Exploring the Role of Loyalty Card Programs in Building Customer Relationships

The assignment content explores the relationship between customer loyalty and information technology. The study reviews various articles on customer loyalty, reward programs, and loyalty marketing research. It also examines the effectiveness of Tesco's Club-Card program in boosting customer loyalty. The analysis highlights the importance of understanding customer behavior through data analysis and CRM techniques to maintain a sustained relationship with customers.

Business Integration Project
How reward strategies can bring loyalty in present competitive market:
A case of Tesco Club cards

DECLARATION
I would like to give my sincere thanks to my mentor who guided and supported me all
throughout the process of this work. Discussion sessions with him were profoundly illuminating
and inspiring. It proved highly beneficial in selecting a suitable topic for this business integration
project. In addition to this, I would also like to thank my family and friends who have been a
strong moral support all through this research process.
ETHICAL CONSIDERATION
The achievement of entire work has been done by following ethical values and norms. In
addition, transparency and confidentiality are followed to avoid biasness and chances of wrong
interpretation of data. In addition, data can be cross checked from more than one source and
discussed with supervisor before used. In addition, simple data analysis tools are used to analyse
the data effectively and enhancing reliability and validity of present work effectively.
NEED OF CONFIDENTIALITY
All information collected from various authentic sources has been managed in a chronological
manner. Besides that, information is kept confidential to increase the level of reliability. In order
to convey other findings and results in own words, prior permission and confidentiality are
needed.

EXECUTIVE SUMMARY
In dynamic era, in the context of surviving in the market and better influence the customers,
it is essential for enterprises to emphasize on relationship marketing. Transforming the shopping
experience of the present day consumers are forcing retailers to use lucrative promotion
strategies such as loyalty card and promotion offers in order to penetrate customers toward their
brand and enhancing loyalty. In order to understand the impact of reward strategies, case study
of Tesco has been taken. This retail giant enterprise is chosen because it provides facility of
Club-Card to its customers.
The present dissertation concentrates on exploring the importance of relationship marketing
and promotion strategies with respect to customer satisfaction and retention with enterprise.
Secondary analysis and evaluation of data technique has been applied which is qualitative in
nature. In addition, reliability and validity have been maintained during the entire research work.
For the purpose of internal environment of UK base retail firm, SWOT analysis has been
employed.
The Researchers shared his viewpoint regarding the fact that retailers employed loyalty
programs expect profitability in return. Cost employed by Tesco in executing and initiating card
club is high. It incurs huge technology investment. It also raises customer retention and thereby
is incredibly helpful in developing sustainable business. Therefore, engaging in Customer
Relationship Management (CRM) generates positive consequence on enhancing the customer
retention and business growth.
With help of PESTLE analysis, external environment of UK and customer's perception
towards strategies have been analyzed. In addition, Porter’s Five Forces model has been applied
for analysis the retail market and current trends of Tesco. From the result of study it is cleared
that most of the customers were satisfied with rewarding strategies and they have positive
perspective towards enterprise and services offered by company to them at stipulated time. It is
identified that reward strategies and club-card play a crucial role in appealing customers and
retaining them with firm for a long time period. As analyzed from findings, customer
relationship model and marketing tactics through relationship management employed by Tesco
have created the great impact on customer retention and business growth for long term
perspective.

Table of Contents
1.0 INTRODUCTION.....................................................................................................................6
1.1Rationale of the study.............................................................................................................6
1.2 Strategic marketing strategies used by Tesco........................................................................6
1.3 Relationship between customer satisfaction and brand loyalty.............................................7
1.4 Research Aim. .......................................................................................................................7
1,5 Research objectives................................................................................................................7
1.6 Research questions ................................................................................................................8
1.7 Scope of the research ............................................................................................................8
2.0 LITERATURE REVIEW..........................................................................................................8
2.1 Introduction ...........................................................................................................................8
2.2 Role of Reward strategies used by UK retailers to magnetize customers.............................9
2.3 Tesco’s club cards program and its contribution in enhancing customer loyalty and
business growth............................................................................................................................9
2.4 Effectiveness of loyalty models and their impact on retail business in future ....................10
2.5 Impact of customer relationship model and relationship marketing on customer retention
and growth ................................................................................................................................10
2.6 Contribution of Tesco Club card as a loyalty marketing tool in growth of firm.................11
3.0 RESEARCH METHODOLOGY ............................................................................................11
3.1 Introduction .........................................................................................................................11
3.2 Research strategy ................................................................................................................11
3.3Data collection and analysis..................................................................................................11
3.4 Reliability and validity ........................................................................................................12
3.5 Ethics concerns ...................................................................................................................12
4.0 FINDINGS ..............................................................................................................................12
SWOT analysis .........................................................................................................................12
PESTL analysis..........................................................................................................................13
Porter five forces model ............................................................................................................14
4.1 RESEARCH LIMITATIONS. ................................................................................................15
5.0 CONCLUSION .......................................................................................................................15

