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“Focus on customers and do not look back at the competitors!” This rule preserves the value of marketing in our nowadays. However, its practical implementation means concrete actions that are changing all the time due to changing market conditions, the evolution of marketing theory and the improvement of its technical base.
Loyalty – is a business strategy, it is directly related to the business philosophy. The cornerstone of the philosophy of loyalty lies in the fact that the primary business objective – is creating value for the consumer, rather than making a profit. Companies are unable to control the human capital, both tangible assets, because people always have their own views and beliefs, so the only way – to earn their loyalty. To have a stable financial performance, companies need to achieve sustainable growth in customer loyalty and offer customers a unique value for these commodities (services).
Nowadays companies in almost every sector of industry, tend to have a loyalty program for all or some of its customers. The reasons for this are simple:
– intensive competition;
– insufficient number of potential customers.
That’s why there are countless loyalty programs in such industries as retail marketing , as all stores want to attract and behold customers, as well as make them to shop in their stores only. That is why Tesco company also turned to loyalty programs as a tool of effective CRM.
There are many approaches to building customer loyalty programs. Some programs are based on traditional incentive programs based on saving money, because they are very popular and obvious. The company Tesco has chosen an incentive program based on the use of loyalty cards. The purpose of this study was to discover Tesco Clubcard scheme , examine 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.
The study results reflect the overall conclusion that the successful loyalty program is aimed at a deep and personal knowledge of clients to be opportunity to make for them the right offer at the right time with the right price and on the correct channel.
Many marketers have expressed the view that raising the retention rate of consumers by only 5%, the company may increase the lifetime value of purchases of its average buyer at 25-100%. This is where the problem arises in the creation and implementation of company loyalty programs, aimed at establishing strong emotional relationships with customers.
It is much easier to have an army of loyal customers who are so confident in the brand, that not even think about switching to another. The famous rule Pareto works flawlessly: 80% of turnover for 20% of buyers, and the main task – to make this 20% as can be more loyal.
Thus, the decision to establish a customer loyalty program was already adopted by Tesco company. 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.
The main problem existing today in customer loyalty programs is in its unoriginal motivation role. Sometimes it seems that they are all created by one scheme and assume the standard reactions. Despite the fact that loyalty has two components – financial and emotional, the majority of existing programs attract consumers only by material component, forgetting about emotions. And perhaps the effect of such a program would increase the true customer loyalty – emotional commitment to the store, company, brand, and therefore require new, more sophisticated tools.
One of the most important issues is to define the target audience of loyalty program.
Whom is the program designed for? Whose loyalty the company wants to improve? In accordance with this determined and conditions for participation in the program. For example, if Tesco company wants its loyal clients to be: those who make at least 5 purchases per year, or vice versa, several times a week (if we’re talking about regular buyers of food). In this case, once again it is necessary to emphasize the importance of marketing research and identify key baseline parameters prior to the development of loyalty programs.
Among the other most common mistakes of existing loyalty programs – is incorrect thresholds of transition from one rate of accumulation, the level of discount to the other. As a result of incorrect calculations, most of customers very quickly reaches the maximum level of discounts (rate of accumulation), and the company suffer loses. When spending on the program reaches a peak, it is usually closed that provokes a negative response from customers. According to analysts, such experiments are fraught with a loss of 30-40% of regular customers.
Also the inefficient system of communications prevent the company from better understanding of its customers, when clients get a lot of letters uninteresting to them, they became irritated and cease to respond to the proposals.
The inefficient loyalty programs involve such errors, which the company should avoid:
– First, it is improper positioning, when the key segments of buyers are not identified. Generally, the reason for that is the lack of distinct market positioning and knowledge of “its” client, which leads to
desire to please everyone but this is impossible
– Secondly, the company has improper arrangements. Often the scheme from one loyalty program is simply transferred to another, without adaptation to the unique market conditions and customer needs. This strategy is unable to make customers more loyal, but sometimes it can ruin relationships with them.
Through the analysis of the primary research, several key findings have been established and the objectives of the study have been achieved. 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.
Before the club card was launched, Tesco had 15% of the retail food trade. Within six months this rose to 18% coming from competitors such as Asda and Sainsbury’s. But, in addition, Tesco gains a large amount of secondary trade in areas such as alcohol where people had before not bought from Tesco. The Tesco club card was a powerful incentive for them to do so. Initially, the trade and national press were sceptical, reporting that this was just another updated form of the Green Shield trading stamp incentive. And an expensive one at that, an investment of £300 million over three years and 4.5% of company profits. (Humby et al 2003)
But now it is universally recognized to have worked. Tesco has 10 million active customers and one third of all homes in the UK are in the Tesco club card scheme. It took eighteen months to break-even on the expenditure and between six and seven months on incremental costs against sales.
One of the main benefits that could derive from the Tesco loyalty scheme – is an opportunity to focus on a particular group of customers and, accordingly, to target its incentives to those customers who give the maximum benefit, and thus increase the speed of the impact of advertising messages. Moreover, it significantly reduces the cost of advertising. The key to this is the accumulation of information, which if desired can be divided into segments.
Using by Tesco the clubcard loyalty program is one of the possible scenarios to gain a competitive advantage – it is well-designed and ongoing loyalty program that gives these benefits:
– Securing a permanent client.
– The possibility of material rewards client depending on its activity.
– The possibility of psychological promotion of client.
-Increase of the size of one-time purchases of loyal customers.
– The persistent and increasing level of sales due to regular customers.
– The possibility of combining the sale.
– The possibility of additional sales.
– Ability to attract loyal customer to promote the proposed product.
