1.0 Introduction- 400 words
1.1 Company Background- 200 words
1.2 Rationale of the research- 200 words
1.3 Research Question Aims and objectives
1.4 Research Question
To what extent Customer Loyalty programme provides a Competitive Advantage to the Organisation?
Research Aims
To investigate how Competitive Advantage can be derived from Customer Loyalty programme at Tesco.
To examine if customer loyalty has an impact on the overall success of Tesco.
Research Objectives
Critically analyse the literature on competitive advantage and customer loyalty.
Identify the sources of competitive advantage.
Identify various aspects of customer loyalty and competitive advantage through a survey of 60 customers at Tesco.
Investigate the relationship between brand and customer loyalty.
Evaluate different strategies of competitive advantage.
Analyse to what extent Competitive advantage has an impact on the overall growth of the organisation?
Discuss the role of marketing tools to give competitive advantage to Tesco.
Recommend findings from the survey on loyalty programme to achieve competitive advantage.
Literature Review-
2.0 Introduction
Even though most customer loyalty programmes offer primary financial benefits, customer loyalty is about making customers love the company and its products or services. In essence, the loyalty programmes are meant to provide cost discounts. Consumers who purchase products or services do so due to low prices in a given shop and they tend to change if they find a cheaper product. The one and only way to create a long lasting relationship with the client is to establish a true friendship with them which is not only based on financial incentives, but on emotion, trust and partnership. Customer satisfaction is more about the customers’ assessments of what the business or organization provides. It’s about whether a business feels they get what they want from the client. According to Truss 2000, customer loyalty tends to be more profitable to the company as it costs less to service an existing customer than to win a new customer and hence its importance.
2. 1Types of customer loyalty
Monopoly loyalty
This is where clients have little or no choice and hence they become loyal to a given business. According to Thomson 2000, customers that have fewer options tend to be dissatisfied.
Financial constraints
In majority of the cases, the cost difficulty or hassle in changing from one product or service to the other become so great that clients only do it as a last option. As well, research indicates that customers tend to live on low satisfaction or on cheaper good (Thomson, 2000).
Incentivized loyalty
This has been the most over hyped marketing policy in the past years. The type of loyalty has effects on customers who are not using their own money.
Habitual loyalty
This might be the most rampant form of repeat business. Sometimes, when the prices of goods are increased, customers tend to change to other cheaper products or go without a particular good or service.
Committed loyalty
Just from its dictionary definition, it is where customers are committed to a given company. Committed customers play a big role as they are highly committed to the organization or company, not only in terms of purchase but they are also satisfied. The customer tends to make all the purchases from the given business.
2.2Factors affecting Customer Loyalty
There are a number of factors that the businesses must put into consideration in its endeavours to offer customer service. Various factors in turn affect the customer loyalty to a given business. First, customers tend to choose cheaper programmes. Offering a range of programmes to choose from is very important since every customer has his own needs and wishes that are to be met by the organization (Stewart, 2006). Customers also look for good services. The link between good customer service and value addition to the organization has been underscored by attempting to delineate the value brought to the organization by proper communications strategy that is intermarried with relevant marketing skills to offer the desired services. The impact of the customer service on the company delivery is another factor that must be put into consideration (Orlando & Johnson, 2001)
Quality in loyalty programmes is an imperative aspect in the development of teams meant to conduct business organization’s activities (Rahim & Minors, 2003). Quality is another factor affecting customer loyalty. Quality is usually aimed at eliminating the main causes of the problems, through continuous process improvement programs and therefore reduces the variations from the target to the aimed objectives in the firm (Graetz, 2002). It is aimed at improving the customer satisfaction through provision of better services and also removes the activities that have no value to the organization and customers. They also remove services that add no value to the clients.
2.3Conditions of loyalty
Conditions of loyalty vary from one organization or business to the other and also depend on the type of customer loyalty programme being undertaken. According Kleiner 2006, one of the conditions is membership. All participants have to first become members of the loyalty programme before participating in any loyalty programme. Points are associated with given prices and goods or services (Robinson & Kleiner, 2006). To get the points, customers and expected to make purchases from the store. The prices are to remain constant for all members. The more the participation the greater the earnings are also applicable to all customers. Tesco will increase in its earnings suppose many customers make more purchases to earn more point. The company and the customer hence remain interrelated. Form the store, customers will demand high quality goods and good services to remain loyal.
