Customer loyalty Tesco Case Study - Research Proposal Example

1. Introduction 1.1 Background Retail shopping has undergone tremendous change from the traditional shopping customs and the sector has become intensely competitive. Lifestyle changes and income disparities have brought about changes in customer expectations. The differentiation does not lie in price cuts or product on offer but the customer values the services that add value to the overall shopping experience. Companies realize that they operate in an entirely different environment and which is constantly evolving. It has become important to assess the real time demand of the customers and their needs. This has become all the more pronounced because of the competition in the service industry and the customer becoming more demanding requiring value for their money. One of the changes is a fiercer and more intense competitive rivalry. The force driving the revolution is the changing consumer characteristics. Speed, convenience and fresh food – these are the benefits that consumers have been able to derive through shopping at retail supermarkets. You can do just about everything ‘right’ in business and fail if you do not take care of their needs, wants, desires and emotions, contend (Falvey, 1985). Tesco, supermarket grocery retailer has become a familiar household name in the food and non-food retail business after a long history of growth. Tesco’s core purpose is to create value for customers to earn their lifetime loyalty. One of the reasons for Tesco’s success is its continuing pursuit of its mission. Another reason has been the implementation of its customer loyalty card (Clubcard) in 1995. However, in order to keep its competitive position in a competitive market, Tesco needs to make an analysis intermittently to understand the demands of the market. In today’s scenario, customer service is what matters. 1.2 Rationale for study Tesco’s is known for understanding its customers better than anyone, being energetic, being innovative and being the first for customers, using its strengths to deliver unbeatable value for customers, and to look after its people so they can look after its customers. All these will be analysed critically in this research to examine to what extent they have helped in achieving its competitive advantage. The motivations for the study arose as grocery retailing has become intensely competitive and international chains have become common. Service has become vital for survival as it brings in customer loyalty and repeat business. It would be interesting for the sector to understand to what extent service in this industry is important and whether the retailers are able to satisfy the customer needs. The study would help to provide recommendations for Tesco’s future service provision in order to face the challenges of globalisation. 1.3 Objectives for study The objective of the study is to determine the customer expectation in the services industry with particular relevance to grocery retail sector. This would help the retailers to enhance their service offerings and improve the sector. With this objective the aim of the study is: 1. To determine the extent to which Tesco is making efforts to retain customers. 2. To determine the gap between customer expectations and discharge of services in the retail sector. 3. To determine what retailers could do to enhance their service offerings. 4. To determine how the customer loyalty card (Clubcard) has contributed to the success of Tesco since 1995. 1.4 Significance of the study Customer loyalty and advocacy are very relevant in a competitive economy so these issues are very helpful in understanding the purpose of any organisation and how any organisation can fulfil that purpose. In the case of Tesco the research study is quite relevant since it deals with a successful organisation that has achieved a remarkable competitive advantage after the launch of its customer loyalty card (Clubcard) in 1995. At the same time it is very useful to study how the implementation of the management tool known as The Steering Wheel of Tesco has helped this organisation to keep its focus on the customer in order to deliver quality service on a consistent basis. 2. Literature review Total quality management is the processes by which a business can improve its customer satisfaction, customer loyalty, competitiveness and profitability. Customer loyalty is essential to build relationships and this fact has been realized by Tesco who introduced the Club Loyalty Cards. A stable customer base is a core business asset, contends Rowley (2006) and relationship marketing has shifted the focus of the marketing exchange from transactions to relationships. Tesco is the first retailer to offer online grocery shopping and they have been able to leverage the benefits in the right manner. Through the internet customers are able to make faster and informed decisions as the internet has eliminated the trade-off between reach and the richness because it brings rich information to a great number of people both simultaneously and cost-effectively (Tse, 2007). At the same time e-market place poses certain challenges as customer expectations keep changing and human interaction in online exchanges is negligible (Amit & Zott, 2000). Many in the retail segment many have failed because they overlooked the social context and behavior of the customers (Yoruk & Radosevic, 2000). To keep the confidence level high among he consumers there has to be coordination of functional level strategies and trying to optimize individual functions can lead to failure. Customer’s value perception also depends upon the past association with the product or service. Tesco has been able to capture what creates value for their customer through right merchandise and wide range of goods on offer. In addition, they have gained market leading position by educating and empowering its customers to adapt the online channel (Tse, 2005). 3. Research methodology 3.1 Research Structure Tesco has grown to be really big so it is very difficult and complex to study its operations in a comprehensive way. So this research study will be limited in its quantitative dimension. The questionnaires and interviews will be conducted on a very limited number of Tesco stores in the U.K. Customers would be selected randomly and some store managers too would be interviewed. Due to limitations of the resources it is not possible to conduct a comprehensive quantitative study. On the other hand, the qualitative dimension of this research project will be much more comprehensive since it is easier to find secondary data for the Literature Review. So the strength of this research study will be focused on its qualitative dimension. 3.2 Data analysis Qualitative research leads to a large amount of unstructured data and its analysis can be tedious and monotonous. The process involves data reduction, data display and finally drawing conclusion and verification of the data collected. Selection of the secondary literature itself forms a part of data reduction as plenty of literature is available on customer service in the retail sector and specifically on Tesco. Conclusion will finally be drawn after extensive literature search. 4. Expected outcomes The outcome is expected to add knowledge to the existing literature on customer service expectation and how retailers add value to their services. The research would guide the firms in future when taking a decision on service offerings. It would also identify the gaps between customer expectation and the services offered. 5. Limitations and conclusion There is no unique research method and each method has its own difficulties. Qualitative research method is known to have constraints as it tends to neglect the social and cultural construction of the variables studied. The categories listed for research may not be comprehensive or may require further sub-categories. Participants may not be willing to give the right information but the study would to a large extent deliver the strategy that Tesco has been pursuing in gaining competitive advantage. References Amit, R., & Zott, C. 2000, Value Drivers of E-Commerce Business Models, Answers.Com, 2008, Tesco PLC, (online), available from http://www.answers.com/+tesco?cat=biz-fin (accessed May 30, 2008). Bazin, A., 2006, Nov 3, Book Review: Scoring Points, (online), available from http://mim.blogs.appui.esc-toulouse.fr/wp-content/uploads/2008/01/scoring-points-how-tesco-continues-to-win-customer-loyalty.pdf (accessed May 29, 2008). Bellinger, G., 2004, People, Purpose, Process, & Data, (online), available from http://www.systems-thinking.org/pppd/pppd.htm (accessed May 29, 2008). Business Week, 2007, Mar 5, Customer Service Champs, (online), available from http://www.businessweek.com/magazine/content/07_10/b4024001.htm (accessed May 18, 2008). Brown. B and Carl.S (1990) The Golden rules of Customer Care-Clay Publishing ltd. London Datamonitor (2004), Tesco Plc, company profile, London: datamonitor (ref: 1674). Davis.K. 1999, Putting Customer First: A case for CRM Rowley, J. 2006, Customer relationship management through the Tesco Clubcard loyalty scheme, International Journal of Retail & Distribution Management Vol. 33 No. 3, 2005 pp. 194-206 Tse, T. 2007, Reconsidering the source of value of e-business strategies, Strat. Change 16: 117–126 (2007) Yoruk, D. E., & Radosevic, S., (2000), International Expansion and buyer-driven commodity chain: The case of Tesco, retrieved online 05 December 2008, from http://profesores.ie.edu/enrique_dans/TESCO/international%20expansion.pdf Read More