Effect Of Tesco Clubcard On Consumer Store Loyalty Marketing Essay

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The intend of the researcher is to examine the effect of the Tesco Clubcard on consumer store loyalty. In 1995, Tesco bring in the constancy clubcard that was to propose, " benefits to regular shopper whilst helping the company discover more about its customer needs" (Tesco, 2004, p. 3 ). The achievement of the Tesco clubcard have been well recognized, in 2002 a Market and view Research survey originate that Tesco's clubcard had been supplementary winning than the programme presented by competitor supermarkets. It were in phrase of consumer "take up" of the clubcard or growing consumer number and use the superior effect on consumer loyalty to store.

1.1 Background

At the minute each trade business segment offering a loyalty schemes to their consumers. Various loyalty schemes are based on the coming up objects only, however other of them can have obtained as you do the normal shopping in the store to same retailers. Tesco clubcard offer discount reward as well as the combination of short time rewards such as Vouchers and long term advantages such as discount an high level of price items.

Tesco had launched the first time ever its clubcard scheme in 1995. This scheme helps the Tesco to build fron the National loyalty Scheme, which linked the Tesco to Customer database. The success of the trial clubcard covered the way for the UK national launch. Strong views of the scheme was open to all tesco customer through any of its then 519 stores. Cards were issued on application and were able to be used to accumulate points on every shopping trip. The customer offered the attractive streak card at the sign out, where it was swiped through existing credit card reading equipment.

1.2 Motivation for choosing Topic

As researcher is doing research on the loyalty cards effectiveness on consumer behaviour. So, researcher proposed their research title is " Clubcard affect consumer buying behaviour". Because it encourage and give a confidence to researcher to come touch with customers and improve their communication skills without having any circumstances. More researcher was inspire by the system that how it may encourage the customers and improve their substantial growth.

Secondly it will enhance researcher skill and gave a chance to get particular experience which will be helpful in upcoming period and will give broder and wider insight of consumer buying behaviour. As researcher need to get master degree and improve the skills, this research will help researcher improve the skill and researcher can contribte in retail business.

Researchers totally research proposal based in loyalty card scheme for the Tesco's consumer behaviour. This loyalty card is known as Tesco clubcard. As we know Tesco is the big and competitive retail industry in UK and they introduce first time ever consumer clubcard scheme in 1995.

1.3 Research objectives

As doing work on research proposal, the main question of researcher in research proposal should be " understanding the significance of the consumer's clubcard scheme and consumer behaviour in the business sector".

Research objective of clubcard effectiveness on consumer buying behaviours are:

To review the literature on consumer buying behaviour

Accumulating and presenting the information in such form which will able to assess overall performance and growth of the Tesco.

To investigate that how clubcards helps for the organization as business profit.

To identify the customer interest to buying product from Teso

To identify how the clubcard influence consumer behaviour

1.4 Service quality

Service quality is the result of the comparison that customer make between their expectation about a service and their perception of the way the service has been performed ( parasuraman et al., 1985 ; lewis and Booms, 1983)

1.5 Research question

The following research questions are:

Why clubcard system is beneficial to the customer.

How customer make their point by using their clubcard in the time of doing shopping.

Does the system is affecting to the Tesco.

How do customer find the Tesco clubcard.

Tesco - spreading the success?

Analyzing how the loyalty card is useful for the customers.

At the end, this research proposal will help researcher to explore the business strategies and real importance of clubcard scheme for the both retailers and their customers or new customers to make them satisfied with each others.

2. Literature review

Literature review will observe the research topic, company know how and its data and retail industry business reports that can be essential for the proposed study. Consumers are motivated to engage in activities for many aired reasons.

According to the Consumer psychology in behavioural perspective. " The most widely-accepted and influential models of consumer behavior derive in large part from cognitive psychology. As a result, consumer choice is usually understood as a problem -solving and decision -making sequences of activities, the outcome of which is determined principally by the buyer's intellectual functioning and rational, goal-directed processing of information."(Foxall, p.8)

"We can say that consumer clubcard can reflect the consumer's behaviour in the direction of the business to buy their products (good and services) frequently and they can propose these goods of that retailers to their friends, family and business associates ( Mcllroy and Barnett 2000). To identify with the business requirements to be met in all requirement. Customer service has always been important, but today's customers have so much more freedom of choice than in previous decades that the marketplace for every product or service is considerably more competitive.

Service is not the only issue that decides where people make their purchases, but it is a very important one. In many surveys of both consumer and business purchasing, service often ranks higher than price in people's priorities. Service can give a company 'competitive edge' and can offset other factors. There is a clear business justification for building customer loyalty. It is usually far cheaper to retain existing customers than it is to find new ones, which can be both a difficult and expensive process. Existing customers are already known to the organization and can be contacted easily. A loyal customer may spend many thousands of pounds with an organization over the year. (jenny and dredge 1988).

Consumers and their behaviour comprise of many attributes and differentials. These differences are not just associated with demographics, groups or any one particular item. These is a complex development of behaviour that exist in the consumer markets. Just by human nature, consumers can be natural, changeable, and self-interested. By these definitions, businesses, consumers and purchasers are usually trying to find the best profitable deal around and always looking after number one ( number one cab be the business or themselves). What makes the customers is not always a liking attribute, but rather an educated or compulsory procedure that has been in stowed into their mindset. In other words, we as merchants can still influence the consumer. These are conduct to boost the products as vendors and create relationship to influence the consumers to have confidence in the products. Once the consumer's need are found, vendors can then create the "image" of what the consumer should expect from the products. On the other hand, getting as much information about the customer can give the vendor more information to better serve the market as a whole. The marketplace is characterized by continuous change in market composition, business practices and structure.(Moschis, George P.).