6.0 RECOMMENDATIONS.........................................................................................................15
REFERENCES..............................................................................................................................17
APPENDIX 1.................................................................................................................................20
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LIST OF FIGURES
Figure 1: UK retailers market share...............................................................................................11
Figure 2: Reward strategies and their roles...................................................................................12
Figure 3 Tesco Club card...............................................................................................................13
Figure 4: UK grocery market value...............................................................................................13
Figure 5: Correlation between Tesco club-card and market share................................................14
Figure 6: Tesco Club-Card reward value.......................................................................................16
Figure 7 SWOT analysis................................................................................................................20
Figure 8 PESTLE analysis.............................................................................................................22
Figure 9 Porter's five force model.................................................................................................23

1.0 INTRODUCTION
In contemporary world, cut throat competitive is present in the retail market section and it
forces companies to make balance between the quality and cost (Sheth, 2011). In the context of
surviving in the market and better influencing the customers, it is essential for enterprises to
emphasize on relationship marketing and meeting the needs of customers within defined time.
Changes in demographic profile and lifestyle of people are encouraging organizations to focus
on their reward strategies in order to attract new and retain existing customers for a long time
period. Relationship marketing becomes a leading trend in the retail industry (Vivekananthan,
Cynthujah and et.al, 2014). Transforming the shopping experience of the present day consumers
are forcing retailers to use lucrative promotion strategies such as royal card and promotion offers
in order to penetrate customers towards their brand and enhancing loyalty in this dynamic
changing arena (Yoo and Bai, 2013). Different organizations including Tesco, Sainsbury and
Asda are concentrating on different loyalty programs including Club-Card, Nectar card and
traditional loyalty card for attracting customers and retaining them with firm for a long time
period (Lacey, 2015).
1.Significance of the study
Rationale behind conducting current research is to investigate the function of reward
strategies in term of bringing customer loyalty and enhancing their satisfaction level. In this
regard, Tesco is chosen because it provides facility of Club-Card to its customers in which they
can earn rewards after each purchase. Tesco is seen to be one of the most successful retail
organizations across the globe. The point which is crucial in the beginning of Club-card based
loyalty scheme and a strategic CRM technique is its use by the Tesco (Tesco Club-card, 2015).
In mid of 2009, management of Tesco announced the re-launch of Club-card to increase
prevailing customer base of 15 million (Aydin and Özer, 2005).
By conducting this research, investigator would be able to explore the importance of
Relationship Marketing (RM) and promotion strategies in terms of customer satisfaction and
retention with the enterprise for a long time period (Dorotic, Bijmolt, and Verhoef, 2012). On the
basis of data-centric approach and loyalty marketing, Tesco was able to drive more targeted and
tailored marketing messages. It helps firm in increasing customer satisfaction and making them
royal towards product (Vivekananthan Cynthujah and et.al, 2014).
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1.2 Strategic marketing strategies used by Tesco
As per given case scenario, Tesco case study has been taken in order to better understand
the roles of reward strategies to bring customer loyalty. Tesco PLC is a British multinational
grocery and general merchandise as well as it is famous for providing quality of services and
products at affordable price to its customers (Lacey and Sneath, 2006). This UK base retail giant
has many stores in twelve countries in all overt the world. In addition, firm is famous for
introducing loyalty card and other promotion schemes in order to magnetize customers towards
its brands. In 1995, Tesco was launched Club-card which is the most celebrated loyalty scheme
in the world (Ivanauskiene and Auruskeviciene, 2015). In this scheme, customer gets one point
for spending £1 and it can also be doubled up on special offers. The objective of loyalty card is
to advertise tailored marketing messages among broad population. In this regard, Tesco club-
card is used because firm is using this concept to offer incentives or special facilities for
attracting customers. Special offers, club-card rewards and green club-card points are the major
features of Tesco club card (Yoo and Bai, 2013).
1.3 Relationship exist between customer satisfaction and brand loyalty
Chiron and Aubier (2001) argued that contentment level of customers highly influenced
repeat purchase, loyalty and retention of consumers within organization. Consequence of study
shows that satisfied customers have positive perspective toward enterprise and services offered
to them. With the hope of increasing their overall return on investment, management of Tesco
introduces different promotion tactics and club-cards (Aydin and Özer, 2005). Besides that,
enterprise is also investing money in technology-up-gradation and effective use of new emerging
technologies for expectation of dynamic changing clients in this competitive era (Palmatier,
Scheer and Steenkamp, 2007). By conducting present research, investigator would be able to
understand the relationship between loyalty and satisfaction. In addition, CRM model and RM
tactics employed by management of Tesco help it to maintain better relationship with customers
and enhancing the level of brand loyalty in a proper manner (Garnefeld and et.al., 2013). On the
basis of present situation of the firm, it can be said that by concentrating on club-card and other
approaches, management of Tesco would be able to increase its profitability and satisfaction
level of consumers in a significant manner (Galbraith, 2011).

