Loyalty Marketing Tool

School of Management
Blekinge Institute of Technology
The accuracy of customer reward program as loyalty marketing tool
Philip Law
Supervisor: Anders Hederstierna
Thesis for the Masters degree in Business Administration Fall/Spring 2008
Abstra ct
ABSTRACT
Relationship marketing is perceived as a leading trend in marketing and twentyfirst century consumers have evolved into becoming increasingly promotionliterate (Harlow, 1997 cited in Egan 2001, pg 381). The knock on effect of this is a decrease in reliance on traditional and most frequently used methods for building customer relationships. For over a decade, supermarkets have transformed the shopping experience through the creation of out of town locations which can accommodate the development of considerable sized outlets, extensive product ranges expanding beyond food. Offering a wide range of services one would not normally associate with a supermarket such as telecommunications, finance and insurance, and with this the additional incentive of customers collecting and redeeming points through customer loyalty programs. Categorically today Tesco is not only the UKs largest grocer, but also the worlds most successful internet supermarket (Humby and Hunt, 2004, pg 1). The Tesco Clubcard is widely considered to be a pioneer and success story in loyalty marketing, helping to propel Tesco to be the number one supermarket retailer in the UK (Tapp, 2005, pg 176). By carrying out a literature review on previously published materials and the use of a quantitative survey, this study aims to uncover and identify the value of the Clubcard scheme and how significant it is it in creating true customer loyalty to Tesco. The findings of the study revealed consumers place greater importance upon store location, value for money and product range rather than loyalty card schemes, in store magazines and vouchers. 1
Abstra ct The results revealed that although respondents aspired to gain points and redeem the rewards offer by the Tesco Clubcard, they also showed that todays consumer is more in touch and has a greater knowledge of the schemes and as such consumers tastes, perceptions, attitudes and demands have
Abstra ct evolved. Furthermore, it was revealed that consumers are effectively manipulating suppliers to their own ends as the findings exposed that consumers are shopping around for the best deals and they own and actively use more than one loyalty card. The primary research revealed the failure to evolve the Tesco Clubcard scheme into what todays consumer demand has brought the Clubcard proposal to a unique crossroad. It is recommended that the Clubcard model evolves to adapt to the new tastes, attitudes and demands of the new generation of consumers. An understanding of the 21 century consumers will help ensure a loyal customer base. Areas such as lowering prices shall help sustain a competitive advantage within the supermarket industry. Further consideration should be given to giving customers an instant rebate at the point and time of sale rather than rewarding them through the collection of points. The current image of the Clubcard feels dated and as such a revision and re launch may give it a much needed boost and help motivate and excite consumers.
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Acknowledgem ents
ACKNOWLEDGEMENTS
I would like to give thanks to the following people for their help and support in the completion of this study. First and foremost I would like to give great thanks to my family and friends who have supported me through my studies. Special thanks to my partner Jenny for all her help and support during my course and the writing of this thesis I couldnt have done it without you! I would like to thank my tutor Anders Hederstierna for his time, attention and guidance throughout the writing of this thesis. Finally I would like to thank Tesco for allowing and helping with the research of this dissertation.
Philip Law
Table of Contents
TABLE OF CONTENTS
Abstract Acknowledgeme nts Table of Contents Table of Figures
1.0
CHAPTER ONE INTRODUCTION

1.1 1.2 1.3 1.4 1.5 1.6 The Rise of Tesco The Background to the Study The Scope of the Study Purpose Objectives Summary 7 8 9 10 10 11
2.0
CHAPTER TWO LITERATURE REVIEW

2.1 2.2 2.2. 1 2.3 2.4 2.5 2.6 2.6. 1 2.7 2.8 2.9 Introduction The Tesco Story The Tesco Timeline Characteristics of Customer Relationship Management (CRM) The Clubcard Phenomenon Defining Loyalty Loyalty Marketing The Customer Loyalty Ladder The Tesco Clubcard as a Loyalty Marketing Tool The Relationship between Satisfaction and Loyalty Does Loyalty Result to Profit? 1 3 1 3 1 7 2 0 2 1 2 3 2 6 2 9 3 1 3 4 3 6
Table of Contents 2.1 0 2.1 1 Do Customer Reward Programs Deliver Long Term? Conclusion 39 43
3.0
CHAPTER THREE METHODOLOGY

3.1 3.2 3.3 3.3. 1 3.3. 2 3.4 3.4. 1 3.4. 2 3.4. 3 3.4. 4 3.4. 5 3.4. 6 3.5 3.6 3.6. 1 3.6. 2 3.6. 3 3.7 Introduction Research Objectives Selection of Research Methods Features of Qualitative and Quantitative Research Analysis of Data Questionnaire Design The Eightstep Questionnaire Construction Procedure Justification of Questions Question Types and Wording Questionnaire Layout Interviewer Versus Respondent Completion Coding Sample Selection Procedure and Sample Characteristics Strengths, Limitations and Validity Strengths Limitations Validity Summary 4 8 4 8 5 0 5 2 5 4 5 4 5 5 5 6 5 6 5 7 5 8 5 8 5 9 6 0 6 0 6 1 6 2 6 2
4.0 CHAPTER FOUR RESEARCH FINDINGS AND ANALYSIS

4.1 4.2 4.2. 1 4.2. 2 Introduction Analysis User Profile of Tesco Clubcard Respondents Customer Perceptions on Tesco Clubcard 64 64 64 67
Table of Contents 4.2. 3 4.2. 4 4.2. 5 4.2. 6 4.2. 7 4.3 Loyalty and Satisfaction Tesco's Efficiency and use of the Information Gained from Clubcard Has the Tesco Clubcard Created Loyalty? Are consumers Manipulating Suppliers? Does Tesco Really Need the Clubcard? Conclusion 72 73 75 76 79 82
5.0
CHAPTER FIVE CONCLUSION

5.1 5.2 5.3 5.4 Introduction Conclusion of the Study Recommendations Limitations and further research 85 85 89 90
REFERENCES
93
BIBLIOGRAPHY
103
Appendix A Questionnaire Justification Appendix B Questionnaire Appendix C SPSS Coded Questionnaire Results Appendix D SPSS Frequency Tables for Questionnaire Results
105 107 110 114
Table of Figures
TABLE OF FIGURES
2.0

2.2.1 17 2.6.1 29 The Tesco Timeline Customer Loyalty Ladder
3.0
CHAPTER THREE METHODOLOGY

3.3.1 52 3.4.1 55 Features of Qualitative and Quantitative Research The EightStep Questionnaire Construction Procedure

4.2.1.1 Frequency table: Gender of Respondents 65 4.2.1.2 Cross tabulation: Please Choose your Gender * Please Indicate Which Age Group You Fall Into 65 4.2.1.3 Cross tabulation: Please Indicate Which Age Group You Fall Into * I Trust Tesco Products and Their Image 66 4.2.2.1 Frequency table: Please Indicate How Often You Use Your Clubcard When You Purchase Goods or Services with Tesco 67 4.2.2.2 Cross tabulation: Please Indicate Which Age Group You Fall Into * If Tesco Did Not Have the Clubcard Scheme, Would you Still Continue to Shop There? 4
68
Table of Figures
4.2.2.3 Cross tabulation: I Think Tesco is Very Innovative * I Feel More Could be Done to Increase my Loyalty 69 4.2.2.4 Cross tabulation: I Trust Tesco Products and Their Image * I Feel More Could be Done to Increase my Loyalty 69 4.2.2.5 Cross tabulation: If Tesco did not have the Clubcard scheme, Would you Still Continue to shop there? * I Expect Rewards to be a part of my Normal Shopping Experience 70
Table of Figures 4.2.2.6 Cross tabulation: Importance of Loyalty Card Schemes * Have you Redeemed any Rewards from the Clubcard Scheme within the last 12 Months? 71 4.2.3.1 Cross tabulation: Would you Describe Yourself as Being Loyal to Tesco? * Would you Describe Yourself to be a Satisfied Customer of Tesco? 72 4.2.4.1 Frequency table: Do you read Clubcard Magazine? 74 4.2.4.2 Cross tabulation: Do you read Clubcard Magazine? * If "yes" or "sometimes" Please Indicate what you think of the Magazine 74 4.2.5.1 Cross tabulation: Does the Collection of Points Influence you to buy more or to buy specific/alternative Promotional Products? * Location Of Store Importance 75 4.2.6.1 Frequency table: Apart from Clubcard, do you own and regularly use other store loyalty cards? Please indicate how many 76 4.2.6.2 Frequency table: I Usually Shop Around to get the Best Deals 77 4.2.6.3 Frequency table: I Expect Rewards to be a part of my Normal Shopping Experience 78 4.2.6.4 Cross tabulation: Please Indicate which age group you fall into: * Do you know how many Clubcard Points you gain for every 1 you spend in store? 79 4.2.7.1 Table: The Importance Respondents Placed upon Factors that Influence Loyalty 6
79
Table of Figures
4.2.7.2 Frequency table: What more could Tesco do to make you more Loyal? 81
Chapter One Introduction
Chapter One
Introduction
1.0 CHAPTER ONE INTRODUCTION

1.1 The Rise Of Tesco
Categorically today Tesco is not only the UKs largest grocer, but also the worlds most successful internet supermarket (Humby and Hunt, 2004, pg 1). Arguably one of the worlds most successful advocates of Customer Relationship Management (CRM) (Humby and Hunt, 2004, pg 1) and as commented by Tapp (2005, pg 176), The big success story of database driven management is Tesco. It seems to understand when to closely manage the analysis, and when to let it go its own way; when to go with a hunch based on experience and when to question conventional wisdoms). Since the introduction of the Tesco Clubcard scheme in 1995, the retailer has managed to ascertain a sound reputation for innovation using imagination and technology to constantly deliver customer value resulting in increased sales and customer retention in the ferociously competitive food retailing industry. Tesco and the Tesco Clubcard are seen as the key player in the UK and one of the most important schemes in commercial history . It has revolutionised the way a multi billion pound industry is run. Individuallevel data has been systematically gathered on most of Tescos 12 million customers, allowing the company to understand each customers value to the company and how it may be able to increase that value or prevent loss (Tapp, 2005, pg 192). Before Clubcard, Tesco was stuck as the UKs secondranking supermarket (Humby and Hunt, 2006, pg 1). Tesco claims nearly 1 of every 7 spent on the high street (Hawkes, 2008). In April 9
Chapter One Introduction 2008 Tesco has reported an 11.8% rise in underlying annual profits for 2007 to 2.846bn, meeting analysts forecasts (BBC Business News, 2008).
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Chapter One Introduction What this thesis will investigate is how significant and instrumental the Clubcard scheme has been in building the success of Tescos rise to dominance. With other supermarkets offering similar schemes, why exactly do customers constantly return and not defect to rival stores? What is the true value of the Clubcard scheme to Tesco? Given the current position that Tesco are in and offering so much to customers it could be disputed if Tesco really need the Clubcard scheme. With this setting in mind I would like to initiate the concept of Customer Relationship Management (CRM). Berry and Parasuraman, (1991) have commented that in order for an organisation to sustain a relationship with its customers it needs to offer benefits that are important to them and at the same time difficult for competitors to replicate. Barry stressed that the aim is to transform indifferent customers into loyal ones and solidify the relationship. This argument is further enforced that twentyfirst century consumers have evolved into becoming increasingly promotion literate (Harlow 1997 cited in Egan 2001, pg 381). Today, there is a CRM revolution underway among businesses. It represents an inevitable literally irresistible movement. All businesses will be embracing CRM sooner or later, with varying degrees of enthusiasm and success (Peppers and Rogers, 2004, pg 6). CRM has become a major management growth tool of the last decade (Gilles, Righby and Reichheld 2002) and research has shown that the market for the worldwide customer relationship management (CRM) software is projected to surpass $8.9 billion in 2008 and is forecasted to reach $13.3 billion by 2012. (CRMToday.com, 2008).
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1.2
The Background to the Study
The evolution of supermarket shopping has advanced at an expediential rate over the last decade. Having transformed the shopping experience and changed the way
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Chapter One Introduction in which we shop through the creation of out of town locations which can accommodate the development of considerable sized outlets, extensive product ranges expanding beyond food, a wide range of services one would not normally associate with a supermarket such as telecommunications, finance and insurance. With this the additional incentive of customers collecting and redeeming points through customer reward programs. The trend and interest in using loyalty cards is undeniable. Approximately 85% of households in the UK had at least one active loyalty card (Mintel, 2004). These loyalty cards are key to an organisations marketing activity as it allows marketers to interact directly to the people who will benefit the most with tailor made offers and communication. However, some studies have suggested that the loyalty card scheme are at a crossroad and do not work as shoppers attitudes have changed and they prefer to pay less for their groceries than earn points on their purchases.
1.3
The Scope of the Study
The study of this dissertation will commence with focusing on secondary data, in the form of a literature review. The motivation for this is that it shall provide a depth of understanding, the concepts and theories that are to be investigated and to provide an example on how others have embarked upon this subject area. Primary research is essential in order to complete the objectives that this thesis sets out to achieve, therefore the findings of the literature review will direct the author into the construction of a primary research tool in the shape of a questionnaire to address areas where there maybe gaps. Subsequently, the methodology will explain the conditions into how the primary research was conducted before an analysis of the results attained. The closing stages of this 1 3
Chapter One Introduction study will then be concluded and recommendations will be made.
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Chapter One Introduction 1.4 Purpose
The intention of the thesis is to uncover if Tesco truly need their Clubcard scheme any longer to keep customers loyal due to the sheer amount of effort they currently use to keep customers loyal and given the position that they are in. The tool may assist in the aid of repeat purchases but does the scheme demonstrate and create true loyalty.
1.5
Objectives
1). Chronicle Tescos rise to power and being the number one supermarket retailer within the UK. 2). Define loyalty and loyalty marketing. 3). Recognise the factors that affect the significance of a customer reward program and their roles within the supermarket sector. 4). Question how instrumental the Clubcard reward program is in building the success of Tesco to where it is today and its role as a marketing tool. 5). Establish the real value and significance of the Clubcard reward program to Tesco. 6). Discover the general attitude of Tesco customers towards the Clubcard reward program. Analyse and obtain the importance of the scheme to customers and ascertain just how significant the scheme is in keeping them loyal.
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Chapter One Introduction 1.6 Summary
From establishing the aim of this study the reader is conscious to the scope of the investigation and what it sets out to accomplish. The motivation of the subject and a brief background to Tesco and its Clubcard scheme has provided a solid foundation for advancing to examine secondary research. The literature review follows in the next chapter.
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Chapter Two Literature Review
Chapter Two
Literature Review
2.0
2.1

