Dissertation On Tesco x593d

Chapter One Introduction 1.1 Background New millennium gave birth to new business prospects. One of the fastest growing markets is that of the supermarket shops that have taken the retail industry by storm. The supermarkets have expanded over the business areas of not only the food items but that of technology, automobiles, finance and telecommunications. They are labeled as the “self-service stores” which provide a huge range of various household products such as that of food and other utility items. A supermarket has different divisions and this segmentation is done on the basis of similar item group such as dairy, medical supplies, meat, tobacco, kitchen appliances etc. The development of supermarket is mainly associated with factors such as rise in population and industrial development. Supermarkets of UK have expanded their business not only in their national market but have spread its divisions in the international markets as well. Due to this global expansion they have managed to sweep maximum profits and stepping into areas other than food items including financial services and clothing. For the sole intention of reaping profits, these supermarkets have adopted various marketing techniques to attract customers, to retain them through customer satisfaction. Such marketing strategies are devised so as to gain maximum number of customers. The purchasing power of the customer is therefore influenced by these marketing incentives which result in customer loyalty. Loyalty is developed through a strong relationship that the organization builds with its customer in order to sustain them. This relationship is built and sustained though persistent purchases done over a predetermined time period. According to (Gefen, 2002; Rowley & Dawes, 2000) A loyal customer provides the foundation and permits the companies to allocate their resources and energies to other business affairs and ventures. To achieve Customer Loyalty, certain Customer Loyalty Programs are formulated. They are meant to make the customer believe he is making a profitable purchase ultimately by purchasing the same product through the same medium. One unquestionable marketing tool to enhance Customer Loyalty is the customer’s keen interest in using loyalty cards. As stated by (Mintel, 2004), there were approximately 85% of households in UK that kept no less than one active loyalty card. These loyalty cards establish the ground for the marketing advancements of an organization and make it possible for the marketers to interact with the people in a way which benefits those with custom made offers and lucrative connection. On the other hand, some studies propose that the loyalty card scheme is not completely a stable strategy of marketing for they at times contradict with the attitudes and nature of the shoppers that have lately altered. They would rather prefer in paying less for their goods and grocery items than earn any points. This study therefore explains and evaluates whether the Customer Loyalty Programs such as loyalty cards are effective marketing procedures or not.

1.2 Introduction of TESCO

Tesco PLC (aka Tesco) was founded in the year 1919 by Jack Cohen and is recognized as United Kingdom’s biggest supermarket which dominates the British retail sector both globally and domestically. It is the leading food and global grocery retailer and is expanded across Europe, North America and Asia. It started its services in food but has now expanded its services to clothing, electronics, financial services, online services and telecom services. Tesco operates through a strategy based on long term commitment. According to (www.tesco.com) its four key components are the core UK business, the retail services, international coverage and the non-food sector. The company currently operates 5380 stores in 14 countries across the globe and is currently headquartered in Cheshunt, Hertfordshire, England (Tesco.com). Tesco owes this accomplishment to a brilliant oerations strategic and management team. According to (Humby and Hunt, 2004) without a doubt, in the world today Tesco is the world’s most successful supermarket in-store and online along with being UK’s most known grocery store. As stated by (Humby and Hunt, 2004) and further asserted by Tapp (2005), “Tesco has changed the theory of retail market as it has been successful to a major extent in the CRM which is basically an information technology containing a large data about its customers, hence being successful in its management. It has adapted to new methodologies and has equipped itself in the understanding of managing the analysis and keeping a keen observant eye as to when to go with the flow; when to go with the experience based on intuition and when to inquire the predictable and usual expertise”. The operation of Tesco basically is in a large and broad industry sector known as the Retail sector. The major business of the company is driven through its store spread in over 14 countries. All of Tesco’s stores can be classified in five different categories, namely: Express, Metro, Superstore, Extra and Homeplus. Each of these four different kinds of stores is targeted towards different kinds of market segments. Besides retail, the company also has a presence in a few other different kinds of businesses. In order to generate repetitive transactions from customers from the different businesses, Tesco uses Clubcard scheme that it introduced lately as a tool to award and keep the customers loyal. The Clubcard has also proven effective in helping Tesco collect huge amount of customers’ transactions data through its different sales channels around the globe (Tesco, 2011). This scheme was launched in 1995 and has managed to create a significant image due to its effective results in increased sales and customer retention. It has changed the whole outlook of retail shopping and has ensured the retailer that through this remarkable technique and innovative strategy and technology they can gain benefits in the form of increased sales and loyalty of the customers by repetitive buying and sustain its position in the extremely cutthroat world of the retailing industry. Tesco has brought about a huge revolution in the industry that runs on multi billion revenue. Through its intelligent marketing schemes such as that of Tesco Clubcard it has managed to be the driving force of the UK retail market and has been regarded as a scheme that has played a significant role in the history of profit making industry. Tesco holds a large market share which is determined by the customers buying at Tesco. (Tapp, 2005) stated that Tesco holds about 12 million customers across the globe and it has maintained this status by devoting itself to the customer’s needs ultimately adding value to the company and refraining from practicing such a strategy that lead to losses. According to (Humby and Hunt, 2004), “Tesco was wedged at the UK’s second‐ranking supermarket of the UK before they introduced the Clubcard scheme”. The idea of Tesco’s value can be taken from the statistics by (Hawkes, 2008) which asserts that £1 out of £7 is Tesco’s share in the high market. According to (BBC Business News, 2008), Tesco in April 2008 has ed for an 11.8% increase in basic annual profits which were £2.846bn in 2007, hence meeting the forecasts of the analysts. This thesis will probe into the reasons as to why the customers are motivated to make use of the Customer Loyalty Programs such as Clubcard and are bound to remain motivated for successive

buying and remain intact with Tesco and not fall for its rival stores. What marketing strategy does Tesco incorporate for the sustenance of its value and how these Customer Loyalty Schemes generate customer satisfaction, retention and loyalty. The concept of Customer Relationship Management (CRM) originates from the aforementioned set of ideas. As per (Berry and Parasuraman, 1991), an organization needs to concentrate on two main factors, first to sustain its customers and uphold their trust in them by proposing benefits of such sort that the customers feel essential and second to keep those benefits of such a nature that cannot be imitated or replicated by its competitors. The emphasis of Barry was on the nature of the customers that could be targeted by the company as their loyal customers and to strengthen the relationship between them. He believed that customers who are indifferent towards any brand or organization and are unresponsive in their views can be compelled easily than the ones who already have their favorites. The abovementioned case if further strengthened by stating that the progress of the consumers of the twenty first century has been remarkable as they are accustomed to the marketing techniques and have apt understanding of the brands and promotion and therefore are termed as ‘increasingly promotion literate’ by (Harlow 1997 cited in Egan 2001). “CRM in today’s world of business as cited by (Peppers and Rogers, 2004) is the most happening strategy that is revolutionizing the consumer business industry. It is viewed in a context that is integral and an overpowering movement that ultimately all businesses will be compelled to adopt for their definite success”. (Gillies, Rigby and Reichheld 2002) has perceived CRM as the core tool responsible in management growth of an organization since the last decade. Research in (CRMToday.com, 2008) revealed that the probable revenue for CRM software market in 2008 was to exceed $8.9 billion. It is predicted to achieve a total of $13.3 billion by 2012.

1.3 Statement of the Problem The research study aims to investigate an in depth study and analysis of the methodologies and research models that prove that Customer Loyalty Programs such as the Clubcard scheme has proven to be an effective marketing tool for Tesco.

1.4 Aim of the Study The dissertation seeks to aim at the understanding the concept of “Customer Loyalty” as a marketing tool by keeping Tesco PLC as an example. The research focuses on how “Customer Loyalty” has emerged as a unique marketing tool alongside some of the traditional marketing tools and how it proves to be effective in achieving customer satisfaction.

1.5 Impotance of the study Main intention of the thesis is to analyse the Customer Loyalty Programs in a broader perspective and to discover whether they are an effective marketing tool in keeping the customers loyal. For this purpose, case study of Tesco is taken and further it is discussed through various research methodologies whether they really require their Clubcard scheme to any further extent to maintain their customer loyalty purely because of the amount of energy and effort they currently exercise to keep customers loyal provided their current exposed position. Even though the Clubcard scheme is assisted by a number of repeated purchases, even then, does it imply true loyalty or not. The scope of this research is to find how “Customer Loyalty” has evolved into an effective marketing tool by using Tesco as an example. Different concepts, frameworks and theories will be used to

identify whether “Customer Loyalty” has been an effective marketing tool for Tesco, and if yes, to what extent. The study of this thesis will start with emphasis on the secondary data and the tools which will be used for the analysis will be reviewed in the “Literature Review”. This will provide an incentive for the study to have an in depth analysis and understanding of the theories and concepts that need to be explored and also to see the perceptions and discussions of others who have taken on this subject. Primary research is crucial in order to cover the objectives of the study. Therefore, for the purposes of this dissertation, I will carry out the primary research by using questionnaire methodology of surveying. The study will take into the existing network of people as survey participants. Being a customer of Tesco, the research will also bring the first hand insights about different kinds of marketing, advertising and business tools used by Tesco. Afterwards, the methodology will explain the circumstances of the primary research conducted and analysis of its results. The final two stages of the study will then be concluded and recommendations will be presented.

1.6 Objectives of the Study The dissertation has the following key research objectives: 1) To define “Customer Loyalty” and determine the successes and challenges of different “Customer Loyalty” programs. 2) To evaluate the effectiveness of “Customer Loyalty” as an overall marketing tool.

3) To analyze the various ways in which “Customer Loyalty” is used as a marketing and a business tool to derive value for the firm.

1.6.1 Research Questions The dissertation will attempt to address the following research questions: 1) How does “Customer Loyalty” program create value for Tesco? 2) In what ways “Customer Loyalty” programs differ from traditional marketing programs? 3) How do “Customer Loyalty” programs drive customer satisfaction?

1.7 Delimitation There are certain delimitations of the study. Tesco allowed only specific timings for the survey to be conducted therefore time was the biggest constraint I had to face for the research to be carried out. Only one store of Southwark, London was surveyed from therefore area constraint was also there. The people surveyed during that time were randomly picked by the rule of every 4th person being surveyed, therefore, it can be said that through random sampling the bias was reduced but due to limited samples data could not be stretched.

1.8 Organization of the Study Following is the outline and organization of the dissertation.

1. Chapter 1 of the dissertation has introduced the statement of the problem, laid the aim and objectives of the study, described the problem to be addressed along with the components of the design. 2. Chapter 2 offers a detailed review of literature and related research significant in relation to addressing the problem of the study. 3. Chapter 3 presents the methodology and procedures used for data collection and analysis. 4. Chapter 4 contains data analysis and presentation of the results. 5. Chapter 5 submits a summary and discussion of my findings, suggestions and recommendations for practice and future research.

Chapter Two Literature Review 2.1

Introduction

The arrangement of this chapter is made to provide a literary background to the study and seeks to accomplish the following objectives of the dissertation: 1. Narrate the background and history of Tesco. 2. Presenting the detailed SWOT Analysis of Tesco. 3. Defining Loyalty and Loyalty Marketing. 4. Understanding the concept of Customer Relationship Management (CRM).

