Loyalty cards have been one of the marketing tools
of the 1990s. Despite the fact that Loyalty schemes have been
around for some time, questions have been asked about their
effectiveness. The withdraw of loyalty cards by some UK retailers
such as Asda, Safeway and Somerfield has added more fuel to
the debate. Loyalty schemes have been around for some time
and are operated by many companies, predominantly retailers.
Most operate on a system of discounts, vouchers or gifts for
points accumulated. In the UK, many retailers and other service
companies have developed so-called loyalty cards as part of
their marketing mix.
According to Mintel report counting only the supermarket loyalty
cards, 20 million cards have been issued in the between 1992
and 1994. Today, according to Mintel [1],
about 63% of adults participate in a loyalty scheme run by
one of the leading retailers. However, more than 40% have
more than one card in two different competitive retailers.
According to Burnham loyalty schemes do very little for the
consumer and merely serve to prop up the organisation: “At
the end of the day, are customers being bought cheaply, and
unknowingly digging deeper into their own pockets to increase
retailers’ profits?” However other markets disagree
with Burnham.
They point out that Consumers relationship marketing (CRM)[2]
as the process of creating, and maintaining strong, relationship
with customers and loyalty schemes are the cornerstone to
this process. They point out that increasing, marketing is
moving away from the focus on individual transaction towards
a focus on building a relationship with consumers and loyalty
schemes is one of the ways in which this is done. Advocate
of these schemes point loyalty card helps a great deal in
collecting valuable market data on customer purchases and
preferences.
1.2 MARKETING AND LOYALTY CARDS
Marketing management rest upon how consumers behave in reaction
to product, price, promotional and distribution strategies
(Festinger and Bramel 1962 ).[3]
In competitive economies, successful marketing depends on
matching the marketing mix by integration strategies to consumer
willingness to buy effectively from you than the rivals (Kotler,
1997 ).[4] The consumer-
oriented marketing, which result from such matching, is in
response to the enormous discretion exercised by purchases
in the economies (Baker, 1997 ). [5]
Moreover, the choice made by consumers has consequences not
only merely for competing companies within a given industry,
because companies are increasingly forced to compete across
the conventional boundaries of markets and industries but
also on the long term survival of the brand (Baker, 2000).
Companies do not compete merely with known rivals in the same
trade, but with each other, whose disparate business involves
entirely separate responses to the creation and fulfilment
of demand. The nature of consumer’s choice nowadays
is such that the survival and growth of firms depends upon
managers having an accurate understanding of consumer’s
buying pattern (Siomkos, 1994 )[6].
By understanding consumers, a company is better suited to
build a product and brand, which the consumers desire (Blackston,
1992) [7]. Therefore
collecting information from consumers using loyalty card ensure
that the retailer is best suited to produce and deliver what
consumer need.
1.3 AREA OF STUDY The research focused solely on the UK retail supermarket
scheme, in particular Tesco’s club card. The research
sought to find out the advantages in introducing loyalty cards
against the costs? What are the disadvantages? Would customers
come into the stores anyway, or are they enticed by the loyalty
schemes. The research survey was carried out outside Tesco.
Tesco supermarket retail store was the location of the survey.
This is due to the fact that, supermarket retail has a loyalty
card scheme.
1.4 PROBLEM DEFINITION The problem definition was to find the effectiveness
of the Tesco loyalty scheme. The research will also seek to
assess whether, the scheme are still effective form to meeting
consumer need, or whether there are other ways of meeting
these need.
1.5 THE RESEARCH PROCESS
The research process followed the one recommended by Sekaran
(1992) [8]as shown
in the figure below. The broad area of research has been identified
as the retailer supper market.
Figure 1.1: The research process Source: Sekaran (1992)
1.6 RESEARCH OBJECTIVE The aim the research was to ascertain answers to
questions whether loyalty schemes are effective. Furthermore
the research sought to find out how consumer’s perception
on Tesco loyalty scheme and if they find them useful. Therefore
the objectives of this research were:
• To attempt to assess to what extent Tesco’s
club card contributed to the store’s fortunes.
• To attempt to assess via primary research what kind
of emphasis customers place on store loyalty.
• To assess the data mining opportunities of loyalty
cards for the store.
• To examine the future of loyalty cards.
• To examine the significance of customer loyalty schemes
to organisations
• To identify the benefits of loyalty schemes for customers.
• To determine the impact of loyalty schemes on customer
decision-making.
The research also sought to satisfy the differing level of
experience readers from differing backgrounds such as marketers,
employers, academics etc, who could be interested in the results
of the research.
1.7 USEFULNESS OF RESEARCH
The research also explored some aspect of consumer attitudes
and perception towards loyalty schemes. The findings could
be useful in understanding loyalty schemes.
Mintel report (2001), Marketing
Intelligence’ Vol: June 2001[Return]
Festinger L and Bramel S (1962)
Consumer Behaviour, Basic Book press[Return]
Kotler P, (1997) Marketing Management:
Analysis Planning and Implementation,
London; Prentice Hall Publication[Return]
Baker J M (2000), The Marketing
Book; Oxford, Butterworth Heineman[Return]
Siomkos B, (1994) Principles
of Marketing London, Addison Publication[Return]
Blackston, M (1992) ‘A
Brand with an Attitude: a suitable case for treatment’,
Journal
of Marketing Society, Vol 3, p 231-241[Return]
Sekaran U (1992) Research Methods
in Business (A skill building approach) New
York 2nd edition, John Wiley & Son INC [Return]
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