Introduction
This chapter aims to provide a background to the study and seeks to carry out the following objectives of the dissertation: 1). Chronicle the history and rise of Tesco. 2). Understand the concept of CRM. 3). Define Loyalty and Loyalty Marketing. 4). Determine if the Tesco Clubcard has generated loyalty and what factors customers are loyal to. 5). Realise the issues that may affect the value of a customer reward program and recognise the importance within the supermarket industry. 6). Given Tescos current range of loyalty marketing strategies, examine if the Tesco Clubcard is really needed. The literature review will commence with the charting of Tescos background story, followed with defining the fundamental terms with a focused discussion. It will conclude with a summary of the main points mentioned.
2.2
The Tesco Story
Recent work from Reference for Business (2007) and the European Foundation for the Improvement of Living and Working Conditions (2007) have chronicled the history of Tesco. It is with allusion to these bodies of work that this section is based upon. 1 3
Chapter Two Literature Review In 1919, John Edward Cohen invested 30 into a small grocery stall in the East End of London, selling whatever could be housed in the tiny stall. Thus began Cohens career as a market trader after serving in the Royal Flying Corp. By 1932, Cohen officially founded Tesco Stores Limited. The name was a based on a private label tea that Cohen bought and sold from a merchant which used the initials T.E. Stockwell and by adding the first two letters of his surname TESCO was born. Within 8 years, Cohen expanded his operation and opened more than 100 small stores in the London area. In 1935 Cohen was invited by several key American suppliers to the United States to witness and learn the American food retailing system. On returning to the UK from his visit, Cohen wanted to take the American selfservice supermarket vision and implement it in the UK. By 1947, Cohen realised his dream and opened the first Tesco self service store in Hertfordshire. However, the public were not ready for such a radical approach and it failed to capture the interest of British shoppers, the end result was that the store closed in 1948. Not deterred by this Cohen reopened the shop one year later to a warmer reception from the great British public. Helped by the acquisition of smaller grocery chains Tesco rapidly expanded over the next two decades and in 1956 the first Tesco supermarket to carry fresh foods in addition to more traditional dried goods was opened. During the 1960s, Tesco range of products diversified. Nonfood merchandise and household items were now being sold and with it came a higher margin. It was also during this period that the 1 4
Chapter Two Literature Review company completed construction on a 90,000 squarefoot warehouse. With the opening of a 40,000 squarefoot store the term superstore was born. This term not only referred to the actual size of the store but also the immense selection of food and nonfood items available within it.
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Chapter Two Literature Review In 1963, Tesco signed up to the Green Shield stamps scheme. This was another American idea, where the theory of the scheme was that retail organisations would purchase these stamps and then give them away as a bonus to customers for every purchase they made. The amount of stamps given reflected on how much customers spent. Once the customers had collected sufficient stamps and stuck them into a Green Shield collectors book, the shoppers could then exchange this for merchandise from a catalogue or shop. The outcome of this was customer loyalty as shoppers congregated on stores offering stamps. The American food retailing system that Cohen had introduced resulted in Tesco operating approximately 900 supermarkets and superstores throughout the UK by 1976. The sheer nature of the American supermarket vision of pile it high, sell it cheap did not lend itself to generous profit margins and the firms management established that this strategy had not aged well and in fact was deteriorating, consequently causing an image problem among consumers. The food industry and consumers were evolving and Tesco were guilty of missing the vital signs of change in the market and that consumers were demanding quality over quantity. During the 1970s, consumers were spending less money on food purchases and Tesco profits were lower as customers tastes were changing and they had more disposable income. In addition, the Tesco brand began to look slightly jaded and was suffering an image quandary. In an attempt to win back shoppers, increase sales and 1 6
Chapter Two Literature Review gain more market share the Green Shield Stamp scheme was scrapped in 1973 and prices were cut across the board. Initially the new strategy worked, however the diminishing image of Tesco was still apparent. The majority of Tesco stores were poorly staffed with inadequate
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Chapter Two Literature Review customer service and merchandise selection. In order to recuperate, an extensive modernisation program was undertaken and 500 unprofitable stores were closed. Tesco made a considerable investment to not only improve its stores physically but also to provide the higher quality merchandise that consumers desired. The upshot was prevalent upgrading and enlargement of smaller cramped stores. Cosmetic and practical changes such as widening aisles and enhanced lighting were used and the main focus of Tesco was on the superstore concept. The average superstore covered 25,000 square feet but eventually expanded to as large as 65,000 square feet.
In order to improve efficiency the original distribution systems were computerised and restructured. To compliment the new highquality and serviceoriented image of these new stores, Tesco also introduced its own label product lines which had been developed through extensive Research and Development (R&D) programs. During the late 1970s and early 1980s the UK food sales market was in a slump. In order to encourage more sales and customer loyalty Tesco began an application which cut prices on approximately 1,500 food items. The knock on effect of this was a renewed price war between Tesco and J. Sainsbury. Throughout the rest of the 1980s Tesco continued to expand into Ireland and in 1985 the 100 superstore was opened. By 1989 the company had spent 500 million on building 29 new stores. By the beginning of the 1990s, Tesco had become one of the top three food retailers in the UK, encompassing 371 stores in Great Britain in addition to becoming the largest independent gasoline retailer in the UK. It was also during this period that Tesco expanded 1 8
th
Chapter Two Literature Review into new countries acquiring store chains in Poland, the Czech Republic and Slovakia. To further reinforce the innovation at Tesco, two new formats of store were experimented. The first was the Tesco Express format, which combined a petrol
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Chapter Two Literature Review station and small convenience store into one. The Tesco Extra format expanded the nonfood departments. In February 1995, the Tesco Clubcard was introduced. Two years later, in 1997, Tesco branched out into financial services creating a Tesco Visa card, instore banks, savings accounts, loans and insurance. By the millennium Tesco, launched its ecommerce business and turned to developing its nonfood business. The aim was to turn the nonfood side of the business to be as strong as the food side. Stores now carried extensive electronic products, toys, sports equipment and general household goods and furnishings. In September 2002 Tesco introduced its own line of clothing. International operations were also developing as Tesco entered Asia opening stores in Thailand, South Korea, Taiwan, Malaysia and China. Today, Tesco stands as a genuine retail giant, it has consistently out performed rivals and increased market share. The strength and diversification of Tescos own brand products is indisputably impressive. Expansion in the UK and abroad is continuing and industry observers can find little to fault the companys operations.
2.2.1
The Tesco Timeline
Timeline on the growth of Tesco: 1919 Founder Jack Cohen begins selling surplus groceries from a store in the East 2 0
Chapter Two Literature Review End of London. His first day's profit was 1 pound on sales of 4 pounds.
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Chapter Two Literature Review 1924 Cohen's first ownbrand product is called Tesco Tea. The name came from the initials of TE Stockwell, a partner in the firm of tea suppliers, and CO from Cohen's surname. 1939 Tesco has around 100 branches. 1947 Tesco Stores (Holdings) Ltd floats on London Stock Exchange with share price of 25 pence. 1956 First Tesco selfservice supermarket opens in a converted cinema in Maldon. 1960 Takes over chain of 212 stores in North of England and adds another 144 stores in 1964 and 1965. 1961 Tesco Leicester enters Guinness Book of Records as the largest store in Europe. 1963 Introduction of Green Shield Stamps scheme. 1979 Annual sales reach 1 billion pounds. 1982 Annual sales exceed 2 billion pounds. 1987 Tesco has 377 stores far fewer than before, but each store is larger. 1991 Becomes Britain's biggest independent petrol retailer. 1995 Becomes Britains marketleading food retailer. Tesco Clubcard customer rewards scheme is launched, the innovation set to transform the stores fortunes, and track its customers. Tesco enters Hungary. 2 2
Chapter Two Literature Review 1996 Tesco spreads to Poland, Czech Republic, Slovakia and Northern Ireland. 1997 Terry Leahy becomes chief executive. Tesco moves to capture share of loan and personal finance market as Tesco Personal Finance is launched. Company launches 24hour trading as the first of many Tesco Extra Hypermarkets open. 1998 Enters Taiwan and Thailand 1999 Mobile phones go on sale in Tesco stores; launches online bookstore and online banking. Enters South Korea. 2000 Tesco.com launched and goes live. 2001 Strategic relationship with U.S. supermarket Safeway to take Tesco.com model to United States. Enters Malaysia. 2002 Tesco has 730 stores in the UK. 2003 Tesco enters Japan and Turkey. 2004 Enters China. Launches own brand Fairtrade range. Tesco broadband launched. Enters music download market. 2005 Makes 2 billion pounds of annual profits. Announces non food store trial. Enters Czech Republic and Slovakia through Carrefour asset swap and exits Taiwan 2006 Tesco has a total of 1,879 UK stores and controls approximately onethird of the UK grocery market. November 8, 2007 Opens first U.S. store near Los Angeles. 2 3
Chapter Two Literature Review Adopted from Sanderson (2007) and Simm (2007, pg 116117).
2.3 Characteristics of Customer Relationship Management (CRM) The past decade has seen many firms (re)adopt a customer focus often through a formal program of customer relationship management (CRM) (Uncles, Dowling and Hammond, 2004, pg 92). Peppers and Rogers (2004, pg 6) back up this claim citing that there is a CRM revolution underway among businesses. Despite becoming one of the most intensive and important developments of the business climate there is no specific definition for CRM, as commented by Goodroe (2005, cited in Wylie), CRM is difficult to define. Its somewhat misunderstood, largely misused, and in some cases abusedoften by the very people who strive to define it. In the modern marketplace customers continue to gain vigour, it is vital that an understanding of them is undertaken to provide personalised value. Customers dont want to be treated equally. They want to be treated individually (Newell 2003, pg 17). Through the use of an elaborate process arbitrated by information technology, CRM is designed to create and continuously improve the relationship between an organisation and its customers in real time transactions. Despite the fact that CRM is essentially rooted within information technology it is more than just a technology. It draws from traditional marketing principles and key to this process is the recognition and definition of what customers deem as value and delivering it, the end result is value is thus created with customers, not for them (Gordon, 1998, pg 9). 2 4
Chapter Two Literature Review What can be established is that the CRM process suffers when it is not adequately understood or implemented. Clearly CRM involves much more than marketing and in its most generalised form, CRM can be thought of as a set of business practices
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Chapter Two Literature Review designed, simply to put an enterprise into closer and closer touch with its customers, in order to learn more about each one, with the overall goal of making each one more valuable to the firm (Peppers and Rogers, 2005, pg 6). In order for an organisation to truly engage the customer it is essential that companies can exceed consumers expectations, therefore any definition of CRM would be fundamentally wrong if it didnt start with the customer in mind. The following excerpt will be used to define CRM: Relationship Marketing is the ongoing process of identifying and creating new values with individual customers and then sharing the benefits from this over a life time. It involves the understanding, focusing and management of ongoing collaboration between suppliers and selected customers for mutual value creation and sharing interdependence and organisational alignment (Gordon, 1998, pg 9). For the case of the Tesco Clubcard, Humby and Hunt (2004, pg 16) have cited that the definition of CRM is best summarised as: to improve our performance at every point of contact with our customers, to make them happier and the company richer.
2.4
The Clubcard Phenomenon Customer loyalty is not about how customers demonstrate their loyalty to us, it is about how we demonstrate our loyalty to them. Lord MacLaurin, Chairman of Tesco 2 6
Chapter Two Literature Review In February 1995, the Tesco Clubcard was launched and it became the UKs first supermarket customer reward program. Originally piloted in twelve stores, the inspiration of the card was to gain an insight into shopping habits of customers and
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Chapter Two Literature Review give something back to them. Points would be accumulated for every 5 spent and in turn the points would be converted every quarter into Clubcard vouchers which the customer could redeem in any Tesco store. However this scheme was later changed when it was realised that pensioners and students were not fully benefiting due to the small frequent purchases they made (Louis, 2002, pg 5). Under the new scheme, shoppers gained one point for every 1 spent on goods in store, online, on Tesco Petrol forecourts, Tesco Personal Finance products and Tesco Telecoms. Additional points could also be connected at 10 Clubcard partner companies (Papworth, 2005). Once the customer has accumulated 150 points the points are converted into Clubcard vouchers at an exchange rate of 1p to one point, thus giving an effective discount of 1%. To add further value to the vouchers, they can be swapped for AirMiles or Clubcard Deals such as days out, film hire, restaurant meals, magazine subscriptions, holidays and flights. These deals are priced at four times the instore redemption value of the vouchers. For example a years magazine subscription to Cosmopolitan magazine which normally costs 34.20, costs 8.55 in Clubcard vouchers (Papworth, 2005). The costs associated with running a loyalty program are notoriously high. The Green Shield stamp scheme cost 12 million annually. The Clubcard scheme introduced new pointofsale (POS) technology as well a call centre to handle customer queries and a vast supporting computer system to record and analyse the Clubcard information. In total it cost Tesco 300 million over the first three years and approximately 4.5% of Tesco profits to run the scheme.
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Chapter Two Literature Review Tescos share of Within six months of the introduction of Clubcard, the UK retail grocery trade had increased from 15% to 18%. Less than 12 months after the launch, with over eight million Clubcard customers purchasing some 200 million instore
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Chapter Two Literature Review products per day, Tesco was now propelled to being the number one retailer in the UK (Peppers and Martha, 2001). Following the success, some competitors launched rival schemes although these were later scrapped. One retailer, ASDA, did resist the trend of loyalty cards and focused primarily on its competitiveness and reducing costs. It was assessed that in 2001 the Clubcard scheme had managed to attract approximately 20 million members in the UK, of which over ten million card holders were active users. Seth and Randall (2001, pg 39) have commented that Tesco did not invent the card nor were they a first mover, but in retrospect they executed its introduction bravely and brilliantly, getting the timing right.
2.5
Defining Loyalty
In order to investigate the value of the Tesco Clubcard scheme, it is vital that an understanding and definition of loyalty is established. In the context of retail marketing loyalty can be perceived as a combination of customer behaviour and attitude (Fraoch Marketing, 2006). It is usually characterised as activities carried out by an organisation for the development of a longterm relationship with its customers. With this in mind, the concept of loyalty may initially appear to be rather simplistic. However, there is an overwhelming amount of research focused on the definition and term for the notion of loyalty. Customer loyalty is acknowledged as a key concept whose importance has been recognised by many academics and 3 0
practitioners.
Questions about how to define loyalty were addressed more than 20 years ago (Grisaffe, 2001). Upon further investigation and reading it can be seen that there is a
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Chapter Two Literature Review lot more to the notion and as commented by Parker and Worthington (2000, pg 491) it is a complex phenomenon. One of the most distinguished insights into loyalty was provided by Dick and Basu (1994, pg 102), who cited loyalty as the strength between relative attitude and repeat patronage. Key to understanding this is the correlation between behaviour and attitude. However this is not significantly sufficient as the perception could ascertain changes in behaviour and attitudes in the future. It has been suggested by scholars that loyalty is an emotional concept, Jenkinson (1995, pg 116) resists defining loyalty in behavioural terms and notes the concept of loyalty as the reflection of a customers subconscious emotional and psychological need to find a constant source of value, satisfaction and identity. This advocates that loyalty is an emotional concept created by trust. Humby and Hunt (2004, pg 17) have commented that loyalty is an emotional response based on empathy. To further the ideology and recognition that thoughts and feelings are active, East (1997, cited in Rowley, pg 539) comments other variables such as social and physical environment as well as the personal abilities have been found to preempt action. Conversely this view could be seen as being functionally loyal (Barnes 2002) whereby customers are only loyal to a company due to convenience. Functional loyalty is often created by functional values such as quality, distribution, price, convenience or through different loyalty programs providing a tangible reason to prefer certain suppliers. However, this is easily replicated by competitors, thus the creation of functional value only offers a shortlived competitive advantage, functional loyalty cant be very long lasting (Barnes, 2002). 3 2
Chapter Two Literature Review Neal (2000 cited in Grisaffe 2001), states that loyalty is a behaviour, this is arguably the most controversial (view) but the best supported by data. The controversy comes about because loyalty is this model is defined mainly with reference to the pattern of past purchases with only secondary regard to underlying consumer motivations or commitment to the brand (Ehrenberg, 1998; Fader and
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Chapter Two Literature Review Hardie, 1996; Kahn et al., 1988; Massey et al., 1970 as cited in Uncles, Dowling and Hammond, 2004, pg 94). Shapiro and Varian (1998, pg 128) believe that loyalty is concerned with repeat purchase or buying largely and exclusively from a single vendor. Uncles et al., 1994 (as cited in Uncles, Dowling and Hammond, 2004, pg 94), comments that after extensive studies of data and purchase pattern, researchers have found that few consumers are monogamous (100 percent loyal) or promiscuous (no loyalty to any brand). Rather, most people are polygamous (i.e. loyal to a portfolio of brands in a product category). Essentially from this perspective, loyalty is defined as an ongoing propensity to buy the brand, usually as one of several (Ehrenberg and Scriven, 1999, cited in Uncles, Dowling and Hammond, 2004, pg 94). Loyalty to the brand (measured by repeat purchase) is the result of repeated satisfaction that in turn leads to weak commitment. The consumer buys the same brand again, not because of any stronglyheld prior attitude or deeplyheld commitment, but because it is not worth the time and trouble to search for an alternative (Uncles, Dowling and Hammond, 2004, pg 94). Grisaffe (2001) argues that loyalty is not just about behaviour, If a buyer has a cognitive rule, buy the lowest priced brand, and brand B is always lowest, they look behaviourally loyal to B over time. Until brand A enters the market at a lower price. Then the customer switches to show repeat purchase of A, until market prices change again. To which are they loyal, the brands, or the decision rule? True loyalty is not just behavioural. Barnes (2002) claims that repeat buying does not make loyalty . Loyalty is essentially an emotional concept, like relationships, and yet many firms seem not to understand or appreciate this. Many businesses continue to 3 4
Chapter Two Literature Review Barnes (2002) define loyalty in behavioural terms. Furthermore also cites that, There is a great tendency in business to measure or define loyalty entirely in behavioural terms number of visits, frequency of visits, total spend, share of
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Chapter Two Literature Review category spend, number of years as a customer, etc. There is a tendency to confuse loyalty with retention two concepts that are related, but certainly not the same thing. Retention is a behavioural concept; loyalty is not. A focus on retention creates a highrisk situation where a company may think its customers are a lot more loyal than they really are. Why, then, do some businesses define loyalty primarily if not exclusively in behavioural terms? The answer is often as simple as thats what we are able to measure most easily. In fact, many companies today capture such information automatically every time a customer interacts with the firm. To obtain a list of our most loyal customers, we simply request the information from the customer database. Loyalty defined behaviourally is also a much easier concept to understand, without having to get into all that consumer psychology. Of the various definitions, the characterisation deemed to be the most appropriate when discussing the Tesco Clubcard has been cited by Humby and Hunt (2004, pg 9). It has been suggested that daytoday life loyalty suggests emotional commitment and monogamy: one choice above all else. In comparison retail loyalty implies on looking to achieve a little extra goodwill, a slight margin of preference, an incremental shift in buying behaviour.
2.6
Loyalty Marketing
Loyalty marketing can be defined as the management process of identifying best customers and utilising customer data and insight to create, retain and grow profitable relationships (ICLP, 2005). Loyalty marketing is often expressed in a manner of ways, such as 3 6
Chapter Two Literature Review relationship marketing, onetoone marketing, customercentric marketing and frequency marketing. However as commented by Duffy (1998, pg 435), the appropriate term should be loyalty marketing as loyalty is the business objective. What we seek to achieve here is loyalty.
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Regardless of the idiom, loyalty marketing is an approach based on strategic marketing and has been expressed as the sine qua non of an effective business strategy (Heskett, 2002, pg 355). The fundamental aim is to define profitable behaviour and consequently manage this relationship by designing a range of initiatives to maintain and influence profitable behaviour. Repeat purchase is rewarded and a channel of communication with customers is facilitated to encourage further repeat purchase. Customer loyalty programs are coordinated, membership based marketing activities designed to enhance the building of continued marketing exchanges among pre identified customers toward a sponsoring brand or firm. Loyalty programs use targeted communications and customise the delivery of branded goods and services to build stronger bonds with the sponsoring brand/firm that would result without such programs. Often based on cumulative brand purchases, loyalty programs enhance value proposition offerings to preserve active customer status (Lacey and Sneath, 2006, pg 459). They allow marketers to capture detailed transactional and preference customer databases. These databases can be used to determine customer value, define specific marketing strategies for finite customer segments, and model customer attrition and intervention strategies (Lacey and Sneath, 2006, pg 461). Uncles, Dowling and Hammond, (2004, pg 92) claim that the two aims of customer loyalty programs stand out. One is to increase sales revenue by raising purchase/usage levels, and/or increase the range of products bought from the supplier. A second aim is more defensive by building a closer bond between the brand and current customers it is hoped to maintain the current customer base.
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Chapter Two Literature Review Gordon (1998, pg 20), has criticised loyalty marketing as programs that typically result in another piece of plastic in your wallet to encourage more customer patronage. However, several kinds of scheme are currently run in the retail industry, from card schemes, special services, and customer magazines to customer panels (Wright and Sparks, 1999, pg 431).
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Of the above excerpts it can be empathised that the most frequent used customer reward programs employed are loyalty cards, given their ability to identify frequent buyers and segment the market. Humby and Hunt (2004, pg 17) have argued that it should not be contended that cardbased customer reward programs are credible alternatives to being offered excellent service, innovative products and services or the right price. All of which can develop loyalty. The important point is that these initiatives and a cardbased loyalty scheme are not mutually exclusive. Rayner (1996, pg 8) identifies customer reward programs as a mechanism for identifying and rewarding loyal customers. Sharp and Sharp (1997, cited in Lacey and Sneath 2006, pg 459), have commented that loyalty programs are set apart from other forms of promotions by their longterm nature and deliberate emphasis on preserving customer retention and intensifying purchase frequency. They work by using a process of operant conditioning theory. Operant conditioning refers to a systematic program of rewards and punishments to influence behaviour or bring about desired behaviour . It relies on two basic assumptions about human experience and psychology: (1) a particular act results in an experience that is a consequence of that act and (2) the perceived quality of an acts consequence affects future behaviour (Heil, 2006). Operant conditioning is based on the concept that if a given bit of behaviour has a consequence of a special sort, it is more likely to occur again upon similar occasions (Skinner, 1978, pg 19). Operant conditioning deals with learned and not reflexive behaviour and the procedure occurs as individuals learn to perform behaviours that produce positive 4 0
Chapter Two Literature outcomes. Applied to retail organisations, Review over time consumers associate with companies that reward them, the knock on effect is they will choose to reiterate to buy products that fulfil their own needs. Implemented customer reward programs, points and the incentives offered all act to influence and strengthen consumers behaviour. It can be remarked that this behaviour is not generic amongst all consumers and that some customers are not affected or influenced by the prospect of rewards. Tapp (2005, pg, 126) has
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Chapter Two Literature Review commented, given the hue and cry about loyalty over the last decade, let us be clear the prevailing evidence is that absolute loyalty cannot be regarded as the norm in most markets. Uncles, Dowling and Hammond, (2004, pg 95) claim that to increase sales by enhancing beliefs about the brand and strengthen emotional commitment of customers to their brand, companies need to move customers up a loyalty ladder through imagebased or persuasive advertising and personal service (recovery) programs are frequently used tactics (Brown, 2000; White and Schneider, 1998 as cited in Uncles, Dowling and Hammond, 2004, pg 95). Payne (1994, pg 2930), has constructed the Customer Loyalty Ladder which illustrated that the goal of loyalty marketing is keeping and improving the relationship with the customer. 2.6.1 The Customer Loyalty Ladder
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From the above diagram each rung of the ladder shows the priority in which tasks should be undertaken in order to accomplish loyalty. Payne has observed that companies need to focus on improving their relationship with each customer and progress them up the ladder rather than converge on individual sale (Payne, 1994, pg 30). Loyalty marketing is not undertaken by every organisation, Reichheld (cited in Finnie and Randall, 2002, pg 26) has commented that some companies do not view loyalty marketing as an objective, but a duty and a must. Furthermore Reichheld (cited in Tapp, 2005, pg 126) asserts that, ultimately the key to profitability was the high retention of the firms existing, stable, profitable customers. Additionally, Tapp (2005, pg 172) construes that, a lot of frequentpurchase behaviour (e.g. supermarket goods) is based on repertoire purchasing, in that customers retain a basket of brands which they jump between in a polygamous fashion . The clear conclusion from these pieces of work is that exclusive brand loyalty cannot be regarded as the norm in most markets. Uncles, Dowling and Hammond, (2004, pg 95) conclude by claiming loyalty programs are also designed to strengthen commitment and create velvet handcuffs to bond the customer to the brand. The number and similarity of loyalty programs employed today has caused concern and rather than creating or adding towards customer loyalty it can argued that they are actually causing confusion and apathy and stimulating loyalty overload (Tapp, 2005). Additionally, Uncles, Dowling and Hammond (2004, pg 102), claim that 4 3
Chapter Two Literature Reviewgained is likely to be when widespread copying happens, any benefit ephemeral.
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Chapter Two Literature Review 2.7 The Tesco Clubcard as a Loyalty Marketing Tool
Loyalty schemes tend to be most useful in frequent purchase markets . And also commonly found in markets where the core product is a commodity and companies have great difficulty differentiating themselves (Tapp, 2005, pg 274). The amount of customer reward programs that has been introduced by retailers and service providers has become more widespread in recent years. Byrom et al. (2001) suggests that there is over 150 such schemes currently in the UK with a result of approximately 40 million cards in current circulation. Stone (2004, pg 192) comments that, Around 80 per cent of UK households participate in at least one customer loyalty scheme. The average consumer participates in three schemes. In the grocery market, Tesco claims a 'first mover advantage' not in the sense of having a scheme but in the sense of being the first where the scheme is a strong part of a transformed marketing approach. Historically information has been linked to exchange theory (Hirschman, 1980), whereby consumers are willing to exchange their personal information in order to obtain other resources, such as monetary savings or enhanced services . In the case of loyalty programs, participating customers are offered an enhanced value proposition, and in return firms will be given access to personal information that can be used to further refine strategies and tactics (Lacey and Sneath, 2006, pg 461). When a customer joins a customer reward program their details are entered into a database in which further transactions of their purchases are recorded building a profile of purchasing habits. In exchange for registration, the customer receives points that can be used in full or part payment for products or services (Rowley, 4 5
2005, pg 195).
Mauri (2003, pg 1314) has commented that, the technology of loyalty cards allow retailers to transform cold data on consumer behaviour into warm relationships and
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Chapter Two Literature Review eventually into a genuine loyalty founded on mutual understanding and trust. A warm relationship is also a learning relationship. A prologue with regards to the Tesco Clubcard has already been covered in section 2.3 of this thesis. The Clubcard is viewed by Tesco as a way of saying thank you to its customers by allowing them to earn points through meeting everyday needs and undertaking everyday activities (Rowley, 2005, pg 198). Clubcard is designed to give you something back for shopping with Tesco (http://www.tesco.com). As the UKs largest retailer and given the considerable customer base, the Tesco Clubcard accumulates and records information on a sizable population of the UK on an astounding basis. It is estimated that on eight of every ten trips to Tesco, shoppers use a Clubcard. There are in the region of 25 million Clubcards in existence which represents 14 million households; resulting in more than 11 million active cards (Simm, 2007). As commented by Jenkinson (1995), loyalty cards are also about the collection of customer data, in a bonus program, the bonus is the price for the information that I get. I buy knowledge through it, not loyalty, because loyalty is not purchasable. With every swipe of a loyalty card at a point of sale, the retailer is recording the entire transaction in detail: from the name of the shopper, the time they shop, the shop they visited and the entire contents of their trolley (Field 1997). Langenderfer and Cook (2004, cited in Lacey and Sneath, 2006, pg 458), have raised the issue that for customers who participate in loyalty programmes, there is potential for increased concern about the misuse of personal information and loss of control over how information is being collected and disseminated. Simm (2007) remarks, The Clubcard enables Tesco to keep a record of each 4 7
Chapter Two Literature Review holders name, age, address, telephone number and email. The company knows each holders dietary preferences and the makeup of their family. It keeps track of exactly everything a cardholder has ever bought, from which store, and the precise date and time of each purchase. From the data, Tesco can guess whether you had a lonely singles night in, or threw a party at the weekend. It will know if you have a drink problem, buy
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Chapter Two Literature Review condoms, whether you're a junkfood addict, hooked on painkillers, or have an undue fondness for tinned pineapple. The card will keep a record of any complaints made or other communication with the store, and any additional market research you have taken part in. The information helps Tesco to typecast its customers by analysing their life stage, whether student, young family or retired. It assesses how much they are worth to them, by spending and loyalty. It works out if they are upmarket, market or poor (or, as Tesco euphemistically calls this category, cost conscious. Being able to classify groups in this way has helped Tesco become the UKs dominant retailer. With the vast range of product offerings from Tesco such as finance, insurance, mobile phone services in conjunction with core food and nonfood products, the message is Tesco is an everyday experience (Rowley, 2005, pg 199). An important component of many loyalty programs is the cope for crossselling, in an attempt to increase shareofwallet, rather than market share (Peppers and Rogers, 1997). Loyaltyprogram members are encouraged to buy products they would not normally have bought from that provider. In essence, the loyalty program is seen as a brand extension (Uncles, Dowling and Hammond, 2004, pg 100). Due to the success of the Clubcard scheme, addition multiple brands such as Avis and Powergen/E.ON energy have joined to align themselves with the Clubcard brand. Swaminathan and Reddy (2000 as cited by Lacey and Sneath, 2006, pg 459) have mentioned that loyalty programs supported by multiple participants offer increased customer value by accommodating a broader scope of business and organisational value due to the sharing of program costs. The strength of the Tesco 4 9
Chapter Two Literature ReviewCorporate Clubcard image was highlighted in the Powergen Responsibility Report (2003) which notes, In 2003, Powergen joined Tescos Clubcard scheme as a key facet to our approach to customer loyalty. Tesco Clubcard demonstrates our focus on customers.
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Chapter Two Literature Review Capizzi and Ferguson (2005, pg 72) describe the loyalty marketing industry as having the telltale characteristics of a mature market, principally in the UK where programmes look the same everywhere. The Clubcard model although not unique has firmly embedded itself as a customer reward program with multiple relationships, extending beyond the simple relationship between Tesco and their customers (Rowley 2005, pg 198). It should also be mentioned that in addition to the Clubcard scheme, Tesco also employ other marketing tools to create loyalty. Approaches such as lower prices on key products, instore magazines or value added approaches in service or store layout are all utilised. However, with all this added value and as commented by Parker and Worthington (2000, pg 491), just as a shopper expects to be offered trolleys at the entrance to a supermarket he/she will expect some sort of reward to be offered at the check out.
2.8
The Relationship between Loyalty and Satisfaction
Much research has been carried out by scholars into the importance of customer satisfaction. Kotler (2000) defined satisfaction as a persons feelings of pleasure or disappointment resulting from comparing a products perceived performance (or outcome) in relation to his or her expectations. Reichheld (1996, pg 381), views that customer satisfaction is the key to securing customer loyalty, this hypothesis has remained largely unsubstantiated and is far from robust. As argued by Newell (2000, pg 30) who claims that customers today demand more that simple satisfaction for their loyalty and that most companies think a satisfied customer will be a loyal customer. That may have 5 1
been true at one time, but its not now.
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Chapter Two Literature Review What can be established is that satisfaction can lead customers to treat their primary store as a safe bet in their attempt to reduce their perceived risk of disappointment when shopping (Reselius, 1971). Customer satisfaction leads, by linear progression, to retention/loyalty and ultimately to profitability (Hallowell, 1996). Sderlund (1998), expands on this theory by accepting for a positive association between loyalty and satisfaction, but additionally observing that increasing satisfaction does not produce an equal increase in loyalty for all customers. Satisfaction does not continually produce in retention, similarly dissatisfaction does not necessarily result in defection. There is no evidence to suggest that satisfaction alone is a significant factor in influencing loyalty. However, satisfied customers can help form the base of any successful business and result to repeat purchases, brand loyalty, and positive word of mouth exposure (Hoyer and MacInnis, 2001). What this demonstrates is that the correlation between customer satisfaction and customer loyalty is neither clearcut nor linear, with satisfied customers still defecting. Zairi (2000) has commented on numerous studies that have been carried out to examine the impact of customer satisfaction on repeat purchase, loyalty and retention. The end result is they all suggest a similar message in that: satisfied customers are likely to share their positive experience with approximately five or six people and dissatisfied customers are likely to tell another ten people of their unhappiness. In addition gauging dissatisfied customers can be difficult since many customers will not complain and also to differences in the industry sectors. It is vital that the distinction between satisfaction and loyalty is noted since the two are clearly different. Duffy (2001, pg 36) believes satisfaction is a starting point, remarking that it is essential to get you in the race, but its no longer enough to make 5 3
Chapter Two Literature Review you a winner. The importance of satisfaction should not be overlooked and the consequences of not satisfying customers can have severe consequences to businesses.
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Chapter Two Literature Review The importance of customer satisfaction has been reinforced by La Barbera and Mazursky (1983) who commented that, satisfaction influences repurchase intentions whereas dissatisfaction has been seen as a primary reason for customer defection or discontinuation of purchase. However, McIlroy and Barnett (2000) argue, even if customers are satisfied with the service they will continue to defect if they believe they can get better value, convenience or quality elsewhere . Satisfaction is a necessary but not a sufficient condition to loyalty. In other words, we can have satisfaction without loyalty, but it is hard to have loyalty without satisfaction. Miranda et al (2005, pg 230) sustains that loyalty does not result from satisfaction alone. Breakaway customers may not have been dissatisfied with the service provided from their primary store; it is simply that it did not insulate them sufficiently from switching. This is especially significant to any business operating in a highly competitive market with many choices and low customer switching costs, as commented by Best (2005, pg 16), Grocery store, restaurant, and bank customers can switch quickly if they are not completely satisfied. It is the authors belief that defecting customers may not have been dissatisfied with the service they received from their primary store, it is purely that the store did not insulate them adequately from switching. It was discovered that loyalty was influenced by several factors such as price, level of service, travel distance and reward programs. This area has been considered in chapter four of this thesis.
2.9
Does Loyalty Result to Profit?
Firms employing loyalty programs should expect them to be profitable. On the cost side of the profit equation, accurate estimates are difficult to obtain even within corporations (Uncles, 5 5
Dowling and Hammond, 2004, pg 101)
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Chapter Two Literature Review The costs involved with executing and sustaining a customer reward program are notoriously high. Investment in technology means millions are being spent on software, hardware and personnel. Such schemes can take years to establish and if successful can reap dividends to an organisation. Clarke (1997, pg 147) has noted that if it is well planned and aimed at the right customers, it can pay for itself many times over. The sheer competitiveness of the food retailing industry ensures that maintaining market share and increasing profit is an invariable and gruelling campaign among major players. However, Butscher (2002, pg 3), has noted that although there are thousands of programmes in existence, very few create real loyalty and devotion. The association between loyalty and profit and the economics of customer loyalty has been recognised by numerous scholars and studies. Anton (1996) states, When you can increase customer loyalty a beneficial flywheel kicks in, powered by: increased purchases of the existing product, crosspurchasing of your other products, price premium due to appreciation of your addedvalue services, reduced operating cost because of familiarity with your service system and positive wordof mouth in terms of referring other customers to your company. Reichheld and Sasser (1990) concluded that as a customers relationship with a company extends then profits rise. Bowen and Chen (2001) have stated It is commonly known that there is a positive relationship between customer loyalty and profitability. Today, marketers are seeking information on how to build customer loyalty. The increased profit comes from reduced marketing costs, increased sales and reduced operational costs. Finally, loyal customers cost less to serve, in part because they know the product and 5 7
Chapter Two Literature Review require less information. They even serve as parttime employees. Therefore loyal customers not only require less information themselves, they also serve as an information source for other customers.
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Chapter Two Literature Review To further the union between loyalty and profit, Haywood (1989, cited in McIlory and Barnett 2000, pg 347) notes, building customer loyalty has a direct impact on profitability and past research has claimed that it can be five times more expensive to obtain a new customer than to retain one. In a generation of increasingly promotionliterate customers (Harlow, 1997 cited in Egan 2001, pg 381), the substance and worth of word of mouth communication is essential. Clarke (1997, pg 146) points out that making customers more loyal will facilitate them to remain as customers for longer, buy more, will pay premium prices and, most importantly generate extra business through referrals. Todays consumers know the fundamental messages and aims of promotions designed to get them to part with their cash. Personal recommendations from friends, family or colleagues are perceived as a more reliable form of endorsement and assurance. With this perception the customers themselves are a marketing resource through referrals. Loyalty is a consequence of creating value for customers and profit is a consequence of loyalty (Tapp 2005, pg 173). Profitability is determined by margins that depend on a wide mix of factors, of which loyalty is one (Dowling and Uncles 1997). The connection between loyalty and profit is apparent and may initially appear to be rather simplistic. However as mentioned, consumers are becoming increasingly more savvy, the internet has allowed an increase in suppliers of goods and services to be utilised and all manner of price comparison websites and forums to appear where members post deals for all variety of goods and services resulting in sensitive price conscience consumers. The Internet makes a buyers search more efficient and encourages rational shopping versus a more emotional shopping in brick and mortar store, which appeals to our senses (Trehan 2006). 5 9
Khan (1998) is
of the same opinion, stating that consumers are smarter than marketers generally perceive, and are actively manipulating suppliers for their own ends. Egan (2001, pg 381) argues that consumers are taking advantage of suppliers and jumping from one to another to get the best deal they can.
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2.10
Do Customer Reward Programs Deliver Long Term?
Loyalty programs are a marketing strategy based on offering an incentive with the aim of securing customer loyalty to a retailer. Achieving rewards is related with purchasing frequency, so this type of program are also called frequent purchase programs (Shoemaker and Lewis, 1999; Long and Schiffman, 2000; Bell and Lall, 2002) or reward programs (Kopalla et al., 1999; Kim et al., 2001) (Gmez, Arranz and Cilln 2006, pg 387). Given the popularity of loyalty programmes and as suggested by Byrom et al. (2001) that there are over 150 such schemes currently in the UK, Humby and Hunt (2004, pg 14) state there have been more loyalty programmes that have failed than succeeded. Despite the considerable growth in customer reward programs, one of the most debated areas is just how successful are loyalty programmes in delivering and do they actually create value to either businesses or consumers. Determining the success of a customer reward program is very subjective in that it depends on the goals that were set and what echelon of achievement is a loyalty programme considered to be a success. There are many factors at play such as how one can totally isolate the effect of one stimulus from all other factors that could have influenced the target factor (Butscher, 2002, pg 140). In addition customer preferences and circumstances change over time, as well as being exposed to a whole host of advertisement, promotion and other loyalty programmes. Consumers are most likely to participate in programs they believe offer equitable relationships and will, ultimately, base their decision to participate 6 1
Chapter Two Literature Review of fairness in loyalty programs according to their perceptions (Lacey and Sneath, 2006, pg 462). Uncles, Dowling and Hammond (2004, pg 100) claim that only a truly exceptional program will change the purchasing behaviour of customers to increase sales revenues significantly.
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Chapter Two Literature Review As mentioned, Tesco is the number one supermarket retailer in the UK and Humby and Hunt (2004, pg 3) have commented that Tesco may well have got to this enviable position without Clubcard but it could not be done so as quickly or as cheaply as it has done without the customer data and insight that Clubcard provides. The information has guided almost all of the key decisions the management team have made in recent times, reducing the risk of taking bold new initiatives. Many critics and scholars believe the customer reward program phenomenon to be a bribe. Parker and Worthington (2000, pg 496) have commented that the term loyalty card is a misnomer and that the customers loyalty is not for sale. It cannot be bought by organisations or deals. To further this argument, Egan (2001, pg 382) declared loyalty is fleeting and cannot be bought. Reichheld (1996 cited in Tapp, pg 170), raises the issue that loyal customers ignore vouchers and coupons, and are less price sensitive on individual items than new customers. There is an interesting irony here: many companies have loyalty schemes which offer lower prices via points systems in return for loyal custom; but companies whose customers only stay with them because of the customer reward program dont have genuinely loyal customers. Reichheld (1996) found that old customers pay higher prices than new ones because fundamentally they are happy with the value they are getting from the company. Reichheld (2002, cited in Finnie and Randall), also argues that loyalty programmes can assist in reducing business costs and increasing profit as return customers tend to buy more from a company over time, refer others to your company and pay a premium to continue to do business with you rather than switch to a competitor who they are neither familiar nor comfortable. Reichheld (1996) has constantly maintained that companies cant buy loyalty. 6 3
Chapter Two Literature Review They can only earn it through consistently creating superior value for their customers. There has been much criticism of customer reward programs and that most studies claim lower prices, rather than loyalty schemes, will keep customers coming back for more (Matheson, 2003). Additionally, loyalty programs have faced mounting
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Chapter Two Literature Review pressure concerning their use as a facilitator of specific customer information and potential to discriminate against nonmember customers because of greater marketing resource allocations shifted toward selective customers (Lacey and Sneath, 2006, pg 462). When considering the success of loyalty programmes some indices are easy to measure, such as number of members, increase in expenditure on loyalty programme products, and response to special offers. Indices that are more difficult to measure include a members repeat purchase behaviour or increase in brand loyalty (Butscher, 2002, pg 143). Perhaps the greatest benefit obtained from loyalty programs resides in the data mining and knowledge base that firms can use to develop statistical models to improve customer loyalty, support customer service, and develop new offerings to help reduce defection and increase customer lifetime value (Wansink, 2003, cited in Lacey and Sneath, 2006, pg 461). Equipped with this specific information, organisations can design specific communications and product mix offerings. Loyalty programs represent an alternative to massmarket promotion since firms have the ability to more precisely target an increasingly fragmented customer base, and communicate customised and relevant vale propositions and marketing messages to individual customers (Lacey and Sneath, 2006, pg 461). What can be established is that loyalty programmes can provide retailers with a mechanism and justification for individual customer data. In such fiercely competitive markets, as commented by Stone (1994, pg 37), knowing who the best customers are, what they buy, and how often provides a secret weapon. It is estimated that as a result of the Clubcard scheme Tesco has approximately 6 5
Chapter Two Literature Review 100,000 different promotional messages which reflect the buying habits and preferences of its customers.
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Chapter Two Literature Review Pressey and Matthews (cited in Tapp, 2005, pg 171), argue that despite the recent use of loyalty cards and database marketing techniques by UK retailers, most transactions are discrete, short term, oneoff acts. Customer reward programs can also direct businesses to overlook divisions of the business which may need attention, as noted by Fill (2002, pg 672), in 2000, the number of instore promotions fell from 700 to just 200, reflecting the need to provide for those whom are price sensitive. Although it is clear that customer reward programs can create value through personalisation, they are increasingly attracting negative remarks. OMalley (1998, pg 52) describes them as little more than sophisticated sales promotion. Humby and Hunt (2004, pg 13) profess that customer reward programs can destroy value and encourage a Big Brother culture implying that the relationship isnt trust, it is bullying on behalf of corporate giants who wont give discounts unless you give up your right to privacy. This hints that loyalty relationships are more appropriate to business to business markets rather than consumer markets (Dowling and Uncles, 1997). To further this perception, The notion of customer loyalty is important to marketing people but not, on the whole, to customers. Customers dont see why they should accept a good offer from a new supplier just because they are satisfied with their present one (McCorkell, 1997 cited in Tapp, 2005, pg 172). From the above critique and given the fact customer reward programs are costly compared to other promotions (Dowling and Uncles, 1997). One may question that perhaps the marketing budget funds are better spent elsewhere. This is palpable in the market place today with many businesses projecting funds into lowering prices, developing own brands and branching out into other markets and services. Given the sheer number of organisations participating and operating their 6 7
own customer
reward programs and consumers owning more than one loyalty card, it is evident that achieving loyalty is increasingly difficult.
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Chapter Two Literature Review Clearly, loyalty programs can be used to convey prestige to customers and make them feel special, important and appreciated (Morgan et al., 2000 cited in Lacey and Sneath, 2006, pg 459). However the effect on the firms nonparticipating customers can lead to dissatisfaction and alienation with the firm. Moreover, customers who participate in the program might become frustrated, and perhaps even disenfranchised, due to their inability to benefit from those programs (Downling and Uncles, 1997 cited in Lacey and Sneath, 2006, pg 459). Despite the criticism, loyalty programmes if executed properly and maintained can be hugely beneficial to the retailer. Tesco have always maintained that the Clubcard was a simple thank you for customers who shop at their stores and as such offered the promise of rewards to them. However, Uncles et al., (2003, cited in Lacey and Sneath 2006, pg 461) states, the ultimate marketing objective behind loyalty programs is their use as a primary datagathering platform that can help improve the efficiency and effectiveness of a firms marketing initiative. In actuality they are effectively locking them into the loyalty programme and preventing them from moving to a competitor brand (Fill, 1999, pg 563). Barnes (2002) also concurs that, The basic premise behind such programs is to reward customers for giving the company a greater share of their business. The rewards are extrinsic points, free merchandise or trips. Where true loyalty exists, the rewards are largely intrinsic. One shopper recently observed in an interview that the frequentshopper club of which he is a member feels nothing like any other club to which he has belonged. It never meets. He rarely gets to associate with other members. Such programs often lock customers in. They create barriers to exit, but they dont often lead to true loyalty.
2.11
Conclusion 6 9
Chapter Two Literature Review It was suggested that there was a difference in every day loyalty and retail loyalty. Loyalty was recognised as being emotional, behavioural or attitudinal and defined as looking to achieve a little extra goodwill, a slight margin of preference, an incremental shift in buying behaviour (Humby and Hunt, 2003, pg 9). Loyalty
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Chapter Two Literature Review marketing can be defined as the management process of identifying best customers and utilising customer data and insight to create, retain and grow profitable relationships (ICLP, 2005). Loyalty marketing was also identified as a business strategy (Heskett, 2002, pg 355), which transpires through the theory of operant conditioning. Additionally, the longterm benefits of a customer reward program and if it creates value was analysed. Loyalty programs are designed to accommodate individual consumers in the form of added products or enhanced customer service options not generally presented to all of the firms customers (Lacey and Sneath, 2006, pg 459). These schemes can offer many benefits to the retailer and act as a mechanism and justification for accumulating personal data of customers and increasing switching costs effectively locking them into the loyalty programme and preventing them for moving to a competitor brand (Fill, 1999, pg 563). It is widely regarded that loyalty is established through trust. However the literature surrounding the subject implies that loyalty schemes/ customer reward programs are manipulative and controlling and are little more than sophisticated sales promotion (OMalley (1998, pf 52). Reichheld (2002, pg 27) argues that some loyalty programmes are just gimmicks to get the maximum value extracted from a customer base. While Parker and Worthington (2000, pg 496) raise the issue of a new strain of customers known as points junkies who are desperate to gain and save points in order to redeem them for free products or services. Additionally, Parker and Worthington (2000, pg 496) commented on the knowledge of consumers by questioning how ethical is a reward scheme that relies on maintaining the ignorance of the very customers that it wants to see exhibiting loyal behaviour. Despite this loyalty programs continue to be used by organisations as marketing tools to support their customer relationship 7 1
Chapter Two Literature Review management (CRM) strategies (Lacey and Sneath, 2006, pg 458). What was found was the perception that loyalty could actually lead to customers manipulating suppliers by jumping between organisations to get the best deal.
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Chapter Two Literature Review From the literature review it is apparent that satisfaction and loyalty is not the same thing and they are not mutually exclusive. The focus addressed issues that would affect the value of a customer reward program and illustrates the need for an organisation to steer satisfied customers into loyal customers. It was also determined that organisations operating in market sectors where there is intense competition and similar competitors necessitate the use of loyalty marketing. Loyalty schemes tend to be most useful in frequent purchase markets . And also commonly found in markets where the core product is a commodity and companies have great difficulty differentiating themselves (Tapp, 2005, pg 274). Due to the sheer number of customer reward programs being offered to customers, it is vital that retailers are more innovative and creative with the rewards they offer. Capizzi and Ferguson (2005, pg 78) imply that some loyalty card members view the rewards they gain as being opportunities of a lifetime which they have complete control over having commented that the rewards given to customers must appeal on a different level and that customer reward program participants are embracing the idea of redeeming points for an onceinalifetime experience, specifically lifestyle themed rewards that appeal to a members dream. The theory is that customers will aspire to collect and redeem more points and thus increase spending. The use of the Customer Loyalty Ladder (Payne, 1994) determined how marketing tasks should be prioritised in order for an organisation to accomplish the target of loyalty. By exploring the Tesco Clubcard model we gain a hypothetical insight into how Tesco are providing an everyday experience (Rowley, 2005, pg 199) to their customers. 7 3
Chapter Two Literature Review However, the oftcited success of Tescos loyalty scheme is difficult to determine because it was introduced as part of a much broader program of new business development and store acquisition (East and Hogg, 1997 cited in Uncles, Dowling and Hammond, 2004, pg 102).
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Chapter Two Literature Review The completion of the literature review has addressed several objectives. However there are areas which have been identified and do require further investigation. The main issues is a user profile of the Clubcard and to realise the differentiation between loyalty in relation to the Clubcard brand, the customer reward programs itself and Tesco. To which of these factors do loyalty schemes generate true loyalty? These factors and the remaining objectives of the dissertation will be answered and achieve through primary research in the next chapter.
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Chapter Three Research Methodology
Chapter Three
Research Methodology
3.0
3.1
CHAPTER THREE RESEARCH METHODOLOGY

