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Loyalty card and customer loyalty: case study of Tesco in UK (Aldershot location) - Essay Example

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CHAPTER 1 Introduction 1.1 Introduction Over the past years many service providers and retailers have introduced loyalty schemes as a strategy of retaining customers. The Customers join the loyalty schemes by completing a form with their personal details i.e…
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Loyalty card and customer loyalty: case study of Tesco in UK (Aldershot location)
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Download file to see previous pages about the preferences in terms of products or services. The importance of having a database on customer purchase profiles is that it helps in segmentation of the retailers’ customer base, hence ensuring that the right marketing strategies are used such as direct marketing and special offers to meet customers’ requirements (Rowley, 2005). Loyalty schemes are widely used by different sectors in the retails, for example the travel agents, financial service providers, hospitals and supermarkets. Loyalty cards are an important tool of marketing. Retailers around the world – from Tesco to smaller chains – use loyalty cards to retain existing customers, generate new customers; gather data on the customer decision process and increase the spending of the customers in their stores (Sharp, Byron and Anne Sharp, 1997).The Clubcard loyalty card scheme of Tesco has the same objectives. It is the most important part of customer relationship management (CRM) of Tesco. The objective of CRM at Tesco is to increase the brand in consumer preferences to such a level that becomes a lifetime customer of Tesco. This enables Tesco to utilize the lifetime economic value of the customer. It is three times easier to continue with the present customer than to attract a new one (Philip Kotler, Kevin Kohler, 2006). This mindset guides the loyalty card scheme at Tesco. Besides this the loyalty card scheme, the Clubcard, succeeded in increasing the revenues of Tesco. This increase in revenues happened at Tesco stores, like the one in Aldershot, as the average customer started spending more for the reason that discounts and motivators offered by the Clubcard. In 1996 – a year after the Clubcard was introduced by Tesco- the Aldershot store recorded a growth of 20% in its top-line (revenues). There are also costs associated with loyalty card schemes similar to the Clubcard. These costs come from the discounts and rebates offered to the customers. They have other cause of reducing the already low margins on which most retailers like Tesco operate. However, empirical evidence at Tesco stores, like the one at Aldershot, shows that the loss in margin is more than offset by the huge increase in volumes caused by loyalty cards like the Clubcard. Therefore, loyalty cards like the Clubcard have a favourable influence on the profit of the retailers. The Clubcard scheme increased the profits of Tesco at the store level as well as at the consolidated level. It ended up creating great value for the shareholders of Tesco. While the biggest benefit of loyalty cards like the Clubcard is a strategic or long term in nature. They enable retailers to collect information the way customer do their shopping like TESCO (Fred Reichheld, 1996). The Clubcard has enabled Tesco to create a huge database of information on the buying behaviour and buying patterns of the customers. The company utilise this information to establish its strategy. The product present inside the Tesco stores, are continuously upgraded according to the information on the latest buying preferences of the customers, as revealed by the Clubcard. Tesco also utilize the information of customer buying behaviour very creatively for its in-store display of products. For example men tend to buy grocery items more during weekends. Therefore Tesco stores display other men products like beer next to grocery on weekdays. This ultimately enhances the sales of ...Download file to see next pagesRead More
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