Analyzing Customer Loyalty: Sainsbury's Loyalty Card Scheme Case Study

This case study examines the relationship between Sainsbury's loyalty card schemes and customer loyalty. The study employs an inductive approach and interpretivism philosophy, using survey data from 40 Sainsbury's customers to assess the impact of loyalty card schemes on customer retention and growth within the retail sector. The research investigates the significance of customer loyalty, the connection between loyalty card schemes and customer behavior, and provides recommendations for enhancing Sainsbury's loyalty program. The dissertation includes a literature review on customer loyalty and the retail sector, details the research methodology, presents data analysis and findings, and concludes with recommendations for improving customer loyalty through effective loyalty card schemes. The study highlights the importance of customer satisfaction and the role of loyalty programs in a competitive market, emphasizing the need for attractive schemes to retain customers and maintain a competitive edge. The study provides insights into the factors that influence customer loyalty and offers a framework for retail organizations to improve their customer loyalty strategies and enhance their profitability.

Analyze relationship between loyalty card schemes and customer loyalty -
Case study of Sainsbury's.
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ACKNOWLEDGEMENT
I would like to thank my mentor for the bottom of my heart as they have provided me
good knowledge and effective support for conducting study in an appropriate manner. I would
like to express my gratitude to friends, colleagues as well as family members who have guided
me at every step of thesis. Through their support I was able to accomplish my dissertation in the
best possible manner. In the series I would also like to state special thanks to my team members
who have assisted in collecting data and in analyzing it further.

ABSTRACT
Customer loyalty is the level which business organization has achieved success in
retaining customers for the long run. It reflects the positive experience of the customer towards
the product or services. For this dissertation Sainsbury is selected which is the British
multinational supermarket of UK. The main objective behind this study is to analyze the
relationship between the loyalty card schemes and customer loyalty. In the present study,
inductive approach and interpretivism philosophy has been used by the scholar. For assessing the
relationship between card scheme and customer loyalty survey has been conducted by the
scholar on 40 customers of Sainsbury. From the primary data analysis it has been assessed that
customer loyalty plays a vital role in the growth and expansion of retail sector. Further, from this
dissertation it can be summarized that loyalty card scheme of Salisbury has high level of impact
on customer loyalty.
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Table of Contents
CHAPTER 1: INTRODUCTION ...................................................................................................3
1.1 Background of the study ......................................................................................................3
1.2 Rationale of the study ...........................................................................................................3
1.3 Aims and objectives of the research .....................................................................................4
1.4 Research questions ...............................................................................................................4
1.5 Significance and scope of the study .....................................................................................4
1.6 Structure of dissertation .......................................................................................................5
CHApter 2: Literature review .........................................................................................................7
Theme 1: What is customer loyalty ............................................................................................7
Theme 2: Significance of customer loyalty in retail sector ........................................................7
Theme 3: Relationship between loyalty card scheme and customer loyalty ..............................9
CHApter 3: research methodology................................................................................................12
Research Type...........................................................................................................................12
Research Approach ...................................................................................................................12
Research Philosophy ................................................................................................................13
Research Design .......................................................................................................................13
CHApter 4: data analysis and findings..........................................................................................16
CHApter 5: conclusion and recommendations..............................................................................22
RECOMMENDATIONS...............................................................................................................24
References......................................................................................................................................25
APPENDIX....................................................................................................................................28
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CHAPTER 1: INTRODUCTION
1.1 Background of the study
Customers are the king of market and they have power to affect the growth and
development of the firm to the great level. In retail industry customers satisfaction and loyalty is
the key of success. Now, fierce comparison take place in the retail sector. In order to cope up
with this situation retail companies are starting to make focus on introducing the most profitable
schemes to the customers (Andy, 2005). Such schemes allow firm to perform in the market in an
efficient manner. Nevertheless, companies are facing difficulty in assessing the suitable scheme
which helps them in raising customers loyalty. In order to attain success in the highly
competitive business environment it is required for the firm to make selection of suitable
schemes and loyalty factors. This dissertation is based on Sainsbury which is the British
multinational retailer of UK. Sainsbury makes use of wide range of loyalty schemes to satisfy the
needs of target market in an efficient manner. The present research will describe the ways and
types of schemes which retail business organization can use of to build and raise loyalty among
the customers.
1.2 Rationale of the study
What is the research issue?