Introduction
In order to address all the objectives set out in this dissertation, primary research is essential. The methodology will illustrate the chosen methods undertaken in order to conduct the primary research. It will impart justification into the chosen method of research and provide assessment to the chosen approach in terms of advantages, disadvantages and limitations.
3.2
Research Objectives
From the literature review, several issues were discovered which required further investigation and research. Referring to section 2.7 in the literature review drawing attention to the perception that a satisfied customer was not necessarily loyal, Reichheld (1996) injects that customer satisfaction is the key to securing customer loyalty. However, Duffy (2001, pg 36) described satisfaction as being a starting point in order to create true loyalty. The crucial issue raised in the works of these scholars is that it demonstrates the role of the Tesco Clubcard in building loyalty, either through the theory that customers simply need to be satisfied in order to be loyal or through Duffys loyalty calculation hypothesis. In conducting the literature review it was noted there was a wealth of acclaim and admiration for the Tesco Clubcard scheme. However, despite this positive commendation there appears to be a lack of evidence that it has actually created loyalty. Humby and Hunt (2004, pg 17) argued that it should not be contended that 4 8
Chapter Three Research Methodology cardbased customer reward programs are credible alternatives to being offered excellent service, innovative products and services or the right price. All of which
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Chapter Three Research Methodology can develop loyalty. Much of the literature raised the claims that loyalty is generated and influenced by other factors such as price, location, coupons, range of products and staff assistance. Tesco have been vigilant to these factors and the needs of their customers by implementing all of the strategies mentioned, in addition to the Clubcard customer reward program. Therefore primary research is required to be undertaken to determine and establish if the Clubcard has actually created loyalty. If it has, then one must determine what factors the customers are loyal towards. Tesco, the customer reward program or to the Clubcard brand itself? Section 2.6 illustrated the view that Tesco sustained the Clubcard is a straightforward thank you to their customers and it is designed to give you something back for shopping with Tesco (www.tesco.com). However, from this an area of interest is found concerning customers being less attentive to rewards and instead being more interested in gaining appreciation and recognition from Tesco. The issue raised here is with regards to the building of affinity that Tesco has with its customers through the use of specific magazine topics or quarterly mailings. The literature review also exposed that consumers are increasingly becoming more aware, as commented by Khan (1998), consumers are smarter than marketers perceive, and are actively manipulating suppliers for their own ends. Egan (2001, pg 381) supports this view by concluding that consumers are taking advantage of suppliers and jumping from one to another to get the best deal they can. This would suggest that loyalty card schemes are actually allowing consumers to manipulate suppliers for their own needs. With the quantity and penetration of customer reward programs 5 0
Chapter Three Research Methodology currently in operation, the Clubcard model is not unique with Seth and Randall (2001, pg 39) commenting that Tesco did not invent the card nor were they a first mover. However, it is essential to know if the Clubcard scheme insulate(s) them [consumers] sufficiently from switching (Miranda et al., 2005, pg 230). Additionally the literature review indicated that consumers have come to expect some form of
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Chapter Three Research Methodology reward as part of their routine shopping experience (Parker and Worthington, 2000, pg 491). In addition to the issues raised from the literature review, it was felt that several other objectives were left unresolved. From this the research objectives are: 1) Investigate customer opinions and perception on the Tesco Clubcard, analyse and understand their opinions and mindset. 2) Gauge the effectiveness of how the gathered information from the Tesco Clubcard is utilised. 3) Recognise and identify the main users of the Tesco Clubcard Scheme. 4) Determine if the Tesco Clubcard has actually created loyalty and ascertain what customers are loyal towards. 5) Establish if the Tesco Clubcard is actually needed, given the number of loyalty initiatives currently employed by Tesco to facilitate customer satisfaction. 6) Consider the conjecture that consumers are manipulating suppliers for their own needs by shopping around and participating in other customer reward programs.
3.3
Selection of Research Methods
The technique of research methods can be divided into quantitative and qualitative approaches. As commented by Charoenruk (2007, pg 12), quantitative research is described by the terms 5 2
Chapter Three Research Methodology empiricism (Leach, 1990) and positivism (Duffy, 1985). It derives from the scientific method used in the physical sciences (Cormack, 1991). This research approach is an objective, formal systematic process using numerical
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Chapter Three Research Methodology data findings, it describes, tests, and examines cause and effect relationships (Burns & Grove, 1987), using a deductive process of knowledge attainment (Duffy, 1985). It is primarily concerned with the collection of data using numbers and measurements. It seeks to establish relationships between two or more variables via a process of statistical methods to obtain the connotation of the relationship. According to Malthotra and Peterson (2006, pg 150), quantitative research is a research methodology that seeks to quantify the data and typically applies some form of statistical analysis. Routinely the data is collected using a premeditated template of questions in the form of a structured questionnaire survey incorporating primarily closed questions with set responses. There are various vehicles used for collecting quantitative information but the most common are onstreet or telephone interviews (Market Research World 2006). Qualitative research is chiefly concerned with the collection of in depth information via a process of asking questions to understand how people feel and why they feel as they do (Market Research World 2006). Indepth interviews, focus group discussions and participant observation are common methods used for collecting qualitative information. With reference to Proctor (2003, pg 529), qualitative research methods usually involve small samples, which attempt to elicit descriptive information about the thoughts and feelings of respondents on a topic of interest to the research. Charoenruk (2007, pg 2), comments that, qualitative research differs from qualitative approaches as it develops theory inductively. There is no explicit intention to count or quantify the findings, which are instead describe in the language employed during the research process (Leach, 1990). A qualitative approach is used 5 4
Chapter Three Research as a vehicle for studying the empirical Methodology world from the perspective of the subject, not the researcher (Duffy, 1987). Benoliel (1985) expanded on this aspect and described qualitative research as modes of systematic enquiry concerned with understanding human beings and the nature of their transactions with themselves and with their understandings.
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Chapter Three Research Methodology 3.3.1 Features of Qualitative and Quantitative Research
Adapted from Neill (2007) Qualitative versus quantitative research: key points in a classic debate.
Qualitative
Quantitative
The aim is a complete, detailed description.
The aim is to classify features, count them, and construct statistical models in an attempt to explain what is observed.
Researcher may only know roughly in advance what he/she is looking for. Recommended during earlier phases of research projects. The design emerges as the study unfolds.
Researcher knows clearly in advance what he/she is looking for. Recommended during latter phases of research projects. All aspects of the study are carefully designed before data is collected. Researcher uses tools, such as questionnaires or equipment to collect numerical data. Data is in the form of numbers and statistics. Objective seeks precise measurement & analysis of target concepts, e.g., uses surveys, questionnaires etc.
Researcher is the data gathering instrument.
Data is in the form of words, pictures or objects. Subjective individuals interpretation of events is important ,e.g., uses participant observation, indepth interviews etc. Qualitative data is more 'rich', time consuming, and less able to be generalized.
Quantitative data is more efficient, able to
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In order to achieve the objectives of the methodology, the selected research method to be used requires the outcome of a combination of statistical analysis in addition to an indication with regards to consumers attitudes and perceptions. It is often mentioned amongst marketing research literature that qualitative and quantitative approaches are bipolar measurements of data. The qualitative approach places emphasis on gaining indepth answers from a small number of respondents, whereas in contrast quantitative approaches accentuates gaining statistical information from a large number of respondents. However, Veal (1997, pg 34) has observed that sometimes the information is qualitative in nature but is presented in quantitative form. This supports the suggesting that qualitative characteristic questions in a survey can be collected by using open ended questions seeking opinions. An additional benefit of using open questions is that it allows for a multitude of replies where each respondent can give a personal response or opinion in his or her own words (Collis and Hussey, 2003, pg 179). From the research methods mentioned above it has been determined that a questionnaire survey will be the most effective and efficient medium in order to achieve the objectives of the dissertation. Luck and Rubin (1987) defined a questionnaire as a formalised schedule to obtain and record specific and relevant information with tolerable accuracy and completeness. Bruce (2004, pg 7), states that the role of the questionnaire is to elicit the information that is required to enable the researcher to answer the objectives of the survey. To do this, the questionnaire must not only collect the data required, but collect the data in the most accurate 5 7
Chapter Three Research way possible. Additionally, McNabb Methodology (2004, pg 150) comments that, questionnaires can be designed to determine what people know, what they think or how they act or plan to act . The flexibility of the questionnaire results in very few rules to follow in development of the instrument.
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Chapter Three Research Methodology The decision to use a quantitative method over a qualitative approach was based on the grounds that a large representative sample is needed. Qualitative research is principally based on in depth interviews and focus groups based on non representative samples. Therefore this method is regarded to be inappropriate to the study. It is imperative that there is unbiased study and analysis of data. One such possible scenario with using a focus group could be that an individual could influence other respondents or control the group to a specific direction. Furthermore, given the extensive training required to conduct a sophisticated qualitative study (McDaniel and Gates, 2006, pg 81), it is apparent that in order to extract the required information the interviewer required a great skill set. It is acknowledged that focus groups are a useful medium for understanding emotions and attitudes. However, by using both qualitative and quantitative techniques in the survey, it is felt that this understanding can be an achieved to an extent on a larger scale and at considerably less expense.
3.3.2
Analysis of Data
Results and analysis of the data using a computer software package known as SPSS (Statistical Package for the Social Sciences) can be found in appendix C and appendix D respectively.
3.4
Questionnaire Design The questionnaire represents one part of the survey process. It is, however, a very vital part of the process. A poorly written questionnaire will not provide the data that are 5 9
Chapter Three Research required or, worse, will provideMethodology data that are incorrect (Bruce, 2004, pg 7).
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Chapter Three Research Methodology As the questionnaire is the chief data collection tool, it is essential that the questions are appropriate to what this study is intending to achieve. Emphasis should be on using the correct terminology and it should be appropriate enough to extract the required information from the respondent base.
3.4.1
The EightStep Questionnaire Construction Procedure
McNabb (2004, pg 151) has constructed an EightStep questionnaire construction procedure
Malhotra (1999, cited in McNabb, 2004, pg 151) claims that in the preparation of a questionnaire the researcher must follow a systematic procedure in order to be sure that it fulfils three broad objectives. The questionnaire must: 1). Successfully gather information that answers each study question. 2). Motivate respondents to answer all questions to the best of their ability. 3). Keep all potential error to a minimum.
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Chapter Three Research Methodology With this in mind, the above questionnaire construction table has been used as a guideline rather than a checklist of steps as questionnaire construction is as much as art as it is a science (McNabb, 2004, pg 151).
3.4.2
Justification of Questions
The preliminary intentions for the survey have been recognised from the secondary data. This has identified the issues and areas to be addressed by providing a map for the questionnaire (Punch, 2003, pg 30). The validation of the questions used can be found in appendix A.
3.4.3
Question Types and Wording
It is imperative that the questionnaire has been constructed using clear and concise terminology, avoiding doublebarrelled questions and jargon to avoid any unnecessary confusion. As commented by Bruce (2004, pg 8), a questionnaire writer who is not familiar with the vocabulary of a market can very quickly come unstuck. Additionally the consideration for avoiding bias in a question has been noted and the problem if respondents inability to evoke has been abridged by keeping the reference time periods relatively short (McDaniel and gates, 2006, pg 272). The query of age group and sex of respondents are used to help meet the objective of building a profile of the Tesco Clubcard user. As age can be a sensitive issue it was decided that the use of precoded groups was 6 2
the best method.
The questionnaire consists predominantly of both multiple choice and dichotomous closed questions. It was devised that the multiple choice closed questions allowed
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Chapter Three Research Methodology respondents to indicate their opinions as well as allowing for more than one response to be recorded. The dichotomous questions were purposely limited to two fixed alternatives as this is easier to manage but it also ensures a rapid answer from respondents. In order to gain a better understanding of respondents opinions and to allow for a more precise measurement of attitudes, certain questions within the questionnaire will be graded using a Likert scale of one to five where respondents are instructed to tick the response options that best reflect their positions on each item (Foddy, 1999, pg 154). The justification adopting a fivepoint Likert scale is to ensure that respondents have a sufficient choice of responses which best represents their feeling and it will also increase the response rate and quality of responses, additionally this approach allows for attitudes to be measured and analysed accurately. The addition of an open question has been incorporated in the questionnaire. The initiative for this is to allow respondents to use their own words and expressions without restricting choice. Furthermore it will enable an opportunity for the interviewer to encourage respondents to develop and expand on their answers and reveal more information. Although analysis of this data will not be as straight forward as the closed questions, it was determined that they could support the data obtained from the previous questions and reveal more information with regards to their motivations and attitudes.
3.4.4
Questionnaire Layout
Cohen and Manion (1994, pg 258), commented that the appearance of the questionnaire is vitally important. It must look easy, attractive and interesting rather than complicated, unclear, 6 4
Chapter Three Research Methodology forbidding and boring. it is important, perhaps, for respondents to be introduced to the purposes of each section of a questionnaire, so that they can become involved in it and maybe identify with it. If space permits, it is
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Chapter Three Research Methodology useful to tell the respondent the purposes and foci of the sections/of the questionnaire. The questionnaire will commence establishing connection through the introductory statement detailing the topic and the motive for carrying it out. Once initial contact is made, the opening question in the questionnaire will determine if the respondent is qualified, i.e. if he/she owns a Tesco Clubcard. If the answer is negative then the questionnaire will be terminated to avoid wasting time for either party. A positive answer will be followed by a brief description of the respondent and multiple choice questions which can be answered quickly and accurately.
3.4.5
Interviewer versus Respondent Completion
The chosen method of data collection is that the questionnaires will act as an initial script whereby the interviewer reads out the questions to the respondent and records the answer they give. The validation for this method of data collection is so that the interviewer can ensure that the responses received are complete, accurate and facilitates any questions that respondents may field during the survey. It is vital that care and attention must be taken so that no attempt is made to take lead or influence the respondent into giving answers they normally would not give.
3.4.6
Coding
Coding means assigning a code, usually a number, to each possible response to each question (Malhotra and Peterson, 2006, pg 407). This refers to the way the gathered data will be coded, tabulated, analysed, and interpreted Computers using readily available, easy 6 6
Chapter Three Research Methodology touse statistical software tabulate almost all survey results. For this reason, most questionnaires are precoded (classification numbers appear beside each question and each possible response), making data entry simple and less
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Chapter Three Research Methodology errorprone Responses to openended questions are grouped into categories and classes are then translated into numerical form for counting and additional statistical analysis (McNabb, 2004, pg 153).
3.5 Sample Selection Procedure and Sample Characteristics It has been determined that approximately 100 respondents shall be drawn from a population of all visitors to Tesco in Newcastle Upon Tyne. The size of the sample has had to be limited due to available time, money and resources. This can be classified as convenience sampling in which the sampling selection process is continued until your required sample size has been reached (Saunders et al., 2003, pg 177). It is felt that probability sampling would be the most appropriate method, therefore there is no set criteria for respondents other than that they are Tesco customers. As commented by Fink (1995, pg 9), every member of the target population has a known nonzero probability of being included in the sample. Using this process will eliminate any subjectivity and ensure a fair method of acquiring respondents. Potential respondents will be approached as they enter the supermarket and the probability sampling that will be employed will be a rule of four persons, whereby every forth person that passes will be asked to participate. Regardless of the response the process will start over again. Furthermore it has been determined that potential respondents will be approached as they enter the supermarket. The reason for this is because potential contributors are more likely to participate when 6 8
Chapter Three Research Methodology empty handed and less likely to be in a rush.
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Chapter Three Research Methodology The times and dates in which this research was carried out were unfortunately constrained by the periods that Tesco allowed. The questionnaire was carried out on the following dates and times:
Date & Time th 15 April 2008 9.30am 11.30am 16 April 2008 9.30am 11.30am 17 April 2008 9.30am 11.30am 18 April 2008 9.30am 11.30am
th th th
Completed Questionnaires 14 24 19 22 12 9 TOTAL = 100
3.6
Strengths, Limitations and Validity
The proposed method of collecting data through questionnaires is akin to any form of research, it has its merits but additionally it also contains limitations and issues of validity. Questionnaires have many advantages. The greatest of these is the considerable flexibility of the questionnaire. Questionnaires can be customdesigned to meet the objectives of almost any type of research paper (McNabb, 2004, pg 150).
3.6.1
Strengths
The method of using a questionnaire allows responses to be collected in a standardised way, resulting in the data being 7 0
Chapter Three Research Methodology more objective. This results in a reduced bias and allows respondents to talk freely.
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Furthermore the information gathered can be presented in numerical and graphical form. Moreover this would facilitate the platform of a structured logical analysis and, if required, this can be reanalysed by others. Using a questionnaire results in a potentially large representative sample. Information can be gathered from a large portion of a group. The use of the forth person rule ensures that everyone calling into Tesco on the days and time the questionnaire will take place has an equal probability of being chosen to carry out the questionnaire.
3.6.2
Limitations
Questionnaires, like many evaluation methods occur after the event, so participants may forget important issues (Milne, 1999). As commented by Clarke and Crichter (1985, pg 27), there is always a gap between what people say and what they actually do. This is valid in all research models nonetheless this factor must be taken into consideration when carrying out an analysis of the results. The time limits imposed by Tesco for when the questionnaire can be conducted will not be 100% representative of their customer base. Due to the restrictions, data will only be obtained from consumers who happen to visit the store on the specific days the survey is conducted and within the allocated time frame. Additionally, respondents may answer superficially, however as the questionnaire is designed to be completely relatively quickly hopefully this issue can be avoided. 7 2
3.6.3
Validity
In the context of questionnaires, validity depends chiefly on reliability. Reliability is a characteristic of the instrument itself, but validity comes from the way the instrument is employed (EWB 2007). If a questionnaire is shown to be unreliable then there is no discussion of validity. Veal (1987, pg 186) commented that validity is the extent to which (the questionnaires) accurately reflect what they are meant to reflect. EWB (2007) back this up by citing, validity refers to whether the questionnaire or survey measures what it intends to measure. In an interview situation, validity could be compromised by an assortment of scenarios and circumstances. For example, if respondents are in a rush to complete the questionnaire this could affect their responses. Additionally, the possibility of respondents giving exaggerated responses or fail to interpret the questions as intended by its designer (Belson, 1986, pg 13). The proposal of approaching respondents and interviewing them before they enter the store is made on the basis that the respondents latest experience with Tesco may cause an irrational change in their opinion and thus resulting in inaccurate data being recorded by the questionnaire. This will further enhance the validity of the questionnaire.
3.7
Summary
The method in which the data will be collected has been defined and acknowledged with validation in this chapter of the dissertation. Using the questionnaire as a research tool and 7 3
Chapter Three Research Methodology combining quantitative and qualitative research methods will answer the aims of the study. The next chapter presents the research findings and provides analysis of the results.
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Chapter Four Research Findings and Analysis
Chapter Four
Research Findings and Analysis