1.4 Aim and Objectives
Main aim of the research is to identify the ways in which reward strategies can bring
customer loyalty in a cut throat competitive era. In this regard, researcher emphasizes on Tesco
Club cards and customer loyalty programs as well as their roles in increasing customer loyalty.
By considering this aim, investigator aims to investigate relationship between customer
satisfaction, loyalty and retention.
1,5 Objectives of research
After identifying the research aim and conducting research work in a systematic manner,
following objectives are defined. In addition, investigator has conducted the study by considering
these objectives and streamlining the questions effectively.
 To analyze the roles of reward strategies used by UK retailers to magnetize customers
 To investigate the Tesco’s club cards program and its contribution in enhancing customer
loyalty and growth of the business
 To identify the impact of customer relationship model and relationship marketing on the
customer retention and business growth of Tesco.
 To evaluate the effectiveness of loyalty models and its impact on retail business in future
1.6 Research questions
After recognizing the research aim and objectives regarding to role of Tesco Club-Card, research questions
have been prepared that can be enlisted as follow.
 What are the roles of reward strategies used by UK retailers to magnetize customers?
 What is the role of Tesco’s club card program and its contribution in enhancing customer loyalty and
growth of the business?
 What are the main impact of customer relationship model and relationship marketing of Tesco on customer
retention and business growth?
 How effectiveness of loyalty models and tactics can influence retail business growth in future?
1.7 Scope of the research
In today’s competitive scenario of retail industry, scope of the current research is very
wide. In recent arena, customer satisfaction, loyalty and retention factors play a crucial role in
attaining growth and enhancing the level of performance as compared to other competitors
present in the market (Lacey and Sneath, 2006). By conducting this research, researcher would
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be able to identify the roles of reward strategies used by UK retailers to magnetize customers in a
proper manner (Lacey and Sneath, 2006). Besides that, present study also helps researcher,
students and scholars to disclose the main impact of customer relationship model and
relationship marketing tactics used by Tesco on customer retention and its business growth
effectively (Asiah and Musa, 2011). Furthermore, market analysis tactics including Porter Five
Forces model, PESTLE and SWOT analysis can be beneficial for the researchers in order to
understand main contribution of loyalty models and tactics on customer loyalty and growth of
the business in a significant manner. This study will help in theoretical area related to the field of
marketing and promotions.
2.0 REVIEW OF LITERATURE
2.1 Introduction
RM has been perceived as a leading trend in retail market sector (Rowley, 2005). The
critical aspect of this effect and its motive lies in depreciating the use of traditional methods to
increase customer relationships. This concept is growing interest in retail sector of UK. Rivalry
and competition in market has led to increase in certain ways and reward strategies for retention
of customers and business growth. Tesco is the largest grocer in UK and is also the most
successful online super-market around the world (Tesco Club-card, 2015). By carrying out the
critical review on published sources, study focuses on identifying the reward strategies, Tesco's
Club-card schemes and its contribution on developing customer loyalty.
2.2 Role of Reward strategies used by UK retailers to magnetize customers
Reward strategy determines the direction of using developments and innovations in order to
support business growth. According to Gummesson (2002), customer loyalty is significant
outcome. In retail sector, every organization has been successful in magnetizing customers. In
this competitive business environment, every organization in sector has stood out with some
different reward scheme (Gummesson, 2002). This is to gain their customer attraction to a higher
level (Hong and Wang, 2009). It helps clients to order products via mobile apps and in return
they can earn their loyalty points (Tesco Club-card, 2015). The growth of retailers in UK can be
seen in form of increases their market share.