2.4Measuring loyalty
Customer loyalty is measured based on the customer increased or decreased purchase of goods or services. It can also be measured form the reaction of customers towards a given good or services after the introduction of the loyalty programme (Langley, 2000). It can also be measured form the increased profits acquired after the introduction of the loyalty programme. However, the increased sales or profits cannot be a trusted measure since increased purchase can be contributed by various factors (Rumelt, 2004).
Customer loyalty, measured by the help of surveys is assessed through the use of questions and items, reflecting the aim of the loyalty. For every good or services, clients are asked to rate their level of satisfaction. According to Rumelt 2004, the commonly used measure include
Customer satisfaction
Chances of choosing again the same product or service
Chances of recommending
Chances to continue buying similar product
Chances of buying different product
Chances of increased buying of the same product or services
Chances or likelihood of changing to another services provider
The measure of customer loyalty depends on the type of loyalty and its aims. One method of measuring customer loyalty can be applicable in one case but not the other and vice versa. Therefore, the repeat customer method can be the best measure of loyalty.
2.5Managing loyalty
Managing the loyalty schemes depend on the type of customer and the company. It requires a thorough understanding of the customers and their requirements. Tesco has a role to keep their eye on the loyalty scheme without which the schemes might turn ineffective. After some time, it is expected that customer tastes and preferences change and so should the scheme.
Since the programmes vary from one business or company to the other depending on the aim of the programmes among other factors, it is imperative to find a suitable programme for a given group and close monitor thereafter. In cases where the customer incomes and expectations vary by margins, two or more loyalty programmes can be designed (Sutton, 2005). This will give easy time in designing and their managements.
.
2.6Elements of a loyalty strategy
There are various elements of loyalty strategy. Though the elements depend on many factors the most common elements, referring to Tesco are four.
Customers segregation. All businesses are not similar or operate in same environments and so the differences in clients. All clients are unique and have varied tastes and preferences on each and every good and service. The aim when segregating customers is to recognize a potential client forms the existing ones. The managers tend to look for the key indicators for example, where the client comes from, the income of the customer, taste and preferences, customer potentiality among other factors (Hubert, 2000).
It is important to define the customer groups. Each group of customers behave differently and so deserve different treatments. The loyalty programmes should be aimed at addressing the requirements of customer groups. In cases where the taste and preferences are too varied to be bridged, different loyalty programmes are necessary (Gabriel & Griffiths, 2002).
Setting Goals for each segment or customer group is another important aspect. After the loyalty programme has been defined and set for a given customer group, low level strategy should be in place. The goal and targets required for the clients should be something achievable or measurable. This should be average billing, more referrals of clients, and increased number of visits among other factors. The loyalty should be specific to accomplish one or two objects.
2.7Loyalty and loyalty schemes
Customer loyalty is among the most important assets to be possessed by a company. With the increase in the number of competitors, goods and services, many product and services, and the expansion of the internet trading, loyalty is rarely existent in the modern retail environments. A customer loyalty programme is a structured and non-short termed marketing effort which gives incentives to the repeat clients (Dulewicz & Higgs, 2009). The programmes are meant to encourage the clients to make more purchase of some products or services, increase their number of visits and make them refer others to buy the same good or service. The loyalty schemes differs form one company to the other depending on the aim of the loyalty and the expected outcomes (Farmer & Kingsley, 2001).
2.8Reward design
Often, rewards are designed dependent on the number of earned point. The more points a customer has a greater the reward. This is fair method since it depends on the number of purchases one make in Tesco. Customers have positively responded to the programme. In reaction to the programme various Tesco competitors have designed different customer loyalty programmes to retain their present customers. In majority of the cases, they range from silver, diamond and gold depending on the number of purchases one make. The naming however varies from one competitor to the other like starter, middle, and advanced. In reaction to the competitors’ move Tesco has lowered the cost of their reward points. This has assisted it retain majority of its customers.
2.9Competitive advantage and its factors
Tesco has a great advantage as it established its stores in the areas with low competition. Since other businesses have already built a name in other parts, taking advantage of these areas is the only option of Tesco (McNamara, 2007). Since it has already attained its customer trust in these areas, its fame has spread to other areas giving it a competitive advantage. Tesco was keen in choosing its stores locations. They considered store visibility, accessibility, traffic and population’s age and income. This was to ensure that its stores are located in areas convenient for the majority of the target customers. The visibility of the store was also analyzed from a customers’ view point (Johnson, 2001). The more visible it is the less the advertisement needed. Tesco built up large retail stores in areas of high visibility and this helped it draw customers from other shops/stores. The visibility of the retail stores attracts customers as it acts as a means of advertisement (Giannini, 2000). Tesco has also retain its high quality products and this has helped it retain majority of its clients and capture more.
