the correlation between frequent shopper program and
TRANSCRIPT
“The correlation between frequent shopper program and
Customer loyalty, implications and potential improvements
for Nectar at Sainsbury’s”
An Internship Report Submitted In Partial Fulfillment
Of The Requirements for the
Degree of Bachelor in Business Administration
Students Name: Abul H. Md. Helal
ID: 14121173309 / Uel 0857044
Module Name: Research Methods & Project
Module Code: SM
Module Leader: Mr. Raja Khan
Research Supervisor: Ms. Elvy Kollasseril Velayudhan
Guildhall College
In collaboration with
University of East London.
Word Count:
Date: May 2010
ABSTRACT
The intention of this dissertation is to check the effectiveness of the loyalty programs
offered by Sainsbury’s to its customers by analyzing the satisfaction rate of consumers
towards the loyalty program such as Nectar Card. It is very necessary to understand this
relationship due to the high expenditure organizations are investing in the loyalty
programs and whether the investment is really worth. The methodology that has been
used in order to conduct the research for this dissertation is a mix of both the qualitative
and the quantitative types. The primary data has been collected using the method of
questionnaire and interviews. The customers have been surveyed through questionnaire
and the management which involved the store manager and marketing executive of
Sainsbury’s. The expert comments of the management level and the filled questionnaire
from the customers have helped the researcher analyzed the way in which the loyalty
programs or the frequent shopper programs are contributing towards the customer loyalty
and what exactly is making the customers to become loyal towards the organization. Both
the primary and the secondary data collected were in similar to each other after the
conclusions have been reached. By taking the appropriate evidence in to consideration
this dissertation has been concluded that the loyalty programs or the frequent shopper
programs create a positive impact over the customers and the organization and such
programs increase the customer satisfaction rate and even help in retaining the existing
customers while make the organizations perform better in order to meet the req uirements
of the customers.
ACKNOWLEDGEMENTS
In the name of ALLAH, the most Dominant, Compassionate and merciful. He granted
upon me the courage and fortitude to complete my research project.
It is a privilege for me to state my thankfulness to my mother and fiancée for their love
and enormous support and especially for their encouragement and admiration throughout
my entire life.
I would like to express my gratitude to supervisor Ms. Elvy Kollasseril Velayudhan and
Dissertation coordinator Mr. Raja Khan. Their guidance assists me to complete my
research project and she never hesitates to provide me her valuable time while preparing
the project report whenever I needed.
I also want to thanks to all of them who have given a lot of valuable suggestions and
moral support to me.
TABLE OF CONTENTS
Abstract
Acknowledgment
List of Figures
List of Tables
1. CHAPTER ONE – INTRODUCTION
Research Background
Aims Of Research
Objectives
Research Questions
Statement of Problems
Rationale
Significance of the Study
2. CHAPTER TWO - LITERATURE REVIEW
Introduction
Marketing Strategy
Relationship Marketing
Consumer Satisfactions
Customer Loyalty and Retention
Customer Relationship Management
Loyalty Program
Advantages and Disadvantages of Loyalty Programs
Economic Benefit of Loyalty Programs
Nectar Card at Sainsbury’s
Nectar Card Association
2.10 Depth of Review
2.11 Hypothesis
2.12 Conclusion
3. CHAPTER THREE – METHODOLOGY
Introduction
Secondary Research
Primary Research
Qualitative and Quantitative Research
Structure of the Questionnaire
Pilot Testing
Sampling
Participants
Ethical value
3.10 Analysis of Research
3.11 Reliability and Validity
3.12 Estimation and Development
4. CHAPTER FOUR - ANALYSIS AND FINDINGS
Introduction
Nectar card Participants
Customers Reaction to the Nectar card Program
Nectar Card vs. other Loyalty Programs
Nectar Card and Sainsbury’s
Improvements required for the Nectar Card programme at Sainsbury’s
Response of the Sainsbury’s and the
Loyalty Management towards the Nectar Card
5. CHAPTER FIVE – CONCLUSIONS AND RECOMMENDATION
6. REFERENCE LIST
APPENDIXS 1
LIST FO FIGURES
1. CHAPTER ONE – INTRODUCTION
1.1 Research Background
The competition in the current market has increased to a very large extent which had
impacted the way in which the marketing is being done (Butsher, 1998). The marketing
strategies are being implemented innovatively with high creativity. Organisations are
considering the use of Individual Relationship Marketing so that they can sustain in this
highly competitive market. According to Gummesson (1999), the relationship marketing
has been constantly undergoing a lot of changes and now the strategy of 4Ps which is the
Product, Promotion, Price and the Place has now changed in to the 30Rs which is
considered to be the thirty relationships of the new marketing paradigm.
Organizations are currently considering the types of marketing that consider the
relationships between the organization and the customers as they are proved to be highly
effective and productive which can in turn let the organization meet the demands in this
competitive market. This is the main reason that has made acquiring new customers
highly difficult and more expensive. According to Bruhn (2003), organizations have
become customer centric starting from the 1990s in order to meet the demands of the
customers when the requirements of the customers have undergone a lot of changes.
Marketing is considered to be an activity undertaken by the organization to satisfy the
ever changing requirements of the consumers by accomplishing the goals of the
organization as well at the same time (Kotler, 2003). The retail industry has considered
the frequent shopper program as it is a highly effective marketing strategy. According to
Butscher (1998), organizations are able to improve the rate of customer satisfaction when
a specific group of consumers is targeted who are offered many benefits so that a good
long lasting relationship can be maintained. Normally the benefits the organizations give
to the customers are based on points which can be collected by the customer by making
fruitful purchases and there upon these points can be redeemed in the form of a discount
or vouchers. According to Buttle (1996), the retention of customers has become the main
goal for many organizations and hence has changed their marketing strategies
accordingly. This can even improve the performance of the organization economically as
it leads to increased turnover as well as savings at the same time (Christopher et al.,
1991). In addition to this, when the existing customers are being retained, the cost
involved in acquiring new customers is also saved (Palmer, 2001). The marketing
management deals with acquiring highly profitable markets so that a good relationship
can be maintained in that market leading to more profits (Kotler et al., 2005).