Figure 1: UK retailers market share
(Source: Martin, 2015)
In similar fashion, Sainsbury has launched its Nectar card which offers a value proposition
from its customers. Along with this, it helps them to capture their information and their spending
pattern. Tesco is one among organization who has been successful in launching its club card
program. It is the world's most data-centric approach in range of its loyalty programs (Smith and
Potter, 2010).
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Figure 2: Reward strategies and their roles
Similarly, in rising trend of British market grocery, Waitrose came up with my Waitrose
loyalty card program. It focuses on offering tangible rewards and near term prizes to its
customers. Regarding this, Berry (2002) shared the viewpoint that these strategies are beneficial
in connecting the clients more closely to the shopping. In this internet world, people are showing
keen interest in reward credit points. It helps in getting cash-back privilege on their buying
(Berry, 2002). For instance, users at stores of supermarket shop such as Asda, Sainsbury and
Tesco can earn £12 cash back on a £100 of purchase (Smith and Potter, 2010). In UK, there are
about 150 such schemes with a circulation of 40 million cards in current circulations. About 80%
of household population was found to be interested in customer loyalty scheme (Tesco Club-
card, 2015).

2.3 Tesco’s club card and its contribution in enhancing customer loyalty and business growth
Figure 3 Tesco Club card
Loyalty marketing refers to the process of management where customers are identified to
retain and growing profitable relationships in business. Tesco is the first organization who has
introduced the concept of Club card. It infers that for every £1 of spending, they will receive plus
one point. It is also available with special offers, club card rewards and green Club card points
(The Telegraph, 2015). From the below figure, it is clear that loyalty card play an important role
in increasing growth of Tesco.
Figure 4: UK grocery market value
(Source: martin, 2015)
According to Gummesson (2002), loyalty programs are the initiatives that support in determining
the information regarding customer database (Gambeson, 2002). It is used as specific marketing
strategies for them and their values. However, studies made by Sheth (2011), criticized the
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loyalty marketing as another piece of burden which encourages customers in addition to the
plastic money (Sheth, 2011). There are authors such as Brown (2014), who believed that
customers should not consider the promotion initiatives of retail organizations such as special
service, with the card based reward program. These are not mutually exclusive (Brown, 2014).
According to Sage (2012) there is a direct correlation between market share and changes in
reward of Tesco club-card.
Figure 5: Correlation between Tesco club-card and market share
(Source: Sage, 2012)
Frisou and Yildiz (2011) throw some light on Tesco's club card program and its
effectiveness in enhancing customer loyalty, retention and business growth. For Tesco, Club card
is viewed as a way to deliver thank you for purchase made (Frisou and Yildiz, 2011). It is a way
of developing everyday meetings with customers by raising their reward points. It has helped in
standardizing customer base, associated records and information as kept by Tesco. Bijmolt
(2010) commented on it and said that every time customer's card is swiped by retailer, the
information shares with respect to time, place, value and many more things (Bijmolt, 2010). This
is also a way which can contribute in the misuse of personal information. In this way, Tesco is
able to create a complete family picture regarding what they buy, number of members, their
activities, addiction etc. It has helped Tesco to become the dominant retailer of UK. In the words
of Vengeliene (2013), Club card model is one such approach used by Tesco. Similarly, other
such approaches that are used to gain the customer loyalty are value added approaches in service
or store layout and low prices for key goods (Vengeliene, 2013). Enhancement of customer

