The report will focus on the “Relationship Marketing” practices followed by the Boots Company. The report will also be highlighting the benefits of the loyalty card scheme adopted by the company and will be suggesting, what else they need to adapt to create new and to retain existing customers.
In today’s world the businesses are customer oriented, whether they are small or large scale businesses. Companies are doing their best to deliver the value added services to the customer to retain them and at the same time to create new ones. As said by the David jobber (2007), that in the real life situation, it is easy to retain the existing customer but it is very difficult to attract a new customer to the business. This has realized the companies to emphasis more on the relationship marketing programmes like customer loyalty, customer retention and customer satisfaction programme to turn the existing and the new customers the loyal advocates of the business (Christopher et al, 1991). The report will be critically evaluating the Boots “Loyalty card scheme programme” as a tool for building relationship with the customers.
Background of Boots
Boots is a UK based company with stores in many national and international geographical locations. Initially “Boots” were indulging in medicine business but with the growth in the business, they have expanded their portfolio from the medicines to electrical business and from optical to the insurance business. Boots solely gives credit for the growth and expansion in business to the loyalty card programme, which they introduced in the year 1997 as a tool for creating long term relationship with their customers (Branding Asia, 2009).
Shani and Chalasani defines “relationship marketing as a process, which involves an integrated effort to construct, sustain and make a network with every individual customer and to make stronger the network for the benefits of the each sides, which can be made through the individual or the interactive session over a longer duration of time (Shani and Chalasani, 1992).” Relationship marketing is not only beneficial and limited to the manufacturer and the end consumer, it is also beneficial for the suppliers, stakeholders and partners as they all are the part of the value chain. Relationship marketing is not all about the financial exchanges between the two entities it is also about the social and the cultural exchanges (George Homans, 1961). This principle is been widely used by each type of a businesses in present environment of threat and competition. Businesses have started maintaining social exchanges with their customers in terms of the love and loyalty, whereas cultural exchanges in terms of season greeting.
Boots loyalty card scheme works on the principle model of (Christopher et al, 1991), loyalty ladder.
Customer (Emphasis on Sale) (Path of loyalty starts)
(Source: Christopher et al, 1991)
Loyalty ladder defines the relationship that’s exists between a customer and a firm. It explores the steps of trust, commitment and loyalty of customer towards the products and services offered by a company.
Boots implements loyalty ladder to maintain the long term relationship with its customer. Boots initiates its process of loyalty building and sales process by its promotion and advertisement campaign to attract new customers. In the beginning the Boots customers are the suspects, they don’t have value and trust towards the products offered, but in the future Boots believe that they will turn these suspects customer into the prospects customer, as they wits the needs and requirement of customers by making them part of the mailing process. In this process they make them buy products by providing the best available services with a differential advantage which no other firms provide, this helps them to bring back the customer to the business and builds a initial relationship, though the customer is still not loyal towards the firm and later they register them as the part of their data base to send them future promotional offers so that they turn them into a future client.. From here the process of sales turns into process of loyalty, here Boots creates a sense of loyalty in customers by the introduction of its advantage card, which offers customers a discount coupons and points, which they can use to buy the future products. The points offered are more as compare to the other retailer; this creates a trust and relationship among customers. Advantage card gives a consumer an opportunity to reward themselves, this build a bond between customer and boots. To increase the level of loyalty among customer Boots issues kiosk coupons to customer so that they can have a self tailored discount coupon as per there requirement, this makes customer believe that’s it more of a social exchange rather than a monetary exchange and makes them a supporter of the business. On this stage Boots do not do any promotional campaign as its customer have started doing word to mouth promotion of brand themselves and have turned themselves into the loyal advocates of the business, advocating other people to be associated with the business.
Customer relationship management technique of the Boots
Boots have build and maintained its relationship with the customer by its IDIC approach (P.R Smith and Dave Chaffey, 2005). This has helped them to reach the wider range of audiences and gave them an opportunity to full fill their specific requirements.
Identification: Boots have achieved successful customer relationship by identifying the various target customers and by studying there buying behavior. In this they identified the choice of the consumer towards a particular product and reason for their dislikes. They were mange to identify these behavior patterns through the mailing process and also through the vouchers programmers, which recorded the spending pattern of the customer (Noelle McElhatton, 2004).
