Customer Loyalty in Retail Sector

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COUNTRY REPORT

ON

CUSTOMER LOYALTY IN RETAIL SECTOR
WITH SPECIAL EMPHASIS ON TESCO

Submitted By:
Rajat Kaul
A1808709003
2009-2011

Submitted To:
DAVID OGLE

TABLE OF CONTENT

Chapter 1Introduction

Introduction

Aims and Objectives

Chapter 2Literature Review

The Concept of Loyalty

Loyalty Programs in India

Chapter 3Methodology

Research Methodology

Comparative Analysis

Chapter 4 Analysis

Success Factors

Chapter 5Conclusions and Recommendations

Limitations

Recommendations

Bibliography

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1. Introduction (Overview and Background)

Traditionally, Retail marketing has focused on market share and customer acquisition rather than on retaining existing customers and on building long-lasting relationships with them. More recently, however, market share has been gradually losing its revered status as marketing’s holy grail and the wisdom of focusing solely on customer acquisition (hoping that this effort will compensate for high levels of defection) is now being seriously questioned and considered as very high risk since ever more players enter an increasingly crowded marketplace. In response to these changes there has been a new emphasis on defensive marketing, which focuses on holding on to existing customers and getting more custom from them (higher “share of customer”), in contrast to activities which focus on winning new customers. Calls for a paradigm shift to the pursuit of loyalty as a strategic business goal have become increasingly popular over the recent years.

Accordingly, in Feb 1995, Tesco changed the way it did business so fundamentally that its effect is still seen in every part of the company. The events changed the way Tesco makes decisions, develop products, manages its stores and, most importantly the way it serves its customers. On that day Tesco launched ‘Clubcard’, its customer loyalty programme. As a major food retailer, in a competitive market sector, there is always a need for brand loyalty. Customer loyalty schemes were not a new idea when Tesco launched it but Tesco developed a contemporary version of the original concept which went much further in developing an active relationship with customers. Today, Tesco Clubcard has established itself as one of the most successful loyalty schemes over the past nine years, and a key driver of this is that the scheme in integral to Tesco’s stated core purpose, ‘To create value for customers’. By understanding its customers more and using this insight to deliver back what the customer wants, Tesco is succeeding in its purpose- to deliver value to the customer and earn their lifetime loyalty. Working with its suppliers, it helps both parties to gain a better understanding of what the customer wants in terms of good value quality products and in-store promotions. Tesco’s marketing works because they combine insight with creativity, value and scale. Before Clubcard, Tesco was stuck as UK’s second-ranking supermarket. Today, not only is it the UK’s largest grocer, it is the world’s most successful Internet supermarket, one of Europe’s fastest growing Financial Services company and arguably one of the world’s most successful exponents of CRM. The Tesco Clubcard is the most successful CLP currently running in the UK, used by one third of all UK households (there are 25 million Clubcards in circulation, of which 10 million are active in any one week), with 82% of Tesco’s turnover going through the Clubcard (in out-of-town superstores, this figure rises to over 95%). No one would claim that Clubcard is exclusively responsible for the success of Tesco, but it is clear that the benefits of the Clubcard are now written through the Tesco business like lettering though a stick of rock. Tesco may well have got this enviable position without Clubcard but it could not have done so as quickly or as cheaply as it...
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