5. Determining how Tesco’s Club-card has been an effective Customer Loyalty Marketing tool for Tesco. 6. Discussing the Customer Loyalty Ladder. 7. Establishing the relationship between Customer Loyalty and Customer Satisfaction through the Service Quality Models. 8. To understand the issues that may have an effect on the value of the customer reward program and identify its significance within the supermarket industry.

The literature review of the dissertation will start off with mapping the background and history of Tesco, later defining and explaining the fundamental terminologies and concept that provide the basis for this study. Lastly, it will conclude with a summary of the aforementioned key points.

2.2

Tesco history and story

History of the foundation of Tesco is explained on the basis of the documented history extracted from European Foundation for the Improvement of Living and Working Conditions (2007) and the Reference for Business (2007). John Edward Cohen in 1919 started his career as a market trader by investing £30 into a little grocery stall in located in East End London. Cohen officially and publically landed the milestone of Tesco Stores Limited in the year 1932. The conception of the name Tesco came from a dealing of a private label tea that Cohen made with a merchant and thus took the initials from T.E. Stockwell and merged it into the first two letters of his last name. Cohen managed to expand his business operation by opening more than a 100 small stores in and around the London area just within a span of 8 years. The idea of self-service supermarket in USA attracted Cohen’s attention when he was invited for a visit there to get acquainted with the knowledge and know-how of American food retailing structure. He aspired to take that system and implement in the UK retail market. The first Tesco self-service store was inaugurated in 1947 in Hertfordshire but due to the conventional lifestyles and conformist approach of the UK consumers, it failed to succeed or attract customers resulting in its shutdown only to get reopened the following year and succeeding in making its mark and grabbing attention of the shoppers. This resulted in the launch and success of the first self-service supermarket in Britain. Alongside the gains and profits acquired from the smaller grocery food chains that aided to the growth of Tesco within the next two decades, Tesco managed to increase its exposure to the fresh foods carriage along with the dried goods and products. Later on during the 1960’s, Tesco broaden its horizons by expanding from food items and branching into non-food items such as the household merchandise which embarked on a new journey of Tesco. A 90,000 square‐foot warehouse was constructed which led to the whole new terminology of “superstore”. It was equipped with wide varieties of food and non food items with a wide range to choose from. Tesco enlisted itself for the Green Shield stamps scheme which was originally an American marketing strategy whose core idea was to enhance customer purchase. Retail organizations were to purchase the stamps and forward them to the customers in the form of bonus or prize. After evaluating how much of the stamps were given away, it was determined the increased amount of purchases made by the customers. They then would put them into a Green Shield collector’s book and they could exchange those stamps for any product in the supermarket mentioned in the catalogue. This was an efficient and an effective marketing technique for it not only collected a number of customers, but sustained them as well that resulted in customer loyalty. Shoppers would buy from Tesco just to make use of the stamps. As a result of this successful practice of American food retailing system, by

1976 Tesco expanded to for about 900 large stores and markets all over UK. Due to the evolving society, the American methods of marketing started suffering losses for the consumers demanded quality over quantity and Tesco failed to measure up to their expectations and demands. Tesco didn’t gain much during the1970’s as consumers became more aware of the market pricing and had more income at disposal. As a result, Tesco was stuck in a predicament and was depleted due to reduced purchases. So it decided to finish the Green Shield Stamp scheme in 1973 in order to restore company’s image and increase profits through increase sales and lowered prices. Even though it write off the Stamp scheme, but due to poor shop maintenance and unsatisfactory customer service it went through a complete modernization that resulted in shutdown of 500 inadequate and unprofitable stores. In order to get back on track and to succeed in the competitive industry, it invested substantially on its stores not only on its exteriors, but also increased the quality of the merchandise as per the desires of the customers. They extended the aisles and expanded the sections by not only giving a spacious outlook but to provide quality item goods. The average superstore of Tesco enclosed an area of 25,000 square feet but ultimately expanded its buildings to 65,000 square feet. With the invention of new technology of computers, the systems were computerized and reconditioned. Tesco initiated in its own product lines which were based on the development of the large scale Research and Development (R&D) programs. Slump in the UK food market during late 1970’s and early 1980’s, drove Tesco to induce a strategy for the purpose of increased customer loyalty and that was to cut down massive food prices on almost 1,500 items that were related to food. The accompanying effect of curbed prices resulted in a cutthroat price war between Tesco and J. Sainsbury. Tesco continued to infiltrate into Ireland and opened its 100th superstore by 1985. The expenses in the construction of 29 new stores amounted to £500 million. By the 90’s Tesco had managed to grab a position in the top three food retail markets in UK with 371 actively working stores in Great Britain accumulating the largest gasoline retailer independently in the UK. During the same time frame, Tesco acquired store chains in countries like Poland and the Czech Republic. Tesco experimented with new arrangements of innovative style stores which resulted in overall expansion of the business. First was the Tesco Express format which targeted the expansion of nonfood departments by forming a petrol station and convenience stores in one area. Second was the Tesco Clubcard which was introduced in February 1995 and was aimed at exploiting customer purchase pattern. Later on, Tesco matured its financial services by making its own Visa card, in-store banks, loans, insurance and savings s. The new millennium gave birth to the e-commerce business had initiated that made it possible for Tesco to enlarge its non-food business area. The prime objective was to strengthen the non-food side as that of the food business. In today’s competitive retail business world, stores have a broad spectrum of products and services that they provide to their customers. They include electronics, sports equipments, household items, clothing household furnishing alongside food items. Tesco has introduced its own line of clothing in September 2002 which is a remarkable advancement in covering the clothing sector too. Tesco has not only expanded in the UK market but has taken a global perspective as it involves in international operations by entering international markets of Asia with stores opening in Taiwan, South Korea, Malaysia, China and Thailand, In the present day, Tesco stands as an authentic unopposed retail giant of the retail industry. It has not only made it possible for it to adapt to new technologies and advancements to reap profits but to outwit its competitors and rivals by always staying one step ahead of them by sweeping major market share.

Undeniably, Tesco has made a trustworthy and reliable authentic brand name over the years of continuous efforts to maintain its standard by varying company’s operations and adaptability to new and innovative marketing and business strategies.

2.3

SWOT Analysis Tesco: A detailed Review

An in-depth analysis of Tesco’s operations till 2010 is viewed using the SWOT analysis. Company’s strengths, weaknesses, opportunities and threats are discussed as follows. Strengths:  Tesco shares a status of the third largest grocery retail company in the world as per Datamonitor (2010), with active operations of over 4,331 stores with their main concentration in USA, Asia and Europe. 2010 showed company’s grocery retail market share in UK at 30.7% (Euromonitor, 2010).  Tesco has been consistent with its remarkable financial performance over the years which emphasizes on the financial abilities of the company. As per Datamonitor (2010), Tesco viewed an increase of 14.9% in the year 2010 as compared to 2008 with a turnover of £ 54billion. Tesco has devised its strategies mainly to tailor its products and services in such a fashion that it meets the demands of the market. It stresses on product affordability by making sure that the customers are getting the desired product within their set budget without losing quality. Tesco Direct raised over 50% in 2009 (Tesco, 2010).  Tesco has well established its customer retention strategy through various customer loyalty programs especially the ‘Tesco Clubcard’. As cited by DunnHumby (2008), Tesco collects its data that it receives from the Clubcard scheme and uses it in its Customer Relation Management Systems. The extracted information is further utilized in various marketing techniques and procedures for efficient marketing results. Weaknesses  Taking into the comparison between the company’s performances over the last year (2009), Tesco has not been able to match up to their level of performance. Tesco suffered financial loss and image of brand distortion as it withdrew a number of products and items from market (Mintel 2010). This resulted in harming the value of the company which pledges to provide high quality products at cheaper rates.  The main operations of the company lie inside the market of the UK and therefore its concentration is mainly to reap profits from the UK retail sector and due to this limited market stretch and geographic diversification it is exposed to complete market risks and less revenue generation. Opportunities  Tesco has managed to expand its commercial network as it has launched over 620 stores among which 435 were outside UK (Mintel, 2010). Due to the expanded business and increasing geographic diversification and covering international market, company will be less exposed to systematic risks and managing its economy of scale.  With the venture of online shopping on Tesco.com it was recorded that over 1 million customers have shopped through its online shopping extravaganza (Guardian, 2010). It has resulted in being more cost effective tool and has managed to attract a wide range of customers from all over the globe reaping more profits.  Tesco wants to globalize and ascertain its global position in the market and its business by entering into a much lucrative market than others at present which is the Indian market. As

stated in (Daily Mail, 2010) one of the biggest industrial groups of India which is the Tata group has signed a franchise agreement with Tesco through its retailer known as Trent. It has been predicted by (Euromonitor, 2010) that there will be an increase from £125 billion to £145 billion from 2009 to 2014 in the food retail market. This is due to the reason that food is the top priority and a necessity and despite a recession, people will always go for buying and stocking of food items.



Threats  The economy of the UK has suffered a contraction instigated by the global financial crisis that hit the world in recent times. It is estimated by the International Monetary Fund (IMF) that it will further decline by 4.2% as per (Poulter, 2009). In this case, the financial holdings of Tesco may suffer.  As a result of financial crisis and people losing their jobs, decrease in standard of living, low income with lesser wage rates it is noticed that people have become more optional in their purchases. Therefore affecting the sales of the company in a harmful way especially in the non-food retail sector.  Though Tesco has been a leading company in the grocery and food retail market for the past 15 years but now it faces extreme competition from Asda, Morrisons and Sainsbury’s according to (Mintel, 2010).

Keeping in mind the above mentioned key points, following is the presentation of the Tesco SWOT analysis of Tesco:

Strengths

Strong Financial Performance

Low Cost Leadership

Leading Market Position Loyalty Schemes

International Expansion Market Growth

Threats

Financial Crisis

Decreasing Income

Increased Competition

Concentration in UK

Strong Portfolio

Online Presence

2.4

Loyalty and loyalty marketing 2.4.1 Defining Loyalty

Loyalty can be presented in such a way as to establish permanent and long term relations between the company and its customers. Loyalty is described in (Fraoch Marketing, 2006) in of retail marketing as “an amalgamation of the behavior of the customer and its attitude.” Having said this, loyalty is not a relative term neither a vague concept as extensive amount of research is done on this term and its concept in of marketing and customer satisfaction and retention. In this section I have presented the definitions and ideas of various academics. Loyalty has been explained by Dick and Basu (1994), that it is the potency that is present amid two important variables that are the comparative attitudes and repeated investments. To have a keen insight of loyalty one must have a clear understanding of the correlation between behavior and attitude. But it is not a constant relation and opinions may vary from person to person thus determining the changes between behavior and attitudes. Loyalty is considered as an emotional phenomenon as Jenkinson (1995) defies the concept of loyalty as being exact and states, “loyalty is more of a behavior that is driven by the need of emotions in its subconscious to achieve a constant means of satisfaction, worth and individuality”. This signifies loyalty being related to emotions and build with a bond of trust as cited by Humby and Hunt (2004) that “loyalty is related to emotions and is founded on the basis of comion and understanding.” This concept is further strengthened by various definitions and explanations that believe that feelings and emotions are active and not a “dead” phenomenon. As stated by East (1997) and cited in Rowley (2005) there can be other factors like social factors and the environment that anticipate the actions”. On the other hand it can be viewed as “functionally loyal” as per (Barnes 2002) which means that the customers are loyal only to a particular company mainly due to the convenience they receive from them. The term functional loyalty can be obtained from values that are functional like quality, price and distribution and convenience that is provided through various loyalty programs which form a concrete basis for the customers to a certain supplier. But due to the duplication that can

easily be done by the rival companies, it is not regarded as a long lasting concept as per (Barnes, 2002). Certain other literatures have been provided giving some information about the term loyalty. According to (Neal 2000 cited in Grisaffe 2001), “loyalty is a behavior”. This is quite a vague and controversial view point but is ed by data. As seen in (Uncles, Dowling and Hammond 2004) “the reasons for this controversy can be due to the reason that loyalty in this context is measured on the basis of purchases made in the past and not really on the foundations of consumer’s drive towards brand dedication”. Shapiro and Varian (1998) think that repeated purchases of large amounts from a particular company labels as loyalty.