Organizations need to consider various options such as the market that provides the
opportunity to grow, increased revenue and a huge market share.
The database of the customers is being maintained by the organizations so that custom
products and services can be offered to the customers and hence fulfilling their
requirements. The CRM (Customer Relationship Management) deals with such activities
that are related to the management of databases. Many organization are implements CRM
in to their activities so that the customers can be retained with the new strategies resulting
in building long lasting relationships with the customers.
The Frequent Shopper Program also helps the organization in such a way that the
organizations can gain huge knowledge on the customers. The market of the United
Kingdom is well known across the world for its loyalty card market in which the most of
the retail giants offer such a system. Sainsbury’s was the first in the world to start the
loyalty card marketing strategy pertaining to a store. It adopted this strategy in the year
1982 when their advertising agency which was Broadbent at that time has suggested to
them. Then in the year 1995, Tesco launched the Club card programme on a national
level across all its stores which is first of its kind. After that in the year 1996, Sainsbury’s
has launched it won reward card which was later replaced in the year 2002 by Nectar
card. The Nectar card had a partnership with many major brands.
1.2 Aims of Research
The main aim of this project is to analyze the importance of frequent shopper programs
pertaining to the retail industry and Sainsbury’s in particular and to find out how such a
marketing strategy can be used to retain the consumers and satisfy the requirements by
making them loyal towards the organization.
1.2.1 Objectives
The objectives of this research are:
To analyse how the frequent shoppers program can increase customer
satisfaction and retain the customers
To understand the underlying marketing strategies involved in the
loyalty cards
To understand whether the Loyalty programs are really effective in
retaining the customers and how effective they are in making the
customers loyal to the organisation
1.2.2 Research Questions
The following research questions will be answered in our project:
What is the use of a loyalty program in increasing the customer
satisfaction by maintaining consumer’s trust and how loyalty can be
generated from the customers end?
Can the choice of products by the customers be changed by loyalty
programs?
Is customer retention really that important?
How Nectar card has helped Sainsbury’s to retain customers and
increase the satisfaction levels of customers?
What are the basic strategies of marketing and how CRM has made a
drastic change to the way of marketing?
1.5 Statement of Problem
Organizations are investing large amounts of money on Loyalty programs and on
technologies to understand and maintain the database of consumers. It has now become a
major issue to be considered due to the highly competitive market. So are the
organizations really benefiting much from such programs and are the organizations really
able to meet the expected demands of the customers with such programs when huge
investments are made on such technologies?
1.6 Rationale for Study
The rationale for study of this project comprises of two stages. In the primary stage we
will consider the secondary sources of literature to understand the concepts of marketing
and how advancements have been brought in to the field with the help of various
technologies. In this stage we will also come to know the underlying concepts of the
loyalty cards and how they can help the retention of the consumers and help increase
profits for the organization.
In the next stage we will conduct a survey based on certain questionnaire that has been
approved by the supervisors so that respective conclusions can be drawn based on the
answers from both the managerial level of the organization that has been taken in to
consideration and the customers as well. We will come to know whether the Loyalty
cards are really useful and if so how productive they have been until now from this
questionnaire. And also issues such as meeting the demands of the customer i.e., are the
demands of the customers who are loyal to the organization been taken care of and
fulfilled accordingly?
1.7 Significance of the Study
This study is done in depth so that the various underlying concepts related to the
marketing can be understood from the scratch and no point related to how the loyalty can
be made, the technologies involved and the way in which it is being implemented
currently can be understood accordingly. In order to understand all these concepts and
stay focused on the aims and objectives of this research we should not deviate from the
topic and the material that is considered highly relevant has only been considered.
The real time findings of this study can let us know whether the organizations are really
accomplishing what they need to accordingly in the intended way. This study can be used
to present the analysis report as we are even conducting a survey on the consumers and
the management to understand in depth whether the purpose of launching the loyalty
cards with huge investments is fruitful or not.
2. CHAPTER TWO - LITERATURE REVIEW
2.1 Introduction
The Literature Review of this topic emphasizes on two core areas on how marketing is
being performed by the organizations in order to retain or maintain the relationship with
the consumers after the relationship has been established. The two areas that are being
taken in to account are the Relationship Marketing and the Marketing Strategies. In
account to this, the key driver in order to retain the customers has also been discussed
which is the Customer Satisfaction. When the marketing strategy has been taken in to
account for the retail business, most of the academics stress upon programs such as
‘frequent shopper’, as such programs are highly popular. The current retail segment is
concentrating on the consumer loyalty programs by stressing on the consumer
relationship management. The information technology is also being used to maintain
healthy relationships with the consumers.
2.2 Marketing Strategy
In order for an organization to satisfy the requirements of the consumers, increase the
revenues, and surpass the competitors in the market to be successful forever, an
organization needs to concentrate its resources on the greatest available opportunities
(Lawrimore, 2009).
According to Dibb et al., (2006), in order to get a competitive edge in the market an
organization needs to plan long term and this can be achieved by taking the long term
market in to consideration with respect to the two processes that come under the
Marketing Strategy i.e., the decision making process and the account planning. However,
Kohler (2003), argues that an organization needs to take its goals in to account while
marketing so that an effective marketing strategy can be created. Furthermore, Hooley et
al., (1998) strengthens the argument by letting us know the importance of offering
custom tailored packages of either a product or service to a definite group of consumers
so that the requirements of the consumers can be satisfied as well as the best marketing
strategy can be implemented both at the same time.
