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Customer relationship management (CRM) is the strategy of the company to remain intact with those customers which the organization thinks are valuable or prospects for the company. The just marketing perception was greatly replace by the customer focus marketing as pointed out by Stone, Woodcock, andÂ Wilson (1996)Â who emphasized on the perception shiftÂ from the marketing planning toÂ customer relationship management with the utilization of latest technology and moreÂ focus on the relationship between the customer and supplier. Information technology has blessed us with a value able gift in the form of CRM. In addition, the existence of relation can only lead to a meaningful relation when the customer and the supplier able to understand the relation. Chen and Popovitch (2003) signified the value of customer relationship by stating it as having the customer centric approach which in turn would benefit the organization by developing loyal customers and long term profitability. Payne and Frow (2005) critically viewed the CRM process and provided the strategic view for the customer relationship management Payne and Frow (2005) further identified the three perspectives of CRM and the five key cross-functional CRM processes, providing the explanation and directions for the long term relationship management and retention tactics strategic level to retain loyal and prospect customers by focusing on the process-based framework thus creating customer and shareholder value.
The aim of the current study is to identify marketing and customer focus strategies and tactics used by Tesco to retain the customers by exploring how do they identify the customer needs and justifying the services provided would delight their customers in increasing customer loyalty, retention and through identifying how they overcome the missed and neglected opportunity for long term customer retention. To have a clear picture of customer retention approach this research will provide discussion on supermarkets retaining customer strategies, loyalty and others.
Purpose & Research Questions
Â The aim of the current study is to identify marketing and customer focus strategies and tactics used by Tesco to retain the customers by exploring how do they identify the customer needs and justifying the services provided would delight their customers in increasing customer loyalty, retention and through identifying how they overcome the missed and neglected opportunity for long term customer retention
This research questions are:
Q.Â What are the marketing and customer focus strategies and tactics used by Tesco to retain the customers?
Q. How do they identify the customer need and fulfill their utility?
Q. How do they justify that their customer is delighted by their services and would convert to loyal and profitable customer?
Q. How do they overcome the missed and neglected opportunity for long term customer retention?
A Quantitative research methodology can be used. The data can be collected from the primary sources such as creating questionnaire for supermarket customers by surveying thorough enquiring them with the open ended semi structure questions and close-ended also taking into account the secondary source such as information gathered through the journals, articles and web document. The gathered data with discreet analysis help in reporting key findings.
Due to the limited time available for the research the study will focus primarily on CRM, loyalty, customer retention in supermarket sphere.
II Chapter 2
2.0 Literature review
The purpose of this chapter is to review and critically analyse the academic literature pertinent to the several question is this research.
2.1 CRM approach.
Customer Relationship Management
(CRM) is a way to identify, acquire and retain customers, a business' greatest asset. Research has shown that companies that create satisfied, loyal customers have more repeat business, lower customer-acquisition
costs, and stronger brand value; all of which translates into better financial performance according Siebiel (2009)
The CRM approach is not new; even the relations with customers, the extent to which supermarkets initiate, develop, maintain, and improve relationships with other supermarkets (Berry et al., 1991; Gronroos, 1990; Heide, 1994; Jackson et al., 1985; Morgan et al., 1994; Nevin, 1995; Peterson, 1995; Reinartz & Kumar, 2003).
2.2. CRM components
One of the successful processes for the customer profitability and loyalty is centric approach. Following approach is one of the CRM components, which refer to organizational strategy. CRM is a business strategy that has its rational beginning in relationship marketing Chen and Popovich (2003). To obtain successful CRM supermarkets required to change their strategy towards customer - centric approach. CRM has on organization - broad impact, process that has direct interaction with customers. According to Mendora et al. (2007) the main business process that should be addressed is CRM implementation are marketing, sales, and services. CRM success depends on applying a cross functional, holistic, and customer - centric approach at the same time Bull (2003) combining and care for customers Chen and Popovich (2003). Chen and Popovitch(2003) identify CRM as a mixture of people, processes and technology that seeks to appreciate a company's customers.