A detailed research on the buying behavior and set of patterns involved in this phenomenon has been conducted as noted in (Uncles, Dowling and Hammond 2004) it is concluded customers have different behaviors. There is one class that is ‘monogamous’ which is 100% loyal to the brand. Second class is the ‘promiscuous’ which has no loyalty to any brand whatsoever and third one is ‘polygamous’ in which there is loyalty to a certain type or collection of brands. Barnes (2002) asserts that the foundation of loyalty is not based upon repetitive buying as it is a behavior driven by emotional and feelings. In addition to this Barnes (2002) also presents that, “there are certain behavioral tools that may help in identifying loyalty such as the number and frequency of visits made, total money spent, time span since the first purchase etc. The most apt definition in the context of marketing tool of Tesco known as the Clubcard scheme is stated by Humby and Hunt (2004) as an “emotional commitment” and “monogamy”.

2.4.2 Loyalty Marketing To define ‘Loyal Marketing’, some literatures must be reviewed. As cited in (ICLP, 2005) “Loyalty marketing is the management process identifies the most excellent customers and devices techniques through data resources in building relationship with the customers to retain them for a sustained growth”. Though it can be used in many like relationship marketing or customer-centric marketing, but Duffy (1998), claims that the apt terminology for such a relationship should be loyalty marketing itself. The reason for that is the fact that the main business objective that the company sets out to seek is the loyalty of its customers. The core objective of the organization is to define and locate profitable behavior and ister its relationships in such a way as to maintain and derive profitable behavior. To aid in achieving this goal, customers are rewarded on repeated purchases and are hence facilitated and motivated towards being loyal. (Gilbert and Karabeyekian, 1995; Beenstock, 1999) cited that the academic documentation of loyalty programs development has been recorded during 1990s. According to (Christopher, Payne and Ballantyne 1991; Webster, 1992) it is seen that the main reason why these programs were motivated and facilitated were to curb the cost by retaining the already loyal customers than to make new ones and replace the former ones which made such programs more lucrative. As per (Reichheld and Sasser, 1990) it is observed that by retaining a 5% current customer base, companies overall gain a profit of 100%. A more deep insight is towards the understanding that the reason for this development is to understand the behavior of the customers on an individual level rather than taking it collectively according to (Treacy and Weirsema, 1993; Dick and Basu, 1994). It is often

viewed in the context of loyalty being a repetitive behavior of the customers that often when companies have a long term relationship with the loyal customers; it creates a negative effect on the services of the companies which may in turn affect the trust quotient as per (Grayson and Ambler, 1999). Large concentration of the loyalty programs can cause the effectiveness of such programs to diminish and hence giving no degree of advantage to the firms making them less competitive according to (Gilbert and Karabeyekian, 1995). Loyalty programs may reward customers in exchange for their loyalty but it should be noted that the information they contain in their data base is not mostly used in order to improve the knowledge of their customers as per (Pitta, 1998; Wang, 1997). Loyalty programs however can enhance company’s competitive position in the market by giving them an edge over others through induction of various incentives to attract customers but it should be kept in mind that in order to gain advantage from these loyalty programs, they must be distinct in nature and should not show replication of one another. Customer loyalty programs are well synchronized programs that are based on hip of the pre identified customers in order to develop the strategic alliance for the sponsorship of the brand or the organization. They are built on the basis of targeted communications where they build stronger bonds between the targeted lot of customers and the brand through modification and adaptability of the brand. They are based on collective purchases by the customers, who in fact adds to the value of the brand and through these value proposals they maintain the customer status, (Lacey and Sneath, 2006). Furthermore, (Lacey and Sneath, 2006) state that “these programs allocate the customers in a way that is best suited for the brand enhancement ultimately identifying their value and outlaying the structure for the marketing strategies for customers in a controlled environment. Uncles, Dowling and Hammond, (2004) assert on the aims of the customer loyalty programs. One is targeted in increasing the revenue of the sales by raising purchase or to enhance the variety of products purchased from the supplier or both. Second aim is through building a much closer and trustworthy bond between the brand and active customers which may help in keeping them. Gordon (1998), on the other hand has placed criticisms on loyalty marketing as programs being fake tool with usual and no different results for customer patronage. But (Wright and Sparks, 1999) contradicts by stating different schemes that are induced in the market as these loyalty programs with varying results such as the card schemes, special offers and services and customer magazines etc. Humby and Hunt (2004) argue that loyalty is not based just on a scheme but to manage and develop quality at the appropriate price as well. Tapp (2005) states that regardless of the limelight loyal marketing has taken for the past decade, it can still not are regarded as the norm in most markets”.

2.5

Concept of Customer Relationship Management (CRM)

According to (Uncles, Dowling and Hammond, 2004) It has been observed that firms have redirected their attention to customers through more precise and planned strategies that mainly originate from the customer relationship management (CRM) programs. This has been ed by Peppers and Rogers (2004) claiming a business CRM revolution. There are many definitions to CRM but they are not as precise as they should be as CRM is taking the business world by storm. In this context Goodroe (2005, cited in Wylie) noted that CRM despite of its high importance and progress is not defined properly and is vaguely used and misinterpreted in the business world and that too by the people who try to identify its true meanings. Customers nowadays have increasingly been getting aware of how the market works and gaining strength in of getting equipped with their needs and demands and how to exploit them for their individual benefit. This is why custom-made

products and services are widely used nowadays by the firms as customers nowadays prefer to be treated on individual basis rather than on equality where products are generalized (Newell 2003). CRM is an information technology based process and is mediated by a technological advancement based medium but it is designed in a manner which enhances and builds a strong relationship between the customers and the organizations and building connections in the real world. As per (Gordon, 1998) though CRM originates from the information technology but it is extracted from the traditional style marketing hence creating value with the customers by delivering services that customers think of as the value for them. These comments and illustrations do tell us about the main idea of CRM but it can be said that it is a process of such depth and vastness that if not understood properly could be easily misinterpreted and suffered. Therefore a more generalized and comprehensive definition of CRM is presented by (Peppers and Rogers, 2004) as a business practice structured in a way to create familiarity between the organization and its customers in a way that it increases the value of the organization by making each customer valuable to the organization. In order for this goal to be met, organizations need to keep customers in mind before they create any product or decide on providing any service because the whole idea of CRM originates from what the customers want and to sur their own expectations from the firms. Thus it can be extracted (Gordon, 1998) that CRM is a never ending process which is built over value with individual customers and continuing it over a life time with its foundation on understanding, concentrating and managing the relationship between the customers and the suppliers with cooperation on managerial coalition. For the purpose of locating whether customer loyalty programs are beneficial or not, the case of Tesco Clubcard is taken and for this reason Humby and Hunt (2004) have summarized the CRM meaning as a process to enhance the performance of the company by making the customers more contented ultimately making the company wealthier.

2.6

The Tesco Clubcard Phenomenon

Tesco Clubcard was launched in February 1995 and initially was thought to be a replication of the 1960’s ‘green shield stamps operation’ and was criticized to be a monotonous step pushing the retail industry backwards. On the contrary, Tesco proved all the critics wrong when within the next six months the Clubcard success resulted in profit in shares of Tesco from 15% to 18%, a total of 3% raise and set a benchmark for the customer reward programs of UK. Initially it was funneled in twelve stores mainly to see how customers react to this new technology. The main idea was to acquire a deep understanding of customer behaviors of shopping and their habits, likes and dislikes and by giving something back to the customers in the form of reward points. As said by Lord MacLaurin, Former Chairman of Tesco “Customer loyalty is not about how customers demonstrate their loyalty to us; it is about how we demonstrate our loyalty to them”. These reward points when mounted up to every £5 that was spent by the customers and were transformed into every quarter into a Clubcard voucher. These vouchers could then be exchanged or redeemed by the customers in any random Tesco store. This practice was modified according to the acquired customer insight knowledge which revealed that there is a certain group of customers who didn’t benefit from this offer of £5 and those were the ones who didn’t buy in bulk rather shopped in small

amounts like students and pensioners (Louis, 2002). Therefore Tesco changed the £5 deal to £1 hence giving rewards to the customers on every £1 that was spent on products in the store or online, on Tesco petrol stations, telecoms and personal finance items. These additional points could be associated with 10 Clubcard partner companies as per (Papworth, 2005). At the accumulated level of 150 points, they would transfer into Clubcard vouchers at a 1% discounted exchange rate of 1p/point. Further to increase the value of the Clubcard, Tesco coordinated with other companies like the airlines and magazines restaurants for holiday discounts or weekend discounts on meals, air tickets and magazines such as Cosmopolitan magazine which cost less by using the vouchers. Although the Clubcard proved to be a success with increased profits and increased amount of customers of about 200 million customers shopping in-store every single day at Tesco which drove Tesco to be UK’s number one retailer (Peppers and Martha, 2001). Seth and Randall (2001) remarked on Tesco’s scheme of Clubcard to be a brave and a brilliant move, even though it was not the first one in the market but its success sured any other previously existed. Nevertheless, the cost of running the Clubcard is unimaginably high with it u 4.5% of Tesco’s profit of about £300 million in the next 3 years of introduction. There were many competitors who introduced schemes of same nature but abandoned half way. By 2001, it was revealed that Clubcard had attracted almost 20 million out of which over 10 million were actively using it.

