Customer Loyalty and Relationship Marketing of Supermarket - Case Study Example

CLRM at XYZ Supermarket Executive Summary Customer loyalty and relationship marketing is an important requirement in many organisations since it is the foundation of success and customer retention. The CLRM program will be used to analyse a fictitious XYZ Supermarket that has a plan to setup numerous stores across the country. The aim of the paper is to analyse ways and means in which the business will operate seamlessly. Moreover, the paper addresses literature based evidence that brings into consideration through managing value through loyalty programs. The loyalty program brings into consideration the contribution of customers, the organisation, and other parties involved in the transaction. In addition, some benefits and sacrifices in the value equation are discussed bring into consideration the benefits and difficulties that the customers faces in utilising loyalty programs. The paper also has addressed the benefits that are associated with retaining customers within the organisation. The paper concludes by stating that three important components that can aid XYZ Supermarket to succeed in its operations. Some of the analyses presented include customer-focused loyalty program, effective relationship between the customer and organisation, and comprehensive loyalty program. The recommendations are important and thus these recommendations will be utilised to improve on the XYZ Supermarkets. Some of the recommendations include utilising a comprehensive loyalty program that incorporates numerous products and companies, creating effective relationship between the XYZ Supermarket and the customers in creating a framework that champions the requirements of both parties, and the loyalty program that will be embraced by XYZ Supermarket should be customer-focused. Table of Contents 1.0 Introduction 1 1.1 Background Information 1 1.2 Aims 1 1.3 Scope 1 2.0 Customer Loyalty and Relationship Marketing 2 2.1 Literature-based Evidence 2 2.1.1 Managing Value Through Loyalty Programmes 2 2.1.2 Customer Benefits and Sacrifices in the Value Equation 3 2.1.3 Benefit of retaining customers 5 2.2 Survey Findings 6 2.2.1 Data Analysis 6 2.3Existing Loyalty and Relationship Marketing Program 7 2.3.2 Coles FlyBuys card http://www.colesexpress.com.au/services/flybuys.aspx 7 3.0 Conclusion 8 4.0 Recommendation 8 References 9 Appendix A 12 1.0 Introduction 1.1 Background Information XYZ supermarket is a chain of supermarkets that will be found across the country. It offers diversified products ranging from household products to farm products. The company will open stores in major towns within the country with the aim of ensuring maximum number of customers are reached, ensuring high quality of products offered, and ensuring that most of the products required by the customers are provided. The company that aims to have fifty-six supermarkets will start with ten supermarkets and within the next three years will have expanded to the rest of the country. Moreover, the company will have a loyalty program that will be called SMART CARD program that will utilise allocation of points to money spent. This approach will be utilised to ensure that maximum number of customers are retained and thus building a database that has the needs and requirements of the customers. Generally, it is important to retain customers rather than acquiring new customers and thus the aim of the entire loyalty program will be to ensure that the customers are satisfied and thus retained. 1.2 Aims The aim of the report is to: Understand the importance of loyalty program in customer satisfaction Appropriate strategies that ensures that customer’s are satisfied Importance and benefits of understanding a satisfied customer, and strategies and benefits of retaining customers 1.3 Scope The report will be limited to information found in literature and a minor research that will be done based on nine people. Information obtained from the nine people will be used to formulate appropriate recommendations and appropriate means in which it will aid an organisation to succeed in its operations. 2.0 Customer Loyalty and Relationship Marketing 2.1 Literature-based Evidence 2.1.1 Managing Value Through Loyalty Programmes Creating a connection between the companies and customers is becoming more complete into a situation that companies are revising their approach and strategies towards achieving organisational calls (Sharpe, 2011). It is evident that tracking buying patterns and customer loyalty programs are becoming more important into ensuring that customers are acquired and retained effectively. Customer loyalty programs are aimed at providing benefits to the consumers through appreciating their continuous support through rewarding them (Rauyruen and Miller, 2007). This means that the loyalty programs should be effective in that the buying patterns