The UK’s retail industry is one of the most organised industries in the world where retailers like Tesco, Mark & Spencer’s and Sainsbury are holding the good position in the market. The purpose of my research project is to analyse the comparison between the customer loyalty programs of in the UK retail industry where most of the retailers are trying their best to control the maximum share of customer through their loyalty program. In UK every retailer is doing or planning to implement a very different customer engagement loyalty scheme so that it could get maximize the customer power through its effective data base management which hold so much information about the customer like customers buying behaviour, income level, spending habits, medical spending, and so on. My research will try to find out the question: Does retailer’s success is directly related to its successful loyalty program implementation? For getting the best result for the research a qualitative survey interviews will be taken from 10 -15 employee of different retailers. Report will discuss the research question, literature review and adopted methodology for the research. Collected data would be analysed through SPSS software and the total research would take around three months to complete.

2. Introduction:

Impact of loyalty programs on retailer’s business is perceived to be very positive despite the fact that some of the very big retailers like Asda are not using these programs on wide scale for getting customer loyalty. In retail industry loyalty programs are very popular and most of the big retailers use this for increasing the business through customer’s loyalty. Loyalty programs are part of structured Relationship Marketing activities which encourages customer towards loyal buying behaviour and ultimately leads to company’s profit. According to Market research done on customer’s loyalty patterns, it is tough to get exponential growth by launch of a loyalty scheme because competitive forces reduces its impact on overall retail industry. In retail industry a rewards card, club card, loyalty card, or advantage card is cards which give the membership to the customer who hold it. In UK most of the retailer are running loyalty growth model through loyalty cards for creating more business by knowing customers buying behaviour.

UK is one of the biggest markets in the world for customer loyalty card market where almost every big retailer is running its loyalty card scheme. In 1981 Gary Wilson invented the first loyalty card or discount card which is known by the name of ‘Passcard’ and later on it is known as Passkey however few people believed that passcard was not first discount card. In 1982 first loyalty card is started by one of the leading retail named Sainsbury. In November 1993 boots the chemist retails chain first started the loyalty card scheme in UK market and later on in 1997 with the investment of 30 million GBP it launched Boots Advantage card which gout huge success representing the 3rd largest retail loyalty scheme in the UK market with around 17 million customers. My research question analysis the positive co-relation between the retailer’s success and loyalty card program.

Most of the retailers are trying to use loyalty card schemes as most powerful tools for making their business better in this recession period. There are lot of work have been done which tells direct co-relation between loyalty cards scheme and consumer buying behaviour but how successful retailers are because of these loyalty programs is not widely researched yet. One of the prominent retailer Asda don’t believe in investing the money in loyalty scheme rather it prefer to offer cheapest product rang to attract the customer loyalty. On the other hand another big retailer Tesco press release said “Double points has encouraged more customers to sign up; a higher proportion of transactions are now using a Club card and 18% more households are redeeming Club card vouchers than a year ago”(Retail Week, May 2010)

Club cards are integral part of some retailer’s strategy like Tesco, Sainsbury while retailers like Asda are expanding their business very rapidly with loyalty programs so my research will analysis the effectiveness of club card schemes on retailer’s success. Club card is scheme is very expensive so it’s not necessary that every retailer is growing only because of these schemes. There are so many loyalty schemes but very little research represented the effectiveness of loyalty program. (Kivetz and Simonson, 2002; Yi and Jeon, 2003)

3. Literature Review:

According to Oliver (1997) loyalty is “a deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same-brand-set purchasing despite situational influences and marketing efforts having the potential to cause switching behaviour”. Literature on relationship marketing practices like loyalty card scheme is divided into two groups; one group of researcher believe that loyalty scheme have positive effect on customer loyalty and that will result in increased profitability and revenues of the organization. However on the other hand second group of researcher believe that loyalty program slightly influences retailer’s revenue and profitability through customer’s loyalty. Customers shop from other retailer also where they are not attaching to any loyalty program. These researchers believe that customer’s behaviour is not affected by loyalty schemes rather they shop according to their convenience. Retailer’s strategic planning is to enhance customer loyalty which has positive influence on organisation development, revenues, profitably and culture (Dick & Basin, 1997). Customer Loyalty Research Center (2001) described loyalty as “the commitment of customer to a particular brand or company”. Most researchers have discussed the loyalty card scheme with respect to consumer loyalty.

