Week 19 crm 2 the loyalty card

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  • CWS – co-op wholesale services
  • Week 19 crm 2 the loyalty card

    1. 1. Retail: Issues and Applications<br />Customer Relations Management 2<br />The loyalty card<br />
    2. 2. The diamond of loyalty<br />Few<br />High<br />LOYALS<br />True<br />Loyalty<br />Commitment to stores<br />Number of stores used<br />REPERTOIRE<br />Latent<br />Loyalty<br />HABITUALS<br />Spurious <br />Loyalty <br />Low<br />Many<br />SWITCHER<br />No Loyalty <br />(Adapted from Denison & Knox 1983)<br />2<br />
    3. 3. Behavioural loyalty of UK grocery shoppers<br />Source: Mintel 1999 cited in McGoldrick<br />3<br />
    4. 4. Loyalty Schemes/Programmes<br />An initiative where a specific mechanism is used to<br />incentivise the customer to give a higher share of<br />his/her grocery spend to the retailer-over and<br />above that warranted by the attractiveness of the<br />retailer’s core offering of location, product, service,<br />price, etc. (Coca-cola research group cited in McGoldrick 2002)<br />4<br />
    5. 5. Loyalty Schemes/Programmes <br />But is that all? <br />How do you explain the growth of loyalty schemes?<br />What of the other objectives of the retailer?<br />This definition:<br />emphasises the promotional aspect <br />ignores the information value in providing detailed knowledge of customers’ purchase patterns<br />5<br />
    6. 6. Loyalty Schemes - history<br />Mid 1800’s Co-operative dividends<br />1960’sGreen Shield Stamps / Co-op trading stamps (CWS)<br />Mid 1990’s introduced and grew<br />1994/5 Tesco Loyalty card (Dunhemby)<br />1996 Sainsbury’s Reward card – replaced by<br />2002 Nectar card<br />1997 Boots Advantage card<br />Despite withdrawals (Safeway ABC)<br />Co-op Dividend card, now Co-op Membership card<br />Other retailers have launched cards, and M&S and John Lewis offer vouchers in return for spending on their credit card<br />Best buy - My Best Buy,a tiered, digital loyalty and customer engagement program<br />6<br />
    7. 7. Levels at which loyalty programmes operate(Baxter, 1998)<br />Profit uplift from increased sales<br />Targeted promotion tool<br />Startegic decision support from better understanding of customer behaviour<br />The basis of customer relationships, competitive strategy, store format/location decisions and company culture<br />7<br />
    8. 8. Benefits of loyalty schemesThe retailer’s perspective (a)(MCGoldrick, 2002 p.120)<br />Reinforces loyalty / heavy spending<br />Achieves competitive advantage or parity<br />Service lapses more likely to be forgiven<br />Suppliers finance some of the offers<br />Perhaps less markdowns<br />May save on media advertising<br />Your company name is on a card in the customer’s wallet<br />8<br />
    9. 9. Benefits of loyalty schemesThe retailer’s perspective (b)(MCGoldrick, 2002 p.120)<br />More precise segmentation and targeting<br />Opportunities for mail-outs and reationship building<br />Facilitates cross selling<br />Detailed knowledge of purchase patterns<br />More extensive knowledge of customer’s personal details<br />9<br />
    10. 10. Benefits of loyalty schemesThe customer’s perspective(MCGoldrick, 2002 p.120)<br />Extra discounts<br />‘something for nothing’<br />Personalised offers<br />Other services, invitations to events etc.<br />Membership of a club<br />Choice of redemtion points<br />Satisfaction of saving points<br />10<br />
    11. 11. Drawbacks of loyalty schemesThe retailer’s perspective (a)(MCGoldrick, 2002 p.120)<br />Cost of financial or other incentive<br />Cost of IT systems and cards<br />Launch costs: media, staff training etc.<br />Cost of administration and enquiry handling <br />Cost of mail-outs and coupons<br />Most schemes are easy to copy<br />Many customers also join competitor’s schemes<br />11<br />
    12. 12. Drawbacks of loyalty schemesThe retailer’s perspective (b)(MCGoldrick, 2002 p.120)<br />Withdrawal of a scheme may lose goodwill<br />Most discounts for all customers not just loyalty card holders<br />May convey an association with higher prices<br />Rivals without schemes will exploit this<br />Not a key patronage determinant for most shoppers<br />May distract from more crucial aspects of strategy<br />12<br />
    13. 13. Drawbacks of loyalty schemesThe customer’s perspective(MCGoldrick, 2002 p.120)<br />Discounts usually small<br />Points take a long time to accumulate<br />Too much plastic to carry<br />Inconvenient redemption systems<br />Hassle of filling out the form<br />More junk mail received<br />Invasion of privacy<br />13<br />
    14. 14. Seminar 1<br />Having researched retailers who have loyalty schemes but<br />also offer discounts separately from these schemes (last<br />week) and read this week's material ('Loyalty to the last’;<br />'Deriving and exploring behavior segments within a retail<br />loyalty card program’). If you were the CEO of a large UK<br />based retailer without a loyalty scheme:<br /> What would be your main concerns about introducing a loyalty scheme to your company.<br />What would be the main benefits of introducing a loyalty scheme to your company. <br />Try to comment on and discuss other student's views (in a constructive way).<br />14<br />
    15. 15. Seminar 2<br />Deriving and exploring behavior segments within a retail loyalty card program<br />Arthur W. Allaway, Richard M. Gooner, David Berkowitz, Lenita Davis<br />European Journal of Marketing Vol.40 No 11/12<br />Group 1: Identify the key points in the paper – what is said about behavioural and attitudinal loyalty, about drivers of loyalty? What are the main findings of the research (the loyalty clusters)? <br /> <br />Group 2: Food: Compare and contrast the Tesco and Sainsbury loyalty card strategy<br /> <br />Group 3: Fashion: Critically examine Topshop’s approach to developing customer loyalty<br /> <br />Group 4: Contrast the above with a food discounter such as Aldi or Asda or a fashion retailer such as Primark. Suggest possible reasons for the differences in strategy<br />15<br />

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