According to Brassington and Pettit (1998), the Strategic Marketing consists of various
steps so that the consumers can be attracted and retained. They are as follows
Designing
Analysis
Implementation
Controlling both the new and the existing services and/or products
Additionally Dibb et al., (2006), in support to the above points has added that the
organizations need to persuade consumers in buying own brand products rather than
buying the products of the competitors so as to get a competitive advantage.
In the recent days many retail giants are concentrating on the implementation of the
frequent buyer programs in their respective marketing strategy. And for some giants, this
has become a core component as well in order to retain the consumers as said by the
Nectar Card’s marketing director under the division of loyalty schemes. He even states
that, under rigid times the consumers tend to value their point (Bokaie, 2008). One of the
major components for a successful Marketing Strategy is considered to be the rise of
Competitive Advantage. Every organization needs to adopt a different marketing strategy
for different products as well as various marketing programs in order to be distinct from
competitors so that when the current products are being renovated, an organization can be
highly successful in the market (Kotler, 2003).
2.3 Relationship Marketing
The retail industry is subject to a very high competition and this drastic rise of
competition has given birth for implementing various schemes and loyalty programs. The
change in the relationship marketing was due to the improvements in the loyalty
programs offered by various organizations. This has even led to a change in the
marketing philosophy being implemented (Yuping and Rong, 2009). According to Payne
et al., (2001), the main aim of the Relationship Marketing is to establish a healthy
relationship with the consumers by making them loyal to the organization which can lead
to providing excellent and high quality consumer value.
The main objective of this new marketing criterion i.e. the Relationship marketing or the
one-to-one marketing is to let an organization attain a certain level so that it treats it
consumers as individuals so that a continuous relationship pertaining to business can be
maintained with them (Peppers and Rogers, 1995).
The relationship marketing is nothing but a simple set of marketing strategy as well as a
marketing philosophy (Gummesson, 1999). Now, considering the two terms marketing
strategy and the marketing philosophy, let us understand the individual meanings of both
of them. The marketing strategy deals with the relationships as such how a relationship
can be made between a business and a consumer (seller and buyer). The marketing
philosophy considers the long term process of maintaining the established relationship
between the seller and the buyer by continuously concentrating on the various ways of
enhancing the relationship between them.
According to Payne et al., (2001), in order to be successful in the relationship marketing
strategies, organizations need to study the consumers as well as look in to the issues as
such what can motivate them and their perceptions of value need to be monitored on a
regular basis. However, currently in this highly competitive market, in order to
differentiate an organization from the competitors, offering high quality goods and
services alone is not sufficient (Naver and Slater, 1990). According to Palmer (2001), in
order to establish a long lasting relationship with the consumers, organizations need to
motivate their consumers in to buying their goods by delivering superior value as well as
differentiating the product to the consumer while considering the needs of the consumers
at the same time.
2.4 Consumer Satisfactions
According to Little et al., (2003), satisfaction of the consumers can be described as the
response or reaction from the consumer’s experiences after they have used a product or
service. In order for the consumers to be satisfied every time, the quality of the product
plays a major role. Hence, companies that are either manufacturing or distributing the
product need to ensure the quality of the product on a timely basis. According to Oliver
Loyalty Latent loyalty
Spurious loyalty No loyalty
(1997), the activities of the consumers on a long term are fundamentally based on the
Customer Satisfaction. The main research between the retention and the satisfaction was
highly focused upon in order to understand the consumer satisfaction and the actual
behaviors of the consumers.
Now let us understand the benefits of having customer satisfaction. In order to understand
it, let us consider the following figure:
Figure 2.4.1 Benefits of consumer satisfaction
Repeat patronage
High Low
High/Strong
Attitude strength
Low/Weak
Source: Adapted from Dick and Basu, 1994
However the consumers, who are highly satisfied with the supplied products or the
service that has been provided, tend to be loyal towards the company as the comp any has
gained the trust of the consumers (Gummesson, 1999).
According to Payne et al. (2001), the company can earn huge amount of money if the
consumers are highly satisfied as satisfied consumers maintain long lasting relationship
with the company.
Little et al. (2003), argues that previously customers satisfaction was the key factor for
the consumers to be loyal however, currently the companies are being forced to provide
high level customer satisfaction so as to retain consumers. Consumers want such
companies that satisfy their needs by understanding the requirements of consumers. For
an organization to maintain a relationship with the consumers, it should check the
relationship between the consumers on a regular basis and analyze whether the number of
satisfied consumers is increasing or decreasing. The organization also needs to check
whether the offer it has made to the consumers is meeting their requirements before
trying to divert the interest of the consumers on its competitors (Payne et al., 2001).
2.5 Customer Loyalty and Retention
The main aim of the various loyalty programs is to retain the customers. Every program
that is being offered needs to have a perfect plan so that the success rate can be
maximized. The way in which the consumers perceive regarding the value of the products
varies and this is what drives the factors such as the customer satisfaction, loyalty of the
consumers towards the company and customer retention. A very good marketing strategy
is required in order to ensure the quality of the products being offered, availability of the
products, service and the after sales support. With an effective marketing strategy, all
these can be coordinated effectively so that high value of products can be provided which
in turn can generate many loyal customers.
When a company is following the strategy of loyalty based marketing, it should
concentrate on specific customers in order to gain their complete trust. This can be
achieved when the company understands some basic things such as more benefit can be
got when the existing consumers are retained rather than attracting new consumers. The
cost involved in attracting new customers is 5 to 10 times higher than the cost involved in
retaining the existing customers (Christopher et al., 1991). In support to the previous
statement, loyal consumers will be more willing to spend large amounts of money with
the company they trust and tend to place frequent orders which are consistent (Evan and
Laskin, 1994). When a company has many loyal customers, it is very to create brand
awareness and the profits can be increased as well by spending less amounts on the
promotions and advertising. Moreover, loyal customers market or promote the product of
a certain company by word of mouth which is highly effective (Little et al., 2003).