2.10Customer satisfaction and Competitive advantage
There is a great paradigm shift in the contemporary business environment and this intermarried with the day-to-day economic conditions that various businesses are subjected to; it becomes very essential for every business to explore the aspect of customer satisfaction thoroughly as an important aspect and process of business survival and growth (Collins & Porras, 2004). By exploring customer satisfaction, the business organizations not only gain knowledge of the customer satisfaction drivers but also establish strategies to retain them and have a competing edge over the competitors in the market (Combs, & Skill, 2003).
Knowledge of the customer satisfaction factors is a strong backbone upon which an organization can base its customer retention by knowing the satisfaction drivers of the customers it has attracted (LeBlanc, et al, 2000). Furthermore, though there is a great significance of using customer opinions and attitudes in various fields, not many studies have specifically focused on assessing the attitudes of customers with respect to their satisfaction with the products offered especially in developing economic systems (Buren, 1999). This section attempts to give an assessment of the studies that have been undertaken in an attempt to investigate the relationship of the two broad dimensions of customer satisfaction and that of customer retention. These two dimensions are powerfully related when attempts are made to understand or debunk on customer satisfaction (Crutchfiled, 2000). After all, the ideological significance of endeavouring to satisfy the customer is to retain the attracted customer and attract more hence creating a pool of loyal customer in the market. The end result: – strong customer base and hence formidable market dominance.
In definition, customer satisfaction can be understood as an attitudinal concept which reconciles the customer expectation and actual experience. When the difference between the two aspects (for instance expectation and actual experience) is wide, then there is little satisfaction and an organization stands high chances of losing the attracted customers (Chen, 2001). With the changing characteristics of the market platform on which business is conducted, the aspect of customer satisfaction becomes even more relevant. Online businesses that deal with clients in a virtual world would wish to know the satisfaction of their customers.
2.11Business Strategy and competitive advantage
Since Tesco is relying on high technology to make the purchase of products more convenient for its customers, it is likely to attract more customers. Its system will involve making orders by phone, a factor that will result in saving time and transportation cost. Despite the fact that other business are on the low prices of their products, it is likely to loss many customers to Tesco. By gaining more customers in the area where other competitors are less known, Tesco can easily build on customer confidence. It will later expand to areas where Tesco is well established basing its support from it excellent customer services in other areas. This will negatively affect Wal-Mart as it will loss customers and Tesco will remain its threat even in the future (Oxman, 2002).
2.12Innovation and competitive advantage
To innovate is to create and commit to a strategic focus for creativity and innovation to succeed. There are generally various types of innovations that companies consider for pursuit. Some of the innovation types are more applicable in given cases as compared to others. This depends on the status and stage of company development and objectives. For a starting company, the type of innovation might differ from the ones employed by the growing company (Bontis, 2006). Product innovation or service innovation which is the most common types of innovation results from improvements that are made to existing products and services. Almost all companies that have been established should focus on service or product innovation or they might not gain market share to a more violent competitor (Chauvin & Hirschey, 2003).
2.13Core competencies and Competitive advantage
Accessibility to Grocery stores
Proximity is another issue that the grocery shoppers will analyze before purchasing any product. A consumer may prefer to purchase other groceries in the nearest stores when Tesco is far away (Knight, 2000). Thus the managers of the Tesco should make the stores available in the small towns that were not served by the competitors as this will allow it to launch itself as the sole retailers in these areas thus the consumers will tend to purchase groceries from the stores more so if they are offering better prices than stores in the city which normally take two to four hours to get to by car (Adler & Kwon, 2002).
Grocery shoppers also want to shop in stores that are not too far away from where they live. Grocery shoppers just like any other shoppers tend to have a favourite store suppose incentives are issued. This is usually based on what the store offers which are mostly, reasonable prices, availability of items as well as good quality of the good and services (Brown et al. 2007).
2.14Marketing tools and competitive advantage
2.15Key Success Factors In Retailing
The programmes should have one main aim. This will help the managers have one major focus other things being secondary. Offers should be provided for the repeat clients. Offers act as incentives. When a customer is rewarded according to Oriento 2002, this increases their company lifetime.