loyalty has been reinforced by study made by Brown (2014). It shows that a satisfied customer is
influenced with the intention of re-purchase. It strengthens the customer interaction thereby
improvises connections (Brown, 2014).
Table 1: Impact of club-card on customer and market share
(Source: Sage, 2012)
Year Tesco scheme Impact on customers Market share
2007-2008 Double Points
Promotion
A huge lift in loyalty
value
Decline share (5.5%)
2009-2010 Reducing reward
deals
Price focused
approach
Less attract customers Positive impact on
market share and
£500m of price
discounts
In term of number of years, Tesco Club-card reward value can be identified that can be
understood with help of below figure.
Figure 6: Tesco Club-Card reward value
(Source: Sage,2012)
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From the above market share figure, it is clear that Tesco was seen as the most successful retail
organizations in the world. Idea of loyalty card scheme plays a crucial role in creating a positive
impact. However, it was argued by Vandeweghe et al. (2015) who contradicted that loyalty of
customers is not merely judged on the basis of reward gratification but the complain is made
with respect to convenience and better value (Vandeweghe et al., 2015). It takes years to install
such plans but are reason for reaping profits for retail organization in future. However, it was
noted by Szczepańska and Gawron (2011) that very rare organizations have gained success to
develop real customer loyalty and business growth (Szczepańska and Gawron, 2011).
2.4 Effectiveness of loyalty models and their impact on retail business in future
Currently, there are various marketing tools that contribute successful retaining of client's
loyalty (Davey, 2014). Card based programs are common method that modifies clients to
identify themselves at every occasion of buying. According to Ranaldi (2014), effectiveness of
loyalty programs are two way relationships. Firstly, outcome is observed at the time of purchase
made where loyalty schemes attract the customers. Secondly, loyalty programs identify the
behavior of customer after purchase is made (Ranaldi, 2014).
Osman (2012) believed that loyalty model determines selection effect whereby customers
weigh the value and accordingly make purchase decision. Effect of these programs is reflected
on boosting company growth and reputation. Further, effect of such programs help in
conducting vital market research (Osman, 2012). Satisfaction of customer and online product
deliveries make the customer happier.
2.5 Impact of CRM and RM on customer retention and growth
CRM is considered as the relationship model and a key facet to every organization. In
context to relationship marketing, this concept has emerged as difficult concept (Allaway and
et.al., 2011). As per views shared by Frisou and Yildiz (2011), with the rise in knowledge and
awareness of customers, developing communication with them for attracting and retaining
demands has been changed as a planned process. Therefore, CRM installation has enabled the
retail organization to get benefit in various ways. This concept has now expanded from buying
and selling of goods to developing a mutual sharing concept. Studies made by various author’s
show that relationship selling is complicated when services are complex and sophisticated
(Mollah, 2014). It raises customer retention and thereby is incredibly vital for developing
sustainable business.