By this era when the world become the global village, where the information and technology increase day by day. Monopoly system below ultimate line and there is a huge intense competition between the retailer's companies. Because of that, it is very essential for the companies to build up a good relationship between customers and business." From research, the cost of retain a customer is five times more then to attract a new customers"(Martin 1998). " customer satisfaction is: customer needs and expectations being met all of the time, every time throughout the life of the product or service. Without this you have no customer loyalty." ( Johnsons and schools 1984).

According to the institute of Director in1998 that UK retails company's profit increase by 90% as the customer shows the continual shopping in the similar stores. " From the director of Bain and company has started that the customer loyalty scheme is the only to way to keep the existing customers to increase ansd sustain the margin of profit" (Harvard business review 1993). As consumers wish for to identify the information and familiarity regarding the product which they going to purchase to reduce the cost of their shopping. So it is extremely vital and significant aspect in business to offer the up to date information and knowledge regarding the product.

Howard and Sheth (1969) , applied that there are four typical types of buying behavior based on the type of products that intends to be purchase.

â-ªComplex buying behavior is where the individual purchases a high value brand and seeks a lot of information before the purchase is made.

â-ªHabitual buying behavior is where the individual buys a product out of habit e.g. daily newspaper

â-ªVariety seeking buying behavior is where the individual likes to shop around and experiment with different products. So an individual may shop around for different breakfast cereals because he/she wants variety in the morning.

â-ªDissonance reducing buying behavior is when buyer are highly involved with the purchase of products, because the purchase is expensive or infrequent.

The clubcard launch in 1995 was an integral part of a move, by tesco , to a customer-centred strategy. Launched as a 'Thank you card', it allowed the company to develop one-to-one relationships on a corporate level. The cost of running the scheme is considerable. In addition to the 1% discount on sale, it was estimated that start-up costs alone were £10m but the company was convinced that this was money well spent. During pre-lunch trials at 14 stores, over 250,000 clubcard were issued, representing an uptake at the sites involved of between 70-80%. During the trials, high-spending customers were identified and given special treatment, including invitations to 'meet the staff' cheese and wine evenings at their local store.

The success of the trial clubcard paved the way for the UK national launch. Membership of the scheme was open to all tesco customer through any of its then 519 stores. Cards were issued on application and were able to be used to accumulate points on every shopping trip. The customer presented the magnetic stripe card at the checkout, where it was swiped through existing credit card reading equipment. Details of the customers purchases were recorded, with clubcard points automatically awarded for every £5 spent in the store, over a minimum of £10 per visit. The cost of the mailing were high. By 1996 these were estimated to be £11m alone, but tesco was seeking a return from this investment. And between 1997 to 2003 tesco directly become tesco.com .it can track online performance via clubcard and target those likely to shop from homeand also celebrate their ten years of clubcard with scoring points.

By the end of march 1995, one month after the launch, over 5m people had joined the clubcard scheme and tesco recorded a like-for-like increase in sale. Clubcards impact on sale was However, not everything was plain sailing. One of the earlier problems to emerge with clubcard was in the total amount of data that was being collected. As well as having one of the largest customer database in the UK, this was also continually updated with purchase information, every time an individual customer used their card.

According to Tim Mason, Tescos recently promoted marketing Director, saw the real impact working at the local level: 'I believe that the key to the future is going to be an individual response to individual customers. Micro Marketing will be at the forefront of our future strategy. It is no good talking about which is the "best shopping trip": you have got to deliver the best shopping trip for each and every customer. 'He predicted that eachof the 524 stores would become a marketing unit, where staff would get to know their own customers individually and understand exactly what they wanted from their shopping experience.

The customer service team cannot stand alone in its efforts to satisfy their company's customers. For truly excellent service to be achieved, customer satisfaction has to be the overriding objective for the whole organization. On the customer side, they can think same the retailers think about the customers. They don't want to redeem their points as they need from for next time. So they can double their point at the end of the month or quarter. It is a consumer right that they do not want the voucher or other stuff for the time they shopped because they want something else with that or someone can misuse their vouchers as they don't need them at the time.

Once each market or segment has been defined, it is necessary to understand what value the customers within the segment want or need. This value is most simply thought of as the benefits gained from the offer, but it can also encompass the value to the customer of surrounding services such as maintenance or information. This step also encompasses what the customer is prepared to give in exchande, in terms of price and other criteria, such as lifetime cost or convenience of a purchase.

At the moment, nearly all of retailers are offers their loyalty card scheme to their consumer by asking their employees. And employees, who are not proficient to speak with the consumer with the loyalty card schemes because of less training. By stone and wood cock in 1995, the clubcard scheme can not discuss correctly with their employees which expect to be discuss with them, so they can apply them. Yet the employees does not have any thought the scheme and why don't bother their self are being asked to consumers about that. Gilbert 1999, emphasised that " loyalty cards aim to build greater customer loyalty and retention; develop methods of creating longer-term relationships and lead ultimately to increased sales and profit".

3. Research Methodology:

My research is actually based on the importance of the loyalty card scheme and its spreading popularity throughout UK among their customers behaviour. My research will try to find out the importance and effective role of the clubcard scheme in the retail business as the marketing communication tool. So, retailers can have more understand the behaviour of customers. In order to find out the result of the research, we need to use some methods. There are different method to be use in my research to identify the caused and understanding through systematic and orderly kind of approach. These methods can collect