Little et al., 2003 also states that the companies which have failed in the established
business venture did not concentrate much in understanding the relationship between the
profitability and the retention of the consumers and concentrated highly on attracting new
consumers. Bruhn (2003) supports the previous statement by stating that in order for a
business to succeed, the key elements for a business are considered to be loyalty and also
the profitability.
Various tools and techniques have been developed in order to measure and understand
‘customer satisfaction’. The highly powerful and effective technique is considered to be
the ‘customer retention’, in which the levels of satisfaction are measured by the rate of
the number of customers who have been retained or the Customer retention rate (Payne et
al., 2001). The rate of loyalty of a customer depends on the rate at which he is satisfied.
Two critical factors that determine the retention rate of the consumers by the company
are the product and the services that are being offered.
2.6 Customer Relationship Management
The CRM (Customer Relationship Management) assists in building stronger customer
relationships by providing highly sophisticated software and various analytical tools so
that the information of the consumers can be integrated from various sources and the
results can be applied to ensure that stronger relationships between the customer and the
company can be made (Kotler et al., 2005). According to Peelen (2005), both the
dialogue and customization can be made of use in order to maintain long lasting
relationships with the most valued customers who have been identified with the help of
CRM. According to Kotler (2003), in order to gain a competitive advantage and to
maximize the customer loyalty, CRM helps the companies to find out the details of every
customer so that they can be targeted individually and custom products or packages can
be offered to them. The past records are being used by the companies to create a
relationship which has been developed by understanding the profiles of the customers
(Jobber, 2007). The future needs or requirements of the consumers can also be
understood or assessed when the information from these past records has been pointed
out.
However, according to Palmer (2001), consumers have become highly aware of the
products and services being offered by the competitors at lower prices which made it very
harder for the companies that are trying to satisfy the customers. The CRM needs to
combine the sales forces and the call centers with the new IT such as e-mails and
websites so as to be highly effective. In this way, higher level of customer satisfaction
can be provided which even facilitates the process of communication between the
consumers and the companies by giving various opportunities to the consumers in the
ways in which their suppliers can be contacted (Peelen, 2005). For an organization to
have an effective management relationship, it needs to determine its position in the
market in comparison to the competitors, and understand the way in which they can
achieve the required results and finally needs to evaluate the various opportunities and
the threats. In order to reinforce and build the relationships of the customers and the
financial benefits respectively, the companies need to consider the different relationships
they have with the individual customers and the decisions need to be made accordingly
and the communications need to be established (Payne et al., 2001).
2.7 Loyalty Program
According to Brassinghton et al., 1997, the Loyalty programs consider the long-term
successful programs and provide the highly frequent and loyal customers with an
alternative to currency such as either vouchers or award points. These points and
vouchers can in turn be traded for either different services or various products based on
their value. The initiatives for customers to find the information on such programme is
provided by the organization and most of the customers find it when they shop with the
company either on the website or in store. Though the loyalty schemes initially saw a
high boom from the 1990s, the loyal consumers were offered discounts from the
companies starting from the earlier days when the commercial activity has been started.
This was done in the earlier days so that the customers are encouraged to return to the
same supplier from time to time. According to Yuping and Rong (2009), though it’s been
a long time since the loyalty programs are been offered to the consumers, the customers
still embrace them and stay enthusiastic which has made it grow over and over through
the years.
When the companies are focusing on these long term programs, the promotional
programs such as different programs offering either one time or immediate bene fits
through scratch cards that allow for winning instantly and even the discount programs
from various retail outlets can be excluded. Two main factors constitute the relation to
the programs, which are the design of the program and the way in which the particular
program is being managed. According to Yuping and Rong (2009), every loyalty
program needs to have 3 specifications that are considered highly crucial which are:
1. Rewards
2. Requirements for participation and
3. Point structure
The types of Rewards that can be provided can be understood from the following figure:
Figure The type and the timings of Rewards
Source: Adapted from Dowling and Uncles, 1997
The design of a loyalty program determines the effectiveness of that particular program.
Many benefits are provided to the customers from the loyalty programs such as rewards
that help the customer save money and discounts. These are highly essential in order to
make such kind of programs more popular and the regular customers get attracted to such
things immediately. According to Kumar and Reinartz (2005), loyalty programs are
considered to the best program by many retailers so that the loyalty of the customers can
be enhanced. According to Van et al., (2005), the amount of expenditure by the customer
differentiates the major difference between the members and the non-members. This
makes the members of a loyalty program enrolls the non members in to that particular
loyalty program (Leencher et al., 2006).
2.7.1 Advantages and Disadvantages of Loyalty Programs
Now let us consider the various Advantages and Disadvantages of the Loyalty
Programs being offered by the companies. We shall consider both these from the
perspective of the consumers and the companies as well.