4.1 Introduction
The subsequent chapter will present the findings gained from the primary research conducted via the questionnaire (appendix B) and interpret the results. The results from the quantitative research have been correlated and investigated. This segment of the study provides the fundamental information and data required in order to meet the aims of the dissertation. Individual frequency tables of the results can be found in appendix D
4.2
Analysis
From the research methodology it was determined that there are several areas that need to be established. This has enabled the analysis to be divided into separate sections in order to achieve each objective. The techniques employed in order to present the findings of the analysis include frequency tables and cross tabulation.
4.2.1
User Profile of Tesco Clubcard Respondents
The secondary research highlighted a distinct lack of information with regards to the characteristics of the fundamental users of loyalty cards. It has therefore been determined that an ideal starting point is to identify and establish a user profile of the selected sample. Using the rule of every forth person helped ensure 6 4
Chapter Four Research Findings and that the sampling was random. Analysis
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Figure 4.2.1.1
Please choose your Gender: Cumulative Frequency Valid Male Female Total 29 71 100 Percent 29.0 71.0 100.0 Valid Percent 29.0 71.0 100.0 Percent 29.0 100.0
Figure 4.2.1.1 shows the results from the questionnaire illustrating that out of the 100 respondents, 29 are males and 71 are female. Although the data obtained was somewhat limited by the sample size and time scale, it does exemplify that women are more likely to be cardholders. Interestingly, the fact that 29 males owned a card shows that men are also active consumers and the Tesco Clubcard has effectively obtained the segment.
Figure 4.2.1.2
Please choose your Gender: * Please indicate which age group you fall into: Crosstabulation Count Please indicate which age group you fall into: Under 21 Please choose your Gender: Male Female Total 2 8 10 22 - 29 9 12 21 30 - 39 5 23 28 40 - 49 3 9 12 50 - 59 5 10 15 60 + 5 9 14 Total 29 71 100
Figure 4.2.1.2 shows the age group of respondents compared to their gender. The data shows clearly the mass appeal of the 6 6
Clubcard to be across all age
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Chapter Four Research Findings and Analysis demographics and from the data we can establish that the typical male user of Clubcard is aged 2229 and for females aged 3039. Figure 4.2.1.3
Please indicate which age group you fall into: * I trust Total Super Store products and their image Cross tabulation Count I trust Total products and their image Strongly Strongly Agree Please indicate which age group you fall into: Under 21 22 - 29 30 - 39 40 - 49 50 - 59 60 + Total 4 3 3 4 5 2 21 Agree 4 8 16 5 5 9 47 No Opinion 1 1 2 1 4 1 10 Disagree 0 7 4 2 1 2 16 Disagree 1 2 3 0 0 0 6 Total 10 21 28 12 15 14 100
Figure 4.2.1.3 highlights the age of the respondents compared with their level of trust for Tesco products and the Tesco image. The above data indicates that the age groups most likely to be loyal to Tescos due to the notion they trust Tesco products and its image are the 3039 age groups. Conversely, it is also shown in the 2229 and 3039 age groups higher claims that they do not trust Tesco. In total out of the 100 respondents, 22% did not trust Tesco while 68% did trust Tesco (the other 10% neither agreeing nor disagreeing). What this shows is that Tesco has been successful in establishing position in the market place. However, there is no evidence to suggest that the trust exemplified was formed by Clubcard single handedly.
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Chapter Four Research Findings and Analysis The results also show that the Tesco Clubcard appeals to every age group and that Tesco is effectively managing its relationship with customers in each of their different life stage (Simm, 2007) to attain competitive advantage and thus adding value to the Clubcard scheme.
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Chapter Four Research Findings and Analysis 4.2.2 Customer Perceptions on Tesco Clubcard
The specific focus of the questionnaire has resulted in limited results of Clubcard users, creating unambiguous data that are significant to the study.
Figure 4.2.2.1
Please indicate how often you use your Total Rewards Program when you purchase goods or services with Total Super Store Cumulative Frequency Valid Always Frequently Little Never Total 42 39 18 1 100 Percent 42.0 39.0 18.0 1.0 100.0 Valid Percent 42.0 39.0 18.0 1.0 100.0 Percent 42.0 81.0 99.0 100.0
Figure 4.2.2.1 discloses that a total of 81% of the respondents surveyed used their Tesco Clubcard always or frequently when completing a transaction with Tesco. This high value could be accounted for by suggesting that customers value the Clubcard and have integrated it into their normal shopping behaviour and routine. However, despite this the results also show that there is a remaining 19% of customers who seldom or never use their Clubcard. It is essential that this margin is not overlooked or ignored as this marker represents a large percentage and demonstrates that some consumers do not buy into the scheme and are simply not motivated by the rewards on offer, furthermore it also illustrates that the Tesco Clubcard scheme is not enough to keep specific customers loyal to Tesco. With reference to operant conditioning as mentioned in the literature review in section 2.6 and that if a given bit of behaviour has a consequence of a special sort, it is more likely to occur again 7 0
Chapter Four Research Findings and Analysis upon similar occasions (Skinner, 1978, pg 19). However, the results from the questionnaire show that this concept is indeed not generic and that some consumers do not view one set
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Chapter Four Research Findings and Analysis of behaviours to lead to positive outcomes, adding value to the statement that behaviour is not generic amongst all consumers and that some customers are not affected or influenced by the prospect of rewards.
Figure 4.2.2.2
Please indicate which age group you fall into: * If Total Super Store did not have the Total Rewards scheme, would you still continue to shop there? Cross tabulation Count If Tesco did not have the Total Rewards scheme, would you still continue to shop there? Yes Please indicate which age Under 21 group you fall into: 22 - 29 30 - 39 40 - 49 50 - 59 60 + Total 10 21 26 11 14 13 95 No 0 0 2 0 0 1 3 Don't Know 0 0 0 1 1 0 2 Total 10 21 28 12 15 14 100
Figure 4.2.2.2 shows the age of respondents equated with the notion that if Tesco did not have the Clubcard customer reward program in place, would they still continue to shop there. The results show that a resounding 95% of respondents across all age demographics would still continue to shop there. This raises the notion that perhaps customers view the Clubcard as being of little or no significance or application when they do their shopping at Tesco and in actual fact perceive it as an additional bonus. Appreciably what these results show is that Tesco is doing and offering so much more than merely a loyalty card that facilitates repeat purchases to 7 2
Chapter Four Research Findings and Analysis their customers. It also raises the notion that loyalty is more behavioural than attitudinal.
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Chapter Four Research Findings and Analysis Figure 4.2.2.3

