“The correlation between frequent shopper program and

Customer loyalty, implications and potential improvements

for Nectar at Sainsbury’s”

An Internship Report Submitted In Partial Fulfillment

Of The Requirements for the

Degree of Bachelor in Business Administration

Students Name: Abul H. Md. Helal

ID: 14121173309 / Uel 0857044

Module Name: Research Methods & Project

Module Code: SM

Module Leader: Mr. Raja Khan

Research Supervisor: Ms. Elvy Kollasseril Velayudhan

Guildhall College

In collaboration with

University of East London.

Word Count:

Date: May 2010

ABSTRACT

The intention of this dissertation is to check the effectiveness of the loyalty programs

offered by Sainsbury’s to its customers by analyzing the satisfaction rate of consumers

towards the loyalty program such as Nectar Card. It is very necessary to understand this

relationship due to the high expenditure organizations are investing in the loyalty

programs and whether the investment is really worth. The methodology that has been

used in order to conduct the research for this dissertation is a mix of both the qualitative

and the quantitative types. The primary data has been collected using the method of

questionnaire and interviews. The customers have been surveyed through questionnaire

and the management which involved the store manager and marketing executive of

Sainsbury’s. The expert comments of the management level and the filled questionnaire

from the customers have helped the researcher analyzed the way in which the loyalty

programs or the frequent shopper programs are contributing towards the customer loyalty

and what exactly is making the customers to become loyal towards the organization. Both

the primary and the secondary data collected were in similar to each other after the

conclusions have been reached. By taking the appropriate evidence in to consideration

this dissertation has been concluded that the loyalty programs or the frequent shopper

programs create a positive impact over the customers and the organization and such

programs increase the customer satisfaction rate and even help in retaining the existing

customers while make the organizations perform better in order to meet the req uirements

of the customers.

ACKNOWLEDGEMENTS

In the name of ALLAH, the most Dominant, Compassionate and merciful. He granted

upon me the courage and fortitude to complete my research project.

It is a privilege for me to state my thankfulness to my mother and fiancée for their love

and enormous support and especially for their encouragement and admiration throughout

my entire life.

I would like to express my gratitude to supervisor Ms. Elvy Kollasseril Velayudhan and

Dissertation coordinator Mr. Raja Khan. Their guidance assists me to complete my

research project and she never hesitates to provide me her valuable time while preparing

the project report whenever I needed.

I also want to thanks to all of them who have given a lot of valuable suggestions and

moral support to me.

TABLE OF CONTENTS

Abstract

Acknowledgment

List of Figures

List of Tables

1. CHAPTER ONE – INTRODUCTION

Research Background

Aims Of Research

Objectives

Research Questions

Statement of Problems

Rationale

Significance of the Study

2. CHAPTER TWO - LITERATURE REVIEW

Introduction

Marketing Strategy

Relationship Marketing

Consumer Satisfactions

Customer Loyalty and Retention

Customer Relationship Management

Loyalty Program

Advantages and Disadvantages of Loyalty Programs

Economic Benefit of Loyalty Programs

Nectar Card at Sainsbury’s

Nectar Card Association

2.10 Depth of Review

2.11 Hypothesis

2.12 Conclusion

3. CHAPTER THREE – METHODOLOGY

Introduction

Secondary Research

Primary Research

Qualitative and Quantitative Research

Structure of the Questionnaire

Pilot Testing

Sampling

Participants

Ethical value

3.10 Analysis of Research

3.11 Reliability and Validity

3.12 Estimation and Development

4. CHAPTER FOUR - ANALYSIS AND FINDINGS

Introduction

Nectar card Participants

Customers Reaction to the Nectar card Program

Nectar Card vs. other Loyalty Programs

Nectar Card and Sainsbury’s

Improvements required for the Nectar Card programme at Sainsbury’s

Response of the Sainsbury’s and the

Loyalty Management towards the Nectar Card

5. CHAPTER FIVE – CONCLUSIONS AND RECOMMENDATION

6. REFERENCE LIST

APPENDIXS 1

LIST FO FIGURES

1. CHAPTER ONE – INTRODUCTION

1.1 Research Background

The competition in the current market has increased to a very large extent which had

impacted the way in which the marketing is being done (Butsher, 1998). The marketing

strategies are being implemented innovatively with high creativity. Organisations are

considering the use of Individual Relationship Marketing so that they can sustain in this

highly competitive market. According to Gummesson (1999), the relationship marketing

has been constantly undergoing a lot of changes and now the strategy of 4Ps which is the

Product, Promotion, Price and the Place has now changed in to the 30Rs which is

considered to be the thirty relationships of the new marketing paradigm.