Advantages from the perspective of Consumers
Consumers can save money which indirectly helps in the consumers
making money (Shugan, 2005)
The consumers are offered various special offers and discounts when
enrolled in a loyalty program (Stauss et al., 2005)
Various custom magazines are rolled out to the consumers (Liu, 2007)
Consumers can feel that they belong to the organisation (Stauss et al.,
2005)
Various factors of convenience are given to the consumers (Shugan,
2005)
Consumers can receive various financial services under some
circumstances (Evan and Laskin, 1994)
Advantages from the Perspective of Organizations
Consumers can be identified and understood in depth (Dowling and
Uncles, 1997)
The overall turnover or sales can be increased (Van et al., 2005)
High level of damage is impacted on the competitors (Liu, 2007)
The consumer is contacted more often which can enhance the
relationship with the consumers (Liu, 2007)
Increased Customer satisfaction (Dowling and Uncles, 1997)
An opportunity enabling cross marketing (Liu, 2007)
The behaviour of the consumers can be analysed (Liu, 2007)
The trends of the consumers can be analysed which helps the
organisation to roll out products based on the trends (Liu, 2007)
The benefits can be spread by the consumers word of mouth (Dowling
and Uncles, 1997)
The possibility of differentiation (Liu, 2007)
Possibility of many new consumers enrolling in to the scheme
(Leencher et al., 2006)
A chance to conceal the real prices and enabling high prices (Liu,
2007)
Disadvantages from the perspective of Consumers
Customers may be forced to purchase some goods in certain times
(Shugan, 2005)
A chance of ending up paying higher prices for the goods being
purchased (Shugan, 2005)
Disadvantages from the perspective of Companies
The cost involved in the promotion of these cards is higher (Liu, 2007)
The available information of the consumers may be misleading in
certain (Liu, 2007)circumstances (Dowling and Uncles, 1997)
The real satisfaction as well as the loyalty levels can be concealed
(Liu, 2007)
The loyalty might be built towards the money instead of being to the
brand (Dowling and Uncles, 1997)
Profits might be lost when the rewards or bonuses are being offered
(Liu, 2007)
It is highly difficult for the companies to get out of such schemes when
ones implemented (Liu, 2007)
When the required levels of appreciation is not got, the scheme may
prove to be a big failure based on the expenditure involved (Shugan,
2005)
2.8 Economic Benefit of Loyalty Programs
According to Yi and Jeon (2003), taking in to consideration the economic observation of
these loyalty programs, the members are given a benefit economically and in the form of
rewards out of which the major features are the savings and discounts. The discount
feature in the loyalty program offers the consumers with the price discounts on various
ranges of products or services pertaining to the members of the loyalty program. The
consumers are given immediate rewards for all the purchases they have made.
The members of the loyalty program are provided with various saving points that are
based on the overall money that has been spent on the company. When the member has
collected enough points, he can redeem all those points for any product worth the amount
of points. According to Zhang et al., (2001), the costs can also be switched when such a
characteristic is enabled. All the points that have been accumulated by the consumer are
lost when the consumers stops buying from the company. When the saving feature has
been enabled in the loyalty program, the entire range of products are benefited and not
the specific products. Much effort is required by the consumers in order to take benefit of
the savings reward scheme. The consumers tend to receive an instant reward instead of
simply waiting for it to happen in the future. Hence, the points should not be given to the
consumers on a random basis (Yi and Jeon, 2003).
2.9 Nectar Card at Sainsbury’s
The Nectar loyalty scheme is not run by the Sainsbury’s but by the Loyalty Management
Group UK. When the customers of Sainsbury’s spent £1 at the checkouts, they will
receive 2 Nectar points. When the customer has collected 500 Nectar points, they can
redeem their points at the tills (checkouts) so that they will get £2.50 off on the current
transaction. (Appendix)
2.9.1 Nectar Card Association
The Nectar Programme is not operated by Sainsbury’s but by Loyalty
Management UK. It owns and operates the entire Nectar cards. All the queries
regarding the Nectar cards are dealt by this organization. The Groupe Aeroplan
Inc owns the Loyalty Management UK. (Appendix)
2.10 Depth of Review
The review of literature has been conducted at such a depth that it answers all our
unanswered questions and all our objectives are fulfilled accordingly. The literature
review has been conducted adequately and no compromise was done when the sources
are being collected in order to understand the different terminologies as well the different
marketing strategies used. The literature starts from the marketing strategy and goes
further in to how a relationship can be maintained with the consumers and what are the
points that need to be taken care of.
So the information available was used to the best so that complete knowledge can be got
regarding the topic.
2.11 Hypothesis
Based on literature review and survey with the customers and the managers, it can reach
to the following hypothesis.
The organisations concentrate marketing on the higher price items as the
points given to the customer will be high and hence the customer will be
satisfied which can be considered as one of the steps for the customer being
loyal and hence retaining customers.
The organisations create an impact on customers by offering the regular
promotions to them so that they become accustomed and hence return to buy
the same product as it offers high value to the customer. The customer will
keep returning to buy such regular offers making the customers loyal to the
organisation.
The customers can be offered extra points when own brand products of the
organisation are used constantly. In this way the customer can be made to
switch brands. The highly targeted areas are the products related to bread and
household. Hence it is possible for the organisation to introduce various offers
on such departments and hence adding value to the customers shopping.
Many customers look for the nectar offers that have come in the store and tend
to buy the products that are on offer so that they get value from both the sides
i.e. the value of nectar and the product as well. Hence this can increase the
loyalty of the customers. So organisations implement such everlasting
strategies.
When the customers are given double or triple nectar points in some
occasions, they tend to buy more and save on their shopping as well as
accumulate points so that they can use those points to redeem when they are
making purchases for a holiday or occasions such as Easter or Christmas.
Customers do feel that they are not enough offers in Sainsbury’s related to the
Nectar. This needs to be overcome so that the customers feel that they are
being taken care of and given a value on every shopping being made in
Sainsbury’s.
2.14 Conclusion
Based on the study of all the major aspects of the project, related to applying many
techniques of marketing narrowing our criteria in to the retail secto r, it can reach the
following conclusions.
The efficient way to increase the market share of an organization in this highly
competitive market is the use of programs such as frequent shopper. Such programs allow
the consumers to be loyal to the organization as well can increase the number of satisfied
customers. This leads to the increase of brand awareness as the returning customers make
repeated purchases finally resulting in the low costs of operation.
