Business Integration Project: Tesco Club Card and Loyalty

This business integration project delves into the effectiveness of reward strategies, specifically focusing on Tesco's Club Card program, in fostering customer loyalty within the competitive UK retail market. The research employs a case study approach, analyzing Tesco's implementation of its Club Card and its impact on customer satisfaction, retention, and overall business growth. The project utilizes secondary data analysis and qualitative evaluation techniques, including SWOT, PESTLE, and Porter's Five Forces models, to assess the internal and external environments. The findings highlight the significant role of reward strategies and customer relationship management (CRM) in attracting and retaining customers, ultimately contributing to sustainable business development. The study also addresses the impact of loyalty models and marketing tactics on retail business growth, providing insights into the evolving landscape of customer engagement and loyalty programs.

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).