I think Total Super Store is very innovative * I feel more could be done to increase my loyalty Cross tabulation Count I feel more could be done to increase my loyalty Strongly Strongly Agree I think Total is very innovative Strongly Agree Agree No Opinion Disagree Total 1 4 0 0 5 Agree 8 46 16 2 72 No Opinion 2 8 4 0 14 Disagree 0 4 2 1 7 Disagree 1 1 0 0 2 Total 12 63 22 3 100
What we can establish from figure 4.2.2.3 is that 77% of the respondents surveyed either strongly agree or agree that more could be done by Tesco to increase their loyalty, conversely 75% view Tesco as being an innovative company. What is evident from these findings is that despite consumers feeling that more could be done to increase their loyalty they nevertheless view Tesco as being an inventive company and in a positive light. Figure 4.2.2.4
I trust Total Super Store products and their image * I feel more could be done to increase my loyalty Cross tabulation Count I feel more could be done to increase my loyalty Strongly Strongly Agree I trust Total products and Strongly Agree their image Agree No Opinion Disagree Strongly Disagree Total 1 3 1 0 0 5 Agree 16 34 5 13 4 72 No Opinion 2 7 2 2 1 14 Disagree 1 2 2 1 1 7 Disagree 1 1 0 0 0 2 Total 21 47 10 16 6 100
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As stated previously and as shown in figure 4.2.2.3, 77% of respondents felt more could be done to increase their loyalty. However, despite this, 68% strongly agree or agree on trusting Tesco products and their brand image. What can be identified from this is despite customers attitudes to more being done to keep them loyal they would still continue to purchase products from services due to their confidence in the products and brand offered by Tesco.
Figure 4.2.2.5
If Total Super Store did not have the Total Rewards scheme, would you still continue to shop there? * I expect rewards to be a part of my normal shopping experience Crosstabulation Count I expect rewards to be a part of my normal shopping experience Strongly Agree If Total did not have the Total rewards scheme, you still continue to shop there? Yes No Don't Know Total 8 1 1 10 Agree 48 1 1 50 No Opinion 29 1 0 30 Disagree 10 0 0 10 Total 95 3 2 100
Figure 4.2.2.5 shows that 60% of the respondents strongly agree or agree that they expect rewards as part of their normal shopping experience. However, despite this 95% would continue to shop at Tesco if they did not have the Clubcard scheme. This comparison again shows the loyalty that Tesco has generated and that the majority of customers will shop there regardless of a customer reward program. However what is unclear are all the separate factors that have contributed to build this loyalty.
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Figure 4.2.2.6
Total Rewards Program * Have you redeemed any rewards from the Total Rewards scheme within the last 2 months? Cross tabulation Count Have you redeemed any rewards from the Clubcard scheme within the last 2 months? Yes Total Rewards Scheme 1 - Very Important 2 3 4 5 6 7 8 - Not Important At All Total 4 7 5 13 12 9 5 6 61 No 5 1 2 3 9 3 11 5 39 Total 9 8 7 16 21 12 16 11 100
Figure 4.2.2.6 shows that 61% of respondents have redeemed some kind of reward with Tesco in the last 12 months. What these results reveal is that consumers are attracted to the rewards and seek to realise the experiential and lifestyle themed incentives that Tesco makes available to them. Additionally, 40% of respondents rank a customer reward programs importance between 14 on a scale of 8 (1 = very important, 8 = not important at all). When these results are analysed we can see that 60% of respondents do not view loyalty card schemes as being primarily important (ranked 48). This shows that consumers are not principally interested in customer reward programs or the rewards they can attain from despite a relatively high number of respondents taking advantage of them, but instead view other factors as being more important to them. What this finding illustrates is that shoppers attitudes have 7 6
Chapter Four Research Findings and Analysis changed and they view other factors as being more important than earning points on their purchases.
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4.2.3
Loyalty and Satisfaction
The debate in the correlation between loyalty and satisfaction has been highlighted in the literature. By using a cross tabulation table, the individual variables can be analysed (figure 4.2.3.1). Figure 4.2.3.1
Would you describe yourself as being loyal to Total Super Store? * Would you describe yourself to be a satisfied customer of Total Super Store? Cross tabulation Count Would you describe yourself to be a satisfied customer of Total Super Store Store? Yes No Don't Know Total Would you describe yourself as being loyal to Total? Yes No Don't Know Total 19 31 4 54 13 15 1 29 4 12 1 17 36 58 6 100
The results from the table show that overall, 54% of the respondents surveyed described themselves as being satisfied Tesco customers. However, when the question is cross tabulated we can see that 31% are satisfied but would describe themselves as not being loyal. What we can deduce from this is that satisfied customers are not necessarily loyal to a business. Accordingly, 13% of respondents expressed they were not satisfied Tesco customers but were loyal, exhibiting that they are locked into being loyal. One justification for this could be defined by Barnes (2002) as functionally loyal and mentioned in section 2.5. Functionally loyal is whereby customers are only loyal because they have an objective reason to be such as convenience, factors such as opening times and location is central to them. Furthermore, figure 4.2.3.1 also indicated that 19% of the respondents are loyal and satisfied with Tesco. It is advocated that 7 8
Chapter Four Research Findings and this percentage of respondents Analysis achieved
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Chapter Four Research Findings and Analysis their loyalty condition through the linear progression theory as pointed out in section 2.7. The Clubcard scheme can be viewed as a starting point to loyalty as mentioned by Duffy (2001, pg 36). However, the results indicate that more additional factors are required in order to insulate them (customers) from switching (Miranda et al., 2005, pg 230). Some consumers simply need to be satisfied with a business in order to be loyal. However, the 12% divergence from the results in figure 4.2.3.1 indicates that most consumers need more than satisfaction to be loyal. The results show that the association between loyalty and satisfaction is not achievable through a single method alone and in actual fact is dependent on consumers own variables. Thus confirming Sderlunds (1998 section 2.7) notion that, increasing satisfaction does not produce an equal increase in loyalty for all customers. What can be concluded is that the Clubcard scheme does add value and operating in conjunction with other loyalty marketing tools that Tesco utilise, such as competitive pricing and customer service, allows customers to reach a state of loyalty via different routes and methods.
4.2.4 Tescos Efficiency and Use of the Information Gained from Clubcard The Clubcard magazine has a run of nearly 9 million copies four times a year (Stone, 2004, pg 203) and is an integral part of the Clubcard scheme. It 8 0
Chapter Four Research Findings and Analysisthat 61% of respondents was shown in the previous section surveyed have redeemed some kind of reward from Tesco in the last 12 months. Figure 4.2.4.1 below demonstrates the frequency of the respondents who read the clubcard magazine.
8 1
Figure 4.2.4.1
Do you read Clubcard Magazine Cumulative Frequency Valid Yes No Sometimes Total 25 49 26 100 Percent 25.0 49.0 26.0 100.0 Valid Percent 25.0 49.0 26.0 100.0 Percent 25.0 74.0 100.0
The results show that 49% of respondents claim to not read the Clubcard magazine and that only 51% answered positively to reading it. These statistics are dependant on how long the respondent has been a Clubcard member. However, what can be devised from this is that it does signify that consumers have a lack of interest in this medium.
Figure 4.2.4.2
Do you read Clubcard magazine * If yes or sometimes please indicate what you think of the magazine. Crosstabulation Count If yes please indicate what you think of the magazine. It covers everything you would expect and is of great use Do you read Clubard magazine Yes Sometimes Total 3 5 8 It is a good read with some informative articles and features 9 14 23 It is dull, unhelpful and of no use 13 7 20 Total 25 26 51
8 2
Chapter Four Research Findings and Analysis Furthermore, figure 4.2.4.2 shows that out of the 51 respondents surveyed who did read the Clubcard magazine, a staggering 20 of them found the magazine to be dull, unhelpful and of no use to them. Consequently, this could suggest that Tesco is not suitably employing the data it has gathered from Clubcard to efficiently and effectively communicate with its end customers. Therefore, it could be suggested that the marketing funds could be better utilised elsewhere.
4.2.5
Has the Tesco Clubcard Created Loyalty?
Humby and Hunt (2004, pg 9) implied that retail loyalty is looking to achieve a little extra goodwill, a slight margin of preference, an incremental shift in buying behaviour. To highlight a shift in buying behaviour it is practical to recognise and acknowledge if the collection of points results in an increase of the respondents expenditure. By means of cross tabulating the data with how important respondents rank the location of a store, the data can be divided into true loyal and functionally loyal. Figure 4.2.5.1
Does the collection of points influence you to buy more or to buy specific/alternative promotional products * Location Of Store Crosstabulation Count Location Of Store 8 - Not 1 - Very Important Does the collection Yes of points influence you to buy more or to buy specific/alternative promotional products Don't Know Total 21 29 2 6 3 1 2 2 2 0 18 No 0 19 2 1 22 3 3 13 4 1 11 5 1 6 6 0 3 7 0 1 Important At All 0 1 Total 6 76
7 5
19
13
100
Chapter Four Research Findings and Analysis Figure 4.2.5.1 shows that 76% of the respondents surveyed claimed that the collection of points did not influence them to increase their expenditure or to buy specific alternative/promotional products. At a glance this statistic appears to show that the Tesco Clubcard has failed in its activity to create loyalty and generate an increase in sales. However, on closer inspection, and with reference to preceding literature, though only 6% of the respondents stated that their spending increased in their pursuit of points, this is a noteworthy figure in relation to profits. The importance of word of mouth exposure was pointed out in section 2.7 and thus this number can be seen as favourable in regards to profit margins. Remarkably the respondents who are increasing their expenditure because of the Clubcard, none of them ranked the location of a store as being the most important factor to them. This suggests a minor fraction of substantiation against the functionally loyal concept.
4.2.6 Figure
Are Consumers Manipulating Suppliers? 4.2.6.1 shows that from the 100 respondents
surveyed, a total of 83% indicated that they own and regularly use up to 3 other store loyalty cards in addition to their Tesco Clubcard, while 17% professed they only own a Tesco Clubcard. Figure 4.2.6.1
Apart from Clubcard, do you own and regularly use other store loyalty cards? Please indicate how many: Cumulative Frequency Valid 1 other card 2 other cards 3 or more other cards I only own a Tesco Clubcard Total 28 45 10 Percent 28.0 45.0 10.0 17.0 100.0 Valid Percent 28.0 45.0 10.0 17.0 100.0 Percent 28.0 73.0 83.0 100.0
7 6 100
17
These results lead to the principle that competitors are finding it straightforward to replicate and imitate similar offerings, and consumers are harvesting the benefits from all these schemes. Additionally, it also points to the belief that the Tesco Clubcard is little more than an expensive sales promotion technique. It can be contended that when the Tesco Clubcard was first introduced in 1995 it could have achieved loyalty through its uniqueness and innovation. However, today amongst the twentyfirst century generation of consumers who have more diverse tastes, attitudes and perceptions, loyalty is now much harder to achieve. One can question if loyalty cards have reached saturation point and if the era of the Tesco Clubcard is over? Figure 4.2.6.2 below puts this finding into practice as it illustrates that 60% of the respondents surveyed either strongly agree or agree that they actually shop around to get the best deals. What this data confirms is that consumers are savvy, as mentioned in section 2.9 and that they are manipulating suppliers for their own gains, reinforcing Khans (1998) notion that consumers are smarter than marketers generally perceive, and are actively manipulating suppliers for their own ends. Furthermore these results actually constraint the value of the Tesco Clubcard as a loyalty marketing tool. Figure 4.2.6.2
I usually shop around to get the best deals Cumulative Frequency Valid Strongly Agree Agree No Opinion Disagree 28 32 10 22 Percent 28.0 32.0 10.0 22.0 Valid Percent 28.0 32.0 10.0 22.0 Percent 28.0 60.0 70.0 92.0
77
Strongly Disagree Total
8 100