The perception of relations with customers also relates customer loyalty, according to the literature. Chow and Holden (1997), for example, approximate that firms are leaning towards the opportunities that can be reaped from the structure of customer loyalty. However, these authors identify that there has been a classic change so that the relationship with the customer is now seen as the unit of value.
2.3. Cross functional processes.
Where, Payne and Frow (2005) used an expert panel of executives with extensive experience within the CRM and IT sectors to discover specific cross-functional processes. They identify five CRM processes including: strategy development; value creation; multi-channel integration; information management; and performance assessment. This inter functional coordination and customer orientation is highlighted in an increasing body of work on market orientation (for instance, Kohli and Jaworski 1990).
Figure 1 outlines the five cross functional processes which contain:
2.3.1. The strategy development process: The strategy improvement process has a double focus on the organisation's business strategy and its customer strategy. This process does not only explain the nature of the other four key CRM processes but, more importantly, it defines the usual objectives for the organization's CRM performance. Clayton M. Christensen (2001)
2.3.2. The value creation process: The value conception process is concerned with transforming the outputs of the strategy improvement process into programmes that both extract and deliver and co-produce (or co-create) value. Paul O'Malley. (1998).
2.3.3 The multi-channel integration process: The multi-channel integration process begins with the recognition of the most suitable channel options for particular segments; and is then concerned with creating an outstanding customer experience within and across all channels.
2.3.4. The information management process: The information management process is concerned with the collection of customer information from all customer contact points; and achieving customer insight that can be used to improve the quality of the customer experience.
2.3.5. The performance assessment process: The performance assessment process makes sure that the organisation's strategic CRM opportunities are being delivered to an appropriate and regular. Payne (2005)
CRM READING ASSESMENT
CRM PROJECT MANAGEMENTFigure 1: CRM Strategy and implementation Model
CRM CHANGE MANAGEMENT
The strategy development process
5. The performance assessment process
2. The value creation process
3. The multi-channel integration process
4. The information management process
2.4. British supermarkets loyalty
British supermarkets became forefront of distributive improvement in Europe; and their performance level and the penetration of own brands are among the highest in the continent Flavian et al.(2002) According to Oliver (1999) there are four phases including cognitive, affective, co native, and action loyalty. According to Oliver (1997) cognition can be based on prior knowledge or on recent experience-based information. Loyalty at this phase is directed towards the brand because of this "information" (attribute performance levels). This consumer state, however, is of a low nature because if the transaction is routine, so that satisfaction is not processed, the depth of loyalty will not be deeper than a simple performance. If satisfaction is processed, it however becomes part of the consumer's experience and begins to take on affective overtones.
2.4.1. Affective Loyalty
At the second phase of loyalty development, attitude toward the brand is developed on the basis of cumulatively satisfying practice occasions. This reflects the pleasure dimension of the satisfaction. Obligation at this phase is referred to as affective loyalty and is encoded in the consumer's mind as cognition and affect. Oliver (1997) stated that cognition is directly subject to counter argument; affect is not as easily dislodged. The brand loyalty exhibited is aimed at the degree of affect (liking) for the brand. Similar to cognitive loyalty, however, this form of loyalty remains subject to switching, so it would be desirable if consumers were loyal at a deeper level of commitment.
2.4.2. Co native Loyalty
The next phase of loyalty development is the co native (behavioral intention) stage, as influenced by repeated episodes of positive affect toward the brand. Conation, by definition, implies a brand-specific promise to repurchase. Co native loyalty, then, is a loyalty state that contains what, at first, appears to be the deeply held commitment to buy noted in the loyalty definition. However, this commitment is to the intention to repurchase the brand and is more akin to motivation. In effect, the consumer desires to repurchase, but similar to any "good intention," this desire may be an anticipated but unrealised action.
