A Study on Effectiveness of Customer Loyalty Card in Earning Competitive Advantage in Retail Industries

1.0 Introduction

In order to increase the market-share a particular organisation needs to come up with different innovative strategies that can facilitate the brand with a higher competitive advantage over the other brands in the similar industry. Nelson (2011) mentioned that competitive advantage proved to be beneficial for a firm by increasing its brand value as well as its stakeholders. On the contrary Czepiel (2009) argued that competitive advantage can bring back sustainability to a particular organisation. Competitive advantage can help the firm to increase its revenue and net profit. However, competitive advantage can be created by offering some extra reimbursement apart from the goods and services. Dick and Kunal, 2004) suggested that a stiff competition is already being persisting in the UK retail industry. Brands like, Sainsbury, ASDA, Morrisons, etc. Are the leading giants of modern trade. Therefore, to enhance the competitive advantage over its rival companies, Tesco has improvised several tactics. The offerings of loyalty card are one of the imperative services offered by the Tesco to its loyal customers. It has been over viewed that due to the loyalty club a brand has managed to amplify 5% increase in customer retention and an enlargement of 25% in the organisational profit. It offers the customer one point for every £ 1 spent in the store. According to Andreassen (2009), the loyalty card has provided Tesco with unparalleled information regarding the preferences and customer’s shopping style. Thus, by utilising the data of the loyal club, the management of Tesco has been able to depict on the customer trends and react accordingly. Hence, in this research work, the researcher will evaluate the effectiveness of the loyalty card in order to create a competitive advantage over the rival brands.

1.1 Rational for the study

The current research will be conducted to evaluate the effectiveness of loyalty card used by the Tesco. By analysing the project the researcher will understand the factors that affect the consumer buying behaviour. On the other hand, the researcher will measure the profitability of Tesco after the introduction of the loyalty card (Dick and Kunal, 2004). However, in order to analyse the importance of the loyalty card to create the competitive advantage over its rival brands, the researcher will compare the benefits and demerits of the card. Therefore, the author has aimed to add value to the academic degree through the practical and real time study.

Thus, the basic purpose of the study is to explore the effectiveness of Tesco loyalty club over the kinds of bonus card by the retailers.

1.2 Research aims

The research aim is to evaluate the importance of the loyalty card in the retail industry of UK. However, in the particular study, the researcher will contrast the effectiveness of the Tesco’s loyalty card with the other similar kinds of hand out cards offered by the rival brands. 

1.3 Research objectives

With the reference to the research aims, the research objectives are being mentioned below:

  • To monitor on the effectiveness of the loyalty card on increasing the profitability of the organisation.
  • To evaluate the literature review of the consumer buying behaviour.
  • To analyse the importance of the Tesco loyalty card in order to influence the purchasing behaviour of the customer with contrast to the other hand out cards offered by the rival brands.

1.4 Research question

 The research questions are as follows:

  • Why the loyal club is being proved beneficial to the customer?
  • How the consumers can manage to collect points by using the loyalty card, during the time of shopping?
  • Has the system been effective from the point of view of Tesco?
  • Analyse the effectiveness of the loyalty card from the customers’ point of view?

1.5 Research hypothesis

A hypothesis is the accurate guess that is based on the theoretical research termed by (Zeithaml et al. 2006). Thus, the hypothesis has been formed in the most appropriate way in order to start the research.

H1: Customer loyalty card helps in building up the competitive advantage of a brand.

H0: Customer loyalty card does not seek to help in framing up the competitive advantage of a brand.

2.0 Literature review

2.1 Significance of service in the context of consumer purchasing behaviour

Cognitive psychology is vivid used concept required to measure the consumer behaviour pattern. Dick and Kunal (2004) stated that consumer preferences can be termed as the problem solving and decision making sequence of activities. The final conclusion of this particular activity can be termed as intellectual functioning and the notion directed processing of the information. Thus, customer service has been considered as one of the vital functions of marketing. Cronin and Taylor (2012) suggested that often services manage to attain the higher rank in the parameter that tends to affect the purchasing decision of the customer. As has been stated by Dick and Kunal (2004), it is quite trouble-free for a brand to retain its loyal customers for years than to find out new customer base. Therefore, the particular brand should always keep a hold of its existing customers with quality service offering. In order to enhance its brand value and sustenance in the volatile market.

