Positive Impact of Loyalty Cards on Business

Running head: MANAGEMENT
Management
Name of the Student
Name of the University
Author Note

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Abstract
The purpose of this study is to explore how loyalty cards can impose positive impact on
business. Loyalty cards, majority of time, resemble plastic credit cards and possess a barcode or
a magnet stripe that is generally scanned at the point of sale. Loyalty cards are designed for
attracting consumers and the programs are helped to incentivize consumers for keep coming
back to the businesses. Thus loyalty card programs are designed for encouraging the consumers
to keep coming back so that extra business can be generated. In order to find out the
effectiveness of loyalty cards on business quantitative data analysis method has been used. For
the nominal data `descriptive analysis through percentage description has been used. Ordinal
variables has been de divided into 2 subdividition. . Variables which are directly involved in
hypothesis testing, for them descriptive statistics, mean medium mode and liner Reggretion
model. 5 organizations has been selected for the survey with the help of random probability
sampling. 5 organizations has been selected for the survey with the help of random probability
sampling. It has been stated that the consent form that the survey needs to be filled by both
managers as well as employees of the sales department of the 5 organizations. From the study, it
has been found that there exists a significance association between loyalty card usage and
revenue generation capacity of sales and marketing factors. Additionally, there exists a
significance association between loyalty card usage and consumer base of sales and marketing
factors. . It has also been found that there exist a significance relation between loyalty card usage
and consumer retention. Lastly, there exists a significance association between loyalty card usage
and data accessibility of sales and marketing factors.

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Table of content
Chapter 1 - Introduction, research questions and hypotheses..........................................................4
Background..................................................................................................................................4
Problem statement.......................................................................................................................5
Research questions.......................................................................................................................7
Variables and hypothesis.............................................................................................................7
Aims and Object..........................................................................................................................7
Chapter 2 - Literature review...........................................................................................................8
Benefits of using loyalty cards by business organisations...........................................................8
Issues associated with conducting Loyalty card programs........................................................10
Strategies for developing effective loyalty card programs........................................................12
Literature Gap............................................................................................................................15
Chapter 3 – Methodology..............................................................................................................15
Research philosophy..................................................................................................................15
Research design.........................................................................................................................15
Research approach.....................................................................................................................16
Target population and sampling................................................................................................16
Data collection method..............................................................................................................17
Data analysis method.................................................................................................................18
Chapter 4 - Data presentation, evidence, analysis and discussion (3000).....................................18
Impact on other business factors................................................................................................25
Discussion and evaluation.........................................................................................................26
Chapter 5 - Summary and conclusion............................................................................................29
Bibliography..................................................................................................................................32

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Thesis Topic: How Loyalty cards help Business?
Chapter 1 - Introduction, research questions and hypotheses
Background
In this era in technological advancement, the competition between business organizations
in order to ensure competitive advantage in the market has got enhanced to a great level. In order
to ensure maintenance as well as enhancement of competitive advantage, business companies are
investing on innovative business strategies in order to attract consumers. Loyalty programs came
in existence while organizations realized that the competitive advantages that has been
experienced due to the product differentiation no longer holds good as a result of proliferation of
similar looking products. In this type of environment, possessing loyal consumers has become
more and more crucial yet difficult so much that consumer loyalty is considered to be one of the
rarest commodities. In order to ensure effective enhancement as well as maintenance of
consumer loyalty, management of business organizations are using various kinds of commence
loyalty platforms. The chief aim of commence loyalty program is to ensure that the management
is selecting the right type of audience at the right time for the organization.
Retail organizations were the first who came up with the concept of loyalty card and
loyalty program. Loyalty card program can be defined as an incentive plan which allows
businesses for gathering data about their consumers. consumers are offered with discounts on
purchase of products, coupons, points for purchasing merchandise along with other rewards in
exchange of voluntary participation in the loyalty program. Along with gathering crucial data
about the consumers, the second goal associated with loyalty card program includes building
repeat business by offering the participating consumers with products or services that are not
available to the non-participating consumers.
One of the chief benefits of loyalty program includes effective consumer retention. The
primary motive behind commencing a loyalty card program is to retain the consumers by
providing them with extra benefits that is not provided to consumers who does not possess the
loyalty card. A good number of studies have found that the relationship perception of a consumer
can be explained as 10 percent of the total variation in consumer retention as well as consumer
share. The fact that consumer retention strategies possess direct relation with the bottom line of
the business cannot be ignored. A business with a 60 percent consumer retention is found to be

