Analysis of Tesco's Loyalty Card Scheme and Customer Loyalty

This report presents an analysis of the relationship between loyalty card schemes and customer loyalty, focusing on Tesco as a case study. The study explores Tesco's various loyalty card schemes, including the Clubcard, and evaluates their effectiveness as relationship marketing tools. The research employs a qualitative approach, primarily relying on secondary data sources such as journals, books, and articles. The findings reveal that loyalty marketing strategies significantly impact customer attraction, foster long-term customer relationships, enhance customer loyalty, and drive purchase decisions. The report also examines the impact of loyalty card schemes on customer retention and provides recommendations for improving these schemes to increase Tesco's customer base. The report includes thematic analysis and a detailed literature review, offering insights into the evolution and effectiveness of loyalty programs in the retail sector.

Analyze relationship between loyalty card schemes
and customer loyalty: case study of Tesco

ACKNOWLEDGMENT
I would like to give my sincere thanks to my mentor who provide me immense support
fro completion of the entire study. He supported me while planning for the data collection
processing and using the collected data in deriving valid outcome in the light of research aim.
Furthermore, I would also like to say thanks to my colleagues who help me during conducting
the study and writing the critical chapter of the study. Finally, I would also like to give thanks to
my friends and other members who give their kind support fro completion of the entire study
successfully.

ABSTRACT
Marketing is the foremost aspect for any corporation which helps to promote products
and services in the marketplace. Present study is based on relationship between loyalty marketing
schema and customer royalty with special reference to Tesco. Such kind of strategies are
proposed at first by Tesco the biggest retail store of UK in order to attract more buyers and retain
them for longer time span. Furthermore, company bring innovation in its marketing strategies as
per the current trend and changing need of buyers. It facilitates to create its unique identify at the
marketplace and increase the customer base of the same. In the current era competition is kept on
increasing due to high level of innovation in the marketplace. Owing to this it is very important
for any corporation to adopt appropriate marketing strategies so as to retain buyers and create
competitive edge of the firm. In this regard, current study has been conducted to examine the
various loyalty marketing strategies of Tesco on its customer loyalty.
In order to conduct the study in structural manner qualitative type for investigation has
been selected. Here, main emphasis has been laid on secondary data so as to assess the
effectiveness of strategies adopted by Tesco. In this regard different sources like journals, books
and articles as well as other published material have used. However, analysis has been done
through preparing themes in accordance with research aim and objectives.
The data analysis has been done as per the qualitative method by focusing on secondary
data only. Here, number of themes are prepared so as the detail explanation can be given for
linkage between loyalty marketing scheme and customer loyalty of Tesco. Furthermore, the main
findings reveals that loyalty marketing has direct impact on the customer attraction and its makes
management able to build long term relationship with same. Furthermore, loyalty marketing
strategies aid to enhance the loyalty of customer and persuade them to take frequently purchase
decision. Also, company increased customer base by implementing such kind of lucrative
strategies in the marketplace.