Organizations are currently considering the types of marketing that consider the

relationships between the organization and the customers as they are proved to be highly

effective and productive which can in turn let the organization meet the demands in this

competitive market. This is the main reason that has made acquiring new customers

highly difficult and more expensive. According to Bruhn (2003), organizations have

become customer centric starting from the 1990s in order to meet the demands of the

customers when the requirements of the customers have undergone a lot of changes.

Marketing is considered to be an activity undertaken by the organization to satisfy the

ever changing requirements of the consumers by accomplishing the goals of the

organization as well at the same time (Kotler, 2003). The retail industry has considered

the frequent shopper program as it is a highly effective marketing strategy. According to

Butscher (1998), organizations are able to improve the rate of customer satisfaction when

a specific group of consumers is targeted who are offered many benefits so that a good

long lasting relationship can be maintained. Normally the benefits the organizations give

to the customers are based on points which can be collected by the customer by making

fruitful purchases and there upon these points can be redeemed in the form of a discount

or vouchers. According to Buttle (1996), the retention of customers has become the main

goal for many organizations and hence has changed their marketing strategies

accordingly. This can even improve the performance of the organization economically as

it leads to increased turnover as well as savings at the same time (Christopher et al.,

1991). In addition to this, when the existing customers are being retained, the cost

involved in acquiring new customers is also saved (Palmer, 2001). The marketing

management deals with acquiring highly profitable markets so that a good relationship

can be maintained in that market leading to more profits (Kotler et al., 2005).

Organizations need to consider various options such as the market that provides the

opportunity to grow, increased revenue and a huge market share.

The database of the customers is being maintained by the organizations so that custom

products and services can be offered to the customers and hence fulfilling their

requirements. The CRM (Customer Relationship Management) deals with such activities

that are related to the management of databases. Many organization are implements CRM

in to their activities so that the customers can be retained with the new strategies resulting

in building long lasting relationships with the customers.

The Frequent Shopper Program also helps the organization in such a way that the

organizations can gain huge knowledge on the customers. The market of the United

Kingdom is well known across the world for its loyalty card market in which the most of

the retail giants offer such a system. Sainsbury’s was the first in the world to start the

loyalty card marketing strategy pertaining to a store. It adopted this strategy in the year

1982 when their advertising agency which was Broadbent at that time has suggested to

them. Then in the year 1995, Tesco launched the Club card programme on a national

level across all its stores which is first of its kind. After that in the year 1996, Sainsbury’s

has launched it won reward card which was later replaced in the year 2002 by Nectar

card. The Nectar card had a partnership with many major brands.

1.2 Aims of Research

The main aim of this project is to analyze the importance of frequent shopper programs

pertaining to the retail industry and Sainsbury’s in particular and to find out how such a

marketing strategy can be used to retain the consumers and satisfy the requirements by

making them loyal towards the organization.

1.2.1 Objectives

The objectives of this research are:

To analyse how the frequent shoppers program can increase customer

satisfaction and retain the customers

To understand the underlying marketing strategies involved in the

loyalty cards

To understand whether the Loyalty programs are really effective in

retaining the customers and how effective they are in making the

customers loyal to the organisation

1.2.2 Research Questions

The following research questions will be answered in our project:

What is the use of a loyalty program in increasing the customer

satisfaction by maintaining consumer’s trust and how loyalty can be

generated from the customers end?

Can the choice of products by the customers be changed by loyalty

programs?

Is customer retention really that important?

How Nectar card has helped Sainsbury’s to retain customers and

increase the satisfaction levels of customers?

What are the basic strategies of marketing and how CRM has made a

drastic change to the way of marketing?