and buying profiles are effectively studied creating conducive retention strategy. Value management is an important aspect in determining whether a customer is satisfied translating in retaining them. One of the strategies that contribute to managing value training and developing employees into understanding how customers should be served and how should be treated when they ask for assistance or when they are complaining (Ndubisi, 2007). Communication between the sellers and buyers are important and should be seamless into creating an environment that ensures for conducive and effective communication. In this case, value management should not only be seen in terms of monetary value but also on the satisfaction that a customer gets while asking for direction towards getting an item for example in a supermarket (Curran, Varki and Rosen, 2010). Moreover, employees understanding the philosophy, mission and vision of an organisation are important since the employees can easily sell the idea of the business. There are instances where an employee does not understand what the company offers and when a customer asks for directions, the employee is stranded and thus the customer create perceive the they perceived value will not be achieved. Thus, it is important to ensure that the employees have the right tools to assist any customer else assist the customer in getting the appropriate person to direct them. In addition, the employees and management should understand that the services and products that they offer should be of high quality (Sharpe, 2011). Quality is an important aspect in determining the value and ensuring that value is managed. This means that the services and products should be within certain level to ensure that a customer is satisfied (Curran, Varki and Rosen, 2010). Value management should factor into consideration the quality of raw materials and ensuring that the end value of the product is within the selling price of that product. Thus, value management can be championed by ensuring that quality of services and products is achieved. After sales services is another important value management component (Scheer, Miao and Garrett, 2010). For example, a sales person offers warranty for a whole year means that the sales person has confidence that the product is long lasting and hence the customer may understand the value of the product (Ndubisi, 2007). Moreover, availability of after sale services creates a perception that the product will be maintained easily. In addition, the relationship between the seller and buyer can be used to improve the product (Rauyruen and Miller, 2007). The relationship between the customer and seller can result in the improvement of a production or development of another product that can improve the value of the organisation (Ndubisi, 2006). The requirements of the customers and the expertise of the organisation can easily be used in ensuring that a product or service that is beneficial for both of the organisations is made (Rauyruen and Miller, 2007). Thus, management and loyalty is important in ensuring that the value of organisation and the value of the customer is championed. 2.1.2 Customer Benefits and Sacrifices in the Value Equation Many marketing strategists understand that creating value for the customer is important to any organization whether non-profit organisation or profit seeking companies (Ndubisi, 2006). This means championing the needs of customer through value is important for the company in ensuring that it has created a niche within the competitive environment, and presence within the market segments (Ndubisi, 2007). Most business strategies understand that for a successful business to gain business ground, two generic factors are usually championed which are low cost and differentiation (Curran, Varki and Rosen, 2010). Both of the strategies usually have similar aims, which include creation of superior customer value. Value equation can be defined has the perceived customer value that is obtained differentiating customer’s perceived costs from customer’s perceived benefits (Sharpe, 2011). This means that the difference between what the customer bought and what the benefits of the product/service determines the satisfaction of the customer (Rauyruen and Miller, 2007). This also calls upon the customer value in exchange, in which the monetary value that the customer gives out is appropriated to what is gained. Apart from the monetary value of the product that a customer acquires, additional costs exists that may negate the experiences of the customer (Martin, Ponder and Lueg, 2009). Some these challenges that are associated with loyalty programs include inconvenient retail locations, parking fees while shopping, poor parking access, difficulty in navigating narrow aisles and in locating sale items (Ndubisi, 2007). Moreover, high access costs may be associated to those discounted stores that are