2.7

The Tesco Clubcard as a Customer Loyalty Marketing Tool

There is a noticeable change in the amount of customer loyalty toold induced in the market by the retailers in recent times. As per Byrom et al. (2001) there are more than 150 customer loyalty tools in actively working in the UK resulting in releasing 40 million cards in the market. This is further remarked by Stone (2004) that the percentage of households in UK who contribute to such schemes is 80% while an average UK customer has three schemes that he deals with. Tesco hasn’t really been the first one to induce the scheme into the market but certainly has been the one to move the entire market by storm and hence changing the whole meaning and approach towards marketing. (Hirschman, 1980) states that this is such a dynamic scheme where customers are agreed on giving out their personal information for some benefits in exchange like monetary benefits and some advanced services. (Lacey and Sneath, 2006) says that as for the loyalty schemes, the companies propose value added services to the customers in exchange for their personal information and which in turn helps the companies to device strategies to increase value of the company. Companies record the data of personal information and buying behavior of the customers who use these card schemes. Mauri (2003) comments that through this data base record that the companies maintain, they can actually translate the data into a relationship that is based on mutual trust and loyalty, hence learning to grow together. Cited by Jenkinson (1995), loyalty cannot be bought so the companies have in mind the strategy to make customers purchase products in exchange of some reward points which actually are the prize they get. The entire list is formulated starting from the shopper’s name to his trolley items from the moment the card is swiped on the counter (Field 1997). The fact that there can be a exploitation of the personal information is cited in (Lacey and Sneath, 2006), that the acquired information can be spread and leaked to sources other than the company itself. Simm (2007) comments that Tesco has a detailed record of all the activities of its card holders as they know the time of purchases to each

and every item bought or returned, the habits, the market status e.g. being rich or poor or cost conscious people. Tesco has undoubtedly emerged as a giant retailer of UK due to its strong data base and information that it collects though its information management systems, and furthers this data to study the attitudes, classes and nature of its card holders. Loyalty programs can also be viewed as an extension to their product and brand value as mostly the items are sold in groups which in other words mean cross-selling. These items are grouped together and tempt the customers in buying them which otherwise they would not think of buying (Uncles, Dowling and Hammond 2004). It is stated by Swaminathan and Reddy 2000 and cited by (Lacey and Sneath 2006) multiple products merge in with the Clubcard adding value to the Clubcard and also by sharing the costs of the organization, hence creating benefits to the organizations. Although Clubcard scheme is a reward program like many others, but it has made a strong hold in the market in gaining customer attention and their trust consistently over the past years as explained by (Rowley 2005). To this Parker and Worthington (2000) add that the customers expect a reward by the end of their shopping when they are a part of a customer loyalty program.

2.8

The Customer Loyalty Ladder

Partner

Partner is someone who has the relationship on equal basis as of a partner with you

Advocate

Advocate is someone who actively advises you to others, as in who does your marketing for you

er

er is someone who has liking towards your organization but only backs you inactively

Client

Client is someone who has done business with you repetitively but may have negativity or neutrality towards your organization

Customer

Customer is someone who has done business but only once with your organization

Prospect

Prospect is someone whom you deem may be influenced to do business with you

(Payne, 1994) states that the customer loyalty ladder consists of tasks that must be dealt with one by one in order to attain loyalty in the customers and this can be achieved by relationship improvement with the customers though movement up the ladder and taking it step by step instead of ing one with the other. Reichheld (cited in Tapp, 2005) states that there are some companies who take loyalty marketing not as an aim or target but as their obligation ultimately which provides stability to them in of lucrative customers. Loyalty programs enhance commitments of the customers with their organizations. At the same time (Tapp, 2005) comments that widespread use of such programs has caused confusion and indifference among the customers as they have a wide variety to choose from, so they don’t feel the importance of any one loyalty program hence making them short-lived.

2.9

Customer Loyalty and Customer Satisfaction

Customer loyalty is often linked directly with customer satisfaction. It is believed that there is a positive relation between them as viewed by many writers (Anderson & Sullivan, 1993; Bolton & Drew, 1991; Bearden & Teel, 1980) that customers can be loyal due to many reasons. One of them could be that they don’t really have any real substitutes for the products they already are purchasing hence making them stick to their current choices. Other reason could be that they actually like the products and are satisfied with their current choices so they want to continue buying them as a result making them loyal to the brand. Most companies adopt this technique of maintaining stability with their product quality so that the already satisfied customers could be made loyal by keeping them. In this context Coyne (1989) stated two brink points of loyalty as high and low. When satisfaction is on a high scale, loyalty considerably increases and on the other hand, it declines radically when satisfaction is down. Therefore as stated by (Oliva, Oliver & MacMillan, 1992) the target of the managers should not be having just satisfied customers but to have exceptionally satisfied customers as loyalty can dramatically increase with just a little push towards customer satisfaction. There are two models for measuring customer loyalty. The first one being the basic or the conceptual model and second being the expanded model which includes the factor of employ loyalty as well. 2.9.1

Tangible

Basic/Conceptual Model

Customer Satisfaction

Reliability Responsiveness Empathy Assurance

Customer Loyalty

2.9.2

Expanded Model

Performance

Internal Service Quality

4 4

Employee Satisfaction

Service Quality

4 4

Customer Satisfaction

Experience Customer Loyalty

Employ Loyalty It is suggested by (Reichheld, 1993) that customer loyalty alone is not enough to sustain a strong bond between the company and the customers, as employ loyalty plays a major role in this process. A skilled employ proves to be beneficial for the company for he will be able to provide better and more skillful services to the customers. This can be achieved with him spending more time in the store for him to be more equipped with the knowledge of the product information and placement in the store. A loyal employ always is an asset to the company for he helps in increasing the sales by attracting more customers. Brand knowledge is the key role in attracting customers. A customer will always look for the same employee that helps him choose the best of the best and gives proper information on the brand. To facilitate employees towards loyalty, salaries must be revised from time to time and extra benefits such as discount offers must be given especially for the employees in order for them to pay more interest in serving better. (Heskett et al, 1992) says that employ loyalty is essential if the company wants to increase customer satisfaction that in turn will lead to customer loyalty. Company also must keep rotating the employ

in order for him to remain interested in the job and try to enhance it by paying more attention to it. Training and development programs must be induced so that employs could benefit from them ultimately benefitting the company. Company should invest in good employees for it is one of the key factors in leading company’s goals and profit targets.

2.10 Loyalty and Profitability Customer loyalty in most company is measured in of its profitability that the company obtains. Higher the loyalty, higher the growth in sales and ultimately amounting to increased profits and winning goals. (Dowling & Uncles, 1997) believes that by reducing costs per serving, profitability can be produced but this assertion is opposed and denied by (Reinartz & Kumar, 2002) who stated after a survey based on four different organizations that it was viewed that customers who are d with the company are loyal to them and it is not difficult to tackle them but these loyal customers due to their long term affiliation often ask for discounts and individual value added services that may cost the company more than their original costs. On the contrary (Mc Ilroy & Barnett, 2000) say that loyal customers are mostly willing to pay heavier prices for their product as the regular customers do in order to obtain the product that they have been using consistently. The cost of switching as viewed by the loyal customers is considered as high and they prefer sticking to their loyalty by staying with the brand rather than going for any competitor and will continue to pay more for the products they are loyal to but it doesn’t hold true for all scenarios (Reinartz & Kumar, 2002). They suggest long-term customers pay lower prices, an average of 5%-7% lower. They also often get discounts when using the loyalty card. At grocery chains for example there is also no evidence that loyal customers pay more for the products, people all pay the same price. Loyal customers seem more price intensive than sporadic buyers. They can evaluate offers better and know best which offer to take and where they get more value. To set up higher prices for loyal customer is also difficult because if a loyal customer notices that he gets charged more he will be dissatisfied and will avoid the shop. Because loyal customers think that they deserve better and should not be rewarded in form of higher prices. In our days it is very difficult to set up price differentiation for a longer time. Most of the times, the loyal customers recommend the product from a specific place or bring other customers along in which the company finds a lot of interest in, as they are considered to be the future loyal customers. A strong buying behavior identifies whether the customer can be targeted as the loyal customer or not, but to find such shoppers, the companies need to invent more ideas and invest more capital in order to attract and identify them.

2.11 Conclusion This chapter concludes with the literature review of the main ideas of the study. According to various authors loyalty is different in different respects. Loyalty can be measured though satisfaction in some and in others according to their trend of obtaining a habitual product. Loyalty marketing can be identified as an in-depth process of creating and developing profitable relationships between customers and companies through data storage method. Various business strategies were discussed and the main that is taken into consideration for this dissertation is Tesco and the use of its Clubcard as a motivating factor for building loyalty among its customers thus resulting in profits. It is quite clear from the literature provided that customer satisfaction may or may not lead to customer loyalty and that they are two different concepts and sections. A frequent buyer can be satisfied but not necessarily loyal. The use of Loyalty Ladder is discussed in the context of generating revenues through following its steps and treating every customer individually rather than pooling them all in. the last section of the literature review discusses how loyalty in some contexts lead to profitability

and how they both are inter related. This section has handled some objectives of the study and explained them in a detailed manner. There are certain areas that need further research and analysis and for that the next sections of research methodology and data analysis are added for further investigation.

Chapter Three Research Methodology

3.1 Introduction Primary research is an integral part of a research for the purpose of covering all the objectives of the research. The methodology will exemplify in detail the methods that are used for the process of the primary research. The methodology will further give justification for the selected methods and evaluate them by explaining their advantages, disadvantages and the limitations of the methods.

3.2 General description of Research Methodologies Scientific methods have been derived by researchers for solving the problems of the research study. Steps are taken to logically and technically handle the problem under consideration. These steps evaluate the problem along with giving its possible solutions by demonstrating the methods involved in the research. Researchers not only should be known to calculate the problems by using various statistical tools like mean, median, percentages and graphs but also the use of these tools in problem solving. Moreover, the researchers should be skilled with the methods of evaluating the assumptions of problems, finding appropriate solutions and deciding which solution is applicable to the research and which is not important for it. Research design is an important tool in the research methodology process and it lays the basis for evaluating, problem solving and suggesting the solution that is in apt with the statement of problem. This is stated by (Byman and Bmguess, 1999) a conscious decision has to be made by the researchers which determines the direction and focus of the study, the research problem and solutions.

3.3 Review and Selection of Appropriate Research Methodologies There are two main approaches towards research methods. One is quantitative and the other is qualitative.

3.3.1 Quantitative Research Quantitative research is based on scientific derivations as it is termed by Charoenruk (2007) as ‘empiricism’ and ‘positivism’ by (Duffy, 1985) which in totality is taken in a more sensory experience than philosophical ideas. This form of research said by (Cormack, 1991) is originated from the use of scientific methods and techniques. This approach is a more objective and independent form of systematic and technical process which is derived from numerical data and their evaluation of results by making use of various tests and observes the cause and effect relationship through a deductive approach (Burns & Grove, 1987). It is a process of data collection by making use of facts

figures in form of numerical values. It defines the relationship between two or more than two variables and achieves their association by making use of the statistical tools. It is a form of research methodology that makes use of the statistical analysis and techniques to quantify the data as per Malthotra and Peterson (2006). A predetermined and aforethought set of questions formulating the questionnaire is compiled along with the responses and accordingly the data is collected. (Market Research World 2006) mentioned that there can be various means and communications through which one can derive and collect quantitative data but on-street and telephone interviews are the most frequently used mediums among them. 3.3.2 Qualitative research The researcher makes use of the qualitative method in order to broaden the scale of study through various means such as the theories, observations and the interviews conducted. It concerns a thorough set of information which is done through interviewing people in order to understand their inclination and behavior towards a particular subject (Market Research World 2006). The mostly used and common methods for this research are the profound group discussions and detailed interviews of the participants. Qualitative methods as described by Proctor (2003) are methods that are comprised of small samples which draw descriptive results and information about the opinions and feelings of respondents on the concerned topic. Charoenruk (2007) claims qualitative research as an inductive method. It does not quantify the results and are rather described in a theoretical language engaged during the process (Leach, 1990). This approach is a channel in which the subject view point of the more experimental and pragmatic world can be understood (Duffy, 1987). A more detailed and enlarged perspective by Benoliel (1985) is presented that explains the qualitative research as a logical enquiry which is obtained through understanding the nature and observations of the human beings. 3.3.3 Characteristics of Qualitative and Quantitative Research Both the research approaches must be used in order to achieve the objectives of the research study. A combination of the statistical assessment while taking the perceptions of the consumers into is formulated. Marketing research literature reveals these two approaches to be bipolar data measurement tools that go alongside. Qualitative approach targets to achieve thorough responses from a small group of respondents while on the other hand the quantitative approach emphasizes on deriving statistical information by targeting a large number of respondents. Despite of the obvious difference it is stated by Veal (1997) that the data often is collected through qualitative means but presented and displayed in a quantitative structural form which reinforces that open ended questions can be asked in a qualitative survey can be asked with opinion seeking format. Open ended question have a plus point as they cover a large base of questions with a number of different replies that are based on consumer’s personal opinions and behavior in their own terminology as per (Collis and Hussey, 2003). Therefore, it can be said as per the above stated description that the best method to achieve the objectives of the dissertation is through questionnaire survey. Certain definitions and description of questionnaire are presented. According to Luck and Rubin (1987), a questionnaire is an official time tabled document which is formulated to achieve the desired information in a complete and accurate manner. Bruce (2004) says that the role of questionnaire is to extract the required information