2.2 Various methods used to increase the service quality and its effect on the profitability

The organisations have adopted different strategies in order to build up a value proposition for the customers. The launching of loyalty card has helped Tesco in creating one to one relationship with the customers (Normann and Rairez, 2008). It can be considered as the corporate level strategy of the brand. However, the loyalty card has increased the proportion of loyal customers of the brand in a significant manner. Thus, a very strong feedback has been pursued from the existing customers of Tesco. Perrow (2008) explained that after one month of the launch of the loyalty card approach, about 5 million people have preferred to join the club. Due to which Tesco has recorded an enormous improvement in sales. On the other Perrow (2008) has argued that the sustainability of the particular brand cannot only be increased by the quality customer service. The brand has to introduce different innovative strategies to progress the quality of the product in order to cope with the strategies of the leading giants. Hence, the pricing strategy is one of the foremost factor to improve the profitability of the brand.

2.3 The impact of the loyalty card on the organisational profitability

With the usage of the loyalty card, Tesco has been transformed into the market leader in the UK. With more than 30pc market share, Tesco has been able to respond to the demands of its customers. Moreover, the brand has been facilitated with 7,300 stores across the group which gave an unrivalled trend and preferences. Kotler (2000) mentioned that the brand has worked with the insight business in order to provide a rich and personalised offer and additional incentives to the customers. It has been over viewed that now-a-days customers often shop across convenient stores, modern trade and supermarkets. Thus, the loyalty card comes into use where the customers seek to collect maximum points against the shopping. Therefore, loyalty card holders have facilitated the brand by purchasing the new hudi tablet for £60 in vouchers, thus, the hudi has come up with a huge margin of profit where 300,000 tablets were being sold before the Christmas (Kothari, 2004). This clearly emphasises on the importance of loyalty card on retaining the customers of hard-pressed families and economic class too.

2.4 Current effectiveness of Tesco’s loyalty card system

The brad Tesco needs to rethink its strategies in order to evolve as the emerging discount brand and for the customers struggling with the inflation of 20 pc (Phillips and Furniss, 2006). Therefore, the strategy of introducing the loyalty card has not only served the brand with bedrock data, but also helped Tesco to revamp its stores to suit the communities, like Tesco express, Up to park and etc. It has been concluded that due to such concept, the loyal customers will tend to purchase more. They will pay the higher price. Due to easy services, the practice helps the brand to expand its customer base by providing positive referrals. Ketchen and Bergh (2004) argued that failure to realize the long term nature of loyalty and failure to discriminate the loyalty offerings have resulted in the propagation of the loyalty programs. Therefore, customers often prefer the concept of a loyalty card, in order to shop around the multiple stores based on the requirements and the availed discounts. However, it is very essential for the marketers to survey on the ways that can add value to the customer’s preferences, as it is proliferately difficult to understand the priority of the consumer and offer a high adapted service at the most suitable times.

3.0 Research methodology

3.1 Type of investigation

The methodology provides a clear idea through which the researcher will conduct the research work. According to Bernard (2011), methodology creates a clear base on which every step of the study can be designed. The research methodology introduces strategies like: sampling, data collection, methods of reliability and the validity of the concept. In this particular research the researcher has selected the explanatory and deductive approach (Bagozzi et al. 2009). As the researches has analysed the effectiveness of the loyalty card based on the existing marketing structure of UK, explanatory approach has been selected. On the other hand, the researcher will analyse the database on the existing concept and theories. However, no introduction of new model has been developed in this particular study. Therefore, deductive approach has been selected by the researcher. 

3.2 Data collection method

Mixed method of data collection has been considered in the present study. The nature of quantitative and qualitative data is in contrast to each other. Corner (2002) reflected that while the quantitative details are descriptive in nature and cannot be quantified as quantitative information. The quantitative details will be accumulated by the personal interview session.

Secondary information will be gathered from books, journals and websites. Past publications will e assessed and the company reviews will be evaluated in order to gain topic related information.

3.3 Sampling method

In order not to be biased in the data collection, the researcher opted for the probability sampling. The sampling technique will be used for accumulating quantitative details. Within the current process, the researcher opted for simple random sampling. Brannen (2009) mentioned that simple random sampling process gives equal chances to each of the respondents to be a part of the study and thus not be biased during the data collection. Thus, the customers will be selected at random that will prevent the researcher from being biased during the data collection.

However, the qualitative details will be accumulated through the non-probability sampling process. In order to gather qualitative details, 4 managers will be interviewed and their selection will be passed on the purposive basis. Ketchen and Bergh (2004) pointed out that the purposive sampling has been undertaken to collect the data from the respondents having prior information regarding the research subject.

