The Effectiveness of Customer Loyalty Programs: H&M Case Study

This research project investigates the effectiveness of customer loyalty and reward schemes at H&M, a major multinational retail company. The study aims to determine whether these programs truly work by examining their impact on consumer loyalty, sales, and the relationship between employee incentives and customer faithfulness. The research employs a descriptive research design with a deductive approach and an interpretive philosophy, utilizing both primary data (questionnaires) and secondary data (books, journals). The report outlines the research methodology, including data collection methods, sampling techniques (random sampling of 20 employees and customers), and data analysis. The literature review explores the importance of customer loyalty, the role of reward schemes, and their impact on business performance. The project is structured with an introduction, literature review, methodology, and conclusion, offering a comprehensive analysis of H&M's customer loyalty strategies and their overall impact on business outcomes. The findings are designed to provide H&M with actionable insights to improve customer retention and profitability.

RESEARCH PROJECT

Table of Contents
PART 2............................................................................................................................................1
1.1 Research project outline...................................................................................................1
1.2 Factors contributing to research project selection............................................................2
1.3 Literature review..............................................................................................................2
1.4 Research methodology.....................................................................................................4
1.5 Gantt chart........................................................................................................................6
2.1 Resources efficiency.........................................................................................................7
2.2 Questionnaire....................................................................................................................8
2.3 Recording and collection of data......................................................................................9
3.1 Research evaluation technique.......................................................................................10
3.2 Analysis of data..............................................................................................................10
3.3 Conclusion and recommendation...................................................................................13
4.1 Covered in power point presentation..............................................................................14
REFERENCES..............................................................................................................................15

PART 2
1.1 Research project outline
Title – Assessing that whether consumer loyalty and rewards schemes actually work - case study
of H&M
INTRODUCTION
Clients loyalty is no more a choice but a required element to be present in every business
type. As competition in the external market has raised to a great level it has increased pressure on
various companies to provide their customers with the best quality and effective outputs.
Customers needs to be loyal towards business so that long term relations can be maintained with
them (Allaway et.al., 2011). As H&M is a retail company and is dealing in products that has
many substitutes available with them it becomes more crucial for them to adopt various polices
through which strengthening of connections with potential consumer can be made possible.
Increase in total sales is the direct benefit to cited company if it is successful in implementing the
loyalty programmes with the external surroundings.
Background
H&M is a very huge organisation Sweden multinational company. Its turnovers are great
that makes it third largest retailer business unit. Its founder took various efforts towards making
it best. Initially it was opened in just one city but gradually it stared expanding result of which is
that now it has more than fifty stores all over the country. It is dealing in products like
stationary, garments, furnishing, playing items petroleum etc. With the passage of time more and
more new entries has taken place in same industry which increased pressure on it to make
continuous improvements. For the same it is of vital importance that H&M gives enough
importance to the consumer loyalty reward programmes which contributes in making good hold
in market.
Goal and Objectives
Aim – To understand weather the clients commitment and rewards schemes actually work or not.
Objective
 To recognise the importance of loyalty in business world
 To evaluate the Role of reward schemes in H&M
 To identify connection between employee reward scheme and customer faithfulness.
1

Research Questions
 How customer loyalty towards is important for H&M ?
 What is the relation between profit and consumer trust?
 Does reward schemes in organisation work for H&M
1.2 Factors contributing to research project selection
In order to make continuous improvements in the existing business researches are done
so that data can be collected for the areas which needs to be improved. Selection of research
projects is done after analysing need for same. Though there are other concerns also which could
be a part of study but to determine whether consumer loyalty and rewards schemes actually work
or not is of vital importance as this will have major effect on cited companies profitability. If it is
realised that even after giving much efforts to maintain effectiveness and efficiency in business
company is not able to achieve the desired goals and objectives than to it becomes necessary to
identify reason behind this cause (Bell, 2014). As consumer is a king in market it becomes very
important to work towards providing them maximum satisfaction. Therefore in order to analyse
the grounds on which clients judge any company is necessary so that accordingly changes can be
made in the existing practices of H&M. No matter how much company is investing in its
operations if the ultimate user finds that cited company is not loyal towards them they will not
appreciate companies pain taken towards completing raw material into finished goods..
Therefore in order to remove this drawback research is conducted which can be utilised by
management of cited company.
1.3 Literature review
According to Bijmolt, Dorotic and Verhoef (2011) being loyal with customers is of vital
importance as it helps in doing more business. When companies are successful in maintaining
trust with their clients more transactions are encouraged and long term relation is established
with them. Once it is assured by the consumers that products and services provided by the
company are of good quality than they do more investment in buying their products as they know
that they will be getting high satisfaction after buying that brand. If it is absorbed that company
is not loyal with their clients than it will have negative impact on its performance as once they
identify that company is not offering what they actually promise than it sales get reduced in the
future. Author suggested that loyalty is the prime requirement for establishing effective
connection with clients and experiencing growth and development. In the words of (>>>>>>)
2