TABLE OF CONTENTS
CHAPTER 1: INTRODUCTION...................................................................................................7
1.1 Background............................................................................................................................7
1.2 Rationale of the study............................................................................................................8
1.3 Research aim and objectives..................................................................................................8
1.4 Research questions.................................................................................................................9
CHAPTER 2: LITERATURE REVIEW.......................................................................................10
2.1 Introduction..........................................................................................................................10
2.2 Analyzing loyalty card scheme used by the Tesco at UK...................................................10
2.3 effectiveness of club card system of Tesco as relationship marketing tool........................12
2.4 Assessing the impact of loyalty card schemes on customer loyalty in Tesco at UK..........14
2.5Conclusion............................................................................................................................15
CHAPTER 3: RESEARCH METHODOLOGY...........................................................................20
3.1 Introduction..........................................................................................................................20
3.2 Research Paradigm..............................................................................................................20
3.3 Research Approach..............................................................................................................20
3.4 Research design...................................................................................................................21
3. 5Sampling..............................................................................................................................21
3.6 Research type.......................................................................................................................22
3.7 Research Strategy................................................................................................................22
3.8 Data Collection....................................................................................................................22
3.9 Data Analysis......................................................................................................................23
3.10 Ethical Considerations.......................................................................................................24
3.11 Limitation of the study ......................................................................................................24
3.12 Future scope for the study..................................................................................................25
CHAPTER 4: DATA ANALYSIS................................................................................................26
4.1 Introduction..........................................................................................................................26
4.2 Thematic analysis................................................................................................................26
CHAPTER 5: CONCLUSION AND RECOMMENDATION ....................................................34
5.1 Conclusion...........................................................................................................................34
5.2 Recommendations................................................................................................................34
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REFERENCES..............................................................................................................................36
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Illustration Index
Illustration 1: Customer loyalty.....................................................................................................10
Illustration 2: Conceptual framework............................................................................................14
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CHAPTER 1: INTRODUCTION
1.1 Background
Marketing is the foremost aspect which gives upward direction to corporation and
increase customer base for the same. Marketing consists of number of tools and techniques
through which an organization can communicate to customers regarding its offerings. However,
marketing requires number of activities to segregate all customers so that marketing plan can be
formulated accordingly. The aspect relating to marketing plays vital role in growth and
development of an organization (Banasiewicz, 2005). This is because by the use of different
marketing activities make it possible for firm to target right number of buyers and adopt effective
marketing strategy to meet their requirement in an effectual manner. In this regard, loyalty
marketing is also the imperative aspect to attract customers and increase sales turnover of
corporation (Brooks and Simkin, 2012). The main motive behind such type of schemes and
program is to increase attention of customers towards the products and services that are being
offered by firm. Furthermore, loyalty marketing ensure retention of customers and also increases
their level of satisfaction. It proves to be effective in in achieving long term objectives of firm
(Barry, 2006).
The loyalty marketing is one of the imperative aspect of marketing because corporation
an easily boosts its sales turnover in the marketplace (Brooks, 2010). The current study is based
on Tesco, a British multinational grocery and general product retailer that operates in 12
countries across Asia, Europe and UK. Further, it is the grocery market leader in UK which
provides wide range of products with rapid innovation in its system. Tesco has 16m loyalty
scheme members in UK, 14m in Asia and 8m in Europe. Further, Club Card fuel save is one of
the effective scheme of company. Here, potential buyers can get Green Clubcard point are added
in the carries bad of client. Similarly reward card also offered to customers which promote them
for bulk purchase (Customer loyalty schemes, 2014). Apart from this, Tesco credit card is also
offered to customers thereby they can be attracted towards the products and services (Blutt,
2004). It helps to increase loyalty of customer and retain them fro longer time span. This is
unique marketing strategy of company wherein it is shown to buyers that company is loyal
towards the same (Loyalty Programs, 2014). Further, after introduction of loyalty scheme of
Tesco, Sainsbury also launched its Reward card so as to attract buyers. Thus, loyalty marketing
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is effective tools to communicate about offering of firm in most effective manner. In addition to
this, loyalty marketing determine long run growth as well as resilience of business in the
marketplace (Brink, Odekerken-Schröder and Pauwels, 2006).
1.2 Rationale of the study
The research issue is related to ineffectiveness of loyalty marketing. This is because
Tesco adopting loyalty card scheme for attracting customers and increasing sales turnover.
However, these programs are not meeting requirement of client as per the set standard. This in
turn increases additional cost and create dissatisfaction among customers. However, this issue
has been facing because of improper implementation of schemes in the marketplace. Also,
employees who are working in marketing department do not have appropriate knowledge. Owing
to this, at present company has to face issues related to intense competitions and customers'
loyalty is not ensured effectively. In this regard, current research shed light on effective
management of loyalty program so as to retain customer for longer time span. Furthermore,
emphasis has been laid on improvement in the present strategy in order to get competitive edge
and increase level of motivation among buyers. Apart from this, it has been analyzed that by
implementing loyalty card scheme in accordance with defined standard, company can be able to
retain loyal customers. Thus, relationship between loyalty card scheme and customer loyalty has
been analyzed.
The current on an examination of relationship between loyalty card schemes and
customer loyalty is beneficial for several parties such as scholar, different industries and other
related parties. Here, scholar who are conducting study in the same field will get benefits from
the current research because they will get source of information . Further, retail industry also
come to know about the potential issues behind failure of loyalty marketing scheme so as to
bring improvement in current strategy. In addition to this, analysts can also get information for