located at isolated locations or industrial parks. These costs can be viewed in terms of consumer frustration, parking fees and wasted time (Rauyruen and Miller, 2007). In the case of value model, process and results quality usually are found on the top of the value equation. Both prove and results quality may be viewed as important benefits by the customers. For example, high process quality may be maximised by a food-based retailer to negate slightly lesser quality and thus evening the results (Ndubisi, 2006). In the same way, low costs can be offered to customers who purchases products in hidden or secluded areas to compensate on high access costs due to inconveniences such as of locations, limited store hours, parking fees, and poor parking (Rauyruen and Miller, 2007). Generally, the idea of value equation goes a long way in determining the benefits and shortcomings that the customer gets (Curran, Varki and Rosen, 2010). Normally, the equation is based on the difference between the cost of a product and the perceived benefit of the product (Ndubisi, 2006). The benefit of the structure is that the customer can gain through utilising certain benefits such as utilising loyalty programs in ensuring that the outcome of the entire process is good (Palmatier, Jarvis, Bechkoff and Kardes, 2009). However, in certain circumstances a customer can purchase a product with the aim of achieving certain goal but the out come is not what was original perceived. Thus, the difference between benefit and sacrifices goes hand in hand when it comes to a consumer. 2.1.3 Benefit of retaining customers Customer retention can be defined as the percentage in which customers can be retained by a business on a long-term period. Customer retention is an important component in driving the success of the business. Thus, customer retention is important, and numerous factors exists that illustrates retention is an important factor in growth of businesses. One of the importances of customer retention is the possibility of a customer doing business again. This is the most obvious advantage that is associated with customer retention (Palmatier, Jarvis, Bechkoff and Kardes, 2009). Thus, effective service and product provision that leads to customer satisfaction will increase the chances in which the customer will come again translating into increase in doing business (Sharpe, 2011). Hence, repeat business brings into consideration a win-win situation whereby the customer and the business benefits (Eisingerich and Bell, 2006). Moreover, repeat in business decreases cost for both the customer and the business. In the case of the customer, repeat means reduction on the cost of looking for another service provider while in the case of business; repeat business reduces the cost of acquiring a new customer. Numerous costs exist in acquiring customers. Some of the costs may include sale demos, following up, advertising, and meeting costs and travel (Ndubisi, 2007). This means that a repeat customer understands the business offering, process, and prediction of quality, and hence reducing the costs that are associated with new customer acquisition (Palmatier, Jarvis, Bechkoff and Kardes, 2009). Moreover, repeat customers increase free channel of advertising in that of word of mouth. Word of mouth recommendations are an important aspect that is associated to a satisfied customer (Du, Kamakura and Mela, 2007). Customers come in different forms in which some are satisfied by products that are mass produced while others are satisfied by customised products (Ndubisi, 2006). Markets are shifting from mass produced towards customised market that is tailored to meet customer specific requirements. Repeat customers provide an opportunity in which more focused relationship can be built based in specific needs of the customers and their requirements (Colwell et al., 2009). Moreover, presence of repeat customers creates an opportunity for a business to have more confidence towards suggesting improvements, designing appropriate products, insights of better products and more satisfaction for the customer (Ndubisi, 2007). In addition, repeat customers creates an opportunity in which the buyer and seller shares ideas in creating new products. Retaining customers effectively presents an opportunity in which transformation occurs for the customers moving from satisfaction state to customer delight state (Palmatier, Jarvis, Bechkoff and Kardes, 2009). It evident that customer delight exists when the business and the customer creates perfect synergy in that the buyer and the seller understands exactly what both parties wants (Lin and Wang, 2006). 