In the modern time, firms who are operating in the retail sector facing high level of the
competition. In this, it is highly difficult for the retail firms including Sainsbury to survive in the
market. In this, business units needs to introduce the attractive schemes which helps them in
increasing customer loyalty. Thus, the association between the loyalty card schemes and
customer loyalty is recognized as an issue.
Why is it an issue?
Customer satisfaction and loyalty is one of the main aspects which have high level of
influence on the growth and success of the business organization (Butscher, 2002). Further,
competitors strategies and policies also affect the loyalty of customers to the large extent. Word
of mouth publicity is also affected when customer loyalty decreased. Hence, low level of
customer loyalty is the significant issue in the present time.
Why is it an issue now?
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Now, business organization cannot build and sustain competitive edge over others if they
do not have loyal customers. In this, it is vital for the business organization to offer various or
appropriate schemes to the customers which provide high level of monetary benefits to the target
market (Flavian, Cristobal and Guinaliu, 2008). Therefore, company needs to make suitable
association between the loyalty card schemes and customers loyalty.
How and when it is going to be investigated?
In order to evaluate the research issue scholar will carry out the investigation to assess the
factors which are closely linked with the loyalty card schemes and customer loyalty. It enables
investigator to offer the suitable framework to Sainsbury and other firms of retail sector which
helps them in increasing the customer loyalty.
What could this research shed light on?
The present investigation will shed light on the level to which loyalty card schemes and
customer loyalty is linked with each other. Besides this, it will also present the aspects which
business units need to improve in their card schemes (Denzin and Lincoln, 2005). By this,
Sainsbury can raise the customer loyalty and thereby enhance their profitability aspects.
1.3 Aims and objectives of the research
The main aim of the present study will be “To analyze the relationship between loyalty
card scheme and customer loyalty: A study on Sainsbury UK. ”
Following will be the objectives for the present research
 To determine the significance of customer loyalty in retail sector
 To understand the link between loyalty card scheme and customer loyalty within
Sainsbury
 To recommend the effective ways through which Sainsbury can build effective loyalty
scheme for enhancing customer loyalty
1.4 Research questions
In order to conduct study in the best possible manner researcher is required to frame
suitable questions which addresses the research aims and objectives. Research questions for the
present study are enumerated below:
 How important is customer loyalty in the retail sector?
 What is the link between loyalty card scheme and customer loyalty?
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 What are the ways through which Sainsbury can build effective loyalty scheme for
enhancing customer loyalty?
1.5 Significance and scope of the study
The present study and it outcome is highly significant for the academic and corporate
sector. At academic level students can use this study to develop their understanding about the
card scheme which are adopted Sainsbury or retail industry. Further, they can also use this study
to assess the level to which card scheme helps in enhancing the customer loyalty. Besides this,
the present study and its outcome will also assists other researchers who are going to conduct
investigation on similar topic. Along with it, the study which is being carried out by the
researcher also helps companies who are operating in retail sector. Findings and framework of
this study will assists business organization in making development in their card scheme.
Through this, retail firms are become able to enhance their customer loyalty to the significant
level. Moreover, productivity and profitability of the business organizations are highly
influenced by the customer loyalty.
In the present era, customers prefer to purchase the product or services from the store
who charges reasonable prices. Now, customers are highly price concious in nature which may
cause of high switching cost in the retail sector (Szwarc, 2005). In this, retailer can retain the
customers for long run when they offer attractive scheme and offers to them. Thus, this study
will provide information to the retail organization including Sainsbury about the extent to which
card scheme helps increasing the customer loyalty.
1.6 Structure of dissertation
Chapter 1: Introduction
In the first chapter of dissertation researcher sheds light on the topic of research. Further,
this, scholar sets the aims and objectives which help them in conducting the whole investigation
in an appropriate manner. Besides this, researcher also discusses the significance and scope of
the study in a brief manner.
Chapter 2: Literature review
Under this chapter, researcher will examine the secondary data sources such as books,
journals and research papers. This chapter of dissertation develop deeper understanding of the
researcher on the issue. Through this, researcher can assess the extent to which card scheme and
customer loyalty is highly associated with each other. Thus, by evaluating the viewpoints of the
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different authors researcher is become able to present the fair outcome of the issue.
Chapter 3: Research methodology
In this section, scholar assesses the approach and philosophy of the research study.