2.16 Summary
Based on the literature review, a number of issues are evident. First, given that customer satisfaction is not a quantitatively measurable variable and it ideally depends on the behaviour of consumers, more investigative efforts should be put in understanding consumer behaviour of consumers in a particular industry, geographic location and across gender (Liana & Buren, 2006). However, it must be taken into account that consumer behaviour is not only a profound process in business interaction with the society but it also has many intervening variables which cannot be assumed. On the same basis, an organization that wants to ensure a satisfied customer without examining the consumer behaviour of customer with respect to changes in quality of services offered and market approach strategies employed may also not be planning to succeed. Customer satisfaction and brand loyalty have a causal link, which means that utmost care must be borne in mind when attempts are made by business organizations to develop satisfaction strategies (Nerdrum & Erikson, 2001). An oversight may easily lead to the plan not working at all. Since the characteristics of the variables a long this causal link may not be similar across the industries and may also vary from business to business, every organization must examine directionality of its customer satisfaction thoroughly (Nahapiet & Ghoshal, 2008).
3.0Research Methodology- 200 words
3.1 Research Approach-200 words
3.2 Research Strategy -200 words
3.3 Data Collection Methods- 300 words
3.4 Limitations of the chosen methods- 150 words
3.5 Ethical implications- 150 words
Analysis and Discussion:
4.0 Survey of customers
This study has collected data from various sources and analysed it to reach to conclusions. Data collected through survey has been analysed and interpreted in a meaningful format.
Customers were asked to disclose their gender during the survey. This is to identify customer if any particular group is more interested about customer loyalty and competitiveness of Tesco. From the above bar chart, it is clear that there are more female shoppers than male who shops at Tesco. On the other hand, only two percent customers did not feel that there gender matters when shopping at Tesco and did not disclose their gender.
During the survey, customers were also asked to disclose their age group. This is to identify if there is any particular age is more inclined to shop at Tesco. The above bar chart represents that majority of customers who shop at Tesco falls within the age rage of 35-45. However, the number of shoppers decrease with their age as only twelve percent shoppers age over 65 went to Tesco for shopping who felt that there is link between customer loyalty and competitiveness.
Researcher wanted to identify if customers who shop at Tesco considers themselves as loyal customer. The above pie chart represents that fifty three percent customers who shop at Tesco considers themselves as loyal customer. This information is crucial for Tesco to analyse market share. If Tesco can increase the number of regular shopper through different marketing tools and loyalty program, the revenue is expected to rise. On the other hand, if Tesco can remain this customer loyal, it will have competitive edge over other stores in surrounding areas. Hence, the percentage of loyal customer is crucial to survive in this competitive environment.
Customers were asked to disclose how they came to know about the store in Laytostone. The above chart represents that thirty eight percent customers came to know about Tesco due to direct marketing. The second highest, around thirty percent concluded that they knew about Tesco through advertisement, loyalty programme, followed by thirteen percent through word of mouth, twelve percent through personal recommendation. On the other hand, seven percent customers said, they knew about Tesco through third party such as magazine company, ice-cream company etc. These companies placed their product on Tesco’s shelf only which made customers to come to Tesco for those particular products. One customer said “ I only come to Tesco because the ice-cream I buy is only available at Tesco, you cannot find it anywhere”. This shows that customer can be loyal to the store due to strong brand awareness of customer.
It was imperative to understand why customers shop at Tesco Leytonstone and not other superstore. The above pie chart represents that forty one percent of customers shops at this particular store due to convenience followed by thirty percent due to availability of products they require for households. On the other hand, twelve percent customers said there is no other alternative and large superstore like Tesco and there is no place to go. Seventeen percent felt the location had good transport link and the shop was available twenty four hours. From the above data, it is also clear that lack of competitors also bring customers back to Tesco, hence it is not absolute that loyalty programme is more effective than any other means.
To identify whether customers are loyal due to the location and distance to Tesco, researcher asked customers how far do they live from the store. From the above chart, it appears that majority (seventy five percent) of Tesco customer live locally, within two miles from the store. However, twenty five percent customers live more than two miles away still shops at Tesco. This figure represent that not only local customers are loyal, but also customers from outside locality is also loyal to customers which contributes to the competitiveness of Tesco.
Management Analysis:
5.0 Recommendation
5.1 Conclusion
4.1 Survey of Employees
5.0 Recommendation
5.1 Conclusion