8.0 8.0 100.0 100.0 100.0
78
Chapter Four Research Findings and Analysis With the sheer profusion on different but similar customer reward programs being employed by organisations and offered to consumers, the data acquired through the survey and shown in figure 4.2.6.3 reveal that 60% of respondents expect some kind of reward as part of their normal everyday shopping experience. This exemplifies the need for market leading suppliers to invest in loyalty marketing schemes in order to compete for evolved consumers with exceptionally high buyer power.
Figure 4.2.6.3
I expect rewards to be a part of my normal shopping experience Cumulative Frequency Valid Strongly Agree Agree No Opinion Disagree Total 10 50 30 10 100 Percent 10.0 50.0 30.0 10.0 100.0 Valid Percent 10.0 50.0 30.0 10.0 100.0 Percent 10.0 60.0 90.0 100.0
The secondary research remarked that loyalty card schemes rely on maintaining the ignorance of the very customers that it wants to see exhibiting loyal behaviour (Parker and Worthington, 2000, pg 496). Additionally Parker and Worthington (2000, pg 496) also argued that such schemes were unethical and lead to the materialisation of points junkies. However, the information gathered from the survey opposes this hypothesis. Figure 4.2.6.4 indicates that consumers are not as ignorant as originally advocated, as well as pointing out that consumers recognise how much they need to invest in to the scheme in order to receive a laudable prize/reward. A total of 52% of respondents 79
Chapter Four Research Findings and Analysis correctly indicated that they knew that for every pound they spent at Tesco they would receive one point in the Clubcard scheme.
80
Please indicate which age group you fall into: * Do you know how many Clubcard points you gain for every 1 you spend in store? Crosstabulation Count Do you know how many Clubcard points you gain for every 1 you spend in store? 1 point for every 1 Please indicate which age group you fall into: Under 21 22 - 29 30 - 39 40 - 49 50 - 59 60 + Total 5 12 17 8 6 4 52 2 points for every 1 1 1 4 1 1 2 10 5 points for every 1 1 1 0 2 4 1 9 10 points for every 1 3 7 7 1 4 7 29 Total 10 21 28 12 15 14 100
4.2.7
Does Tesco Really Need the Clubcard
The data collected from the survey has provided an important insight into the significance of what factors respondents place upon that influence loyalty. Figure 4.2.7.1 below provides this information.
Figure 4.2.7.1
1 Very import ant 31 % 21 % 12 % 9% 25 % 1% 1% 0% 2 3 4 5 6 7 8 Not very importa 4% 1% 4% 11 % 2% 9% 51 % 18 %
Value for money Location of store Quality of service and staff Loyalty card scheme Product range and presentation Overall store layout and appearance Instore promotional magazine and flyers off coupons/vouchers and Money special promotions
18% 29% 14% 8% 19% 9% 1% 2%
20% 19% 24% 7% 12% 12% 2% 4%
10% 13% 19% 16% 14% 13% 5%
3% 9% 13% 21% 15% 18% 8%
6% 5% 8% 12% 4% 27% 14%
8% 3% 6% 16% 9% 11% 18%
8% 14% 25% 29%
81
Taking into account what respondents valued as 1 and 2 (very important/important) and totalling them up revealed the highest ranked order to be: 1) Location of store. 2) Value for money. 3) Product range and presentation. 4) Quality of service and staff. 5) Loyalty card scheme. 6) Overall store layout and appearance. 7) Instore promotional magazine and flyers. 8) Money off coupons/vouchers and special promotions. The findings exemplify that location of store and value for money are the most influential determinant factors in achieving loyalty. The ranking system also shows that loyalty card schemes are in the bottom half of important factors when choosing a primary supermarket. Although the results show that money off coupons/vouchers and special promotions as being the least important, if we examine the other end of the grading scale we can see that a staggering 51% of the respondents ranked instore promotional magazine and flyers as 8 (not very important). This is an interesting discovery as these are both products of the Tesco Clubcard. These findings are substantiation that Tesco may be better off investing money into other areas rather than in its Clubcard scheme. Figure 4.2.7.2 show the results of the openended question in the survey. The aim of which was to give respondents the opportunity to freely write their own comments and remarks into how Tesco could make them more loyal. The responses were grouped as 82
follows:
83

What more could Tesco do to make you more loyal? Cumulative Frequency Valid Improve facilities for elderly people Have discounts at the till rather than rewards Help those without transport Improve store layout Faster checkouts/self service checkouts More Clubcard points per pound Increase product range Increase store promotions More store entrances and exits Increase Clubcard rewards Improved on-line shopping Improve Clubcard administration Total 10 Percent 10.0 Valid Percent 10.0 Percent 10.0
22 14 2 10
22.0 14.0 2.0 10.0
22.0 14.0 2.0 10.0
32.0 46.0 48.0 58.0
4 12 3 3 3 16 1 100
4.0 12.0 3.0 3.0 3.0 16.0 1.0 100.0
4.0 12.0 3.0 3.0 3.0 16.0 1.0 100.0
62.0 74.0 77.0 80.0 83.0 99.0 100.0
The results show that the majority of responses signal towards direct, on the spot, discounts from their final shopping bill, rather than gaining rewards in the long term. This evidence points towards consumers trying to uncomplicate and simplify their everyday lives and that the Clubcard is in theory complicating things for them. Additionally, the findings also show that Tesco should consider investing extra money into providing adequate transport facilities for customers, improved provisions for older people, increased product selection and 84
Chapter Four Research Findings and Analysis improvements to the online shopping service. The feeling is that the Tesco Clubcard should evolve by
85
Chapter Four Research Findings and Analysis taking into account direct discounting from the final bill at the point of sale as a result of points collection. Not only will this assimilate the pricing element of loyalty, but it could also help maintain the success of the Tesco Clubcard.
4.3
Conclusion
Through the analysis of the primary research, several key findings have been established and the objectives of the study have been achieved. The results assessed the value of the Tesco Clubcard as a loyalty marketing tool by classifying the findings into several fundamental areas. The results from the questionnaire show that loyalty does exist amongst Tesco Clubcard holders and Tesco and thus the Tesco Clubcard can be viewed as a valuable asset in terms of a loyalty marketing tool. The high usage of the card by respondents indicate that they have accepted the scheme and are willing to incorporate it into their normal shopping experience at Tesco. Despite the accomplishment of the Clubcard, the results demonstrate that it is not the only aspect that causes consumer loyalty. There has been no indication or evidence to support the theory that the Clubcard alone has created loyalty. Furthermore the results have shown that other areas need to be considered to prevent consumers from switching to a rival. Particular attention should be paid to the details that consumers place importance on, such as value for money, location and store facilities, rather than loyalty card schemes, instore vouchers and magazines which were all ranked poorly by respondents.
86
Chapter Four Research Findings and Analysis scheme is a costly sales The analysis suggests that the Clubcard technique and that perhaps the resources used to finance the scheme might be better apportioned elsewhere to factors which can keep customers loyal and lead to repeat purchases such as lowering prices throughout the entire product range. Respondents regarded
87
Chapter Four Research Findings and Analysis the product of the Clubcard (vouchers and instore magazine) to be at the lower end of the scale in terms of importance when choosing a primary supermarket. Moreover, 49% of respondents claimed they did not read the magazine and out of the respondents that did admit to reading the magazine nearly half maintained that the magazine was not adequate as it did not appeal to them and they regarded it as dull and unhelpful. A total of 85% of respondents claimed they owned and regularly used at least 1 other store loyalty card in addition to the Tesco Clubcard. Additionally 60% of respondents also strongly agree/agreed that they usually shop around to get the best deals. The results have brought to light the new twentyfirst century generation of consumers who have more diverse tastes, attitudes and perceptions and the results show that the buying power they possess is higher than ever and as such they are effectively manipulating suppliers to meet their own needs and wants. With this in mind, it could be contended that the Tesco Clubcard in its current form is a dated remnant of the past and needs to evolve and transform in order to advance its value as a loyalty marketing tool.
88
Chapter Five Conclusion and Recommendations
Chapter Five
Conclusion and Recommendations
89
5.0 CHAPTER FIVE CONCLUSION AND RECOMMENDATIONS

