity Accuris - by
Action point

Price and promotional strategies need to be set at category/segment/brand pack level. A blanket approach simply destroys value and leaves growth opportunities untouched.

Track how shoppers respond to price changes and the elimination of classic promotions. Report to Tesco how their revenue sources are changing. Show how low prices are good for certain segments and bad for others. Be prepared to move away from one size fits all. 

Read why "one size fits all" is a bad strategy and dangers for revenue growth

About Tesco's new "Great Prices Every Day" strategy

Tesco will emphasize everyday low prices and loyalty. It is asking suppliers to: 

- offer better terms and lowest prices

- reduce promotions, eliminate multibuys

- focus on offers for Clubcard holders

- rationalise assortments

Further reading from BBC News, Retail Gazette, The Grocer (login required). 


Tesco already underperformed with promotions

Tesco has not been reaching its fair share in category expansion and in retail switching - the two key Sources of Business® for a retailer. With the elimination of multibuys and the need for shoppers to have a Clubcard, this weakness is likely to worsen. 

The example below shows retail switching with promotions for one product category: Tesco is losing more to its competitors than it is winning. 

Tesco wins losses retail switching.png

Also, Tesco's share of category expansion generated with promotions is below its general share, in beverages, food and personal care. ​

Tesco fair share.png
Tesco Personal Care.png
Tesco Food.png
Tesco Beverages.png

Source: Accuris Benchmark Study 
Based on a total of 44 categories, All UK Grocery Multiples. Equivalised volume (L/Kg/units) weighted based on turnover.

Help Tesco, help yourself ...

For certain categories the Great Prices Every Day strategy will be effective, however for many others it risks to be counter-productive. Promotions that generate traffic to Tesco stores, upgrade shopper spend and grow the category are good for Tesco and good for your brands. Similarly, there are pricing opportunities on the back of strong consumer demand that should be addressed. Lastly, range optimisation is an opportunity to create clarity for shoppers, as long as it is demand driven, not negotiation driven.  


Accuris London

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