2.6 Contribution of Tesco Club card as a loyalty marketing tool in development of firm
In 2010-11, Tesco was faced serious challenges and a certain loss of faith with their
customers. In addition, it was consistently out-performed against its rivals. Chefalas, Thomas and
et.al (2010) was questioned Club-card and the detailed customer insights to alert the management
about market problems (Chefalas, Thomas and et.al, 2010). Introduction of this approach
supported the consumer for buying products from various stores of Tesco. However, Palmatier,
Scheer and Steenkamp (2007) criticized this fact and argued that Club-card is widely recognized
and helps firm in influencing customers and understanding their shopping and buying habits in
an appropriate manner (Palmatier, Scheer and Steenkamp, 2007). It is identified that Club-card
role is very different from when it was introduced due changes come in demographic profiles
and high competition existing in the marketplace. In recent era, customers of today are far more
demanding than in the past and it forces company to change in its promotion and strategic
marketing policies in order to attract customers throughout the world. Lin and Wang (2006)
described that in order to make clients happy and connect them with the firm, Tesco Club card
approach was very beneficial for company. It encourages frequent purchases and sales of
company as compared to other retailers present in retail marketplace (Lin and Wang, 2006). It
helps customers to buy products through nurturing warm a relationship with enterprise. From the
review literature, it is identified that on the basis of Club card concept over the past twenty years,
firm was able to generate profit and increasing its customer base in a significant manner
(Parment, 2013.).
3.0 RESEARCH METHODOLOGY
3.1 Introduction
The section of study which includes all the tools and techniques of research which are
used for accomplishing the aim and objectives in an efficient manner is Research Methodology.
By considering the present case, researcher identifies research methods and also selects the
respective tools such as research design (descriptive design), research method (qualitative),
research approach (inductive), philosophy (Interpretivism), data collection (secondary) and data
analysis (market analysis tools) etc. For meeting the objectives of research study, adequate
selection of research methodologies have been done (Sullivan, 2011).
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3.2 Research strategy
Researcher can use either qualitative research or quantitative research techniques in order
to reduce chance of wrong interpretation of data. For dealing with numeric kind of data,
quantitative data analysis technique is employed. On the other side, qualitative data analysis
technique is employed for the purpose of understanding the meaning and significance of reward
strategies used by marketing department of Tesco in order to retain existing customers and
attracting new customers in a significant manner (Silverman, 2010). As per the present case
scenario, qualitative research strategy is used because it is more appropriate in terms of
understanding effectiveness of loyalty models and tactics that can influence retail business and
growth of UK giant in future to a significant level (Postrel, 2005). In addition, Inductive
approach is used for the purpose of exploring main impact of customer relationship model and
relationship marketing of Tesco for the purpose of customer retention and business growth
(Merriam, 2009).
3.3Data collection and analysis
For the purpose of gathering information related to role of reward strategies in terms of
bringing customer loyalty, secondary data has been employed. On the basis of easy availability
of data and content relevant to similar topic, this technique has been applied in a proper manner.
For analysis secondary data, PESTLE, Porter Five Forces and SWOT techniques have been used.
By applying these techniques, researcher would be able to identify internal and external factors
that can influence Tesco’s club cards program (Vengeliene, 2013). With the help of company's
website, online media and other authentic resources, secondary data related to contribution of
reward strategy and club-card in enhancing customer loyalty and growth of the business.
3.4 Reliability and validity
In order to maintain reliability in the whole research, secondary data was collected
from valid and authentic sources. In the context of reducing the chances of biasness and
misinterpretation of data, all information is arranged in a chronological way (Vandeweghe and
et.al., 2015).
3.5 Ethics concerns
In order to accomplish aim and objectives of present dissertation, entire work is
performed with ethical aspect. For getting the answers of aim and objectives, researcher
emphasizes on the role of Tesco’s club cards program and its contribution in enhancing customer

loyalty and growth of the business (Sheth, 2011). Apart from this, transparency and
confidentiality are followed to avoid biasness and chance of wrong interpretation of data. In
addition, data can be cross checked from more than one source (Shin and Sudhir, 2010). In
addition, simple data analysis tools are used to analyse the data effectively and enhancing the
level of reliability and validity of present work in an effectual manner.
4.0 FINDINGS
SWOT analysis
Figure 7 SWOT analysis Strengths: Main strength of firm is its loyalty card which helps organization to analyze
and understand the behavior of customers in this dynamic changing era. Reward
strategies used by marketing department of UK retail giant provide opportunity of
understanding spending capabilities of people so that better product portfolio can be
prepared and expectation of customers can be fulfilled within stipulated time. Besides
that, use of RM and CRM as well as other technologies to communicate with customers
help firm to solve their queries and increase their loyalty effectively. In order to promote
“Big price drop' campaign “, Tesco was pulled £350 million out of its Club-card point’s
budget and also helps in running sales promotion activity in a proficient manner (Audu,
Hassan and Aboki, 2007). Besides that, 15 million active users in the UK and services
offers to more than 600 partner rewards for customers are the other major strengths of
Tesco Club-card which highly contribute in enhancing customer loyalty and growth of
business in current era (Lawe, 2006).
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 Weaknesses: Poor web security and Club-card fraud are the major constraints associated
with the reward strategies used by management of Tesco (Yim, Tse and Chan, 2008) .
Besides that, unsafe products and no strict actions taken by management of firm
regarding to enhance safety within supply chain are the other weakness faced by
enterprise in their day to day business (Lacey and Sneath, 2006). However, Sheth (2011)
criticized the loyalty marketing but have found advantage of Club-card and reward
programs to target customers (Sheth, 2011). Opportunities: Technology advancement and changing demographic profile of customers
such as lifestyle change, change in use of systems, taste and preference change of
customers, in the modern world are creating opportunities for organization to improve
customer service and maintain better relationship with their customers. In addition,
organization can grasp business opportunity through concentrating on developing
countries markets effectively. By effective use of CRM technique organization can
promote simple buying and selling of goods as well as developing a mutual sharing
concept to attract customers (Chefalas, Thomas and et.al, 2010). As per the view of
Vivekananthan Cynthujah and et.al, (2014) concept of loyalty card scheme plays a crucial
role in creating positive impact in the mind of customers for the long term perspective.
 Threats: Increasing market share of competitors including Aldi and Lidl’s to over 14%
and declining sales of Tesco are creating challenges for company to retain its current
position and attract customers for a long time period. In addition, cultural problem and no
strong ethical code implemented within the company are creating barriers for business to
retain its existing customers and attracting new one in an appropriate manner (Palmatier,
Scheer, and Steenkamp, 2007). However, cost employed by Tesco in executing and
initiating Card club is high and it also create burden on other resources of organization
also (Galbraith, 2011)..