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losing 3 to 4 times as many consumers compared to a business with 80 percent consumer
retention rate.
This innovative strategy has been found to a great way of generating extra businesses which has
encouraged a good number of consumers to come back to the business. Thus, loyalty cards are
considered to be an effective tool for marketing that helps spreading the words about the
company or brand. However, over time, a good number of limitations of the usage of loyalty
card for business has also been detected. Considering the fact that loyalty data does not possess
the potential to look into the purchase of other brands or stores, it provides limited picture to the
overall purchasing behaviours of the consumers. In this study, the aim of the researcher is to find
out how Loyalty cards can helps Business. Along with this, this research paper will also find
out the advantages as well as the disadvantages of loyalty cards and whether, business
organizations should opt for using loyalty card programs as an effective strategy to enhance their
business or not.
Problem statement
Loyalty cards are designed for attracting consumers and the programs are helped to
incentivize consumers for keep coming back to the businesses. In exchange to their willing
participation in the program, consumers are offered with special product discounts and rewards.
Loyalty cards are basically an incentive plan which aloe the retail businesses to another data
about their consumers. Loyalty cards, majority of time, resemble plastic credit cards and possess
a barcode or a magnet stripe that is generally scanned at the point of sale. The card ad been
designed to identify the consumer and send information about the purchase done by the same to
the database. This information is used by the retailers to understand the specific needs and
choices of the consumers and this in turn helps them to influence the buying habit of the same.
According to Evanschitzky et al. (2012), 86 percent of the shoppers in UK are listed in the
loyalty data base. This proves that according to a good number of consumers receiving the
benefits provided by the shops is worth giving up some measure of the privacy.
Thus loyalty card programs are designed for encouraging the consumers to keep coming
back so that extra business can be generated. According to a good number of researchers loyalty
card programs possess the potential to enhance the yearly revenue of an organization through
consumer retention, enhance sales, power awareness as well as effective consumer company

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relationship. Organizations like Designer Shoe Warehouse (DSW), Sephora, Starbucks, Tarte
and Amazon are some of the well known organization that have invested a lump some amount of
their revenue for conducting loyalty card programs. Thus it can be clearly understood the
mentioned strategy is getting popular in all types of industries, be it retail, beauty and other
industries.
While in various industries, loyalty program has been proved to be a highly effective
method of attracting consumers and retain loyalty, a good number of concerns are associate with
the usage of loyalty card for developing business. For instance, it is highly difficult to pinpoint
where the loyal behaviour of the consumers actually comes from. This is because, loyalty
framework cannot break from the transactional spirit. Majority of time, it appears that the
consumer who buys on a frequent rate is a loyal one. However, this may not be the case since the
consumers often opt to conduct repeated buy from an organization not due to satisfaction but
also since it is more convenient for him or her, or due to the provision of rewards. Hence,
loyalty, which in essence is an emotion, may not be gauged by the loyalty program.
Another major concern that is face by a good number start-up organization while
implementing loyalty card as a strategy to enhance competitive advantage is balancing the
bottom line. Considering the fact that in a start-up business the investment costs is high and the
yearly profit is low, offering high discounts to the consumers, regardless of the form, offers the
bottoline of the company. For instance, a loyalty discount of 10 percent, that is 5 dollar discount
on a 50 dollar sale, results in a 500 percent decrement in its profit. that is while the cost remains
the same, the organization, instead of earning 10 dollars for the same end up earning 5 dollars.
What appears to be a small discount, in this case, 5 percent can significantly impact profits.
While a good number of organizations are investing their finances in loyalty programs,
lack of effective researchers on how exactly the loyalty programs can help a business to flourish
has been evident. Not only has his, lack of researches been conducted about the concerns
associated with the implementation of loyalty card program for business purpose. Along with
this, lack of academic researchers associated with the concerns that the management of an
organization must be aware about before using loyalty cards as a revenue enhancement technique
has been detected. Hence this research has been conducted in order to help the management of
already established as well as start-up organizations to use loyalty card in an effective way.

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These researches will also pave the way for future researchers who are willingly to conduct study
on the impact of loyalty cards on businesses.
Research questions
The chief research questions for the mentioned research are as follows:
1. what are the positive impacts of loyalty cards on business
2. What are the risks associated with the usage of loyalty cards for business growth?
3. what are the strategies that are applied by the management for successful implementation
of loyalty cards for business growth?
Variables and hypothesis
H0: Loyalty cards do not impose any effects on the business growth.
H1: Loyalty cards help the business to boost its revenue
H2: Loyalty cards help the business to enhance consumer base
H3: Loyalty cards help the business to enhance access to valuable data.
Aims and Object
The aim of the mentioned research is to find out how Loyalty cards can enhance the growth of
businesses.
The objectives of the research paper are as follows:
4. To find out the positive impacts of loyalty cards on business.
5. To find out the risks associated with the use of loyalty cards for business growth
6. To find out strategies those are applied by the management for successful implementation
of loyalty cards for business growth.