which helps with defining and explaining the objectives of the study and for this purpose the questionnaire must possess the accuracy of the data and findings obtained. The most effective use of the questionnaires can be derived by deg them in the best possible way so they cover the objectives of the study. Regarding this, McNabb (2004) state that it can be done through planning it in a way that determines the likings and knowledge of the people and their possible actions on a subject. The flexibility of the questionnaire leads to fewer rules to abide by for the mechanism development. Often it is decided to make use of the quantitative approach rather than the qualitative one. It is done mainly due to the fact that it covers large number of samples and mostly this is what is needed in a survey to achieve its objectives. Qualitative approach is mostly considered to be unsuitable for the study due to its in-depth interviews which are based on non-descriptive samples and may result in biased opinions of the respondents that is crucial for data analysis. The reason for this is that in a large group of people, there can be an individual that could affect the opinions and responses of the other individuals thus resulting in partiality and biasness of the findings. Due to this reason, the researcher needs to be skillful in order to derive accurate results and for this there is need of extensive study (McDaniel and Gates, 2006). Therefore focused groups are encouraged in comprehending emotions, ideas, thoughts and attitudes. Therefore, both qualitative and quantitative techniques are used in the survey. By making use of both the approaches it is believed that the objectives can be met by targeting a larger lot with curbed expenses.

3.4 Justification of Research Methodologies It was stated in the literature review section that there is a difference between a satisfied customer and a loyal customer. Regarding this Reichheld (1996) introduced a new aspect which stated that customer satisfaction can be used as an important tool to protect the customer loyalty. In the same respect, Duffy (2001) stated that satisfaction can initiate loyalty. These researches critically examine and demonstrate the role of loyalty tools in effective marketing such as the Tesco Clubcard which develops loyalty in customers by satisfying them. The details and impact of Tesco Clubcard on loyalty of the customers is illustrated in the literature portion where it has received praises for deriving customer loyalty but even though it received positive reviews there still is a need to explore into its logical facts and figures in creating loyalty. In this context, Humby and Hunt (2004) have presented their argument which illustrates that provision of customer reward programs are in no way a realistic substitute for loyalty driving brilliant services like product enhancement and advancement and that too at appropriate prices. Loyalty motivating factors were widely discussed in the literature review section to be the price allocation, cards and coupons, diversification of products along with excellent staff and services to the customers. Therefore it is examined that Tesco not only has been successful with the implementation of these strategies but also have been consistent in the success of Clubcard scheme. Taking into the above mentioned context, the basis for primary research is established to be whether Clubcard has been successful in creating loyalty in addition to locating whether the customers have been loyal towards Clubcard scheme or Tesco’s customer rewards programs in general. Clubcard is not merely a coupon but a reward that the customers receive on every shopping

experience as per (www.tesco.com). This has originated the idea that customers are more interested in being d with the brand name ‘Tesco’ rather than benefit from the reward programs. This affiliation and tendency towards Tesco may initiate from the magazines and mails that Tesco generates to build a persistent with the customers. Apart from the aforementioned literature, there was another concept discussed by Khan (1998) which states that consumers nowadays have become more vigilant and market conscious, and are aware of their needs and how their demands be met by influencing the suppliers. This concept is ed by Egan (2001) where he says that consumers drive and control the manufacturers by not compromising on any one deal and keep rotating and substituting one deal for another for their maximum benefit, hence maneuvering the suppliers. This may be implied that the loyalty card schemes rather than controlled by the suppliers are actually manipulated by the customers according to their own demands and requirements. Seth and Randall (2001) pointed the wide use of Clubcard scheme in the retail industry even though it is not an exclusive marketing strategy and neither was Tesco the benefactor of this program. Nevertheless, it was noted that despite of extensive usage of this tool, it has played a major role in safeguarding the company’s value by preventing customers from switching over from one place to another as seen in (Miranda et al., 2005). In this context it was examined by (Parker and Worthington, 2000) that whenever customers shop, they in return expect to be rewarded in some way or the other. Besides the questions that have been raised from the discussed literature review some other objectives were also not dealt with and left with doubts. So the extended research objectives are: 1. Investigate, understand and analyze the opinions and experience of the customers regarding Tesco Clubcard. 2. Measure the value of the Tesco Clubcard and to employ the collected information effectively. 3. Identify the chief s of the Tesco Clubcard Scheme and to classify them. 4. the effectiveness of Tesco Clubcard in building loyalty in customers and to determine the areas towards which the customers show loyalty. 5. Elaborate and examine whether it is necessary for Tesco to make use of the Clubcard in order to get loyalty from customers provided the various other schemes in action to motivate customer satisfaction. Investigate the speculation of customers controlling the suppliers by shopping according to their desires from one place to another.

3.5 Discussion of Sampling Issues A sample of 100 respondents have been collected and drawn from a population of visitors and shoppers to Tesco in Southwark, London. The sample size is limited due to certain delimitations which restrict the research. This can be said that due to limited resources, money and restricted time frame the population size was selected. Probability sampling is the best suited method for this survey as the sample comprises of only the Tesco customers. As per observation of Fink (1995) each and every member of the target population

holds a known nonzero probability for it to be contained in the sample. This is an effective tool in attaining a subjective response and makes sure the responses are just and impartial. Probability sampling is applied by approaching and inquiring for participation to the every fourth person that sets foot in the supermarket and this process will be repeated irrespective of the previous response. It is also kept in consideration that potential respondents will be asked for their input on their entry in Tesco because at that time they are free of any products in their hands and are likely to pay attention and provide more useful insight that could prove to be accurate and helpful for the research. Tesco in their limited capacity could allow us to carry out the research in the following dates and timings: Date & Time November 28, 2011 – 10:00am to 12:00pm November 29, 2011 – 10:00am to 12:00pm November 30, 2011 – 10:00am to 12:00pm December 1, 2011 – 10:00am to 12:00pm December 2, 2011 – 10:00am to 12:00pm December 3, 2011 – 10:00am to 12:00pm

Completed Questionnaires 12 18 26 20 13 11 TOTAL = 100

3.6 Data Collection Procedure According to (Bruce, 2004) questionnaire is a very important part of a survey process which can affect the deductions of the survey in a way it’s formulated. A poorly formed questionnaire can give wrong data or incomplete data resulting in incorrect findings and derivations. The questions must be apt and the language used must be according to the study that is needed to extract the information from the respondents.

3.6.1 Questionnaire Construction Process A construction procedure of the questionnaire is formulated by Malhotra (1999, cited in McNabb, 2004) which states that a questionnaire is bound to follow a set of patterns and procedures for the accomplishment of three significant objectives. The questionnaire must: 1. Successful assembly of information answering all the study questions. 2. Facilitate the respondents to answer to their utmost capacity and capability. 3. Keep the possible error quotient to the least. 3.6.2 Questions Structure and Terminologies It is important that the terminology used in the questionnaire must be clear in its meaning and brief and to the point giving a clear and concise idea of the meaning of the individual questions refraining from using slang language and double-direct questions that may have one meaning but it becomes

difficult for the respondent to answer them accurately. This has been stated by Bruce (2004) that proper knowledge of the subject matter is important and for this purpose the most important part is the language of the market that the writer needs to be skilled with in order to prevent him from falling apart. Biasness must be avoided in the questions by keeping the reference time periods shortened to cope with the respondent’s incapability to recall the response (McDaniel and gates, 2006). It was imperative to sketch out a profile of the Tesco Clubcard and for this purpose the age group and gender of the respondents are taken into . Pre-coded groups are used to rule out the sensitivity issue of the age factor. Types of questions have been taken in keen consideration. The questionnaire contains mainly of both the types of questions being multiple choice and dichotomous closed questions. The multiple choice questions are made to infer opinions of the respondents and in some cases to draw more than one opinion. On the other hand, the dichotomous closed questions result in one limited answer from the respondent which he gives in a short span of time, thus saving time. A Likert scale is used which basically is meant for better understanding of the opinions and accurate measurements of the attitudes of the respondents. This Likert scale is based on a level of one to five where the respondents are asked to select the options which best fits their situation and opinions (Foddy, 1999). The use of this scale is validated by giving the justification that it makes sure that respondents have plenty of choices to select the answers that are most suitable to them and through this scale, a better response can be generated with accurate measurement of attitudes. There is an open question added in the questionnaire for the purpose of facilitating respondents to write their own feelings and ideas about the question without any restriction which will help the interviewer in expanding the answers and disclosing the information. The analysis of the open question will be different from that of the other two types of questions as it covers larger aspect of attitudes and opinions but it is considered to to the previously derived data with useful and detailed information regarding motivational aspects of consumers and their opinions.

3.6.3 Questionnaire Layout The questionnaire should have a friendly vibe by giving an outlook of being easy and attractive that is eye-catching for the respondent rather than being complicated and complex in its outlook so that they can easily understand the main functions of each section while relating themselves with it, as stated by Cohen and Manion (1994). 3.6.4 Coding Method As cited in (Malhotra and Peterson, 2006), coding is a process to allot a code to each and every response given. This involves the process of data coding, tabulation of data and then analysis and interpretation of the data. This coding is done through statistical software which readily works on the data. Therefore, for the purpose of simplifying data entry process with fewer errors, most questionnaires are pre-coded where they are categorized as per the numbers assigned to them with their possible responses. According to (McNabb, 2004) the answers to open ended questions are assembled, classified and categorized and finally decoded into numerical data for statistical analysis.

3.7 Limitations and Challenges The data collection methodology by using questionnaires like any other type of research has its strengths, limitations and validity.