2.4.3. Action Loyalty
Study of the mechanism by which intentions are renewed to actions is referred to as "action control" Oliver, (1997). In the action control chain, the motivated intention in the previous loyalty state is changed into readiness to act. The action control standard proposes that this is accompanied by an additional want to overcome obstacles that might prevent the act. Action is perceived as a required result of winning both these states. If this engagement is repeated, action inertia may develop where by a repurchase may take place. Thus, completing the preceding cognitive-affective-co native frameworks with action phase brings the attitude-based loyalty model to the behavior of interest, the action state of inertial repurchase. In summary, cognitive loyalty focuses on the brand's performance aspects; affective loyalty is aimed toward the brand's likeableness, co native loyalty is experienced when the consumer focuses on wanting to repurchase the brand, and action loyalty is commitment to the action of repurchasing.
2.4.4. Cognitive Loyalty.
Supermarket brand attribute information available to the customer indicates that one supermarket is preferable to its alternatives. This level of loyalty called cognitive.
2.5. Marketing & Loyalty
Loyalty marketing is needed to build long-term relationship in which the client favorably to a product, brand or store, and becomes a regular customer. Loyalty marketing is also called relationship marketing. Loyalty program - a form of marketing that is aimed at creating long term relationships with clients, to make them regular customers. Loyalty helps to understand customer needs and develop those services of service it needed. Loyalty Program designed to increase customer satisfaction by a company.
The concept of "loyalty" combines three key elements:
commitment to the values
long-term relationship of loyalty
to raise awareness of your brand
to increase visitor loyalty to your products
to boost sales of the promoted product that you for the duration of the action
To increase visitor loyalty of our business network. Benefits derived from the introduction of loyalty programs:
reducing the cost of customer relationships,
stable cash flow. (Brumley, 2002:1).
The problem of loyalty programs - formation of a stable consumer base. According to the Pareto Law (Act 80:20), based on statistical research, 20% of customers provide 80% of the profits. It is retention of 20% of consumers and should be designed loyalty programs, as costs of trading firm to win new customers in the 6.11 times higher than the costs of strengthening the already existing client base. And the best way to keep a client is to offer him any benefit when purchasing goods or services in your company. With proper planning, loyalty programs can be a good tool for increasing customer base. F. John Reh. (2002).
2.5.1. Main loyalty programs
According to Taylor and Neslin (2005) the main instruments of the loyalty program: The best known and most common tool - discount programs. Their essence is to provide customer benefits in the form of refund of the paid value of the goods directly to the time of purchase. There is a very tangible benefit. The second, also quite common: lotteries among persons who have made some purchases in a given period of time. And even if the prize is not quite need a man - all the same emotions that accompanied a prize will leave a positive impression of a supermarket. Another variety, recently gaining popularity - accumulative discount programs: They benefit directly depends on the party itself: the more often and a large amount of buy, the more benefit supermarket get.
The fourth type - the bonus program: Their essence is that making purchases, the customer gets some conventional points, accumulating a certain number of which he/she is entitled to exchange them for goods or services at their discretion, which, by the way (as opposed to drawings), this person often wants and needs .
Also an important component of the loyalty, gift certificates is a form of plastic card. This version is much more practical and presentable than usual, the paper certificate. Gift card will reflect supermarket corporate identity, advertising business, and after use can be presented as a discount card or used the prize draw. Therefore, it is expected that price levels may decrease and consumers may become less price sensitive.
Consumers want reciprocity, for its willingness to co-operate with the company. Every step of goodwill should be stimulated. This stimulation may be providing information, compensation, etc., but in any case it should be a sign of respect, but not banal discount. According to research by Maritz Loyalty Marketing use only discounts as a core tool for loyalty programs has little influence on the formation of base of loyal customers
Key factors in gaining loyalty:
Positive experience of co-operation
Good advice friends and relatives
Stable reputation of the company
Positive rating by other organizations (Better Business Bureau, Consumer Reports)
Positive feedback from customers
Advertising with the participation of non-celebrities
Charitable or community activities of the company
The regular appearance of the company on television or radio
The study results make a general conclusion that the successful loyalty program is aimed at a deep and personal knowledge of customers to be able to do it the right offer at the right time with the right price and on the correct channel. It is responsible direct marketing and is the mechanism by which supermarket maintain control over the system of relationships with customers across the enterprise.
