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An analysis of UK loyalty card schemes with particular consideration of their long term future.

Extracts from this document...

Introduction

Independent Study 26334 An analysis of UK loyalty card schemes with particular consideration of their long term future. Student Number: 200214349 Module Number: 26334 Module Leader: David Tucker Supervisor: David Tucker Date of submission: Tuesday 28th March 2006 Acknowledgements Thanks to David Tucker, supervisor, for his support with this research. Thanks also to those who took the time to complete the questionnaires. Table of Contents PAGE Abstract....................................................................................... Chapter 1: Introduction.................................................................. Why did UK retailers introduce loyalty schemes?............................. Why concentrate on customer loyalty?.............................................. How loyalty card information can be used......................................... Why have some databases failed?.................................................... Chapter 2: Literature Review.......................................................... Existing theories on customer loyalty........................................ Current situation and issues surrounding loyalty cards.................. Future of Customer Loyalty Programmes................................... Chapter 3: Research Aims and Methodology.................................... Research Aims..................................................................... Objectives........................................................................... Methodology........................................................................ Chapter 4: Research Findings and Analysis.................................... Chapter 5: Limitations.................................................................. Chapter 6: Recommendations....................................................... Chapter 7: Conclusion................................................................... References................................................................................... Bibliography.................................................................................. Appendices.................................................................................. 1.0 What is loyalty?......................................................................... History of Loyalty Schemes and Database Marketing............ How does a loyalty card work?................................................. 2.0 Pilot questionnaire......................................................... 3.0 Completed final questionnaire.......................................... 5 6 6 7 7 7 9 9 9 10 11 11 11 11 15 30 32 33 35 37 38 38 38 39 40 40 List of Figures PAGE Figure 1. How long have you owned your loyalty card?.............................. Figure 2. Which loyalty schemes are you a member of?............................. Figure 3. How many loyalty schemes are you a member of?...................... Figure 4. How often do you use the loyalty card?....................................... Figure 5. When was the last time you used the loyalty card?..................... Figure 6. What is the minimum you have to spend before using your loyalty card?................................................................................................ Figure 7. How many cards have you not used recently?............................. Figure 8. Did you already shop at the store before you obtained the loyalty card?............................................................................................................ Figure 9. Has your shopping behaviour changed since owning the loyalty card?............................................................................................................ Figure 10. What was the reason for applying for the loyalty card?.............. ...read more.

Middle

It would have been best to use simple random sampling, a form of probability sampling as it gives every person aged over 18 years in Hull an equal chance of being picked for the sample, but this would have been too difficult to administer in a project this size (Zikmund: 2003). Chapter 4: Research Findings Results of primary research Once all the 100 questionnaires were completed, the results were analysed. In some instances, there appear to be more than 100 responses; this is because people may have multiple answers for the different loyalty cards they own. The response rate for the questionnaire was 100%, and all the questionnaires were completed sufficiently. How long have you owned your loyalty card? Less than 6 months 18 6-12 months 26 1-2 years 51 3-4 years 53 4+ years 17 Figure 1. How long have you owned your loyalty card? Wright and Sparks found 26% of loyalty cards were acquired within the last year (Wright and Sparks, 1999). Results found in this study concur; with 27% of loyalty cards being acquired in the last year. This may be influenced by the fact that mainly students were questioned who will mostly be at the lower age range of loyalty card holders so may not have been able to acquire the loyalty card earlier. It does however suggest that customers are not tiring of the schemes as many people are still joining them. Which loyalty schemes are you a member of? Matalan 2 Tesco 32 Boots 52 Fraser 9 Nectar 18 Subway 2 WHSmith 9 M&S Chargecard 1 Topshop/Topman 18 River Island 2 Dorothy Perkins 1 Miss Selfridge 1 Morrisons 5 Warehouse 1 Figure 2. Which loyalty schemes are you a member of? The total number of different schemes people are members of in Hull is 17, demonstrating the sheer variety of schemes available. Also some schemes may not have been included because they did not exist in Hull so there could be even more in the UK. ...read more.

Conclusion

People on average, are a member of 1.62 schemes, and nearly three-quarters of respondents own at least one loyalty card. Of concern for retailers, nearly a quarter of respondents only use their cards 'sometimes' or 'rarely' which may suggest the schemes are not successful in generating loyalty. Also the fact that 18% of loyalty cards were not used during the last six months is of concern. Less people are now carrying loyalty cards with them. The biggest incentives for joining a loyalty card scheme for customers are rewards and benefits, in-store promotion, credit and initial discounts. Customers are not interested in forming a relationship with retailers. Reasons such as convenience, location, product quality, range and price were now more influential to customers than owning a loyalty card, suggesting perhaps loyalty cards are not having the desired effect. The majority of respondents have not disposed of any loyalty cards in the last six months, which suggests customers are not tiring of loyalty cards. However, 68% of respondents have declined at least one loyalty card in the last six months, making an average number of cards declined as 1.7 cards. This means retailers need to make an effort to improve the offerings in their loyalty card schemes to entice customers to join them. Comparisons have been made throughout the analysis of results with Wright and Sparks work (1999). Findings in both studies have been fairly similar but as both studies were localised, further research is needed to validate the results. In summary, research has shown there is still a future for loyalty card schemes but for schemes to be successful they need to offer benefits that appeal to the customer. Schemes need to be easy to join and well promoted. Finally, as wallets are already full of cards, different methods of collecting points are needed such as the Tesco Clubcard key ring to encourage people to carry the card and use the scheme. ...read more.

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