There are many advantages of questionnaires as cited by (McNabb, 2004) who states that the biggest advantage would be the substantial flexibility of the questionnaires. They can be tailored and changed according to the objectives of the study and to meet its criteria. 3.7.1 Strengths Questionnaires are spread and responses are collected in uniformity allowing the results to be more objective and mind-independent. The objectivity of the results prevents the analysis to be less biased and make it possible for the respondents to be more communicative. The acquired data and information is further given a more presentable structure by translating it into the numerical and graphical figures which facilitates a more organized logical analysis that can be further analyzed and interpreted by others. Normally whenever a questionnaire is used, it results in a possibly large illustrative sample. Information is driven from a large group of people and the fourth rule makes it possible for the data sampling to have an equal probability of being chosen. 3.7.2 Limitations As per (Milne, 1999) the various evaluation methods and techniques take place after the event itself and questionnaire method is also like the same method which may result in participants forgetting about the key issues and have problems in recalling them. This is further observed by Clarke and Crichter (1985) that there is always a gap between words and actions of the people thus creating a difference between the derived data and the original outcome which may vary the analysis of the data. Therefore the questionnaire results will not be a true depiction of the customer base due to the limited time frame set by Tesco. Therefore, the data will only be based on the total customer base of Tesco but limited to the visitors at that time frame and on those specific days when the survey was conducted. 3.7.3 Validity Keeping the questionnaire background in mind, the extent of control of the research is maintained by the ways the research study is accomplished. This proves its validity which is mainly dependent upon reliability of the study conducted. (EWB 2007) states that reliability and validity are different in the context that reliability is the characteristic of the tool whereas the validity is the method through with that tool is applied. The reliability of the questionnaire itself proves its validity. If it is not reliable, then it is not valid. This is further enhanced by Veal (1987) that validity of the questionnaires is mainly the level of accuracy that they display as they are meant to reflect it that way. A mixture of situations and circumstances can be negotiated where an interview takes place. The results can be effected if the respondents are in a hurry to answer and fill the questionnaire and also if they fail to understand the questions and answer without proper comprehension (Belson, 1986). Therefore the idea of approaching respondents is taken into so that there can be

lesser probability of inaccurate data caused by irrational deviation of opinions having a negative impact on the validity of the data.

3.8 Method of Data Analysis Data analysis is done after the collection of the data. Certain tools and techniques are used in order to analyze the acquired data. This process involves the classification of data, the coding and tabulation of data in which the data is arranged in the tables and drawing conclusions by using the statistical tools. A statistical analysis using ‘cross tabulation’ is done as per age and gender and comparing its effect with other factors in order to draw and examine the results.

3.9 Ethical Issues Tesco, the company selected for analysis, is a publicly held company. Over the web and on other secondary sources, most of the information about Tesco, and its products and services, is written in an advertising and marketing tone. Also, the annual filing of Tesco is written to assure and entice the shareholders to stay invested. During the course of the research, the researcher expects to thoroughly research Tesco’s different websites and other secondary sources to build an understanding of different products, services and business divisions of Tesco. Considering the persuasive nature in which the information is presented on these sites, there is a risk of getting the research biased, persuaded and polarized in critically analyzing the topic. In order to overcome this problem, the researcher plans to be comprehensive in his research approach and will take measures to not completely rely on one sided sources for the information. In order to carry out the primary research, electronic copies of the questionnaires will be sent to the participants in the MS-Word format. The language of the questions in the questionnaires may make the participants opinionated or biased in their responses. This problem will be overcome by sensibly choosing the right pool of mature and well represented participants.

3.10

Conclusion

In this chapter, the researcher has explained the research methodology that will be used in the data collection and analysis methods. Moreover, the research design has been illustrated in a detailed manner to cover purpose of this research. In addition to the outlined structure of the research, its collection methods and interpretation is also defined along with its validation. The aim of the study is met by making use of the qualitative and quantitative methods in the form of a questionnaire which will further be coded and presented in a statistical form. The next chapter presents the key research findings and presents data analysis in a detailed manner.

Chapter Four Data Presentation and Analysis

4.1 Introduction This chapter will discuss the findings from the primary research from the results of the questionnaire that is mentioned in the appendix and further analyze and interpret its results. Quantitative research was conducted and in this chapter it is properly linked with the results and its further investigation is made. This chapter is meant to meet the objectives of the dissertation in the form of data analysis and investigation of the research conducted with its correlation with dependent variables. 4.2 Data Analysis The previous segment of research methodology illustrated the various tools and techniques through which the data will be collected and the determination of certain areas regarding its analysis and presentation was discussed. These methodologies are important because they help in defining each objective separately and fulfilling its meaning. The two main techniques used in the presentation of

the data and analysis of the findings are by using frequency tables and second through cross tabulation of one variable with another. 4.2.1 Profile of the Clubcard Respondents A profile was important to identify for the purpose of laying the foundations for the data analysis. This was considered as the first step due to the diversity of the responses received and distinct ignorance establishing the s of these cards. Therefore the classification of age and gender was considered useful in compilation of the data and its analysis. As discussed previously, to make sure random sampling was done in order to avoid biasness in results, every fourth person was selected at random. Table 4.2.1.1 Select your Gender:

Male Female Total

Frequency 22 78 100

Percentage 22.0 78.0 100.0

Cumulative Percentage 22.0 100.0

Percentage= frequency/ total number of respondents *100 Cumulative Percentage = Percentage of X1+ Percentage of X2=X3 (so on) The above table indicated that 22 out of 100 respondents were male and the rest of 78 were female. There were certain time and sample size limitations to this data as given the time frame we may say that males do not shop at Tesco and females do but overall we can imply that the amount of females that hold a Tesco Clubcard is more than that of males. Even though the frequency of women exceeds male but men having the Clubcard is also quite noticeable and can be said that Tesco has acquired the section of males as well.

Chart 4.2.1.1 Gender based chart of respondents male

female

22%

78%

It is clear from the above chart that out of the total of 100 respondents’ large portion was of females being 78% and the rest were males i.e. 28% depicting an overall large frequency of female shoppers at Tesco.

Table 4.2.1.2 Identify your Age Group: Frequency 9 20 29 13 16 13 100

Under 21 22-29 30-39 40-49 50-59 Above 60 Total

Percentage 9.0 20.0 29.0 13.0 16.0 13.0 100.0

Cumulative Percentage 9.0 29.0 58.0 71.0 87.0 100.0

From the above table certain derivations can be done. Keeping in mind the limited time and sample size, it can be said that the maximum number of respondents aged from 30-39 with second largest number being 20-29. It can also be seen that the least number of respondents ranged under 21 years of age. This can be implied that the overall frequency change is diverse and there are people who shop in Tesco using Tesco Clubcard from ages under 21 to above 60. This shows how the Tesco Clubcard is used by people of all ages and its hold in the diverse market segment.

Chart 4.2.1.2 Age based chart of respondents Under 21 9%

Above 60 13% 22-29 20%

50-59 16% 40-49 13%

30-39 29%

The above chart clearly indicates the portions of ages of the respondents with largest number of people from ages 30-39 with 29% and least being under 21 of 9%.

Table 4.2.1.3 Cross Tabulation of Gender with Age

Under 21 22-29 30-39 40-49 50-59 Above 60

Male 3 8 3 4 2 2

Female 6 12 26 9 14 11

Total 9 20 29 13 16 13

Total

22

78

100

Table 4.2.1.3 clearly illustrates the segregation of the respondents with respect to gender and age. The demographics elucidate the popularity and usage of Tesco Clubcard across all age groups with maximum number of males from ages 22-29 and females aging from 30-39. On the contrary, the least number of respondents in men ranged at a stretch of 40 to above 60 and in women under 21. This can be illustrated in the diagram below. GRAPH 1 AGE AND GENDER 30 25 20 Male

15

Female 10 5 0 Under 21

22-29

30-39

40-49

50-59

Above 60

The above diagram clearly indicates the largest slot value of 26 in female of ages 30-39 and males of 8 in ages 20-29 reflecting that Tesco Clubcard is used mostly used by males and females in different age groups.

Table 4.2.1.4 Cross Tabulation of ‘Age Group’ with ‘Tesco Products and Image Trustworthiness’

Under 21 22-29 30-39 40-49 50-59 Above 60 Total

Strongly Agree 3 4 4 2 6 1 20

Agree

No Opinion

Disagree

3 10 18 3 5 10 49

2 4 2 5 3 0 16

1 1 3 3 2 2 12

Strongly Disagree 0 1 2 0 0 0 3

Total 9 20 29 13 16 13 100

The above table explains what age groups of the respondents feel they trust the products of Tesco and their image. This result indicates the possible loyal customers who feel high trustworthiness of Tesco products and believe that its image is credible. From the above table this result can be deducted that the age group that believes in Tesco’s product and its image range from 30-39. The level of mistrust on the products ranges from 30-39 and 40-49 respectively. An overall average out of 100 is noted to be 15% who do not trust Tesco products and their image and a large percentage of

69% believes and places trust in it. This can be said that Tesco has proved to be successful in acquiring loyalty of their customers by establishing a trustworthy relationship with them hence making a considerable place in the market. The remaining 16% displayed indifference towards their opinions on the matter. Nevertheless, it cannot be identified whether this level of trustworthiness has been achieved by the Clubcard scheme only or overall by Tesco products. It has hence been proven through this data that Tesco has gained the trust of people pertaining from all age groups and proving to be useful in all ages. 4.2.2 Customer Insight and Awareness Following tables in this segment indicate the limited but definite results of the perceptions and the level of awareness of the Tesco Clubcard s. This has proven to be quite useful for the analysis of the study. Table 4.2.2.1 Frequency of usage of Tesco Clubcard when shopping at Tesco Frequency Percentage Always 52 52.0 Frequently 34 34.0 Little 12 12.0 Never 2 2.0 Total 100 100.0

Cumulative Percentage 52.0 86.0 98.0 100.0

The above table reveals a large percentage of 86% out of 100 respondents make use of the Tesco Clubcard either always or more often. This indicates that the value of Clubcard among its s and the frequency of its usage. This means that the s incorporate the Clubcard as part of their shopping routine whenever they step into Tesco. However conversely, there is a lot of 14% who either use the Clubcard very less or never and they should be taken notice of. This group indicates the section of people who are not easily allured into loyalty marketing scheme induced in the market and do not get motivated to use this Clubcard scheme by thinking of it as something to be made use of. This may also indicate that Tesco needs to do more to attract and influence them and the Clubcard does not suffice to their demands. It was discussed in the literature review section by (Skinner, 1978, pg 19) that people often tend to follow similar patterns and a special set of behavior is often practiced again in the same dimension. But the results of the survey prove to be otherwise showing that practicing a usual pattern is not universal and cannot be established generically thus proving that it is not necessary that every person who shops in the market is influenced by the reward schemes.

Chart 4.2.1.1 Frequency of usage of Clubcard Never 2%

Little 12%

Always 52%

Frequently 34%

The above chart illustrates the percentage of the frequency of Tesco Clubcard s while shopping at Tesco. Largest percentage of 52% is of the people who always make use of their Clubcard indicating that people find the Clubcard useful and beneficial for them.

Table 4.2.2.2 Cross Tabulation of ‘Age Group’ with ‘if Tesco did not have the Clubcard scheme, would the customers continue shopping there’

Under 21 22-29 30-39 40-49 50-59 Above 60 Total

Yes 9 19 25 10 15 13 91

No 0 1 2 1 1 0 5

Don’t know 0 0 2 2 0 0 4

Total 9 20 29 13 16 13 100

The table above displays the age group of respondents and their correlation with the opinion of customers of Tesco if they didn’t have the Clubcard scheme. A significant percentage of 91% has been noted among the surveyed customers who said they will continue to shop at Tesco whether they have the Clubcard scheme or not. This may be implied that the customers regard the Clubcard scheme as an additional benefit that they may receive on their purchase. It can be said that the Clubcard scheme does not have much importance in the eyes of the customers when they shop at Tesco. Therefore loyalty can be described here as ‘emotional’ rather than ‘intellectual’.