Further, it also depicts the methods which researcher undertakes for the collection and analysis of
data. It is the most important chapter of the study which closely influence the outcome of issue.
Chapter 4: Data analysis
In this part of the dissertation researcher evaluates and analyze data by taking into
account the suitable technique. It is the main section of the study which clearly reflects the
solution of the research issue. This chapter offer suitable framework for the last section of the
dissertation.
Chapter 5: Conclusion and recommendations
In the 5 chapter, investigator concludes all the findings on the basis of data which is
analyzed by them in the previous chapter. Besides this, researcher also gives recommendation
about the several areas and aspect which business unit need to improve for attaining success in
the near future.
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CHAPTER 2: LITERATURE REVIEW
Literature review is the most important part of dissertation in which researcher evaluates
the findings and other information of the several scholars. In this, researcher makes evaluation of
the books, journals, research papers and other secondary data sources. It develops deeper insight
among the researcher about the research issue. By making analysis of the various literatures
researcher is able to present the fair view or outcome of the study.
Theme 1: What is customer loyalty
Customer loyalty may be defined as a measure which helps business organization in
making assessment of the extent to which they have attained success in retaining customers for
the long run. According to the view points of Liu and et.al., (2011) customer loyalty is the
outcome of the positive emotional experience and satisfaction which is getting by the consumers
from products or services. When, customers make regular purchase of the particular brand or
product then it clearly reflects their loyalty. Moreover, when customers get positive experience
from the product then they are closely associated with the particular brand. Thus, repeat
purchase of the product or services clearly shows the loyalty of the customers towards the
product or services of particular brand. For instance: Customer make use of the food products of
Nestle for the time. In this,if customer gets positive outcome from the products then it make
repeat purchase of it. Moreover, when product meets the expectation level of the customers then
it develops high level of satisfaction among the customers which may turn into loyalty.
However, it is to be criticized by Hosseini and et.al., (2010) that by repeat purchase of the
product does not show high level of the customer loyalty. Moreover, it is not necessary that
customer make regular purchase of the products. People also shows their customer loyalty by
supporting and participating in the campaign of that particular product. Besides this, giving hit
like to the advertisement of product on social networking site also reflects the loyalty of the
customers towards the products or services. In addition to this, word of mouth publicity about the
product or services are one of the main indicators which shows customer loyalty to the large
extent.
Theme 2: Significance of customer loyalty in retail sector
Siddiqi (2011) said that customer loyalty is the tool which helps retail sector or
organizations in achieving competitive edge over others. In the present era, retail organizations
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are facing cut-throat competition. In this, all the companies make effort to develop loyalty among
the customers by taking into consideration the variety of tools and techniques such as discounts,
combo offers, membership cards etc. Moreover, it is required for the retail organization to frame
competent strategies and policies which helps them in retaining the customers for long run. In the
competitive business arena retail firm can enhance their sales and profit margin when they have
loyal customers. However, it is to be critically evaluated by Santouridis and et.al., (2010) that in
retail sector firm cannot easily get the loyalty of customers by offering discounts to them.
Satisfaction is the key which plays a vital role in the developing loyalty among the customer.
Now, it is highly difficult for the marketer to develop loyalty among the customers. Moreover,
retail organization can develop loyalty among the customers by offering when they exceeds the
expectations of the customers. Due to this, large number of the firms facing the problem of ;ow
level of customer loyalty.
As per the view points of Eid (2011) customer loyalty is highly significant in the retail
sector. Loyalty of the customers place direct and positive impact on the growth and profitability
aspect of retail sector. When customers are loyal towards the products or services of particular
brand then they share their experience with the family member, friends and other people of the
society. Moreover, now people spend their huge amount of time on social networking sites such
as Facebook, Twitter etc.
In the present time, individual share the images of product of brand which they like most.
Furthermore, thy also make comment on the image which attract the attention of their loved one.
For instance: Sam prefers to purchase the shoes of Nike whenever he takes decisions about the
shopping of footwear. Besides this, he also recommends his friend to make purchase shoes from
the Nike store who offers high quality of the products or services as compared to other brands.
In this, it may be recognized as a word of mouth publicity which is the result of loyalty of the
customers. Thus, loyalty of the clients towards the particular brand plays a vital role in enhancing
the customer base to the large extent.