Creation and management of "direct" relationships with current and potential clients - one of the main objectives of direct marketing, CRM (Customer Relationship Management) - is the use of direct marketing, but for the entire company. On the one hand, CRM - is the company's strategy, which aims to effectively attract and retain the most profitable customers. On the other hand, today, CRM involves the use of information technology to streamline business processes with customers, a comprehensive analysis of data about them and for them, and continued institutional improvement of interaction with customers. The key concept of, CRM is the principle of conservation of loyalty needed for the customers.
Customer relationship management (CRM) can be single strongest weapon supermarkets have as a manager to ensure that customers become and remain loyal. Other words, if supermarkets strategy doesn't serve to create, maintain or expand relationships with target customers, in this way it doesn't serve the supermarket. Increased perceived value with a supermarket loyalty card program makes consumers less price sensitive.
2.5.2. Customer Retention
Customer retention is an important objective in this research because of its association with profits and because it helps to understand nature of loyalty.
2.5.3. Some Examples of Systems in Typical Supermarkets
POS Checkout (including electronic payments)-System that records sales and financial information, and that collects detailed customer and product related data.
Self Checkout-Self-service POS station where customers pay for their purchases.
Cash Management-System that controls the cash handling processes from POS to the back office, and to the bank.
Pharmacy-System that manages a customer database for prescription drug verification, dispensing, inventory, third-party insurance billing processing, and accounts receivable.
DSD (direct store delivery)-System that supports the receiving of product distributed directly from manufacturers or suppliers on their own trucks, by-passing retail warehouse facilities.
Time & Attendance-System that is used to plan, monitor, and report employee's work hours.
Item Price Verification-Wireless handheld devices that are connected to POS and used to audit prices on the shelf.
Shelf Space Management-System that helps manage the amount of shelf space allocated to each category, and to each product within the category.
Loss Prevention-auditing tool that analyzes data to identify irregular and fraudulent activities, in an effort to reduce lost profits.
ESL (electronic shelf labels)-LCD shelf tags that are linked to a backroom computer and POS, and that automatically display price changes.
Video Rental-System that tracks video rental inventory and customer historical information.
Teaching Management (LMS)-Computer-based training course software that delivers local or online content for new and existing employees.
Forecasting Systems-Systems that projects expected sales of products for given time periods.
Adopted from Microsoft Retail and Hospitality May (2006)
Each retailer must search for its own winning formula to compete. To succeed, supermarket retailers must take advantage of new innovations, to create customer experiences that deliver true differentiation. Technology will play a major role in enabling these new innovations. Technologies designed to improve the customer's experience in the store, such as faster checkout, or ways to provide additional information to the customer are sometimes difficult to justify when chains are focused on their bottom line. The impact of new system deployment, training, maintenance, and support can add to a retailer's reluctance to simply accept the "next new thing."
2.5.4. Loyalty cards
Tesco, the UK's largest retailer, was particularly pioneering in the development of its Club card loyalty scheme. Since its inception in 1995, the grocer has continued to place
Great emphasis on Club card as part of its wider promotional activity, and the scheme has also been rolled out to Tesco's overseas operations to positive effect.
A number of other retailers have developed similar schemes, with the Nectar card one of the most prominent - utilized by retailers such as Sainsbury .UK retail loyalty schemes is an increasingly powerful weapon. Market Watch (2010).
The purpose of this chapter is to justify the research methodology by choosing descriptive method for this study. Different research methods are going to be mentioned in this chapter.