3.4 Accessibility issues

It has been determined that due to the result of data accessibility issues, the researcher might not have been able to collect enough data for the current research (Kothari, 2004). Moreover, in order to confront any of such accessibility issues, the researcher will seek to collect all the data from the updated journals and several publications available on the web. As it is not required to outline new theories, past publications will be assessed, which will help the researcher to obtain detailed information regard8ing the subject. Internet seems to be a concrete source for collecting sufficient details regarding the effectiveness of the loyalty card for increasing the competitive advantage of Tesco, Uk. Therefore, in order to fulfil other objectives, the researcher will collect the primary data through survey and interview process. The questionnaires will be sent over the questionnaires to the respondents and the qualitative details will be accumulated through the interview process.

3.5 Ethical issues

Cameron (2009) inferred that the ethics of research should be distinct between the acceptable and unfavourable behaviour. During the present study, the researched has certified that all ethical considerations are abided by. The correct details of the sample will not be revealed at anyhow. The respondents will no the forced to respond in a certain manner, rather will be free to possess their opinion to the research questions. None of the company details will be revealed in public and will be strictly used for the current study. Atlast, the respondents will be made aware of the reasons behind the data accumulation, to make them feel free to respond.

3.6 Data analysis plan

Brannen (2009) defines that the data analysis plan determines the process of decoding the collected primary responses. Thus, the analysis plan for the present study depends on the data type. However, the qualitative responses have been accounted in the narrative format, while the quantitative responses are being calculated on the percentage basis. Based on the percentage of the quantitative responses, the researcher will be able to create tables and graphs, required for the current research. The illustrated response will facilitate the reader to evaluate the possible conclusion of the study. The quantitative data will be maintained through the MS Excel. On the other hand, the percentage of the quantitative data will be accounted through the MS Excel, which will help the researcher will accurate calculated data.

3.7 Research limitations

The limitation of the primary research is the specified time frame. It had been difficult to manage the entire data within the specific time frame. Therefore, the researcher had to develop a Gantt chart, with the specified time frame for each of the research activities. The qualitative research sample had another limitation. However, the researcher had been able to introduce subsequent respondents regarding the benefits of the loyalty card of Tesco, yet it could have been explained better. The explanation process had helped the researcher in detailing the research conclusions. Moreover, the researcher had tried to accumulate as much as pertinent data from the chosen sample, in order to provide appropriate objective to the research issue. The final limitation of the present study is the time consumed by the respondents during the time of questionnaires. Hence forth, the researcher had a specified advance in the return date in justifying the questionnaires.

4.0 Anticipated findings

In the above research, it has been over viewed that the anticipated findings are being examined through the empirical data in the research model. The vital findings of the survey are the effectiveness of the loyalty card to facilitate the brand with the competitive advantage and thereby creating a brand trust amongst the potential mass. However, the loyal card can create on the overall performance of a particular brand through its customer retention and loyalty. On the other side, the loyalty card has been considered as the critical components that reflects the customers’ attitude towards the particular brand. Moreover, the point accumulation through the card results as the key motivating factor, which inspires the customer to purchase the products of the specified brands over the other. Hence, the brand should highlight the bonus points in order to enhance the customer base.

5.0 Appropriateness of the proposed dissertation structure

Chapter name Justifications
Chapter1 – Introduction The importance of the loyalty card to understand the brand preferences of the customer. Besides, the aim and objective have be inferred to evaluate the signifance of the –present factor. However, the objective will provide a well defined direction to analyse the current market trend.
Chapter2 – Literature review The past study will support the researcher with the well defined topic, which will lead to justify the aims and objective of the study.
Chapter 3 – Research design and methodology Here the research paradigms have been selected to justify the and help the marketer in the near future, regarding the market trends on the particular research.
Chapter 4 – Findings and analysis The significance of the loyalty card has been highlighted, in order to improve the competitive advantage of the particular brand.
Chapter 5 – Conclusion and recommendation From the primary and the secondary data it has been assessed that the aim and objectives of the study have been justified. Thus, structure has been recommended to improve the competitive advantage and customer base of Tesco.



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Figure 2: Dissertation structure

(Source: Self created)


Research Activities 1st Week 2nd Week 3rd Week 4th Week 5th Week 6th Week
Literature review
Research design and methodology
Desing of survey
Collection of primary data
Data analysis and conclusion
Recommendation suggested


Figure 3: Gnat chart

(Source: Self created)