2.2 Survey Findings 2.2.1 Data Analysis Nine people were survey to present their views on the importance and impact of the SMART CARD in doing their transactions within the XYZ Supermarket. Customers were asked specific questions to enable the analyser to obtain information that can be compared. Nearness of the supermarket to the customers played a major role in determining whether the customers will visit other supermarkets or not. Four out of the nine interviewed customers stated that they could visit other stores because few branches existed and thus due to their conveniences they were ready to visit any store within their reach. Three of the customers interviewed said that they were not sure while the rest were committed to the supermarket according to their feedbacks. Six out of nine customer interviewed said that they had the SMART CARD meaning that the rate of absorption of the card was high. This also may signify the importance of the card in their daily activities. This can also be attributed to the frequency in which customers did their shopping. For example, five out of nine said that they did their shopping daily meaning that they appreciated the importance of the SMART CARD and also may be attributed to diversity of the products offered, customer relation, and comfort in which the customers does their shopping. Most of the customers were happy in increasing the number of points. This is the major factor that motivates the customers. Moreover, the customers are motivated by the fact if they do any means of paying, they can redeem the points and utilise these points in paying for the goods. All the customers appreciated the importance of the card since no one complained presence of the card. Nevertheless, the customer said that improvements should be made in that the number of points earned should be increase; others said that they should expand products offering e.g. linking up with other businesses, while others said that discounts should be provided for those who had more points. 2.3 Existing Loyalty and Relationship Marketing Program 2.3.1 AAdvantage http://www.aa.com/i18n/AAdvantage/programInformation/main.jsp American Airlines offers a frequent flyer that doubles up as a loyalty program called AAdvantage. The program that was started early in 1981 has retained more than sixty seven million members as of 2011. Members are able to earn miles by flying on American Airlines or transacting with many participating companies. The miles that are accumulated through the loyalty program can be used by the customers to upgrade service class, redeem ticket, hotel stays, access discounted car rentals, and merchandise. The customers are segmented into four groups, which are AAdvantage Platinum, AAdvantage Gold, AAdvantage Standard and AAdvantage Executive Platinum. Moreover, other privileges exist from AA’s partner airlines: those that enjoys benefits of Oneworld. In addition, the AAdvantage co-branded credit cards that are issued by CitiCards shares the same benefits. 2.3.2 Coles FlyBuys card http://www.colesexpress.com.au/services/flybuys.aspx Cole supermarket has a loyalty scheme program that is called Coles FlyBuys card. The supermarket chain acquired the loyalty program in that the program will enable customers to acquire more points both in terms of the products offered and in terms of locations. The supermarket chain sends the loyalty cards to the customers and was asked to activate them online. This is different from the normal approach in which customers are requested to fill a form before being issued with a card. The card program will reach numerous market segments where other stakeholders or competitors have not explored. One of the unique benefit of the program is what is termed as my5 in which customers are given ten percent off five products of their own choice. This approach is completely differed compared to the normal approach where points are owned from money spent. Moreover, the loyalty program can create a database and the company can use the database for future strategic approaches. 3.0 Conclusion A successful CLRM strategy should incorporate make sectors that include the customer and the organisation. This means that the loyalty program to be embraced by an organisation should bring into consideration the views and requirements of the customer. Customers’ needs are different but through bringing together these different views may result in formulation of appropriate model. Some of the strategies that may be employed by the organisation include: Customer-focused loyalty program – the loyalty program should be formulated and implemented in a manner that it supports the requirements of the customer. This means that the loyalty program should ensure that the requirements of the customers are met. Effective relationship between the customer and organisation – conducive and productive relationship should be created in that information can be shared effective. The effectiveness of the information will result in the creation of product and services that are beneficial for both the customer and organisation. Comprehensive loyalty program – the loyalty program should incorporate organisations that share similar views and aims. This means that the loyalty program should easily be sold to the customers and thus effectiveness of the program. 