5.1 Introduction
The purpose of this study was to discover if Tesco really needs the Clubcard scheme despite all the efforts it employs to keep customers loyal. Additionally, it also examined the value of the Tesco Clubcard scheme in the context as a loyalty marketing tool. The primary research carried out has produced key results and addressed the objectives of the thesis, outlined in chapter one. This concluding chapter shall illustrate the main findings of the study collectively, concentrating upon the objectives before making applicable recommendations, ascertaining the limitations to the study and, finally, highlighting areas that need further investigation and directing further research.
5.2
Conclusion of the study
The literature review has pointed to the notion that loyalty card proposals such as the Tesco Clubcard scheme are an invaluable marketing tool offering a multitude of advantages to both the organisation and the consumers. The Clubcard has provided Tesco with an opulent collection of data on individual customer tastes, preferences and spending habits. This wealth of information has enabled Tesco to sustain its position as the market leading UK supermarket retailer. However, by examining the scheme in the context of meeting the objectives of this thesis, it can be noted that the significance and value of the Clubcard in achieving customer loyalty appears dissimilar.
90
Chapter Five Conclusion and Recommendations It was discovered that loyalty did exist amongst some card holders, but the study has revealed no evidence to support the notion that the Tesco Clubcard alone has achieved loyalty.
91
The study has identified that a series of modus operandi exists in order to achieve a loyal customer base and that loyalty marketing consists of several factors and not just loyalty cards. Additionally, the thesis has acknowledged and identified the importance of store location and competitive pricing as being the most effective factors in achieving customer loyalty. Tesco currently utilises a number of techniques to ensure that customers are happy and content. Therefore it can be argued that the Clubcard scheme can be seen as an expensive encumbrance and is detracting away from the core business of Tesco. The knock on effect would be to allow funds to be better allocated and spent on areas which improve the other techniques currently in place. Additionally, the study has shown that consumers have evolved since the original conception of the Clubcard scheme, and the new perceptions, attitudes and buyer power they possess has immensely altered the value of the Clubcard and how they see the Clubcard. Furthermore the huge number of customer reward programs and similar designs has resulted in consumers no longer being concerned with the loyalty marketing gimmicks and rewards. Todays consumer is more interested in finding the best deal they can. What has transpired from the study is the discovery that the Tesco Clubcard was a starting point for loyalty. At the time of launch the scheme was innovative and appealing to consumers, however the results of the primary research reflect that respondents who claimed they were satisfied with Tesco were not necessarily loyal and thus more is required in order to lock them into being truly loyal to Tesco. Harlow (1997 cited in Egan 2001, pg 381) remarked on the evolution of twentyfirst century consumers as becoming increasingly promotionliterate and this has reduced the 92
Chapter Five Conclusion and Recommendations significance of the loyalty card within the supermarket industry. Parker and Worthington (2000, pg 496), claimed that consumers are ignorant, however the results from the primary research dispute and contradict this. The primary research showed that consumers are aware of the value of points and they do own and use
93
Chapter Five Conclusion and Recommendations more than one loyalty card. As consumers utilise technology around them, such as the internet, it can be deduced that todays consumers are actively and effectively manipulating suppliers to meet their own needs. The knock on effect of the boom of loyalty cards has now led consumers into expecting some kind of reward in their normal shopping experience. Consumers today are loyal to functional aspects of their shopping experience rather than rewards, with factors such as faster checkouts, product range, transport and online shopping all viewed as being important aspects. Ultimately these factors all contribute to a more convenient shopping experience but it has been suggested that the Clubcard only complicates matters. Furthermore, the results indicated that many respondents claimed that money off discounts of their final bill at the point of sale rather than future rewards were preferred and would make them more loyal. This is a clear indication that consumers today are more attracted to an instant saving/price reduction rather than the longterm collection of points in order to attain a similar reduction. From this finding it can be suggested that changing the format of the Clubcard to be more in line with what consumers demand may make it a more viable and valuable loyalty marketing tool. The general customer perception of the Tesco Clubcard revealed respondents high usage of the card and that they trust the Tesco brand and image in addition to having ardent aspirations to redeem rewards. Conversely, the results also showed some respondents using the card little or never per transaction which points towards the speculation that rewards are simply not enough to keep certain customers loyal to Tesco. The findings also showed that respondents perceived the card as an additional bonus to their shopping and the theory of operant conditioning, as highlighted in section 2.6 has been proven to not be generic with 94
Chapter Five Conclusion and Recommendations some consumers showing positive actions and behaviour without the need for rewards. This factor is further reinforced by the discovery that the majority of respondents surveyed claimed they would continue to shop at Tesco even without the Clubcard scheme.
95
Chapter Five Conclusion and Recommendations One of the categorical features of employing a customer reward program is to reduce high wastage by specifically targeting consumers with information that will appeal to them. The results showed that Tescos communication with its customers via the medium of magazine and vouchers was not effective and not realised to full capacity by recipients. Readership amongst respondents were moderately low and several respondents did not rate the magazine and/or its content. This finding suggests that the Clubcard scheme is directing Tesco to disregard particular sections of the market which offer more interest to consumers such as price reductions or improved facilities. With outlay into other more effective loyalty marketing mechanisms it can be reasoned that in terms of achieving a loyal customer base they may produce better results. Parker and Worthington (2000, pg 496) commented that loyalty cannot be bought and the findings in the primary research back this theory up, discovering over half the respondents claiming they were satisfied customers of Tesco. Further confirmation of this was established with the greater part of respondents maintaining they would continue to shop at Tesco and trusted the Tesco brand. What the findings have shown is that the epoch of the loyalty card is becoming pass. In its current form it is not enough to sustain competitive advantage. The failure to evolve the Clubcard scheme into what todays consumer demand has brought the Clubcard proposal to a unique crossroad. The sheer number of similar customer reward programs has reduced the overall value of schemes. Coupled with consumers that have evolved and are more intelligent has resulted in high buyer power within the supermarket industry. This evidence points to the Clubcard scheme becoming a zero sum game (Mazur, 1997, pg 16). The findings from the primary research have revealed several 96
Chapter Five Conclusion and Recommendations factors which limit the value of the Tesco Clubcard. These are:
97
Chapter Five Conclusion and Recommendations Competitors: the quantity of similar schemes has devalued customer reward programs, caused confusion and resentment amongst consumers and their simplicity of limitations has brought loyalty card schemes to a crossroad. External environment: the evolution of tastes, attitudes, awareness and demands of todays promotional literate consumer has resulted in savvy shoppers who are hunting around for the best deals and commanding more. Perception: the study revealed respondents perceptions towards the Clubcard and the additional Clubcard products such as in store magazine and vouchers was perceived as being weak in terms of productivity and effectiveness. The study has ascertained that the value of the Tesco Clubcard is contentious as it has made loyalty harder to achieve and thus failed to meet the base requirements of the model. Additionally, the research can conclude that the Clubcard in its current format may well have reached its zenith and if it continues to stay dormant then the future value of the scheme is uncertain.
5.3
Recommendations
Unquestionably the Tesco Clubcard customer reward program has brought success to Tesco, yet despite this accomplishment the study has found that it is now in a state of decline. Its value as a loyalty marketing tool is weakening due to numerous factors. Building upon this conclusion, the following recommendations can be suggested: Investigate key areas which are of importance to consumers and allocate the funds necessary in order to ensure that these 98
Chapter Five Conclusion and Recommendations new customer demands are met to help ascertain a loyal customer base. Examine and reduce the current amount of money invested into the Clubcard customer reward program as the concept becomes more dated and investing
99
Chapter Five Conclusion and Recommendations money in more significant areas. Areas such as lowering prices shall help sustain a competitive advantage within the industry. Evolve and transform the Clubcard model to adapt to the new tastes, attitudes and demands of the new generation of consumers. Consideration should be noted to giving customers an instant rebate at the point and time of sale rather than rewarding them through the collection of points. The current image of the Clubcard feels dated and as such a revision and re launch may give it a much needed boost and help motivate and excite consumers.
5.4
Limitations and Further Research
This study is not without limitations. The main area of concern is the sample size of the questionnaire. It is felt that it is not a 100% representation of the whole population and the times and dates in which this research was carried out were unfortunately constrained by the periods that Tesco allowed. Furthermore, with reference to the 100 respondents, generalisations have regrettably had to be made to the sample group. Time and money are supplementary factors which have limited the study to a degree. Tesco would only allow questionnaires to be carried out during a small number of mornings and over a few hours. The result of this is limited results of consumers who happened to visit the store on the specific times and dates the survey was being carried out. Additionally, it is felt that if qualitative interviews were established and carried out the results could help verify and support the findings from the questionnaire.
10 0
Chapter Five Conclusion and Recommendations Extra studies could be performed at different Tesco stores to determine if the value and perception of Clubcard is the same or if it differs from region to region. Further investigation could be carried out to reveal what effects an increased rate of loyalty
10 1
Chapter Five Conclusion and Recommendations points per pound spent would have and if it would make the scheme a more viable and valuable proposition. The research focused solely on Clubcard holders, however it may have been advantageous to extend the investigation to reflect on consumers who do not own a Clubcard yet continue to shop at Tesco despite this. Performing such an analysis would illustrate and identify what generates consumer loyalty and thus determine the most valuable loyalty marketing tool within the supermarket industry.
10 2
Referenc es
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Appendic es
Appendices
Appendic es
APPENDIX A QUESTIONNAIRE JUSTIFICATION

QUESTION VALIDATION 1a). Do you own a Tesco instantly establishes Clubcard? Initial question, leads directly into the subject and rapport with the respondent.
1b). If "yes", please indicate how Although customers may own a Clubcard, the inclusion of this question often you use your Clubcard when determines how actively they use their card. If a respondent owns a you purchase goods or services card but never uses it, this will indicate to the author a greater insight with Tesco. with regards to impending questions concerning their attitudes towards the Clubcard scheme. 2). Please choose your Gender scheme. Used to build a user profile of the Clubcard
3). Please indicate which age Helps in building the user profile and responses have been intentionally group you fall into. broadly grouped. It is vital there is no overlap in the age ranges stipulated. 4). On a scale of 18 (1 = excellent The intention of this question is to establish what factors lead and 8 = poor), how do you rank the importance of each customers to repeat purchase and determine the connection between of the following factors when customer and store. This question also highlights the range of loyalty deciding which supermarket marketing strategies currently used within the retail industry. you use 5). Apart from Clubcard do you The use of this question will determine how many respondents own and regulary use other own more than one loyalty card and divulge if consumers are actively store loyalty cards? manipulating suppliers for their own ends (Khan 1998). Please indicate how many 6a). Do you read the Clubcard Tesco use the information gathered from Clubcard users to determine Magazine? the articles it publishes in its Clubcard magazine. This question will establish how effective this practice is and if customers are responding by reading the magazine and indicate how prevalent this modus operandi is. 6b). If "yes" or sometimes The motive of splitting this question is to void any confusion to Please indicate what you think of respondents and also understanding how they value Tesco efforts The magazine. to communicate with them. 7). Do you know how many consumers are as Clubcard points you gain for The inclusion of this question will discover is as ignorant as Parker and
Worthington (2000) asserted. every 1 you spend in store?
Appendic es
8). Does the collection of points Parker and Worthington (2000) claimed that consumers are influence you to buy more or to becoming points junkies who are desperate to gain and save buy specific/alternative points. Additionally it will also address if customers aspire to promotional products which collect and redeem more points and thus increase spending. offer bonus points?
10 5
Appendic es
9). Have you redeemed any rewards from the Clubcard scheme within the last 12 months? 10). Would you describe yourself as being loyal to Tesco? 11). Would you describe yourself to be a satisfied customer of Tesco? 12). If Tesco did not have the Clubcard scheme, would you still continue to shop there? 13). Please tick the appropriate box which accurately reflects your level of agreement or disagreement. 14). What could Tesco do more to make you more loyal?
This question is designed to test Capizzi and Ferguson (2005) claim that customers actively seek lifestyle themed rewards. This will establish directly if the customer feel loyal towards Tesco. Used in conjunction with the above question this will address the concerns in the literature review with regards to the relationship between loyalty and satisfaction. This question will establish if consumers are locked in to Tesco as the paradigm created by the literature review suggests that it is not just loyalty cards that create loyalty. The inclusion of this was to gather and understand customers attitudes and opinions with regards to Tesco and loyalty.
Purposely an open ended question to determine any other feelings that respondents had and to gain a better understanding of them. Hopefully it will also present new ideas or concepts surrounding customer loyalty.
10 6
Appendic es
APPENDIX B QUESTIONNAIRE TESCO CLUBCARD USER SURVEY

As part of my MBA thesis I am doing some research on the Tesco Clubcard. I would appreciate it if you could take a few moments of your time to carry out this survey. All results will be kept confidential. 1a). Do you own a Tesco Clubcard? Yes 1 No
1b). If yes, please indicate how often you use your Clubcard when you purchase goods or service with Tesco: Always 1 Frequently 2 Little 3 Never 4 ........................................................................... ........................ 2). Please choose your Gender: Male 1 Female 2 ........................................................................... ........................ Please indicate which age group you fall into: Under 21 1 40 49 4 22 29 2 50 59 5 30 39 3 60 + 6 ........................................................................... ........................
3).
4).
On a scale of 1 to 8 (1 = very important and 8 = not important at all) How do you rank the importance of each of the following factors when deciding which supermarket you use: Rank 1 8 Value for money 1 Location of store 2 Quality of service and staff helpfulness 3 Loyalty card schemes 4 Product range and presentation 5 Overall store layout and appearance 6 Instore promotional magazine and flyers 7 Money off coupons/vouchers and special 8 promotions ............................................................................... .................... 5). Apart from Clubcard, do you own and regularly use any other store loyalty cards? Please indicate how many: 1 other card 1 3 or more other cards 3 2 other cards 2 I only own a Tesco Clubcard 4 ............................................................................... ....................
10 7
6a).
Do you read the Clubcard Magazine? If No please move onto es Question 7. Yes 1 No 2 Sometimes 3
Appendic
If yes or sometimes please indicate what you think of the magazine. It covers everything you would expect and is of great use It is a good read with some informative articles and features It is dull, unhelpful and of no use ................................................................ ....................
6b).
1 2 3 ...............
Please turnover questionnaire to continue
10 8
7). store?
Do you know how many Clubcard points you gain for every 1 you spend in
1 point for every 1 1 5 points for every 1 3 2 points for every 1 2 10 points for every 1 4 ................................................................................... ................ 8). Does the collection of points influence you to buy more or to buy specific/alternative promotional products which offer bonus points? Yes 1 No 2 Dont know 3 ................................................................................... ................ 9). Have you redeemed any rewards from the Clubcard scheme within the last 12 months? Yes 1 No 2 ................................................................................... ................ Would you describe yourself as being loyal to Tesco? Yes 1 No 2 Dont know 3 ................................................................................... ................ 11). Would you describe yourself to be a satisfied customer of Tesco? Yes 1 No 2 Dont know 3 ................................................................................... ................ 12). there? If Tesco did not have the Clubcard scheme, would you still continue to shop Yes 10).
1 No 2 Dont know 3 ................................................................................... ................ 13). Please tick the appropriate box which accurately reflects your level of agreement or disagreement: Strongly Agree I trust Tesco products and their image Agree No Opinion Disagree Strongly Disagree
I think Tesco is very innovative I usually shop around to get the best deals
I expect rewards to be a part of my normal shopping experience I feel more could be done to increase my loyalty
14).
What could Tesco do more to make you more loyal?
Many thanks for your time and attention
APPENDIX C SPSS CODED QUESTIONNAIRE RESULTS