1.5 Statement of Problem

Organizations are investing large amounts of money on Loyalty programs and on

technologies to understand and maintain the database of consumers. It has now become a

major issue to be considered due to the highly competitive market. So are the

organizations really benefiting much from such programs and are the organizations really

able to meet the expected demands of the customers with such programs when huge

investments are made on such technologies?

1.6 Rationale for Study

The rationale for study of this project comprises of two stages. In the primary stage we

will consider the secondary sources of literature to understand the concepts of marketing

and how advancements have been brought in to the field with the help of various

technologies. In this stage we will also come to know the underlying concepts of the

loyalty cards and how they can help the retention of the consumers and help increase

profits for the organization.

In the next stage we will conduct a survey based on certain questionnaire that has been

approved by the supervisors so that respective conclusions can be drawn based on the

answers from both the managerial level of the organization that has been taken in to

consideration and the customers as well. We will come to know whether the Loyalty

cards are really useful and if so how productive they have been until now from this

questionnaire. And also issues such as meeting the demands of the customer i.e., are the

demands of the customers who are loyal to the organization been taken care of and

fulfilled accordingly?

1.7 Significance of the Study

This study is done in depth so that the various underlying concepts related to the

marketing can be understood from the scratch and no point related to how the loyalty can

be made, the technologies involved and the way in which it is being implemented

currently can be understood accordingly. In order to understand all these concepts and

stay focused on the aims and objectives of this research we should not deviate from the

topic and the material that is considered highly relevant has only been considered.

The real time findings of this study can let us know whether the organizations are really

accomplishing what they need to accordingly in the intended way. This study can be used

to present the analysis report as we are even conducting a survey on the consumers and

the management to understand in depth whether the purpose of launching the loyalty

cards with huge investments is fruitful or not.

2. CHAPTER TWO - LITERATURE REVIEW

2.1 Introduction

The Literature Review of this topic emphasizes on two core areas on how marketing is

being performed by the organizations in order to retain or maintain the relationship with

the consumers after the relationship has been established. The two areas that are being

taken in to account are the Relationship Marketing and the Marketing Strategies. In

account to this, the key driver in order to retain the customers has also been discussed

which is the Customer Satisfaction. When the marketing strategy has been taken in to

account for the retail business, most of the academics stress upon programs such as

‘frequent shopper’, as such programs are highly popular. The current retail segment is

concentrating on the consumer loyalty programs by stressing on the consumer

relationship management. The information technology is also being used to maintain

healthy relationships with the consumers.

2.2 Marketing Strategy

In order for an organization to satisfy the requirements of the consumers, increase the

revenues, and surpass the competitors in the market to be successful forever, an

organization needs to concentrate its resources on the greatest available opportunities

(Lawrimore, 2009).

According to Dibb et al., (2006), in order to get a competitive edge in the market an

organization needs to plan long term and this can be achieved by taking the long term

market in to consideration with respect to the two processes that come under the

Marketing Strategy i.e., the decision making process and the account planning. However,

Kohler (2003), argues that an organization needs to take its goals in to account while

marketing so that an effective marketing strategy can be created. Furthermore, Hooley et

al., (1998) strengthens the argument by letting us know the importance of offering

custom tailored packages of either a product or service to a definite group of consumers

so that the requirements of the consumers can be satisfied as well as the best marketing

strategy can be implemented both at the same time.

According to Brassington and Pettit (1998), the Strategic Marketing consists of various

steps so that the consumers can be attracted and retained. They are as follows

Designing

Analysis

Implementation

Controlling both the new and the existing services and/or products

Additionally Dibb et al., (2006), in support to the above points has added that the

organizations need to persuade consumers in buying own brand products rather than

buying the products of the competitors so as to get a competitive advantage.

In the recent days many retail giants are concentrating on the implementation of the

frequent buyer programs in their respective marketing strategy. And for some giants, this

has become a core component as well in order to retain the consumers as said by the

Nectar Card’s marketing director under the division of loyalty schemes. He even states

that, under rigid times the consumers tend to value their point (Bokaie, 2008). One of the

major components for a successful Marketing Strategy is considered to be the rise of

Competitive Advantage. Every organization needs to adopt a different marketing strategy

for different products as well as various marketing programs in order to be distinct from

competitors so that when the current products are being renovated, an organization can be

highly successful in the market (Kotler, 2003).