PESTLE analysis
Figure 8 PESTLE analysis Political and legal factors: In order to access to the world's most profitable market and
attracting customers, enterprises was joined European Union. Trade discounts, tax
facilities and other benefits are provided by government of UK to its retailers in order to
promote its business and meeting expectations of their customers within stipulated time.
Political favorable conditions and constant changes arise in market provide opportunities
to encourage families for buying what they want (Lin and Wang, 2006). Despite of that,
food safety laws, regulations, Hazard Analysis and Critical Control point (HACCP)
procedure are developed by government to maintain high degree of personal hygiene.
These legislations highly influence the ways of doing business of retailers and the level of
customer loyalty. Economic factors: UK and world market are undergoing significant change. In dynamic
era, competitors of Tesco including Aldi and Lidl introduce rewarding strategies to attract
customers. In addition, they are emphasizing on in-store and fuel price cut promotion
tactics to give tough competition to retailers present in the market (Aydin and Özer,
2005.). However, decreases demand of many goods and high unemployment in economy
are the major issues which are creating hurdle in the success path of enterprise (Lacey
and Sneath, 2006). In addition, increment in excise duty and VAT rates is responsible for
reducing the level of spending in the respect of customers along with influencing the
sales and other rewarding strategies employed by Tesco (Auh and et.al., 2007). Social factors: After introducing this scheme a third of the UK population (17 million
people) becomes the members of loyalty programs and highly contributing in business
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growth and customer base in a significant manner (Frisou and Yildiz, 2011). Increasing
demand of organic foods, changing customer patterns and increasing awareness about
health are the major factors which add value in business and creates opportunity to
enhance its sales. Technological factors: Drastic change comes in retail industry due to emergence of new
technologies and e-commerce arena (Shin and Sudhir, 2010). In order to grasp business
opportunity and increasing flexibility, Tesco was taken initiative so that consumer
purchase decisions can be supported (Aydin, Özer and Arasil, 2005). Adequate use of
mobile technology and club-cards provide opportunity to UK base retail giant to collect
large stream of data and analyzing them to make sense along with understanding the
customer's buying behavior in a significant way (Webb, 2007).
 Environmental factors: In the context of responding government environment initiatives,
Tesco introduces green club card points and encouraging its customers to reuse plastic
bags (Rowley, 2005). These environment friendly strategies help organization to add
carbon footprint data to its products and promoting waste reduction effectively (Frow and
Payne, 2009).
Porter Five Forces model
Figure 9 Porter's five force model Bargaining power of buyers: In UK, there is high bargaining power. Since, recession
and economic down turn started customers have emphasized on buying products at
discounted rate rather than purchasing expensive one (Rowley, 2005). In this crucial
time, organization was introduced club-card which helped it to ensure low price and
meeting expectation of customers in a significant manner.