The result of the following conclusions: In order to successfully carry out its activities in the market, the company needs to do everything possible to create a sustainable consumer base. On how loyal are customer to the firm will largely depend sales, and the effectiveness of the enterprise. Creation loyalty system – a complicated process. It should not be allowed a margin of error, as this may cause the opposite effect. Loyalty – is one of the most important additional tool in the fight for customers and increase sales.
Building upon this the conclusion from the research, the following recommendations can be suggested:
– To find out main areas which are of importance to consumers and allocate the funds necessary in order to ensure that these new customer demands are met to help ascertain a loyal customer base;
– Evolve and transform the Clubcard model to adapt to the new tastes, attitudes and demands of the new generation of consumers;
– Tesco should consider investing extra money into providing other loyalty programs and services to customers to achieve their satisfaction: transport facilities for customers, improved provisions for older people, increased product selection and improvements to the online shopping service.
Summing up, it is necessary to say that clients loyalty and opinion of Tesco depends on many the many factors: the design of the shop, the correct merchandising, appearance of sellers and their manner of communication with customers. It makes no sense to spend money on creating and maintaining the loyalty program, if the sellers disrespect the visitors and in that way can stop them from any desire to come for the second time.
Tesco company should first pay attention to the basic conditions in the stores: the level of service, quality and thoughtfulness of assortment, pricing, because without this important aspects any bonuses and discounts will not help to attract customers. Yes, the cards to customers influence the customers loyalty, but only after the client was satisfied with the service, attitude of staff, information and convenience of the site and others. First Tesco must provide a decent product and its attractive “package” for the client.buy term paper
For the buyer to have shown their loyalty, Tesco company must understand what must express its evaluative equivalent: discounts, accumulative points system, convertible to an additional rebate or discount cards, the opportunity to participate in the raffle of valuable prizes, personalized service program or something else. It is very important to remember that the “value” does not necessarily mean only the additional benefits or prizes. Level of service, significantly higher than those of competitors, can be a major asset for the buyer.
Do not forget that only bonuses, discounts and other promotions have no impact on customer loyalty, because customer loyalty can not be bought, but it must be earned. Consequently, the main benefits must be intangible like the level of service, special treatment and respect to customer, to work with each client as if he is unique.
Loyalty card programs has many competitors also, as these programs are nowadays a necessity, so as not to lag behind others. Therefore, Tesco company must still make a bet on such a level of service to make the client want to return to the company, regardless of whether he has a card or not. If the client sees respect and care , serving in accordance with the requirements, he has a psychological and emotional affection.
In addition, when developing and implementing customer loyalty programs Tesco company must comply “12 laws of customer loyalty”:
1) Create a loyal staff by good working conditions, and they, in turn, will please your customers.
2) Apply the 20/80 rule: about 80% of your income you get from 20% of your customers.
3) Create a stage of loyalty and make sure that your customers are moving from one to another: the customer becomes loyal to the company and its products and services gradually.
4) First Serve, and then sell: consumers believe that they come to you, because your services are pleasant, productive and addressed to them personally, if it is not – they go away.
5) Carefully study customers’ complaints: the worst, negative customer feedback about you.
6) Be responsive: the speed of response is closely linked to consumers’ perception of good service. More and more customers rely on round the clock service.
7) Know what’s valuable to your client: invest in customer loyalty research that will help you understand how you satisfy customer needs.
8) Try to return your lost customers.
9) Use multiple channels to serve the customers well: customers often change channels, but always expect good service.
10) Start training your staff on working with clients.
11) Collaborate with partners: when controlling the entire supply chain, your company will become out of the reach of the competitors
12) Keep the information in one centralized database: data from all points of contact with customers should be stored in one centralized customer database.
What else can make the Tesco loyalty program really effective?
First, the constant emphasis on the importance of the customer for the company. Various loyalty clubs should not only promote the contribution of the client to company’s business , but also stress the value of clients for your company.
Secondly, the loyalty program must be an ongoing dialogue with customers, getting feedback through surveys, “hot line”, etc.
Third, regular management program within the Tesco company all over thecountry (the market situation is constantly changing, there are companies with similar products, similar benefits and prices, so an appropriate response and correction of the loyalty program will help to maintain a commitment to customer company).
And, fourthly, it is a systematic approach. For a Tesco loyalty program to achieve better results in future, it is necessary to constantly monitor the results of the program in time and to make adjustments (if necessary to change the basic solutions or regulations).
And like any marketing tool, a loyalty program requires continuous monitoring and evaluation of effectiveness. By implementing the company customer loyalty program Tesco company must make an inventory of the program, to get a real idea of how it works. The best way to test the functionality of the loyalty program – is to look at it from outside. This can be achieved by using technology of “Mystery Shopping” , which provides information about the company’s services.
These laws and recommendations will help to avoid the most common mistakes, and will help to better understand and best meet consumers needs, relating not only to the quality of the goods, but with all that the process of acquiring goods or services – and thus will help to earn the customer loyalty and build effective customer loyalty program.
What is needed is a guideline for what techniques are better suited for collecting specific data from customers. Our recommendations for future research are that, the samples must be chosen with systematic method in order to reflect the real situation from multiple geographic areas. Also, the factors used in the questionnaire must clear enough to distinguish the different between loyalty and non-loyalty customers.
If the research needs the participation from the stores, it should include managers in order to understand more precisely about the information. Finally, it should include the information about stores which do not offer the loyalty card program in order to compare the difference between customers loyalty better.
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 across the UK.
Further investigation could be carried out to reveal what effects an increased rate of loyalty 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.
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