Differentiation: With the knowledge of the buying behavior of consumers, they differentiated there services into the various segments and started offering their unique services as per the like and demand of a particular customer. All the services are catered only to the customers having the advantage card. Boots differentiated its customer base in three segments.
In the first, boots started giving benefits to the young parents in terms of the free counseling regarding parenthood and ways of grooming child. This helped them to build the relationship with the parents and young couples (Boots, 2010).
The Second segment is of young mothers and girls. They started offering them free fitness and beauty magazines to gain their trust and make them committed towards company (Boots, 2010).
In a similar way they also started serving old people by giving them counseling regarding their health issues and ways of improving (Boots, 2010).
Interaction and communication: boots uses the online facility to communicate with its entire customers as they sign up most of their target customer online for the registration of the advantage card.
Boots loyalty card is a world’s leading “loyalty scheme” running till date. It has more number of loyalty card holders in comparison to the retail giant Tesco and John Lewis (Retail tech, 2000). Boots loyalty card has attracted more than 12.3 million people. Boots have observed that they have built a loyalty among customers, as 40 % of the purchase is through the loyalty card (Branding Asia, 2009). Boots have maintained the relationship with its customers by continuously upgrading its loyalty schemes. To maintain the relationship with its customers, boots on regular basis employs various models to understand the nature and buying behavior pattern of the consumers. For this they use peer group and wallet model, which helps them to know which customer is buying and which is not. It also helps them to know which product is been bought by the customer and which is not, so they prepare scheme as per the need of the customer (Noelle McElhatton, 2004). Boots though having the largest loyalty scheme but it do not provides any schemes for the younger population though they account larger share of the population. Moreover the vouchers are send through the mailing process, which takes lot of time. Loyalty scheme of boot is only limited till boots and its optical business, they should tie up with the other major retail stores so that its customers can have more advantage and can use same card everywhere. This would increase the level of relationship and loyalty among customers towards boots. In addition to this schemes are more oriented towards the premier value client, leaving the larger share of the population which is the medium value customers.
Success of Boots because of the Advantage card
Advantage card has been the trump card for Boots success throughout these years. Boots have made its schemes more attractive in comparison to all other schemes been operated by other retailers in the UK. They had made their schemes inclined more towards customer by offering them 4 points for the each pound they spend, where as other retailers like Tesco just give 1 points for the each pound spend. This has helped Boots in creating a high switching barrier for the customers and helped them in maintain the relationship with the customers (Alison Hunt, 2007). In Addition to this the Boots have been successful because of the advantage card, which has continuously increased its customer base, which signifies that advantage card of boots has made it possible for boots to maintain its relationship with its loyal customer.
Recommendation to Boots
Boots should start contacting their customers by telecommunication, which so far they have not employed for building relationship.
They should start making schemes for the young generation, as they also account a larger share of the market.
They should join the nectar programme; this would help them in increasing the level of relationship and loyalty among customers. As the customers will be able to access the discount in other stores also like Sainsbury, Waitrose, and BP.
They should differentiate their customers into the valuable, most valuable and mature customers; this would help them in making loyalty schemes as per the need and requirement of the customers.
They should make schemes for the students as well, as they will be the future mature customers.
They should start giving free samples of the new product to its “Card” customers and make them part of the manufacturing process by asking them to give ideas and suggestion related to the product. This would increases the intensity of loyalty and emotional attachment customer will be having with the boots.
They should stop charging for the home delivery services, this will build a good social relationship with the customers.
Boots have efficiently utilized the technology for catering people, whether it’s an introduction of Kiosks machine or the smart card. They have been successful in collecting data of all its customers, which has helped them in maintaining a relationship with its loyal customer. Boots advantage card not only helped them in retaining customers but it also helped them in creating new customer: at the same time it has helped Boots to become the leading chemist in the UK. It is noted that on the basis of the distinct advantage card programme they have achieved the trust and the commitment of all its customers. Taken as a whole, Boots have fulfilled the customer needs and have valued there importance for the company. This has prompted them to consider customers as a sole heart of the business.
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