This research was conducted in order to conclude different tactics and services supermarkets create to retain customers. In order to answer these research goals, a total of 52 respondents from University of Wolverhampton were randomly chosen to make up the sample. Selected volunteers answered a questionnaire in Lickert format structure. Data collected from this research instrument were then presented for analysis. Along with primary data, secondary resources in the type of published articles, journals and literatures were used to support the questionnaire results.
The secondary data analysis has identified the potential benefits of using CRM strategy in supermarkets and loyalty strategy and the best objectives by which to those benefits will succeed. Now researcher is going to conduct a primary research to compare and test the findings.
The questionnaire includes in scope 12-15 quantitative questions in order to create statistical data. Researcher was more focused on accurate information of how important are supermarket services, loyalty. Multiple choice questions using the Lickert's scale that were mutually exclusive were used in order to produce definite results. Researcher also used these to understand the views, opinions and experiences of customers purchasing goods. Printed example of the final questionnaire attached in Appendix 3.
3.2. Research Design
The author of this dissertation uses the descriptive method of research design for this study. According to Creswell (1994) the descriptive method is used to collect information about the present situation and current conditions. Research will describe the situation rather than judge or interpret. The point of descriptive research is to allow formulated hypotheses that pass on to the present situation in order to illuminate it. The descriptive approach is practical and easy to create and it is affordable in financial matter. Moreover, this method provides a realistic approach when main new issues and questions appears during the period of the study therefore further analysis may be conducted.
The condition and the degree in of the current situation are generally presented in the descriptive research. This method is describing the nature of current situation, as it was created to discover the causes of particular a fact. The aim of descriptive research is to achieve a full profile of the people, events or situations. Should be added that with a help of this research type, it is necessary to have a clear view or image of the aspect being studied before the data collection process is started. The researcher of this dissertation is going to use this kind of research in order to examine first hand data from the participants to create rational conclusions for this research. The descriptive approach is fast and convenient in terms of the financial side. In particular research, the descriptive method was adopted to classify the role and importance of using CRM strategies to retain customers in supermarkets. Researcher decided to use this research method in view of the idea to gain first hand data from the participants. The descriptive method due to its practical side and flexibility has a lot of advantages; this method can use a variety of qualitative or quantitative data or a mixture of them, giving researcher more options in choosing the instrument for data collection. The main aim of the research is to identify the role of loyalty in customer purchasing issues as well as the advantages and disadvantages of holding the loyalty cards during the shopping process; the descriptive method is going to be used for this research as this approach is used for collecting existing conditions.
The research collects the opinions of the university staff along with students as respondents in order to provide the relevant data; the descriptive method is appropriate as it can allow creating the classification of the similarities and differences of the participants answers. During this research, primary data were gathered. The primary data were resulting from the answers the volunteers gave during the questionnaire process. With the use of the survey questionnaire this study took an approach of research.
3.2.1. Quantitative research
Quantitative research "employs strategies of inquiry such as experimental and surveys, and collects data on predetermined instruments that yield statistical data" as states Creswell (2003). The findings from quantitative research can be helpful, and confirming. Quantitative data collection methods are concentrated on the quantification of relationships between variables. A quantitative data collection instrument is designed to set up relationship among measured variables. Quantity, statistics and numeral data are the main key factors of quantitative approach. With these factors, a clear picture of data gathering and analysis of actions are essential. It basically gives an overview of the collected data with uncertain incorporate classification.