developing strong marketing tools in order to attract number of buyers. Other than this, experts
who are related to field of study or literature review will be get in-depth knowledge about the
issues behind failure of marketing strategies.
1.3 Research aim and objectives
The research aim and objectives have been specified as follows thereby researcher can
collect relevant data-
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Aim
The of present study is to examine the relationship between loyalty card schemes and
customer loyalty: Case study of Tesco. It is helpful for researcher to collect lay emphasis on
loyalty card of scheme of particular organization.
Objectives
 To analyze loyalty card scheme used by the Tesco at UK.
 To examine effectiveness of club card system of Tesco as relationship marketing tool.
 To assess the impact of loyalty card schemes on customer loyalty in Tesco at UK.
 To recommend ways in which the loyalty card schemes can be improved to increase the
customer base of Tesco UK.
The above mentioned objectives are helpful in preparing strong data base for the study. It
assists researcher to analyze the research issue in the light of objectives of the firm. Further,
formulated research objectives examine the aspect of loyalty marketing to bring improvement in
performance of company. In addition to this fulfillment of specified objectives are helpful in
reaching at aim of the study.
1.4 Research questions
The research questions are listed below which has been formulated as per the research
aim and objectives-
 What are different loyalty schemes used by Tesco at UK?
 How effective the club card system of Tesco in building good relationship with
customer?
 What is the impact of loyalty card schemes on customer loyalty in Tesco at UK?
 How loyalty card schemes can be strengthen to increase sales turnover and customer base
of Tesco, provide suggestions?
The aforementioned research questions facilitate scholar to develop deep understanding
regarding loyalty marketing. It helps to define the problem in precise manner and develop valid
outcome fro the same in an effectual manner.
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CHAPTER 2: LITERATURE REVIEW
2.1 Introduction
The chapter following the introduction is of literature review. It is based of wide range of
secondary studies. It is the most important part of dissertation which serves as the basis for the
present study as it is totally based on secondary information only. Owing to this, literature
review severs as the strong background for the research by which scholar can develop in-depth
understanding for the topic under investigation. Furthermore, views and opinion of different
authors have been included in the current research along with critical review of the same. This in
turn relationship between loyalty card schemes and customer loyalty is assessed in an effectual
manner. Furthermore, literature review is conducted by considering research objectives.
Accordingly, themes are prepared and concept of loyalty marketing is explained in an effectual
manner. At first, loyalty card scheme of Tesco has been explained. Similarly, the second theme
is prepared to examine the effectiveness of Club Card scheme of Tesco in building good
relationship with customers. At last focus has been laid in analyzing the impact of loyalty
marketing on customer loyalty of Tesco. Thus, in the same manner summarize form of literature
review is presented with the help of conceptual framework.
2.2 Analyzing loyalty card scheme used by the Tesco at UK.
Management of customer relationship is one of the crucial aspect behind success of a
retail organization. Promotional strategies refers to different set of activities which are performed
by an organization to attract buyers and increase sales turnover. It is directly associated with
customer behavior, attitude and emotions. It attract buyers and make them able to access wide
range of services that are being offered by firm. Furthermore, loyalty can be referred as active
efforts of organization for developing long lasting relationship with its consumers. The loyalty is
created among customers with “trust” as it is emotional concept where customers seek for
constant source of value. Loyalty card scheme is one of the effective the most effective ways to
increase attention of customers and retain them for longer time span. According to Andy (2005)
customer loyalty assists management of firm to develop shopping habits among customers so
that sales turnover can be increased to a great extent. In this regard, in February 1995 the Tesco
Clubcard was introduced at first time in UK in supermarket as customer reward program. Under
this scheme points were generated for every £5 spent by customers and those points are
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converted into Clubcard vouchers in every quarter. At this juncture, customers were able to
redeem those points from any store of Tesco. Later on, this scheme was changed where
shoppers/customers gained one point for every £1 spend on their shopping. However, these
points are converted into Clubcard vouchers only when 150 points has added. It facilitates to
give 1% discount to buyers so as to increase their level of satisfaction and persuade them towards
offerings of Tesco.
Banasiewicz (2005) this could be challenged on the basis that high cost is involved in
implementation of loyalty card scheme. This is because new point-of-sale technology was
adopted with Clubcard scheme along with call center so that company can effectively manage
the queries raised by customers. Similarly, other technologies like computer system for recording
keeping as well as human resources in the same area tend to increase cost of production. Thus, at
the initial stage total cost of this scheme was £300 million and approximately 4.5% profitability
of Tesco. After the completion of six months company started to boosts at the marketplace where
customers were accessing the same to a great extent. For example only withing 12 months near
about 8million Clubcard customers started to purchase around 200 million in store products
within a single day.
According Blutt (2004) competitors take less time to adopt such kind of strategy so as to
increase number of customers. It enables them to increase sales turnover and create strong
position in the marketplace. However, it was very challenging for Tesco to maintain its
competitive edge. Yet, competitors strategies did not work well and they shifted their focus
towards cost cutting. At this juncture, Tesco become the strong retailer for attracting buyers
because till 2001 approximate 20 million members associated with Clubcard scheme.
Bose (2010) reported that loyalty card scheme has strong impact on the sales turnover
and brand image of the firm. This is because loyalty defines behavior of customers and
accordingly they take decision related to shopping. It can be critically evaluated that association
of large amount of cost tend to reduce profitability of company to a great extent. However, this
gives long run benefit in turn of high sales turnover and retention of large number of buyers.
Brink, Odekerken-Schröder and Pauwels (2006) commented that loyalty marketing
makes it possible for corporation to cover large market share and change the perception of large
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number of buyers. This is crucial aspect in determining long run growth of firm with increased
rate of return.
2.3 effectiveness of club card system of Tesco as relationship marketing tool
According to Brooks and Simkin (2012) customer loyalty level changes with loyalty card
scheme and other promotional activities of firm. It enables them to access good quality of
services and increase customer base. Further, impact of loyalty marketing contributes creating
brand image of the corporation. Customer generally perceive loyalty card scheme as the
profitable deal by which they tend to attract towards products and services of Tesco.
Furthermore, Clubcard scheme of Tesco generated positive attitude among customers. It aids to
build brand image of company and also increases overall rate of return of the same. On the other
hand, with the adoption of loyalty card scheme corporation was able treat customers as
individuals so as to retain them for longer time span. A counter argument might be that
competitors also adopt the same kind of strategies with more benefits for customers. This in turn
customers can shift from one to another brand. This again can create barriers in the successful
completion of organizational strategies.
According to Cahill (2006) loyal card scheme is adopted just because to grab strategic
benefits for loyal customers. However, customers who buy products and services of company
regularly accounts for loyalty. This could be challenged on the basis that if customers buy
products and services once a time them firm cannot gain customer loyalty. In addition to this
loyalty process of customers in accordance with following diagram-
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