Table 4.2.2.3 Cross Tabulation of ‘Tesco is innovative’ with ‘Tesco could do more in enhancing loyalty in customers’ Innovative/Loyalty Strongly Agree No Opinion Disagree Strongly Total Agree Disagree Strongly Agree 2 7 3 1 0 13 Agree 4 52 5 2 1 64

No Opinion Disagree Total

0 0 6

15 1 75

3 1 12

1 1 5

0 1 2

19 4 100

The equation of the correlation between customer’s perception on the fact that Tesco is innovative but Tesco could do more to enhance their loyalty through other incentives is established in the above table. A large number of respondents amounting to 81% believed that Tesco could certainly enhance loyalty in them as they agreed or strongly agreed upon this notion while on the other hand 77% believed Tesco as innovative. These two contrasts are viewed in one relation and it can be deduced from the above survey correlation that even though there is a considerable amount of customers who do feel Tesco could make them more loyal through more loyalty programs yet they feel this company is quite innovative originates creativity in its schemes and marketing strategies. The relation depicts a positive result.

Table 4.2.2.4 Cross Tabulation of ‘Tesco Products and Image Trustworthiness’ with ‘Tesco could do more in enhancing loyalty in customers’ Trustworthiness/ Strongly Agree Agree No Opinion Disagree Strongly Disagree Loyalty Strongly Agree 1 16 2 1 0 Agree 3 39 5 2 0 No Opinion 1 13 0 1 1 Disagree 1 5 4 1 1 Strongly Disagree 0 2 1 0 0 Total 6 75 12 5 2 There is a large percentage of customers who believe Tesco could do more to increase their loyalty towards them and it is noted that 81% of the customers have an opinion that Tesco could enhance their loyalty by incorporating various tools and techniques but conversely 69% strongly agree or agree with Tesco’s products trustworthiness. This means that even though there is a large group of people who believe Tesco could make them more loyal but also continue to shop at Tesco due to its reliability and product value. Table 4.2.2.5 Cross Tabulation of ‘if Tesco did not have the Clubcard scheme, would the customers continue shopping there’ with ‘expectation of rewards to be a part of my normal shopping experience’ Continue Strongly Agree Agree No Opinion Disagree Total Shopping/ Expect Rewards Yes 14 53 22 2 91 No 1 1 3 0 5 Don’t Know 0 1 0 3 4 Total 15 55 25 5 100 The above table indicates that 70% customers have the expectation of being rewarded with their shopping which means that they expect reward schemes to be a part of their shopping spree. Despite that there are a 95% number of respondents who were of the opinion that whether there

Total 20 49 16 12 3 100

are reward programs or not they will continue shopping there which indicates to the value of the company and its brand value. However, the individual effect is yet to be established.

Table 4.2.2.6 Cross Tabulation of ‘Ranking of Customer Loyalty Features’ with ‘have you exchanged your points you get on Clubcard in the form of any rewards in past 12 months?’ Ranking/ Points Redeemed in 12 months 1 – Very Important 2 3 4 5 6 7 8 – Least Important Total

Yes

No

Total

5 6 7 14 16 7 8 5 68

5 2 2 4 7 6 4 2 32

10 8 9 18 23 13 12 7 100

The above table indicates that 68% of the respondents made use of the redeem policy of points and had exchanged their points with the services that Tesco provide. This proves that the customers do tend to get attracted towards the incentives that Tesco induce. There was a 45% responses revealed from rank 1 to 4 as per the loyalty card scheme factors. These loyalty schemes showed a 45% importance level but a 55% unimportance level (from 5-8) which indicate that there are more number of people who consider these loyalty programs as something not to be taken use of. Even though there is a high number of people who do take advantage of these schemes and redeem their points but there are others as well who have other interests than redeeming card points earnings.

4.2.3 Customer Loyalty and Satisfaction Previously in the literature review portion, various viewpoints have been discussed displaying a relation between customer loyalty and satisfaction. In this section, independent variables are taken in through the results of the conducted survey which analyze their correlation according to cross tabulation method. Table 4.2.3.1 Cross Tabulation of ‘being loyal to Tesco’ and ‘being a satisfied customer of Tesco’ Loyal/ Satisfied Yes No Don’t Know Yes 21 12 5 No 34 12 9 Don’t Know 2 2 3 Total 57 26 17

Total 38 55 7 100

From the table above there are certain derivations that we can state with respect to loyalty and satisfaction. It is concluded that 57% of the customers who were chosen for the survey had

portrayed that they are satisfied customers of Tesco. Having stated this, there is a 34% number of respondents who depicted that they are satisfied customers but not loyal. This can be deducted from the above illustration that customers who are satisfied are not essentially loyal as well. On the other hand 12% of the respondents depicted they were not satisfied but they showed themselves as being loyal which may mean that they are bound to be loyal as per the statement in the literature section by Barnes (2002) that such customers can be loyal as per their easiness and can be labeled as functionally loyal as they can choose to continue to shop at a place as per their convenience. Moreover, a 21% of respondents showed that they are loyal as well as satisfied which indicated a high ratio of customers matching up their loyalty level with their satisfaction level as per the linear progression theory as illustrated in the literature review section. The results cover the literature of Duffy (2001, pg 36) that Clubcard schemes can be taken as an initiative to achieving loyalty but there should be more factors introduced in order to protect and keep the existing customers. The 9% deviation in the results indicates that it is not sufficient for the customers just to be satisfied to achieve loyalty in them as they need added advantages for the transition of satisfaction to loyalty. This can be deduced that an increase in the level of customer satisfaction does not equate to increasing customer loyalty which is verified from the literature. It can be inferred from the above results that there need to be more than single variables to achieve loyalty and satisfaction as one may not suffice. Therefore Tesco needs to make use of other marketing tools such as pricing strategy and product diversification etc along with the Clubcard in order to achieve customer loyalty in them. GRAPH 2

Loyalty and Satisfaction 40 35 30 25

Yes

20

No

15

Don’t Know

10 5 0 Yes

No

Don’t Know

It is illustrated in the above diagram that 34% of respondents feel they are satisfied but not necessarily loyal indicating that satisfaction does not always lead to loyalty. However there is a 21% showing both loyalty and satisfaction. 4.2.4 Effectiveness of Information achieved from Tesco Clubcard As per (Stone 2004, pg 203) Tesco’s Clubcard magazine issues over 9 million copies after every 3 months and it is considered as a vital component in the scheme. The magazine itself is viewed by many customers which results in added advantage in gaining Clubcard in numbers. 68% of the

respondents in the past 12 months as illustrated in Table 4.2.2.6 chose to redeem their points for the rewards by Tesco. Further the information for the Clubcard magazine is explained and discussed. Table 4.2.4.1 Frequency of respondents who read or do not read the Clubcard magazine Frequency Percentage Cumulative Percentage Yes 32 32.0 32.0 No 46 46.0 78.0 Sometimes 22 22.0 100.0 Total 100 100.0 The above table illustrates the frequency of the respondents who choose to read or not read the Tesco Clubcard magazine. The 100 respondents selected resulted in 46% saying that they do not read it at all while 32% in a positive response saying they do. While a 22% indicates that it is read sometimes by the Clubcard holders. It also depends upon the duration since the customer is holding the Clubcard. Overall results in this table imply that customers are not much interested to read the magazine. Table 4.2.4.2 Cross Tabulation of ‘do you read the Clubcard magazine’ with ‘indicate your opinion on the magazine’ Do you read/ Opinions It covers your It is a good read with It is uninteresting, of magazine expectations and is some informative unhelpful and useless beneficial features and articles Yes 9 8 15 Sometimes 3 15 4 Total 12 23 19 The number of respondents who read the Clubcard magazine is 54 out of a total of 100. And out of these 54 respondents, 19 found the magazine uninteresting, dull and useless. It can be derived from the above results that the magazine is not proving to be beneficial for Tesco and the funds that are used in the marketing costs of the magazine can be relocated to a better use. The magazine is not proving to be a useful barrier between the products and the customers. GRAPH 3

Tesco Clubcard magazine 16 14 12 10 8 6 4 2 0

Yes Sometimes It covers your It is a good read It is uninteresting, expectations and is with some unhelpful and beneficial informative features useless and articles

Total

32 22 54

The above diagram represents the number of respondents who read the Clubcard magazine and maximum number of people who find it a good and informative read. 4.2.5 Has Tesco Clubcard been successful in building Loyalty? Following Table 4.2.5.1 illustrates the relation in order to identify whether the Clubcard has been able to create loyalty in its customers or not. Retail loyalty as described in the literature section, according to Humby and Hunt (2004, pg 9) that it is a slight shift in the preferences that the consumers has in his purchases and it requires an added benefit in the buying of the customer that leads to retail loyalty. To establish the connection between the buying behaviors of the customer, it is crucial to cross tabulate two variables of the questionnaire that prove the Clubcard loyalty as being true or functional.

Table 4.2.5.1 Cross Tabulation of ‘does point collection on Clubcard persuade you to buy other bonus points collecting promotional products’ with ‘Promotional Benefits in Store Location’ Buying promotional products/ Store Location Yes No Don’t Know Total

1 – Very Important 1 18 1 20

2

3

4

5

6

7

8 – Least Important

Total

0 2 1 25 15 7 5 3 4 30 20 12

1 3 5 9

0 4 2 6

0 2 0 2

0 1 0 1

5 75 20 100

The above table indicates a staggering 75% respondents answering that the point collection on the Clubcard did not influence their purchasing behavior and they did not feel compelled to buy any other promotional product. According to the above statistics, it appears that the Clubcard has proven to be unsuccessful in creating loyalty hence rise in the sales. The amount of mere 5% is enough to generate marginal profits as discussed earlier in the literature. The result of this 5% is noticeable in the overall profit statement. The other factor was the location of the store and it is noticed in the table that the customers who buy other products did not give importance to the location of the store thus crossing out the notion of functional loyalty. This may mean that the increase in expenditures indicates true loyalty towards the Clubcard.

4.2.6 Are Consumers Influencing the Suppliers? Table 4.2.6.1 Frequency of respondents of owning a card other than Tesco Clubcard Frequency Percentage Cumulative Percentage 1 other card 26 26.0 26.0 2 other cards 47 47.0 73.0 3 or more other cards 9 9.0 82.0 I own only the Tesco Clubcard 18 18.0 100.0 Total 100 100.0 The above table indicates that the largest amount of respondents of 47 out of 100 owns 2 or more other cards than Tesco Clubcard. It can be believed that loyalty in today’s age is hard to achieve due

to the diverse range of reward cards to choose from. Customers have evolved their tastes and ideas about buying a product and with the innovation of supply side, the consumer side has managed to become advanced and equipped with new buying strategies that make it harder for the supplier to result in loyalty of the customer.

Chart 4.2.6.1 Frequency of owning other cards I own only the Tesco Clubcard 18% 3 or more other cards 9%

1 other card 26%

2 other cards 47%

The above chart indicates that there is a large percentage of 47% who own 2 or more cards other than the Tesco Clubcard indicating that people are now more aware of their demands and means to meet them.