4.0 Recommendation Incorporating loyalty programs to an organisation is difficult but it is important to ensure that the approach utilised is productive. The recommended strategies that XYZ Supermarket should embrace include: Utilising a comprehensive loyalty program that incorporates numerous products and companies Creating effective relationship between the XYZ Supermarket and the customers in creating a framework that champions the requirements of both parties The loyalty program that will be embraced by XYZ Supermarket should be customer-focused References Colwell, S., Hogarth-Scott, S., Jiang, D., and Joshi, A. 2009. Effects of organizational and serviceperson orientation on customer loyalty. Management Decision, vol. 47, no. 10, pp. 1489 – 1513 Curran, J., Varki, S., and Rosen, D. 2010. Loyalty and its antecedents: Are the relationships static? Journal of Relationship Marketing, vol. 9, no. 4, pp. 179-199 Du, R., Kamakura, W., and Mela, C. 2007. Size and share of customer wallet. Journal of Marketing, vol. 71, pp. 94-113 Eisingerich, A., and Bell, S. 2006. Relationship marketing in the financial services industry: The importance of customer education, participation and problem management for customer loyalty. Journal of Financial Services Marketing, vol. 10, pp. 86–97 Lin, H., and Wang, Y. 2006. An examination of the determinants of customer loyalty in mobile commerce contexts. Information & Management, vol. 43, no. 3, pp. 271-282 Martin, W., Ponder, N., and Lueg, J. 2009. Price fairness perceptions and customer loyalty in a retail context. Journal of Business Research, vol. 62, no. 6, pp. 588-593 Ndubisi, N. 2006. Effect of gender on customer loyalty: a relationship marketing approach. Marketing Intelligence & Planning, vol. 24, no. 1, pp. 48 – 61 Ndubisi, N. 2007. Relationship marketing and customer loyalty. Marketing Intelligence & Planning, vol. 25, no. 1, pp. 98 – 106 Palmatier, R., Jarvis, C., Bechkoff, J., and Kardes, F. 2009. The Role of Customer Gratitude in Relationship Marketing. Journal of Marketing, vol. 73, no. 5, pp. 1-18 Rauyruen, P., and Miller, K. 2007. Relationship quality as a predictor of B2B customer loyalty. Journal of Business Research, vol. 60, no. 1, pp. 21-31 Scheer, L., Miao, F., and Garrett, J. 2010. The effects of supplier capabilities on industrial customers’ loyalty: the role of dependence. Journal of the Academy of Marketing Science, vol. 38, no. 1, pp. 90-104 Sharpe, M. 2011. Engaging the student as a customer : a relationship marketing approach. Marketing Education Review, vol. 21, no. 3, pp. 211-228 Appendix A Q1. If you frequent this chain of supermarkets, are you willing to try any other supermarket? Likely Not sure Unlikely Out of the nine people who were interviewed, four said that they were likely to visit other supermarkets stating that sometimes the supermarket may not be at their location. Three were not sure while two were unlikely. Q2. Do you have a SMART CARD that is issued by this supermarket? Yes No Only six people said they had the SMART CARD Q3. How frequent do you visit and shop at this supermarket? Daily Twice in a week Weekly Monthly Five people who were interviewed said that they visited the supermarket to purchase perishables e.g. milk and bread while three said they visit weekly while only one said that she visits once in a month. Q3. What motivates you in coming to this supermarket? Many of the consumers said that they were happy increasing the number of points that they accrued after purchasing products from the customer. ****This is because in every purchase, a customer is given one percent of the value of purchase. For example, if a customer purchases products worth $100, he gets one point. These points are later converted into monetary value in which future shopping can be paid using these points. Q4. If you have the SMART CARD, how do you benefit from the card? Customer 1: Gaining points helps me in future transactions since the more I shop, the more I earn points Customer 5: I may redeem the points during shopping Q5. If you have the SMART CARD, what are some of its shortcomings? Some times when I forget the SMART CARD at home, I feel like loosing some cash. Anyway, there are no shortcomings so far. Q6. How do you feel should the entire process of the SMART CARD be improved? Customer 3: Increase the number of points based on the policy that you use. Customer 5: Expand the products offerings e.g. you can link it up with other businesses such as dry-cleaning stores Customer 7: Those customer with more points should be given discounts when they purchase Q7. Can you tell someone about the SMART CARD and the supermarket? Many consumers understand the benefits associated with the card and I am ready to provide them information regarding the program Read More