The modern approach out of the marketing strategies can be considered as implementing
the loyalty programs. These programs have changed the way in which the organizations
approach customers. The organizations have now become customer centric rather than
concentrating on the products they provide. The CRM (Customer Relationship
Management) has made this possible on a large extent. Due to CRM, the organizations
are continuously striving to meet the demands of the consumers which is increasing the
rate of customer satisfaction which drives the customers to become loyal to the
organization and finally retaining the customers.
Even though many schemes are being implemented, the main focus is made on the
customer loyalty. The loyalty programs, satisfying the customers by meeting their regular
demands and retaining the customers is being done so that the customers turn loyal
towards the organization which can create a big difference to the brand name of the
organization. As the retail industry is highly competitive, before starting a loyalty
program, the organization needs to audit the available information such as the satisfaction
levels of the customers, and the number of customers that have been retained as a whole
etc., so that the loyalty programs do not wind up creating a negative impact on the
customers and one more reason for doing this is that the cost involved in implementing
such programs is generally high.
It can be understood finally that a highly efficient program of loyalty is required in order
build an everlasting relationships with the customers.
3. CHAPTER THREE – METHODOLOGY
3.1 Introduction
A rationale for the methodology that has been selected is made when both the primary
and the secondary data is gathered. We also explain the preferred methods considered in
order to do this research as well as the advantages and the disadvantages of the methods
that have been considered is also explained. All the limitations are detected taking in to
consideration the validity, ethics and also the reliability. The questionnaire, analysis of
data and the sampling has also been utilized and respective conclusions have been drawn
by recommending the possible developments at the end.
In order to complete a research, a methodology is required which is the considered
concept behind the research. The major difference between the terms method and
methodology lies in the concept of using a particular past action that has been successful
and the later is considered to be the one that shows the research procedure that is being
implemented or taken care of (Clough and Nutbrown, 2002). In order to collect the data
and analyze it as well, assorted methods can be made of use. The degree of the choice
that has been made depends on the focus that is being made by the study and the required
amount of data so as to analyze the topics effectively (Kinnear and Taylor, 1996).
3.2 Primary Research
The primary method of research is used to obtain the up to date information on the
chosen topic for research purposes. Hence, this type of data is collected in order to satisfy
a specific purpose which can also be considered as an empirical type of research in which
the collected data can be argued as well as interpreted so that it contributes to the
respective theory (Bryman and Bell, 2007).
Moreover, the research topics are favored by the collected primary data. The primary data
can be collected using various mediums such as through questionnaires and conducting
interviews. Though it is not very easy to be understood on the hold, in order to
understand the primary data, the secondary analysis as well as the conducted research
will be highly useful.
3.3 Secondary Research
A considerable amount of secondary sources are reviewed in order gain an in depth
knowledge on the subject taken in to consideration i.e. the consumer loyalty programs in
the industry of retail. This type of resources i.e. the secondary type comprises of all the
material that has been made a note of on a later date of the commencing of the event
which includes comments on those events and the situations as well (Birley and
Moreland, 1998). In order to conduct an in-depth literature review, the relevant and the
existing information has been taken as the base (Silverman, 2005). The secondary data
has been gathered from various electronic journals that could be accessed from the
EBSCO host. All these journals were related to the service and the marketing industry.
Moreover various reports and online sources have been used in addition to the textbooks
acquired from the library. The main intention of using the textbooks was to evaluate and
inspect the similar and the non similar results and also to demonstrate the criticism made
on the disagreement.
The major difficulty in approaching this particular method of research was the quantity of
the available secondary sources of information on marketing. The data was available in
vast numbers which made it very hard to choose the right information that needs to be
placed in our research.
3.4 Qualitative and Quantitative Research
The surveys are a way of Quantitative type of approach while the interviews are
considered to be a qualitative type of research taking in to consideration small samples to
which open questions are being asked (Silverman, 2005). Moreover according to Bryman
et al., (2007), the questionnaire that needs to be completed by self can also be considered
as a qualitative research due to the difference being that there will be no interviewer who
will ask questions and hence the respondents need to read the questions and answer them
on their own.
According to Kinner and Taylor (1996), the qualitative type of research does have
complications when the questions are not appealing to the population. In addition to this,
the respondents may face difficulty in answering the questions and there is no one
available to assist (Bryman et al., 2007). In order to analyze the different aspects in
relation to a particular event, the questionnaires can prove to be highly effective (Hansen,
1998).
Gunter (2008) argues that the quantitative methodologies are being used in order to yield
much data regarding the behaviors of the participant and their reactions. However this
type of research helps highlight the point of understanding it over the considered quantity
and also assists in discovering the requirements, inspirations as well as the activities of
people.
3.5 Structure of the Questionnaire
The questionnaire needs to be highly simple and easy to be understood. They need to
be logical and needs to reflect the aim of the research or the survey being conducted
as the relevant information needs to be provided to the researcher from this type of
questions (Jobber, 2007). Furthermore, Jobber (2007), highlights the much important
steps used to design a questionnaire which are three in number and have been
identified as:
Figure: 3.5, Stages in the development of a questionnaire
Source: Adapted from Jobber. 2007
Definition of the research problem
Exploratory research
Information required
Definition of the population
Target groups
Survey methods
Ordering of topics
Type of questions
Wording and instructions
Layout
Scaling
Probes and prompts
Coding
Pilot testing
Re-Design
Final questionnaire
Pilot stage
Design Stage
Planning Stage
3.6 Pilot Testing
The questionnaire was testing before implementing in the real world. The main motive
behind such a step was to ensure and allow the researcher to draw comparisons from the
information collected from various sources (Bryman et al., 2007).