Table 4.2.6.2 Frequency of ‘customers who usually shop around in order to get the best deals’ Frequency Percentage Cumulative Percentage Strongly Agree 26 26.0 26.0 Agree 35 35.0 61.0 No Opinion 7 7.0 68.0 Disagree 24 24.0 92.0 Strongly Disagree 8 8.0 100.0 Total 100 100.0 Table above identify the frequency to be 61% of the people who agree to the fact that they do shop around and explore the market to get the best of the best deals and get benefitted from them. This result thus ascertains the idea of Khan (1998) that the customers are more equipped and skilled than the marketers and hence they manipulate the marketers for their own needs and demands. The value of the Tesco Clubcard is further deteriorated with the above findings.

Chart 4.2.6.2 Frequency of shoppers who shop around to get best deals Strongly Disagree 8% Strongly Agree 26%

Disagree 24%

No Opinion 7%

Agree 35%

The above chart indicates that there is a large percentage (35%) of respondents who agree that they do shop around to get the best deals. This shows that shoppers are skilled and influence the suppliers.

4.2.7 Does Tesco Really Need the Clubcard (Loyalty Influencing Factors) Table 4.2.7.1

Value for money Store Location Staff cooperation and service quality Loyalty card schemes Variety of Products and presentation Store design and general appearance In‐store promotional magazine and leaflets Money off vouchers/coupons and special promotions/ments Value in Percentages %

1-Very Important 30 20 14

2 3 4 19 16 9 30 18 14 15 21 9

5 5 9 9

11 22

7 9

2

18 14 23 12

1

0

2

0

2

5

6 7 7 9 5 2 14 13

9 20 22 9 9 15 12 13 17 10 5

8-Least Important 5 2 5 13 2

16

10

4

15 21 14

43

9

15 22 27

20

According to the ranks given by the customers to the loyalty by these factors which influence loyalty, following illustration can be derived:

1. 2. 3. 4. 5. 6. 7. 8.

Value for money Store Location Staff cooperation and service quality Loyalty card schemes Variety of Products and presentation Store design and general appearance In‐store promotional magazine and leaflets Money off vouchers/coupons and special promotions/ments

The above findings show that the most important factor is the store location and value for money in determining whether the loyalty can be affected or not. Card schemes are ranked at the bottom showing not much of importance for the loyalty card schemes and coupons and special promotions as hitting the bottom as being least important.

Table 4.2.7.2 The last table below is for the open ended question in which the respondents were asked of their open views on how can Tesco improve their loyalty. Following were the results:

What more could Tesco do in order to enhance loyalty in you? Frequency Percentage Cumulative Percentage Facilitate elderly customers 18 18.0 18.0 Discounts rather than rewards 35 35.0 53.0 Provide transport facility 12 12.0 65.0 Expedite check-out counters 15 15.0 80.0 Improve online shopping 6 6.0 86.0 Enhance range of products 14 14.0 100.0 Total 100 100.0 The above open opinions of the customs point to the fact that most customers demand and prefer discounts than reward points. This forms the basis of the Clubcard scheme and most customers feel it will make their life simpler by replacing discount with the reward points that are to be redeemed. Facilitating the elderly is also very much asked to keep in mind and improvement of brands by expanding the range is also suggested.

Enhance range of products 14%

Chart 4.2.7.2 How can Tesco Clubcard enhance loyalty in customers

Improve online shopping 6%

Expedite check-out counters 15% Provide transport facility 12%

Facilitate elderly customers 18%

Discounts rather than rewards 35%

The above chart illustrates the percentages of respondents who feel that there can be various methods through which Tesco can improve loyalty in them. The maximum number of people was 35% who said that discounts are better than the reward points they earn from Clubcard scheme. 4.3 Conclusion According to the analysis through the primary research certain findings have been seen and the aims and objectives of the study have been attained. Tesco Clubcard was evaluated through various factors. There were various marketing tools that were classified which formed the basis of our findings and evaluations. The results pertain to the fact that the customers of Tesco are loyal and hence the Tesco Clubcard scheme that Tesco offers proves to be an asset for the company. It is achieved that the Clubcard is quite valuable as a marketing tool and loyalty schemes such as Tesco Clubcard prove to be successful marketing tools in developing loyalty in customers. The wide acceptance of the Clubcard by the customers has indicated the success of the Clubcard alone. Keeping in mind the results of the success of the Clubcard, it is also concluded that it is not the sole purpose for customer loyalty. It was evident from the findings that there are other features and factors that affect loyalty within customers and thus we cannot state that the theory is ed by the findings that the Clubcard is the only reason to motivate customers in being loyal. Other factors include location of the store, value of the money, magazines, store layouts and promotional vouchers that need to be dealt with in order to sustain the loyal customers. Furthermore it is deduced that the cost on the Clubcard is relatively higher than the results it gains. Therefore the same resources should be reallocated in some other marketing strategy that benefits the company accordingly. It is also established that there are a number of customers who own cards other than the Tesco Clubcard hence influencing and manipulating the suppliers according to their demands and needs. They shop around for better market prices, brands and offers an promotions which is a smart strategy to influence suppliers to meet their demands. The new era has made the customers savvier and knowledgeable of the market buying and purchasing strategies. They know what is best for them and how they can achieve the desired product. Thus the Tesco Clubcard as innovative as it was back then needs to devise newer improved strategies to attract customer loyalty nowadays.

Chapter Five Conclusion and Recommendations

5.1 Introduction The main purpose of the study was to find out whether customer loyalty tools can be used as effective marketing tools in building loyalty among customers. For this purpose, the study of Tesco and Tesco Clubcard was used. In this chapter the main findings of the study will be discussed and recommendations will be given with investigating into the results of the primary research conducted.

5.2 Conclusions of the study According to the literature presented in chapter 2 of the dissertation, it was explained in detail how there are various marketing strategies in the market today and how the Clubcard scheme is priceless in of motivating loyalty and creating benefits for the company and its s. Due to the data base management of the profiles based on buying behaviors, tastes and preferences of the customers, Tesco now stands at a strong position in the market with the leading number of customers making use of its services especially the Clubcard. The literature stated that holding a Clubcard meant the customer has loyalty but the data findings of the questionnaire have proved otherwise. There are other factors pertaining to the fact that loyalty is not subject to only one marketing tool but is affected by many other factors. It was thus deduced that holding a card does not label a customer as loyal due to market segmentation and diversification that the customer can choose from. One of the most effective tools besides the loyalty cards is the store location and pricing policy that enhances customer loyalty. It was further concluded that the cost reimbursed in providing the Clubcard to the customers is fairly high than the results it bear. Therefore it can be said as per the findings that those same costs can be allocated to a better use in another marketing strategy that customers feel compelled towards. The new technological discoveries and innovations every day have made the consumers nowadays more market savvy which has made them aware of strategies to purchase the goods in a way that suits their needs, interests and money value. The attitudes of the customers have changed since the inception of the Clubcard scheme in 1995 as there are similar schemes induced in the market that gives choices to the customers in a way that gives competitive advantage to them. As per the literature provided of Parker and Worthington (2000) it was mentioned that consumers are unaware of the market and un informed about their interests but the primary research has proven otherwise giving us ample knowledge of the awareness of the new aged consumer. They know where to get the best deals from by rotating in the market and by owning more than one loyalty cards is a clear depiction of how advanced the consumers have become. The advancement and technology has brought the market knowledge to their door step and there are various means nowadays through which the information can be gained. The competitive advantage is in of pricing strategy and best deals at discount offers and other promotions and clubbing of brands and products to enhance product selling. Due to increasing rewards on the loyalty cards, customers have now started expecting rewards and/or discounts on their every shopping spree. It is further established through our primary research that true loyalty is often over taken by functional loyalty which is subjected to individual facilities the company has to offer. Moreover, the customers demand for simplification of their everyday life by inclusion of discounts rather than reward points, provision of transport facility, broadening the range of the products and convenient and fast checkout counters so that they are motivated towards loyalty. Living in a fast life, the consumers expect and demand a fast service in

of discounts rather than reward points that prolong the process of receiving bonuses and savings. Therefore it can be said that the Clubcard strategy should be changed to be aligned with the demands of the customers so that it can prove to be an effective loyalty marketing tool. The study also revealed that Tesco Clubcard is owned and used by a large number of people which makes it valuable for the company and is regarded as an asset for Tesco. This usage was calculated on the fact that the customers trust the products of Tesco and consider it to be reliable in of providing reliable and quality products. The vast range of results also pointed out to a section of customers who despite of owning the Tesco Clubcard do not use it giving us the idea that Clubcard is not a sufficient marketing tool in order to extract loyalty out of the customers. In some cases, it was examined that irrespective of whether the company offers a reward scheme or not, the customers tend to stick to their existing company and not tend to shift to the rivals as it was revealed in the primary research. It is explored that when a company introduces a customer reward program to its customers, it should deliver the information to them in a concise and specific manner that is easily comprehended by the customers and is not complicated, dull or boring that the customers do not feel compelled to read. Tesco magazine could prove to be a fruitful barrier between the customers and the organization but on the contrary the research revealed that it is not popular among the customers as most giving a low response to its usage or in other cases being indifferent towards it. Furthermore, the literature of Parker and Worthington (2000) stated that loyalty is not purchasable and this comment is ed by the findings of our research that more than half of the respondents claimed themselves as Tesco’s satisfied customers and also that they will continue shopping at Tesco as they trusted the company and its image. The findings depicted that the loyalty card era is becoming obsolete and coming to a threshold of a point where they can go extinct. This is because of the fact that a large number of loyalty schemes are incorporated in the market creating competitive advantage for the customers giving them wide variety of selection. Thus the card scheme value has reduced. According to the findings, Tesco Clubcard value is limited due to certain factors being rivals and competitors in the market, the external environment and awareness and the changing perceptions in of effectiveness and productivity of the promotional magazines. The results of the study of Tesco Clubcard are controversial pointing out to the fact that it has made it harder for the customers to achieve loyalty and thus it does not meet with the rationale of the study. Lastly, it is also concluded that the Clubcard in its present state has reached its brink and will not prove any more value to the company unless revised. 5.3 Recommendations There is no doubt about the success and accomplishments of Tesco in the past decades. Tesco owns most of its credit to the Tesco Clubcard but it has lately been viewed that there has been a considerable decline in the Clubcard usage and its value in the market as the marketing tool. Due to this, following recommendations are given:  Probe into the important fundamentals of consumers and distribute and allocate the finances and resources in a way that customer demands are dealt with.  Investigate cost reduction and investment in Tesco Clubcard scheme and putting them in areas that need attention like price allocation in order to maintain competitive advantage over rivals.  Modify the Tesco Clubcard as per the demands and tastes of the customers in order to motivate and persuade customers to be more ionate about the Tesco Clubcard.

5.4 Limitations of the Study and Further Research

There are certain limitations of the study. Mainly being that a sample size of 100 respondents was taken due to time constraint. Tesco allowed the survey to be conducted only at the aforementioned time and dates. Therefore, the result cannot be fully established within the given data but unfortunately the results had to be taken in general in order to derive results. Due to limited time and resources, a constraint sample size could be taken. If given the time, interviews could have been conducted that would have proven to be more beneficial and substantial for our study. Single store of Tesco in Southwark London was taken due to time constraint. The study could have been more concrete had there been more store outlets being surveyed from. The study has discussed the Tesco Clubcard holders, their patterns and behaviors and has left out the non-card holders. If the non-card holder segment was taken into as well, it would have given a much broader spectrum of the factors effecting customer loyalty and as to what marketing tool/s are more effective in achieving loyalty.