maintaining faithfulness with different consumers also reduce total cost of company as once they
are familiar with the products and other services of organisation they demand less attention and
assistance by the working employees and help themselves. Instead of asking for customer
support services sometimes they even help other consumer in solving their quarries while their
visit for buying in stores. Author gave emphasis on how this way an easy working surroundings
are developed as managers do not work under the pressure. Stress of maintaining price efficiency
also get reduced through this concept as once clients are satisfied with the product of cited
company they do not compare it with other options available in market which is a very positive
factor for H&M as it has got many substitutes in external environment Brinkmann (2014)). With
this there are also many other advantages of consumer commitment programs which are given
according to Chen and Pearcy (2010)) who highlighted the advantages of same in context of
experiencing growth and expansion. Writer says that when clients are loyal with the company
they give an effective feedbacks and honest suggestions which can be further utilised for making
improvements and innovations in the existing products. As clients utilise the offerings more on
continuous basis they are more aware about its positives and negatives which can be utilised as a
framework for production department to remove these flaws. This will increase customer
satisfaction and utility of same commodity hence total output will get raised which will further
hike the total sales. He also said that consumers which are loyal towards the company act as a
brand ambassador. Apart from advertisement or other marketing mouth publicity is the most
effective. It is not like clients share only their bad experience but also tell others about their good
experience which they have with a particular brand. Success when discussed influence more
sales and demand in market which is positive move for given enterprise.
As per the views of (Cross and et.al., (2010) no person in business work for free or give
his full efforts without expecting anything in return specially not in H&M which is not a
voluntary service industry. Hence it becomes important that they are given the required
incentives in return so that the productivity of enterprise remains ineffective. Rewards are the
returns which are given to the employees working with an organisation with an objective of
earning something in return which can be monitory or non monitory. Incentives can be utilised
for motivating and inspiring different employees to work with their maximum dedication as
when they know that their efforts will be recognised than the feel motivated. Apart from this it
also bring competition among various employees as all in order to prove themselves better they
3

improve quality and efficiency so that they get more name and fame in business. Dorotic,
Bijmolt and Verhoef, (2012) defined rewards as a measure to calculate the effectiveness of
various employees as their performances are first figure out and than accordingly decisions are
taken regarding selection of best employees. This way management can also gets to know about
its strengths and weaknesses and accordingly take corrective actions for the areas which need to
be improved or modified. Eilks and Markic (2011) says that system of reward giving attracts
more employees towards the business and also helps in reducing the turnover ratios as when
labour is paid enough for their pains and efforts they feel more satisfied and accordingly
contributes in growth of business. This way it becomes a tool to achieve organisation goals. Best
level of each employee is identified through motivating them which further help in decision
making regarding decision taking for appraisals and planning promotion programs for enterprise.
According to Gómez, Arranz and Cillán (2012) consumer loyalty and rewards schemes is
an important tool for achieving organisation growth. For any business unit customer and
employees both are of vital nature as productivity and profitably depends so much on them. It
has to be ensured that loyalty is maintained so that long term benefits can be observed in
business and also employee should be paid enough to get the work done in required manner.
1.4 Research methodology
This is process to collect data from past or present to make a deep investigation in any
matter. It includes many techniques of research like surveys, interviews and more others. This is
used to make decisions regarding any specific matter. Concepts and different theories of
collecting the data are undertaken which are related to the subject matter. The method should
consist of the adequate detail regarding this context (Mackey and Gass, 2015). Every data and
information contained in the research should be clear to understand and represents fair view.
Following methods are to be utilised for this research report :
Research design : Descriptive research design is being taken for the report because it provides a
detailed description of every facts and data. This can not be quantitative. It throws light on
problems of current scenario through data collection process. It provides detailed description of a
sample population. It is very much important for the non quantitative topics for a described
details and analysis. It explains that what is it and how is it so.
4