3.7 Sampling
Sampling can be understood as considering a particular section of the targeted population
that is representative in nature to undergo the sample initially and then inferring it to the
whole targeted population (Shuttleworth, 2009). The most appropriate type of sampling
that can be used effectively for our project is the stratified sampling as the principle
categories pertaining to the sampling are sub divided (Clough et al., 2007).
However Jobber (2007) argues that this type of sampling will be best suited for this
research as it can be ensured that taking a specific intention as a base, a random selection
of the population can be done. According to Denscombe (2007), if any other type of
probability sampling has been taken in to consideration, then the chances of the
researcher including the most required features to that population are very low.
3.8 Participants
In order complete the survey, the researcher approached the store manager of Sainsbury’s
and was then decided that the survey needs to be completed in 3 days. 50 customers with
a Nectar Card and the management of the Sainsbury’s were involved.
3.9 Ethical value
The researcher is responsible to maintain all the standards regarding the ethics. The
researcher will certify that every standard pertaining to the ethical values will be taken
care of. The main issues that have been concentrated on were the safety as well as the
privacy of the participants of the survey. According to Clogh et al., (2007), the
participants will be intimated regarding the purpose and the nature of the study and
permission will be taken from them to continue with the study prior to collecting opinions
from them. In this way it can be assured that the identity as well as the personal details of
the participants is protected to the maximum level.
3.10 Analysis of Research
Various tools such as charts have been used in order to analyze the content that has been
collected through the questionnaire. The outcome of the research is the result of the
information that is highly structured.
3.11 Reliability and Validity
According to Bryman et al., (2007), the quantitative type of research deals with the
reliability of the information and the main concern is whether the result of the survey is
reliable when a period of time is taken in to consideration.
According to Kinnear et al., (1996), when the concept is being measured by a particular
indicator then these issues are referred to be valid. The pilot study included customers
with a Nectar card.
3.12 Estimation and Development
The main purpose was to collect the information from a wide range of customers with a
Nectar Card so as to make a connection to the primary concerns which were the retention
of consumers, loyalty programmes and the customer satisfaction.
4. CHAPTER FOUR - ANALYSIS AND FINDINGS
4.1 Introduction
This project aims at finding the effectiveness of the loyalty programmes in Sainsbury’s
and also to determine the satisfaction rate of the customers by analyzing how satisfied the
customers are when they are using such a loyalty program and how the organization can
understand the requirements of the customers with such programs and fulfils them
accordingly. The research questions have all been answered using both the primary and
the secondary data and the analysis will be made using both the sets of data and the
charts, pie diagrams and bar graphs are made using the data collected from the primary
sources.
4.2 Nectar card Participants
The findings from the 50 customers who are Nectar Card holders have given the survey
questionnaire. The participants were 60% (30) males and 40% (20) females out of which
the highest percentage i.e. 50% (25) of the participants fall under the age group of 18-30
range.
Figure: Gender description
G ender
Males
F emales
Source: Based on the survey
The majority of the customers found out regarding the Nectar Card scheme when they
were shopping in Sainsbury’s as told in (loya lty program) of the Literature Review. The
customers that found out regarding the Nectar card Programme in the Sainsbury’s store
accounted to 56% of the respondents. 54% customers with a Nectar card made their
weekly shopping with Sainsbury’s as stated in (loyalty program) of the literature review.
Figure: Age of the participants
Ag e of the P artic ipants
18 to 30
31 to 40
41 to 50
Source: Based on the survey
4.3 Customers Reaction to the Loyalty Program
By joining the Nectar Card scheme, customers receive varied benefits when they shop in
Sainsbury’s. They receive points on every purchase of over a £1 with restrictions on
tobacco based products and some products.
Based on the survey of customers, the Nectar Card has satisfied many customers. Based
on the scale of 1 to 5 and 5 being the most satisfied customers 64% of the customers rated
4 when asked how well the loyalty card met the customer requirements and expectations.
The customer’s survey revealed that the Discounts and Vouchers are the most enjoyable
rewards by processing a Nectar card and both of them accounted to 44% and 30%
respectively as stated in the (loyalty program) in the literature review while special offers
and spending the acquired points on the bill to get a rebate accounted to 8% and 14%
respectively. The other 4% contributed to the rest of the available resources.
The customer survey revealed that 24% of them thought that the Nectar Card is creating
a high positive experience while 52% rated that it created a considerable amount of
positive experience.
Figure 6: Customer Reactions to the Loyalty Program
0 20 40 60 80
MeetingE xpectations
P os itiveE xperience
C us tomerS atis faction
Average
S ome whatS atis fiedHighly S atis fied
Source: Based on the survey
As stated in the Literature review many customers tend to collect the benefits from the
program and the survey revealed that 76% of the respondents do collect points whenever
they shop with Sainsbury’s which is a very high percentage
Figure 7: Benefits enjoyed the most
B enefits E njoyed the mos t
0 10 20 30 40 50
Dis counts
Vouchers
S pecial O ffers
R ebate on bill
O thers
B enefits E njoyed themos t
Source: Based on the survey
4.4 Nectar Card versus other Loyalty Programs
When the Customers were asked about the Loyalty card being offered, they responded
well that it is effective. When they were questioned how well the Nectar card program is
performing in comparison to other cards, on a scale starting from very good to very poor,
60% of the customers gave a feedback that it was very good in comparison to the other
cards.
Based on these results we can now be assured that the Nectar Card program is doing good
comparatively. In order to check the influence the Nectar Card makes on the customers
shopping, on a range starting from 1 to 5, 5 being the most influence, 58% of the
customers rated 4 and 12% of the customers rated 5. So from this data we come to know
that the Nectar card does impact the purchase decisions of the customers as stated in the
Literature review.