According to Capizzi and Ferguson (2003) one billion people are attached to any kind of loyalty program all over the world. In terms of loyalty schemes satisfied consumers show more loyalty than that of unsatisfied consumer towards the company (Bailey & Schultz, 2000). Few researchers Grinnell (2003) and O’Brien and Jones (1995) discussed positive effect on customer loyalty however some author like Sharp and sharp 1997 could not find the proof of an impact on customer loyalty of loyalty card schemes. Organisation’s growth is related to customer loyalty so big retailers try to attract more customer through loyalty programs. Tesco since inception of loyalty program has spent £150 million through 1% discount to the customers against the point earned. Tesco claims that club card has made it no. 1 retailer in the UK since 1995 when it started loyalty program. According to Rosenspan (1998) loyalty programs don’t create customer loyalty towards the company’s products or services. Asda also focuses on discounting on purchasing rather than on loyalty programs. Some of the author argues about “80-20 law” but top 20% customers of loyalty schemes are not always loyal to the one company’s product rather they customers look for best value for the money with any retailers.

Researchers views are very divided on loyalty programs or customer relationship marketing (CRM) really affect customer loyalty so that companies could grow and be more profitable. According to the Feinberg and Kadam (2002) loyalty programs create differentiation among the retailers rather than impacting on customers purchase behaviour or satisfaction. On the other hand Seybold (2001) counter the above statement by saying that CRM helps companies to enhance their revenues and profitability if they positioned their products according to customer’s need. Very few retailers try to position their products according to customers’ needs rather through loyalty schemes they get to know the category wise buying behaviour of customer’s and by using that data retailers launched own branded products for higher profits. In most of the cases impact of loyalty programs is evaluated post launce of the schemes but for knowing the actual impact of loyalty programs there must be a comparison between pre and post data. According Sharp and Sharp, 1997 pre launch data of loyalty programs are not available and it can’t not be gathered after the scheme launch. He categorised the customers in two group one group of customer who participated in the loyalty scheme called ‘treatment group’ and another group who did not participated in the loyalty program named as ‘control group’. According to him both group must be analysed for getting the real impact of loyalty programs. The retailers are very smart to invest huge amount on these loyalty programs Tesco claims that it has more that 14 million active club card user in 2009 after investing GBP 150 million on relaunch of loyalty scheme.

Retailers in UK invest huge money for loyalty programs but are all the retailers are getting bigger only with these schemes or they are using the customers data for launching their own branded products for getting higher market share in highest selling categories.Sainsbusry is the only retailer in UK retail industry which acquired 50 % turnover by adopting the own branded strategy for increasing the market share and profit. According to O’Brien and Jones (1995) loyalty schemes creates the customer loyalty if company knows how to use and share that knowledge. Researchers views are divided on both point positive impact of loyalty program and negative impact of program but more authors are inclined towards positive impact of programs on company’s success. Majority of programs are planned to increase the repeat purchase of customers and once the repeat purchase increase retailers get increased turnover through the higher footfalls. According to Sharp and Sharp (1997) loyalty programs have the capability to influence the repeat purchase pattern of the customer but the change might be very little but only this kind of marketing practices which can influence customer repeat purchase pattern. Through my research question I would like make a positive co-relation between loyalty programs and customer’s loyalty in UK retail industry.

4. Research Methodology

According to the Zikmund (1997) research methodology is integral part of a report which consist of sampling of data, research strategy, hypothesis, research limitations and other different techniques. According to the literature review impact of loyalty programs on customer loyalty and company performance is positive as well as negative hence there are mixed views of different researchers for both the arguments. My research is to find out positive relation between loyalty program and customer loyalty based on two hypotheses-

H1- Retailers which implemented loyalty programs performed much better through enhancing customer’s loyalty.

H2- Customer loyalty is directly related to retailer’s performance

Research Approach –

According to the Lundahl & Skarvad (1999) fundamentally basically there are two kinds of research approaches – deductive approach and inductive approach. A deductive approach has been selected as quantitative data have to be collected through the questionnaires. For my research this approach would serve the purpose. Selected research approach is helpful to establish the relationship between loyalty program and customer loyalty. Questionnaire will consist the question related to number of cards retailers having, benefits of cards, frequency of visit to store, redemption benefit and how loyal customer is because of loyalty card. These kinds of question will help in finding the relation between two variables.

Data Collection Methods –

After seeing the accuracy of the outcome data i have selected quantitative method of data collection i.e. through questionnaire survey. There are two kinds of data which can be used for research -primary data and secondary data. During my research I’ll collect primary data through conducting questionnaire survey. Than after i would look for secondary data for finding the literature reviews and other data required for the analysis like magazines, newspapers, journals, etc.

Questionnaire-

According to the Chisnall (1992) there are three different kind of questionnaire – personal interviews, self administered quest