Research approach : In this research report deductive reasoning is taken because in this
approach a assumption or hypothesis is being developed that is based on a existing theorem and
then a strategy is being designed to check the assumption. In the context of customer loyalty &
employee relation this theory is considered. In the approach theory is tested against the
observations (Taylor, Bogdan and DeVault, 2015). There less time is used for study as compared
to inductive approach. It is a risk free reasoning. It is a approach from general to the specific. It
deals with the assumed theorem their testing and the confirmation.
Research philosophy : Interpretive philosophy is used in this research report. Meaning of this
doctrine is to interpret the elements used in study. Researchers of interpretive assume that reality
can be accessed only through societal construction like language, instruments, shared meanings
and consciousness. This humanity can be developed on the basis of evaluation of positivism in
science. Researchers are treated as social actor and it is important for them to admire deviations
between people (Brinkmann, 2014).
Data collection : Under customer loyalty and employee relation research report both primary
and secondary data is being used. Primary data is something that is collected by the researcher at
his own. For example questionnaire is being used here. And secondary data is the one which is
already mentioned somewhere else and now is being used for the second time. Newspapers,
books and journals are being taken as the secondary data here (Silverman, 2016). In
questionnaire a different series of questions is being prepared by the person who is making
research. And from journals and other methods of secondary data information is being collected.
Sampling : Random sampling method is used in this research report. 20 employees and
customers are taken for the inquiry. Random sampling means taking any of the person out of a
group of may people and then examine or analyse them. Different random employees are chosen
for the answers of the questionnaire regarding subject matter. And same method is used with the
customers. This procedure is bias free because all persons are treated equally at ate time of
selection for sampling (Silverman, 2016). No one is treated specially. whole population is judged
by some random selections. The result or outcome of research is only based on the conclusion
arose by the sampling.
Data analysis : Qualitative analysis is made in this research report. Element will be interpreted
in different themes. Codes are to be given to different data. After the categorization of coding
themes, patterns and relationships are identified. At the last stage the data is summarised.
5

hypothesises are checked and useful quotations can be inserted in the report. Hence data will be
analysed (O'Leary, 2013).
Validity and reliability : Collected information is reliable when different researchers use the
same method of research and find same conclusion from such. Problems relating to reliability
crops up in different forms (Meyer, 2013). Validate the information means while exploring the
customer loyalty and employee relationships scientific methods were used and all were accurate.
It is to be examined that right methodology is being used for said purpose. Threats should be
minimised as much as possible but it is not necessary to eliminate all threats.
1.5 Gantt chart
Given below is the time taken by each activity performed while conducting a research
report. Depending upon nature and type of work timeline for each varies which is presented
through a Gantt chart.
Task/
Period
1 2 3 4 5 6 7 8 9 1
0
11 12 13 14 15 16
Suggesting
investigation
Making goal
and
objectives
Organising
literary
study
Investigating
method
6

Assembling
first-hand
data
Information
analytic
thinking
Writing
judgement
Providing
suggestions
Taking
reply from
instructor
Doing
corrections
according to
feedbacks
Last
submission
of report
7

2.1 Resources efficiency
In order to conduct an effective investigation it is necessary that all the resources utilised
are good enough so that required objectives can be achieved. Data collection requires time and
cash and therefore it is very necessary that each of them are utilised effectively in order to
minimise the total expenditure. Time is a very vital resource as if the required information is not
provided on right time than the provided data is of no use (McNiff, 2014). In order to give the
required information regarding how reward schemes and customer loyalty help H&M in doing
good business. Money is an important requirement as it is demanded at every step in conducting
the investigation and also human resources are required as without them no activity can be
continued (Hanauer and et,al., 2012). Hence, it has to be ensured that the work is allotted to those
candidates who are capable of performing all the task as only than his contribution will add to
the need of an enterprise. After this it is also necessary that all the collected facts are presented in
front of the concern authority properly so that interpretation and decision making can be done
properly as limited availability of period may result into loss of quality information.
2.2 Questionnaire
Name
Age
Gender (Male) (Female)
Sample size - 20
1What is your age group?
1)18-25
2)26-35
3)36-45
4)46-60
5)60+
2 How often do you shop on H&M?
1)Once a day
2)Once in a week
3)Once in two weeks
4)Once in a month
3 On a scale of 1 to 5 where 1 represents Extremely satisfied and 5 represents Extremely
dissatisfied how would you rate H&M products and services?
(1)
(2)
8

(3)
(4)
(5)
4 What in H&M products and services do you like most?
1. Quality
2. Price
5 Are you satisfied with the bonus schemes of H&M?
1. Yes
2. No
6 Do you spend more money in H&M after you have a H&M club card ?
1. Yes
2. No
7 Do you gain any benefits after joined the H&M clubcard?
1. Yes
2. No
8 How likely is to switch to another supermarket?
1. Not at all likely
2. Likely
3. Extremely likely
9 How likely is to recommend H&M products and services to your friends?
1. Not at all likely
2. Likely
3. Extremely likely
10 What do you think H&M must improve in their reward scheme?
............................................
2.3 Recording and collection of data
1 What is your age group? Frequency
1)18-25
2)26-35
3)36-45
4)46-60
5)60+
10
6
3
0
1
9

2 How often do you shop on H&M? Frequency
 Once a day
 Once in a week
 Once in two weeks
 Once in a month
2
4
6
8
3. On a scale of 1 to 5 where 1 represents
Extremely satisfied and 5 represents Extremely
dissatisfied how would you rate H&M
products and services?
Frequency
(1)
(2)
(3)
(4)
(5)
8
6
4
0
2
4 What in H&M products and services do you
like most?
Frequency
 Quality
 Price
14
6
5. Are you satisfied with the bonus schemes of
H&M?
Frequency
 Yes
 No
16
4
6. Do you spend more money in H&M after Frequency
10