Kheng and et.al., (2010) criticized that in the present era, needs, wants and expectations
of the customers are changed with the very high pace. In this, if company fails to offer the
products or services according to the demand of the customers then it negatively affects the
loyalty of customers. Further, lack of innovation in the products or services is one of the main
factors which closely influence the satisfaction and loyalty aspect of customers. Thus, if marketer
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or retail business organization fails to comply with the all these loyalty factors then negatively
affects the gross productivity and profitability of firm.
Chen and et.al., (2010) said that client loyalty also helps retail business organization in
expanding their operations in an effectual manner. Moreover, when consumers are highly
satisfied and loyal towards the product or services then company is able to attain success by
entering in the new market. For instance: Now, Titan has started to offer sunglasses and
spectacles to its customer base which is highly different from its existing products namely watch.
Large number of customers make use of Titan watches and they are highly loyal towards this
brand. Thus, by taking into account this fact Titan has taken decision to enter into the new
sector. In this, Titan has attained success in the new market as well with the help of loyal
customers. On the basis of this aspect, it can be said that that customer loyalty plays a significant
role in the growth and development of retail sector.
Gómez and et.al., (2012) claimed that when clients are highly loyal towards the brand
then company needs to make very less expenses on the promotional plans and campaign. This in
turn helps business unit in maximize their profitability. Moreover, high association of the client
with the specific brand or product may result in to the more word of mouth publicity. It is less
expensive and the most effectual tool which assists in developing awareness among the wide
group of customers about the product or services which are offered by the specific brand or retail
organization. For instance: Individual is highly satisfied with the products or services of
Sainsbury and prefers to make shopping from this store whenever he wants retail products. In
this, individual also recommend others to take experience of the quality and cost effective
products which are offered by Sainsbury.
Besides this, when customer base of the retail sector increases then production also rises.
Thus, it offers opportunity to the business organization to get benefits of the high economies of
scale in this, customer loyalty offers benefit to the business unit in terms of high inflow and less
outflow. On the basis of all the above mentioned aspects it can be stated that customer loyalty ha
high level of influence on the growth and success of retail sector.
Theme 3: Relationship between loyalty card scheme and customer loyalty
Loyalty card may schemes may be defined as a technique which is employed by the retail
business organization to build up the loyalty among the customers. In this, business unit needs
offers high level of monetary benefits to the customers which evolves high level of satisfaction
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among the customers. According to the view points of Ozdenizci and et.al., (2010) loyalty card
schemes arr created by the several of organizations to reward the loyal customers and encourage
them to come back the store. In this system, organization gives point to the shopper according to
the purchase which is made by him.
Under this, the points which are collected by the the shopper helps them in getting
discounts at the time of the repeat purchase of the products or services. This is one of the main
factors which encourages individual to return back the store and make shopping from it. Loyalty
cards offer high level of benefits to both organization and customers. However, it is to be
critically evaluated by Hunter and et.al., (2013) that loyalty card schemes do not offer high level
of benefits to the people or consumers who makes shopping of the specific products from the the
specific store. For instance: customer visit the supermarket of Tesco for purchasing product such
as beverages. In this, loyalty card does not proves to be more beneficial for the firm.
Cedrola and et.al., (2010) served loyalty program as an incentive plan which allows retail
business organization to collect data about the customers. In this, retail business enterprise offers
discount, coupons and points etc. to the customers in relation to the merchandise which are
purchased by them. It may be served as a reward which is given to the customers by the business
unit for their voluntary participation Loyalty card is the plastic card that has a bar code and
magnetic strips on it. In this, such card is scanned at the time of point of sales. This card
identifies the customers and record the information about the items which are purchased by them
(Filip, 2011). This card provides deeper insight to the retailer or supermarket about the buying
habits of the customers. Besides this, it also renders information about the product which have
high level of influence on the decision making of the consumers. Thus, it helps in understand the
buying behavior of customers.
Tanford and et.al., (2012) criticized that there are large number of customers who are not
highly influenced by loyalty card schemes. Moreover, high level of competition take place in the
retail sector. In order to scope with this situation companies or supermarket offers continuous
discounts to the customers. Besides this, supermarkets also provide special and heavy discounts
to the customers on specific occasions. In this,customer prefers to make purchase of the product
from the store who gives heavy discount to the customers. Zichermann and et.al., (2010) stated
that card scheme provides high level of assistance in generating the loyalty among the customers.
Moreover, in this technique customer earns points by making shopping from the particular store.
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