Quantitative approach is helpful to avoid gaps in collecting and presenting research data. The point of the quantitative research method is to avoid bias by means of gathering and exploring information which describes the knowledge being studied. According to Leedy and Ormrod (2001:102) "Quantitative researchers seek explanations and predictions that will generate to other persons and places. The authors also add that "The intent is to establish, confirm, or validate relationships and to develop generalizations that contribute to theory"
Quantitative methods create different research problem and conditions. The controlled observations, mass surveys, experiments and other means of research in qualitative method makes collected data more certain ,unfortunately, due to time limit for this study research was limited the researcher presented quantitative approach. However Fryer (1991) notes that the main point of qualitative research is to decode, describe, analyze and understand accurately the meaning of a clear phenomena presence in their regular social contexts. In addition, quantitative method qualifies long procedures of following performance of the respondents. (Polgar & Thomas, 1995). As an alternative of using statistical analysis, the qualitative approach applies content analysis; to explain and outline this research findings, inductive analysis is would be used. The main idea of the quantitative approach is that quantity is valid, dependable and can be generalized with its clear expectation of reason and result (Cassell & Symon, 1994). Being deductive in environment, quantitative approach is reliant on the formulation of a research questions and confirming them practical using a specific data set (Frankfort-Nachmias & Nachmias, 1992). The logical theory of a quantitative approach controls no value. Other words, the researcher personal thoughts, preferences and are not appropriate to this type of research method.
3.2.2. Qualitative research
The researcher will describe the qualitative approach possibilities in current study because of its important advantages. By using qualitative data collecting method is advantageous as it is more open to changes and improvement of research thoughts as this dissertation improvement; this indicates that qualitative data collection tools are very convenient. Furthermore, a variety of research approaches such as in experimental, the qualitative data collection methods are only concentrated on understanding the core of the phenomena in their naturally taking place states. Next to from these advantages, researcher would use qualitative data collection tools as researcher believe that qualitative data are mainly attractive as they offer wealthy images and explanations as well as unexpected findings for new theory construction. The important strengths of the qualitative data is that suggested a more realistic reaction of the research situation which cannot be obtained from statistical analysis and numerical data presented from side to side quantitative method. Qualitative data gathering methods allow convenience in supervising data gathering, research analysis and explanation of gathered information. Adding together, qualitative approach allows the presentation of the event being investigated in a more concrete analysis.
In order to determine whether supermarkets success obeys on customer retention through good CRM strategy, a total of 52 respondents were asked to participate. To achieve relevant information, certain addition criteria were imposed.
Straightforward casual sampling was done for the model selection. This sampling method is structured the way where every individual has an identical chance to become part of the sample. Due to every members of the volunteered have an identical chance of becoming this research respondent, this have to be the most capable sampling process. It is important to point that in arrangement to carry out this sampling strategy, the researcher found the population first, listed down all the respondents of the population and after chosen them to make the sample. To make this process, the questionnare sampling was used. This approach involves the range of the sample at casual from the sampling structure through the use of accidental number tables (Saunders, Lewis & Thornhill, 2003). Figures were selected for each participant in the questionnaire. These numbers were written on pieces of paper; the method was continual until the sample amount of 50-52 was reached.
The main data collecting instrument for current study was presented as a structured questionnaire. (See Appendix 3). The questionnaire was separated on two most important categories: a side view and the survey body. The side views define individual demographic answers of the participants, for instance age, gender, occupation. The survey then explored the perceptions of respondents on services, loyalty from supermarket offers. The questionnaire main part also includes questions identifying the advantages and disadvantages of selecting particular retaining strategies in the supermarkets. Some questions were structured with the Likert format. In current questionnaire type, five variants of answers from 1 the smallest or not satisfied are provided for each question in the study. The answers stand for the degree of importance or satisfaction that every participant has on the specified question.
The Likert type is easy for the respondents to answer the survey fast. However, this research instrument permitted the researcher to bring out the quantitative method successfully with the use of figures for data explanation. For ability to examine the point of the questionnaire created and used for the current study, the researcher hand the questionnaire out to fifty-two participants. These volunteers and their responds were part of the general research process and were used for scope testing. Then the researcher have the questions and they have been answered, the researcher will then start to use findinds of analysis in terms of find of about the respondents suggestions or any corrections to make certain further development of the instrument. The researcher then revised the questionnaire based on the ideas of the participants.