 Supplier power: Prices and supplier related factors are not highly influenced the
performance of enterprise due to presence of large suppliers in UK and huge amount of
products purchased by Tesco from them. There are high presence of food and drink
companies in the market, therefore any changes come in the price of products then
retailer can terminate contract with them without any hesitation (Mascarenhas, Kesava
and Bernacchi, 2006). Rivalry: Existence of high competition in retail segment and rewarding strategies
introduce by Sainsbury, Aldi, Asda and Morrison, are creating challenges for Tesco. In
order to better compete with retailer, UK retail giant and its Club-Card concept and
promised its customers to give money back if their prices exceed from Aldi and other
competitors (DeWitt, Nguyen and Marshall, 2008). Substitutes: Due to recession and economic downturn conditions, consumers spending
has switched to the cheaper rate. It directly influences customer loyalty and growth of
business in modern era (Leahy, 2009). However, substitutes of Tesco such as Dunnes
Stores and Supervalu etc. are emphasized on making their rewarding strategies more
lucrative to magnetize customers and retaining them for a long time period (Söderlund,
2006).
 Threats of new entrants: Surviving in cut throat competitive market and opening new
stores to compete with existing retail enterprises are not easy tasks for any retail firm.
Large cost and highly developed supply chain are creating barriers for new entrants to
enter into the retail market and attracting customers through using rewarding practices
(Yim, Tse and Chan, 2008).
4.1 RESEARCH LIMITATIONS.
Main limitations of present study is time and cost related to the execution in research
methodology in order to attain aim and objectives effectively. According to the given case,
secondary data has been collected from various authentic sources. In the absence of primary data,
researcher was not able to disclose perception of customers towards rewarding strategies and
Club-card approaches employed by firm. However, future activity can be conducted by
collecting primary data and choosing adequate sample size.
23

5.0 CONCLUSION
In dynamic era, organizations are concentrating on rewarding and promotion strategies
to attract and hold customers for a long time period. On the basis of secondary data analysis and
results of market analysis tactics, it is clear that Club-card Fuel Save and other rewarding
strategies used by management of organization help business to improve their loyalty and
increasing retention. Rewarding strategies are the ways of developing regular interaction with
customers and influencing them towards brand. These strategies strengthen the customer
interaction and help in gaining success to develop real customer loyalty and business growth in
this modern era. From the findings of review literature and studies conducted by previous
scholars related to reward strategy, it is clear that Tesco’s club cards program and other
rewarding strategies positively contribute in enhancing customer loyalty and growth of business.
By conducting present research, investigator was able to analyze the roles of reward
strategies used by UK retailers to magnetize customers. By carrying out the critical review on
published sources, study focuses on identifying the reward strategies. Further, it can be
concluded that Tesco's Club-card schemes has created positive impact in terms of developing
customer loyalty.
6.0 RECOMMENDATIONS
Organization should focus on using Club-card data in order to overcome space between the
rich and poor customers. In addition, management should concentrate on reducing the security
and privacy related issues faced by customers while using reward and Club-card strategies.
Tesco should emphasize on putting free Wi-Fi and additional services in its retail stores so that
Club-card holders can use smart phones and other technologies in order to access services of
firm effectively. Despite of that, a virtual store concept and new emerging techniques can be
beneficial for company to identify factors which influence the shopping and purchasing habits of
customers. Further study can be conducted by collecting primary data from customers to know
their satisfaction level regarding the rewarding strategies used by the management of Tesco in a
significant manner.

25

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29

APPENDIX 1
As per the illustration above, it shows that since 1995, when Tesco developed its
Club-Card program, there has been noticed continuous growth and development. The above
figure is an illustration which shows the perceived demand of Tesco Club card and its emergence
as world's leading card system. Osman (2012) stated that rewarding strategies and Club-card
approach used by management of firm highly reflect on boosting the company's growth and
reputation. Quick online product deliveries make the customer happier and satisfied along with
enhancing their loyalty towards brand (Osman, 2012). For the purpose of maintaining sustained
relationship with customers, company is focusing on use of CRM and other techniques. Loyalty
program and club-card used by Tesco help marketing department in accelerating the frequency
of consumers and strengthening the connection with consumers for a long time period in a
proficient manner (Direction, 2007).
Illu
stration 1: Tesco Club card

31