Q1a Q1b Q2 1 2 1 1 2 1 1 2 2 1 3 2 1 2 2 1 2 2 1 2 2 1 3 2 1 3 2 1 3 1 1 2 2 1 2 2 1 3 2 1 1 2 1 3 2 1 2 1 1 2 2 1 2 2 1 3 1 1 2 1 1 3 2 1 1 1 1 1 2 1 1 2 1 3 2 1 1 2 1 2 2 1 1 1 1 2 1 1 2 2 1 1 2 1 3 2 1 1 2 1 1 2 1 2 2 1 4 2 1 2 2 1 1 2 1 1 2 1 3 2 1 1 2 1 1 1 1 2 2 1 1 1 1 1 2 1 1 2 1 2 2 1 1 2 1 2 1 Q Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q5 Q6a Q6b Q7 Q8 Q9 Q1 Q11 Q1 3 2 3 2 8 1 5 4 6 7 1 1 3 4 2 1 0 1 2 1 4 1 2 3 8 4 5 7 6 1 2 1 3 2 2 3 1 3 2 1 6 7 3 4 8 5 1 2 1 2 2 2 2 1 4 1 4 3 2 5 6 8 7 1 3 3 2 2 1 2 1 1 3 2 3 4 1 5 7 8 6 1 2 4 1 2 1 2 1 3 3 7 2 1 5 8 4 6 1 1 2 1 2 2 2 2 1 4 4 2 1 3 6 7 8 5 4 2 3 2 1 1 1 3 2 6 3 5 1 4 7 8 2 2 2 1 1 1 2 1 1 4 3 1 5 6 4 7 8 2 2 1 1 1 2 1 1 2 1 2 4 3 2 7 1 5 8 6 2 1 3 4 2 1 2 3 1 3 3 2 4 8 1 6 7 5 2 3 3 1 3 2 2 1 1 2 3 2 1 6 7 8 5 4 2 3 2 4 2 1 1 2 1 4 3 2 1 5 7 8 6 4 2 1 3 1 2 2 1 1 1 3 3 2 1 5 8 7 6 4 2 1 3 2 2 2 2 2 1 2 3 2 1 5 7 8 6 4 2 3 2 1 3 2 2 2 1 3 3 1 4 8 2 5 6 7 2 1 3 1 3 1 2 1 1 3 7 1 2 5 3 6 4 8 1 3 3 4 2 1 1 1 1 3 4 5 3 1 2 6 7 8 1 2 1 2 2 2 1 1 5 4 1 3 5 2 6 8 7 3 2 1 2 1 1 1 1 2 3 2 7 4 1 5 6 8 4 2 1 3 1 2 2 1 4 6 3 2 1 4 5 7 8 4 1 2 1 2 2 1 2 1 6 6 5 4 1 2 3 8 7 4 1 2 4 3 1 1 1 1 1 6 2 4 3 1 5 8 7 4 2 1 2 1 2 3 1 6 1 6 4 8 2 3 5 7 4 2 3 2 1 2 1 1 3 1 4 3 7 2 6 5 8 1 2 2 2 2 3 3 1 6 1 3 4 2 5 6 7 8 1 2 2 3 2 2 1 1 1 1 2 5 8 3 7 4 6 1 2 4 2 1 2 3 1 3 1 4 6 5 2 3 8 7 1 2 1 2 2 2 3 1 1 2 6 3 1 4 5 8 7 1 3 2 2 2 2 2 1 1 1 3 2 1 5 4 8 7 6 2 3 3 4 2 1 2 3 1 3 8 3 4 2 1 6 5 7 2 3 1 1 1 1 2 1 1 5 5 4 1 7 3 2 8 6 4 2 3 2 2 1 1 1 3 3 7 2 8 1 6 4 5 4 2 1 3 1 1 2 1 5 2 3 4 7 1 6 8 5 3 1 3 3 2 1 1 1 1 3 1 4 5 8 2 3 6 7 4 3 2 1 3 2 2 2 1 5 5 4 3 2 1 6 8 7 1 3 3 1 2 1 1 3 1 3 2 3 1 8 4 5 7 6 1 2 1 3 2 1 3 1 2 1 2 3 4 5 6 8 7 2 3 2 1 2 1 2 2 1 6 8 1 3 5 7 6 2 4 2 1 3 1 2 2 2 1 1 3 6 2 3 7 1 4 5 8 2 3 2 4 1 2 3 2 1 4 7 5 1 3 4 2 8 6 3 2 1 2 2 2 1 1 6 1 3 2 5 6 8 4 7 3 3 2 4 2 1 3 1 1 3 8 4 3 5 7 2 1 6 3 1 2 2 2 2 1 2 1 2 2 1 4 3 5 8 6 7 4 3 3 1 3 1 2 2 1 2 1 5 3 4 2 6 8 7 4 2 1 2 1 1 2 1 5 2 4 1 7 6 5 3 8 1 3 1 4 1 2 1 1 1 6 1 2 3 4 7 5 8 6 1 2 1 2 1 2 3 1 6 7 1 4 6 3 2 8 5 1 1 2 1 2 2 2 1 1 2 1 2 4 6 3 5 8 7 1 2 4 3 2 2 3 1
Q13 Q13 Q13 Q13 Q13 4 2 1 3 2 1 2 1 3 3 2 4 1 3 2 2 2 2 3 2 2 2 2 3 3 4 2 2 3 2 4 2 3 1 2 4 2 2 3 2 4 2 2 2 2 4 2 2 3 2 2 2 4 2 2 4 2 5 2 2 2 1 4 2 1 4 2 4 2 3 4 3 1 1 2 5 3 5 2 3 4 2 4 3 2 2 2 3 1 3 1 3 4 4 2 3 4 1 2 4 1 2 2 4 3 2 3 1 3 3 1 2 2 1 1 1 3 1 2 2 2 1 4 3 2 3 2 2 1 1 1 2 5 3 2 2 1 4 2 2 2 2 4 3 1 1 2 2 2 2 2 2 2 2 3 4 4 4 3 2 4 2 4 2 4 2 3 2 1 3 5 2 1 2 2 1 2 1 2 2 2 2 1 2 2 1 2 1 1 2 2 1 5 2 3 2 2 1 2 2 2 2 2 2 2 1 1 4 2 2 3 2 3 3 2 2 2 3 2 2 2 2 2 2 2 1 2 2 3 4 2 1 2 3 2 2 2 2 2 2 4 2 4 2 2
Q1a Q1b Q2 Q3 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q4 Q5 Q6a Q6b Q7 Q8 Q9 Q1 Q11 Q1 1 2 2 5 4 5 3 2 6 1 8 7 1 1 2 4 1 1 0 2 2 23 1 1 1 3 4 3 1 2 5 6 7 8 2 2 1 2 1 2 2 1 1 1 1 6 4 1 3 8 5 2 6 7 2 3 2 4 2 1 2 2 1 1 1 2 2 3 1 4 8 7 2 5 6 2 2 1 2 1 1 1 1 1 2 2 5 8 3 4 2 1 5 7 6 2 1 3 1 2 1 2 3 1 1 2 2 5 2 3 6 5 1 7 8 4 2 3 3 3 2 1 2 1 1 1 1 1 6 3 5 7 6 1 2 8 5 2 1 1 4 2 1 1 1 1 1 2 2 5 2 1 3 7 5 4 8 6 2 2 2 2 1 2 2 1 1 3 2 3 2 8 3 7 1 4 6 5 2 2 1 2 2 1 1 2 1 3 2 4 3 2 5 4 1 7 8 6 2 2 1 2 1 2 1 1 1 3 2 5 1 3 7 6 2 4 8 5 2 3 2 1 2 2 2 1 1 1 1 2 2 2 6 4 5 1 3 7 8 4 3 2 1 3 1 2 1 1 1 1 2 6 2 1 3 5 4 6 8 7 4 1 2 4 2 2 2 1 1 1 1 2 1 1 7 2 6 3 4 8 5 2 2 4 3 1 2 2 1 1 1 2 2 4 2 8 6 1 3 7 6 2 3 1 4 2 1 2 1 1 1 1 2 3 1 5 3 4 2 6 8 7 2 1 3 4 3 1 2 2 1 1 1 1 2 3 1 4 6 2 8 5 7 2 2 1 2 1 2 1 1 1 2 2 3 7 5 3 4 1 2 8 6 2 1 2 1 2 1 3 1 1 1 1 2 4 7 2 4 6 1 3 8 5 2 1 3 4 2 1 1 2 1 1 3 2 1 2 1 6 5 3 4 7 8 2 2 1 2 2 1 1 1 1 1 1 5 6 1 2 3 4 5 7 8 2 1 3 4 2 1 1 1 1 1 2 2 3 1 4 2 5 3 6 8 7 1 2 4 2 1 1 2 1 1 1 2 2 4 2 8 5 1 6 3 7 1 2 1 2 1 2 1 1 1 1 1 6 7 3 4 5 1 2 8 6 1 2 4 2 1 2 1 1 1 1 2 3 1 2 7 5 4 3 8 6 4 3 2 1 2 1 1 1 1 1 1 1 1 2 4 6 5 1 3 7 8 4 2 1 2 2 2 1 1 1 2 1 2 7 1 2 6 3 4 8 5 2 3 1 1 2 1 1 2 1 1 1 2 3 5 6 7 1 2 3 8 4 2 2 1 2 1 2 1 1 1 2 2 2 1 4 2 7 5 3 8 6 2 2 1 2 2 2 1 1 1 2 1 4 2 1 5 7 3 4 8 6 3 2 1 2 2 2 2 1 1 2 2 3 1 4 8 7 2 5 6 3 4 2 4 2 1 2 1 1 1 1 2 1 1 2 5 4 7 8 6 3 4 2 3 2 2 1 3 1 1 2 1 2 4 2 5 3 1 6 8 7 1 2 3 2 2 2 3 1 1 2 2 3 3 2 5 4 1 6 8 7 2 2 2 2 1 1 1 1 1 1 1 2 3 2 6 5 1 4 8 7 1 1 2 4 2 1 2 3 1 1 1 1 4 1 4 3 8 2 7 5 6 2 2 3 2 2 2 1 1 1 1 2 2 1 2 3 4 7 5 8 6 1 2 2 2 1 1 1 1 1 3 1 5 1 5 6 7 2 4 8 3 2 2 4 2 2 2 1 1 1 1 1 5 2 6 5 7 1 5 8 3 2 2 3 3 2 1 2 1 1 2 2 6 3 1 6 7 2 4 8 5 2 1 3 4 2 1 2 3 2 1 3 2 1 2 1 7 6 5 3 8 4 2 3 1 1 2 1 1 3 1 1 2 2 5 2 1 5 3 4 6 8 7 2 2 1 2 1 1 1 1 1 1 1 3 1 3 2 4 8 6 7 5 2 1 3 1 2 2 2 1 2 1 1 1 3 1 2 3 4 5 6 7 8 3 2 4 3 1 1 2 1 1 3 2 4 1 2 4 7 3 5 8 6 3 1 1 1 2 2 1 1 1 1 2 1 5 1 3 5 4 2 7 6 8 3 2 1 2 1 3 1 1 1 2 2 6 7 3 1 4 2 5 8 6 3 3 2 1 2 2 2 1 1 1 1 2 3 1 3 2 5 4 6 7 8 2 3 2 1 3 1 1 2 1 1 2 2 2 3 1 2 4 5 7 6 8 1 2 4 2 1 3 1 1 1 2 2 6 1 3 5 2 4 6 8 7 2 2 2 2 1 2 1 1 1 2 2 1 1 2 3 4 5 6 7 8 1 3 2 1 2 1 2 1 1
Q13 Q13 Q13 Q13 Q13 4 2 4 2 2 2 2 1 2 2 2 3 4 4 2 2 2 1 2 4 2 1 4 2 2 1 3 2 4 2 1 2 4 2 5 2 2 5 3 4 3 2 1 2 2 5 3 3 1 4 1 2 4 2 2 2 1 5 2 2 2 1 1 1 5 4 2 4 2 2 5 3 5 4 2 2 3 4 2 2 2 2 2 3 2 2 2 1 4 2 2 3 3 4 2 2 3 4 4 2 1 2 1 2 2 3 2 1 4 2 2 3 4 2 2 1 2 2 2 2 2 2 2 1 2 1 2 4 4 2 3 3 2 2 4 1 2 4 2 2 1 2 1 3 2 5 1 2 2 2 2 3 2 2 2 1 2 1 3 2 2 3 2 2 2 2 2 1 3 2 2 2 1 2 2 5 3 2 2 2 1 2 2 3 2 2 1 2 2 2 3 1 1 3 3 3 2 2 2 2 2 2 2 3 2 2 2 1 3 2 2 2 1 3 3 2 2 2 2 1 3 2 3 2 2 3 3 3 3 3 2 2 1 2 2 4 2 2 3 3 2 3 5 3 2 4 3 3 2 2 2 2 1 2 2 2 3 3 2 2
APPENDIX D SPSS FREQUENCY TABLES FOR QUESTIONNARE RESULTS
Respondents who own a Tesco Clubcard

Cumulative Frequency Valid Yes 100 Percent 100.0 Valid Percent 100.0 Percent 100.0
Frequency of how often respondents used their Clubcard when purchasing goods or services with Tesco
Cumulative Frequency Valid Always Frequently Little Never Total 42 39 18 1 100 Percent 42.0 39.0 18.0 1.0 100.0 Valid Percent 42.0 39.0 18.0 1.0 100.0 Percent 42.0 81.0 99.0 100.0
Gender of respondents surveyed

Cumulative Frequency Valid Male Female Total 29 71 100 Percent 29.0 71.0 100.0 Valid Percent 29.0 71.0 100.0 Percent 29.0 100.0
Age group of respondents surveyed

Cumulative Frequency Valid Under 21 22 - 29 30 - 39 40 - 49 50 - 59 60 + Total 10 21 28 12 15 14 100 Percent 10.0 21.0 28.0 12.0 15.0 14.0 100.0 Valid Percent 10.0 21.0 28.0 12.0 15.0 14.0 100.0 Percent 10.0 31.0 59.0 71.0 86.0 100.0
When deciding on which supermarket use, how important is value for money
Cumulative Frequency Valid 1 - Very Important 2 3 4 5 6 7 8 - Not Important At All Total 31 18 20 10 3 6 8 4 100 Percent 31.0 18.0 20.0 10.0 3.0 6.0 8.0 4.0 100.0 Valid Percent 31.0 18.0 20.0 10.0 3.0 6.0 8.0 4.0 100.0 Percent 31.0 49.0 69.0 79.0 82.0 88.0 96.0 100.0
When deciding on which supermarket use, how important is location of store

When deciding on which supermarket use, how important is quality of service and staff helpfulness
When deciding on which supermarket use, how important is loyalty card schemes
When deciding on which supermarket use, how important is product range and presentation
When deciding on which supermarket use, how important is overall store layout and appearance
When deciding on which supermarket use, how important is instore promotional magazine and flyers
When deciding on which supermarket use, how important is money off coupons/vouchers and special promotions
Cumulative Frequency Valid 2 3 4 5 6 7 8 - Not Important At All Total 2 4 8 14 25 29 18 100 Percent 2.0 4.0 8.0 14.0 25.0 29.0 18.0 100.0 Valid Percent 2.0 4.0 8.0 14.0 25.0 29.0 18.0 100.0 Percent 2.0 6.0 14.0 28.0 53.0 82.0 100.0
Frequency of respondents who own and use another loyalty card including the Tesco Clubcard
Cumulative Frequency Valid 1 other card 2 other cards 3 or more other cards I only own a Tesco Clubcard Total 28 45 10 17 100 Percent 28.0 45.0 10.0 17.0 100.0 Valid Percent 28.0 45.0 10.0 17.0 100.0 Percent 28.0 73.0 83.0 100.0
Frequency of respondents who read the Clubcard magazine

Cumulative Frequency Valid Yes No Sometimes Total 25 49 26 100 Percent 25.0 49.0 26.0 100.0 Valid Percent 25.0 49.0 26.0 100.0 Percent 25.0 74.0 100.0
Respondents perception on the Clubcard magazine
Frequency Valid It covers everything you would expect and is of great use 8
Percent
Valid Percent
Cumulative Percent
8.0
15.7
15.7
It is a good read with some informative articles and features It is dull, unhelpful and of no use Total Missing Total System
23 20 51 49 100
23.0 20.0 51.0 49.0 100.0
45.1 39.2 100.0
60.8 100.0
The amount of points per every 1 spent respondents thought they were receiving
Cumulative Frequency Valid 1 point for every 1 2 points for every 1 5 points for every 1 10 points for every 1 Total 52 10 9 29 100 Percent 52.0 10.0 9.0 29.0 100.0 Valid Percent 52.0 10.0 9.0 29.0 100.0 Percent 52.0 62.0 71.0 100.0
Frequency of respondents who increase expenditure or purchased specific/alternative products in the pursuit of collection points
Cumulative Frequency Valid Yes No Don't Know Total 6 76 18 100 Percent 6.0 76.0 18.0 100.0 Valid Percent 6.0 76.0 18.0 100.0 Percent 6.0 82.0 100.0
Frequency of respondents who have redeemed any rewards from the Clubcard scheme within the last 12 months
Cumulative Frequency Valid Yes No Total 61 39 100 Percent 61.0 39.0 100.0 Valid Percent 61.0 39.0 100.0 Percent 61.0 100.0
Frequency of respondents who would describe themselves as being loyal

Frequency of respondents who would describe themselves as being a satisfied Tesco customer
Frequency of respondents who would continue to shop at Tesco if they did not have the Clubcard scheme in place
Frequency of respondents who trust Tesco products and their image

Cumulative Frequency Valid Strongly Agree Agree No Opinion Disagree Strongly Disagree Total 21 47 10 16 6 100 Percent 21.0 47.0 10.0 16.0 6.0 100.0 Valid Percent 21.0 47.0 10.0 16.0 6.0 100.0 Percent 21.0 68.0 78.0 94.0 100.0
Frequency of respondents who think that Tesco is very innovative

Cumulative Frequency Valid Strongly Agree Agree No Opinion Disagree Total 12 63 22 3 100 Percent 12.0 63.0 22.0 3.0 100.0 Valid Percent 12.0 63.0 22.0 3.0 100.0 Percent 12.0 75.0 97.0 100.0
Frequency of respondents who usually shop around to get the best deals
Frequency of respondents who expect rewards to be a part of their normal shopping experience
Cumulative Frequency Valid Strongly Agree Agree No Opinion Disagree Total 10 50 30 10 100 Percent 10.0 50.0 30.0 10.0 100.0 Valid Percent 10.0 50.0 30.0 10.0 100.0 Percent 10.0 60.0 90.0 100.0
Frequency of respondents who feel more could be done to increase their loyalty
What more could Tesco do to make you more loyal

Cumulative Frequency Valid Improve facilities for elderly people Have discounts at the till rather than rewards Help those without transport Improve store layout Faster checkouts/self service checkouts More Clubcard points per pound Increase product range Increase store promotions More store entrances and exits Increase Clubcard rewards Improved on-line shopping Improve Clubcard administration Total 10 Percent 10.0 Valid Percent 10.0 Percent 10.0
22 14 2 10
22.0 14.0 2.0 10.0
22.0 14.0 2.0 10.0
32.0 46.0 48.0 58.0
4 12 3 3 3 16 1 100
4.0 12.0 3.0 3.0 3.0 16.0 1.0 100.0
4.0 12.0 3.0 3.0 3.0 16.0 1.0 100.0
62.0 74.0 77.0 80.0 83.0 99.0 100.0

Loyalty Marketing Tool

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School of Management

Blekinge Institute of Technology

The accuracy of customer reward program as loyalty marketing tool

Supervisor: Anders Hederstierna

Thesis for the Masters degree in Business Administration Fall/Spring 2008

CHAPTER ONE INTRODUCTION

CHAPTER TWO LITERATURE REVIEW

CHAPTER THREE METHODOLOGY

4.0 CHAPTER FOUR RESEARCH FINDINGS AND ANALYSIS

CHAPTER FIVE CONCLUSION

105 107 110 114

CHAPTER TWO LITERATURE REVIEW

CHAPTER THREE METHODOLOGY

4.0 CHAPTER FOUR RESEARCH FINDINGS AND ANALYSIS

Chapter One Introduction

Chapter One Introduction

1.0 CHAPTER ONE INTRODUCTION

The Background to the Study

Chapter One Introduction

The Scope of the Study

Chapter One Introduction 1.4 Purpose

Chapter One Introduction 1.6 Summary

Chapter Two Literature Review

Chapter Two Literature Review

CHAPTER TWO LITERATURE REVIEW

The Tesco Story

The Tesco Timeline

Chapter Two Literature Review

Chapter Two Literature Review

Chapter Two Literature Review

Chapter Two Literature Review

Chapter Two Literature Review

The Relationship between Loyalty and Satisfaction

been true at one time, but its not now.

Chapter Two Literature Review

Does Loyalty Result to Profit?

Dowling and Hammond, 2004, pg 101)

Chapter Two Literature Review

Chapter Two Literature Review

Chapter Two Literature Review

Do Customer Reward Programs Deliver Long Term?

Chapter Two Literature Review

Chapter Three Research Methodology

Chapter Three Research Methodology

CHAPTER THREE RESEARCH METHODOLOGY

Selection of Research Methods

The aim is a complete, detailed description.

Researcher is the data gathering instrument.

Quantitative data is more efficient, able to

Chapter Three Research Methodology

The EightStep Questionnaire Construction Procedure

McNabb (2004, pg 151) has constructed an EightStep questionnaire construction procedure

Question Types and Wording

the best method.

Chapter Three Research Methodology

Interviewer versus Respondent Completion

Completed Questionnaires 14 24 19 22 12 9 TOTAL = 100

Strengths, Limitations and Validity

Chapter Three Research Methodology

Chapter Three Research Methodology

Chapter Four Research Findings and Analysis

Chapter Four Research Findings and Analysis

4.0 CHAPTER FOUR RESEARCH FINDINGS AND ANALYSIS

User Profile of Tesco Clubcard Respondents