In order to check the offers that were related to the Nectar Card, whether they were
attractive or not, 74% of the customers indeed said that the offers were very attractive and
when asked that whether there is any need of introducing more activities related to the
Nectar Card, the response was as expected i.e. 72% customers felt that there is a need of
introducing more activities related to the Nectar card.
As stated in the (Customer Loyalty and Retention) of the Literature review the custo mers
tend to promote the loyalty program to their friends or relatives. As accordingly the
survey results revealed that 68% of the respondents indeed consider recommending or
have already recommended the Nectar Card to either their friends or relatives which
indeed are considerably a high amount of response making the organization profitable.
4.5 Nectar Card and Sainsbury’s
When the customers were asked their opinion regarding their satisfaction levels with the
Nectar Card related to the Sainsbury’s in particular, 66% of the customer rated 4 on a
scale of 1 to 5 where 1 is for the most dissatisfied and 5 stands for highly satisfied.
Though this is a good score, this area can be highly improved concentrating in more
levels in this area.
4.6 Improving required for the Nectar Card programme with Sainsbury’s
When the customers were asked to express their opinion on the recommendations that
need to be made to the Sainsbury’s Nectar card loyalty so that it meets the daily
requirements of the consumers, most of them said that were satisfied with the current
service provided while some of them suggested that Sainsbury’s must give more Nectar
points when the customers buy the own brand products of the Sainsbury’s and the daily
items such as milk, bread etc. This indeed is a valuable suggestion by the consumers and
can be considered by the organization which will improve the sales of the own brand
products as well as the increased buyers for the daily products. When this will be
implemented by Sainsbury’s they can progress further in to the market. A very few
customers have also stated that the card holders need to treated specially at the check outs
so that they are made to feel that they are important to Sainsbury’s. This can indeed prove
fruitful in some cases.
4.7 Response of the Sainsbury’s and the Loyalty Management towards the
Nectar Card
The management who are reviewing the performance of the Nectar Card and the
Sainsbury’s as well has provided their valuable feedback. They do believe that Nectar
Card indeed contribute its share towards retaining the customers and increasing the rate
of satisfied customers as well at the same time. This can make the customers become
loyal towards the organization. The management also tells us that the Nectar Card is in
partnership with many other brands and due to this, the customers will have many options
of collecting points and even if they forget their nectar card when any transaction is being
made, the customers do have 2 weeks time and can add the eligible points on to their card
when they have produced the receipt of purchase. This is an example of the value added
service the Nectar Card provides to its customers.
The management of Sainsbury’s also states that the higher the amounts of purchase made
with Sainsbury’s, the greater amount of benefits the customers get. The customers will be
provided double or triple nectar points based on their shopping behaviors at Sainsbury’s.
The chance of becoming eligible for them is that the customers need to be highly frequent
and make considerable amount of purchases with Sainsbury’s. This has brought made a
deep impact on the nature of shoppers as they are getting triple nectar points on their
purchases which is increasing the sales figures as well as the number of satisfied
customers. And all these benefits are only for the Nectar card holders shopping at
Sainsbury’s.
The management has also told us that the Services provided by the Nectar card indeed is
meeting the customer’s requirements and the high quality service provided by the Nectar
Card is contributing towards this. However, the management is not happy that the
expected results are not got about the customers feeling important when they possess a
Nectar card and the management indeed feels that this area does require a lot of
improvement and the features or the services need to be improved in such a way that the
customer need to feel that they are important as when a customer feels like this, then the
satisfaction rate drives up to the maximum which can in turn make them loyal towards
the organization.
The management is happy that the customers are happy that the services and offers that
the Nectar Card is providing is in a timely basis hence making the customers more
satisfied and loyal towards the organization.
4. CHAPTER FIVE – CONCLUSIONS
The conclusions have been drawn upon carefully reviewing the aims and objectives
stated earlier in the project. The research questions have successfully been answered
apart from accomplishing the stated aims and objectives. All of these acco mplishments
have been possible due to the collection of both the Primary and the Secondary data. All
the Analysis and the findings were in relation to the stated aims and objectives which has
made it very easy to reach the conclusion based on the collectio n of data from the
primary as well as the secondary sources.
The aim of this project was to analyze the importance of the loyalty card programmes
pertaining to the retail industry and in particular to Sainsbury’s. In the literature review it
was mentioned that the Loyalty card programmes indeed increase the customer
satisfaction rate and make the customers loyal towards the organization (Yuping and
Rong, 2009).
The following conclusions can be made based on the literature review and the survey
performed:
The Loyalty program indeed helps in satisfying the customers and retains the
existing customers. According to Yuping and Rong (2009), this does really
happen in most of the cases. This statement was proved after the survey was done
which gave us the exact results and after analysing them, 64% of the customers
felt that the Nectar card indeed meets their requirements and more than 70% of
the customers felt that it made a positive point towards the organisation which
indeed has increased their loyalty towards the organisation. The survey that has
been done with the management reveals the same in support to the statement.
Many marketing strategies are involved taking in to consideration the Nectar card.
Sainsbury’s provides double and triple nectar points to the customers based on
their shopping experience which drives the customers to make considerable
amount of purchases and either saving their points for events such as Christmas or
using them for special benefits when required.
The loyalty program contributes a high percentage towards making the customers
loyal towards the organisation and this has been supported through the evidence
collected from both the primary and the secondary sources.
The customer’s choice of purchase is affected by the Nectar card program as
customers tend to make purchases which can provide them more nectar points.
The survey reveals that 70% of the customers agree that their choice of purchases
and the overall purchases are affected by the offers related to the Nectar cards.
The cost of retaining the existing customers is less than the cost involved in
acquiring new customers. The survey reveals that 68% of the customers indeed
consider marketing the uses of nectar card to their friends and relatives which is
highly advantageous to the organisation as this does not involve any cost and is
just done by the word of mouth which is highly effective.
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Appendix 1