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What makes Tesco the runaway winner of ±±¾©Èü³µpk10's Advertiser of the Year accolade?

It's not just the company's stellar financial performance, which is likely to see pre-tax profits topping £2 billion for 2004.

Nor is it necessarily because of its unswerving loyalty to its agency, which has remained steadfast despite a traumatic period during which Tesco must have wondered whether it would be one of the few big accounts remaining at Lowe's Knightsbridge headquarters.

There's also the launch of Tesco TV to consider. Tesco's investment in placing screens in 100 of its stores to demonstrate the benefits of the products it sells is another plus. Its deal with JCDecaux to sell airtime on the screens demonstrates its knack for leveraging every financial opportunity.

Although these positives weighed firmly on Tesco's side when the choice was made, other factors tipped the balance.

For one thing, the company continues the remarkable feat of presenting itself to its customers in a way that makes them feel like individuals, under the theme of "every little helps", belying its status as a retail behemoth.

For another, it has managed to inspire and motivate an agency team that not only shares brand guardianship but is allowed to work in an atmosphere of mutual trust and respect.

It has proved a potent combination. While Tesco has shown such sureness of touch in totally transforming itself from 15 years ago, when it was seen as a second-rank player behind Sainsbury's, Lowe has managed the big budget campaigns that have effectively communicated the Tesco evolution.

So effectively, in fact, that the company now accounts for £1 of every £8 spent in UK shops.

Today, Tesco stands out as a textbook study of how allowing the needs of customers to drive everything - and how advertising that proposition through populist campaigns - can bring outstanding success.

What's more, its advertising has been made to work doubly hard. Not only has its power been harnessed to talk about improvements to stores and product quality, it has been equally successful in raising staff morale and influencing City opinion.

Indeed, it is a testament to Tesco's history of consistently good advertising under Tim Mason, its marketing operations director, that it should be named Advertiser of the Year at a time when its ad strategy has just undergone a radical overhaul. However, Tesco has an knack for getting it right. This first showed itself in the early 90s when an ambitious programme to distance itself from its "pile it high, sell it cheap" heritage, by upgrading its stores and its offerings, was cleverly reflected in the "quest for quality" campaign starring Dudley Moore as a Tesco buyer hunting exotic chickens.

That was abandoned when client and agency recognised the need to move on and highlight the Tesco shopping experience. Cue Dotty Turnbull, the shopper from hell.

In fact, her character, brought to life by Prunella Scales, was a product of the real-life experiences of Tesco staff. The aim was to show that nothing was too much trouble for the Tesco team, even when dealing with a customer they would happily have locked in the deep freeze before throwing away the key.

Today, the "trolleys" work for its personal finance products is tracking better than Halifax's Howard, and the Cherokee clothing range is continuing to build momentum.

With Dotty still achieving high cut-through, nobody would have criticised Tesco for sticking with a winning combination. The fact that she has been axed indicates the company's awareness of the need for continuous adaptation and change.

By the beginning of the year, Dotty was showing her age at a time when Asda and Morrisons were competing hard on price.

Moreover, Tesco is no longer just a supermarket. Half its floor space is now dedicated to non-food; it accounts for 16 per cent of chart music sales and offers 22 financial and insurance products.

Advertising now has to deliver a potentially confusing message: that Tesco can't be beaten either on price or quality.

Will the new campaign work? Time will be the judge. But given Tesco's well-established instinct for getting it right, only a brave punter would bet against it.

The story of O2, this year's runner-up, almost echoes that of Tesco.

Not so long ago it too was the poor relation of its sector. But, via a combination of tough but necessary commercial decisions and a well-executed programme of integrated communications, it is now snapping at Orange's heels in the race to lead the UK mobile phone market.

And, like Tesco, O2 is also showing that building a brand long term while driving short-term sales are not mutually exclusive.

Three years ago, newly de-merged from British Telecom, the cash-strapped former BT Cellnet was a late entrant into a market dominated by Orange and Vodafone. Its future depended on a new generation of mobiles for which consumer demand was unproven. Without a strong brand, O2 looked ripe for takeover.

However, the doom merchants have been proved wrong. Under Peter Erskine, the chief executive, O2 has not just survived but, by building its brand, has become a formidable competitor in a cut-throat market.

Today, O2 has a market share approaching 25 per cent, making it almost as large as Vodafone. In May, it reported its first pre-tax profits - of £95 million - compared with a £10 billion loss in the previous year.

By any standards, it has been an astonishing achievement brought about via a combination of some ruthless action vital to get the company in fighting order, upgrading its customer services and sprucing up its retail outlets. Meanwhile, a new brand identity devised by WPP's Lambie-Nairn and advertising through Vallance Carruthers Coleman Priest have articulated its growing confidence.

As the citation accompanying this year's Grand Prix awarded to O2 and VCCP at the IPA Effectiveness Awards points out, O2 "has been transformed into a vibrant brand and a thriving business. The case is emblematic of how brand engineering can transform every facet of a business."

Recent winners: Honda (2003); Scottish Courage (2002); COI Communications (2001); Heinz (2000); French Connection (1999).