Tesco's new CEO: store experience far more important than advertising

Ken Murphy spoke at supermarket's half-year results.

Tesco: 7.6% growth in sales across UK and Ireland
Tesco: 7.6% growth in sales across UK and Ireland

Tesco’s newly appointed chief executive Ken Murphy has said he believes advertising pales in importance next to in-store experience in creating positive brand perceptions.

Speaking at the supermarket’s interim results today (Wednesday), Murphy – who succeeded Dave Lewis last week – said: “One of the great lessons that you learn about brand marketing and retail is that greater than 80% of brand perception is driven from the store experience or from the online experience, rather than any marketing communication.

“Really, what we are about is making sure that the customer experience is the best possible experience it can be, and the lion's share of our marketing effort goes towards either communicating that experience or improving that experience in the store itself."

Murphy would not be drawn on details of Tesco's Christmas ad campaign, but said this year’s festivities would be a time to “celebrate the fact that we’re all still alive”.

“The overarching sense I feel is that Christmas this year is all about giving ourselves and each other a break and celebrating the fact that we’re all still alive, we’re as well as we can be and we have our closest family and friends around us," he said.

“That is going to be quite a big deal this year after a tough year for many, many people."

In the half year ending on 29 August, Tesco UK’s like-for-like sales grew 7.6% year on year, most of which came from a 69% rise in online sales in the second quarter.

Total sales across the group were up 6.6% to £26.7bn, while statutory profit before tax rose 28.7% to £551m.

Average basket size increased by 56% due to an influx in Clubcard users, with Tesco extending its “Aldi price match” campaign to include more than 500 products.

Last month, Tesco launched a money-saving campaign to promote its Clubcard loyalty programme.

On the online side of the business, Tesco more than doubled its delivery capacity to accommodate 1.5 million online orders per week, allowing the brand to serve 674,000 vulnerable customers.

“The operational capability required to deliver a performance like that during a pandemic should not be underestimated,” Murphy said.

In July, Tesco was named as the brand that has made the most positive contribution through its actions during the pandemic, according to research from the Internet Advertising Bureau UK and YouGov.

With Halloween just around the corner and growing uncertainty over how Christmas will look this year, Murphy is confident that spooky season will be a good benchmark of how consumers will approach the coming months.

“We had a conversation about Halloween a few weeks ago when people were worried it might be cancelled – you try telling a 10-year-old that Halloween is cancelled.

“We’ve seen quite strong Halloween-related sales, so we’re convinced that we will have as good a Christmas as possible in the circumstances.”

Last year’s Christmas spot followed a delivery driver as he time travelled through festive seasons past.

Tesco also today announced the appointment of chief financial officer Imran Nawaz. He joins from sugar products manufacturer Tate & Lyle.

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