2.3 Relationship Marketing

The retail industry is subject to a very high competition and this drastic rise of

competition has given birth for implementing various schemes and loyalty programs. The

change in the relationship marketing was due to the improvements in the loyalty

programs offered by various organizations. This has even led to a change in the

marketing philosophy being implemented (Yuping and Rong, 2009). According to Payne

et al., (2001), the main aim of the Relationship Marketing is to establish a healthy

relationship with the consumers by making them loyal to the organization which can lead

to providing excellent and high quality consumer value.

The main objective of this new marketing criterion i.e. the Relationship marketing or the

one-to-one marketing is to let an organization attain a certain level so that it treats it

consumers as individuals so that a continuous relationship pertaining to business can be

maintained with them (Peppers and Rogers, 1995).

The relationship marketing is nothing but a simple set of marketing strategy as well as a

marketing philosophy (Gummesson, 1999). Now, considering the two terms marketing

strategy and the marketing philosophy, let us understand the individual meanings of both

of them. The marketing strategy deals with the relationships as such how a relationship

can be made between a business and a consumer (seller and buyer). The marketing

philosophy considers the long term process of maintaining the established relationship

between the seller and the buyer by continuously concentrating on the various ways of

enhancing the relationship between them.

According to Payne et al., (2001), in order to be successful in the relationship marketing

strategies, organizations need to study the consumers as well as look in to the issues as

such what can motivate them and their perceptions of value need to be monitored on a

regular basis. However, currently in this highly competitive market, in order to

differentiate an organization from the competitors, offering high quality goods and

services alone is not sufficient (Naver and Slater, 1990). According to Palmer (2001), in

order to establish a long lasting relationship with the consumers, organizations need to

motivate their consumers in to buying their goods by delivering superior value as well as

differentiating the product to the consumer while considering the needs of the consumers

at the same time.

2.4 Consumer Satisfactions

According to Little et al., (2003), satisfaction of the consumers can be described as the

response or reaction from the consumer’s experiences after they have used a product or

service. In order for the consumers to be satisfied every time, the quality of the product

plays a major role. Hence, companies that are either manufacturing or distributing the

product need to ensure the quality of the product on a timely basis. According to Oliver

Loyalty Latent loyalty

Spurious loyalty No loyalty

(1997), the activities of the consumers on a long term are fundamentally based on the

Customer Satisfaction. The main research between the retention and the satisfaction was

highly focused upon in order to understand the consumer satisfaction and the actual

behaviors of the consumers.

Now let us understand the benefits of having customer satisfaction. In order to understand

it, let us consider the following figure:

Figure 2.4.1 Benefits of consumer satisfaction

Repeat patronage

High Low

High/Strong

Attitude strength

Low/Weak

Source: Adapted from Dick and Basu, 1994

However the consumers, who are highly satisfied with the supplied products or the

service that has been provided, tend to be loyal towards the company as the comp any has

gained the trust of the consumers (Gummesson, 1999).

According to Payne et al. (2001), the company can earn huge amount of money if the

consumers are highly satisfied as satisfied consumers maintain long lasting relationship

with the company.

Little et al. (2003), argues that previously customers satisfaction was the key factor for

the consumers to be loyal however, currently the companies are being forced to provide

high level customer satisfaction so as to retain consumers. Consumers want such

companies that satisfy their needs by understanding the requirements of consumers. For

an organization to maintain a relationship with the consumers, it should check the

relationship between the consumers on a regular basis and analyze whether the number of

satisfied consumers is increasing or decreasing. The organization also needs to check

whether the offer it has made to the consumers is meeting their requirements before

trying to divert the interest of the consumers on its competitors (Payne et al., 2001).

2.5 Customer Loyalty and Retention

The main aim of the various loyalty programs is to retain the customers. Every program

that is being offered needs to have a perfect plan so that the success rate can be

maximized. The way in which the consumers perceive regarding the value of the products

varies and this is what drives the factors such as the customer satisfaction, loyalty of the

consumers towards the company and customer retention. A very good marketing strategy

is required in order to ensure the quality of the products being offered, availability of the

products, service and the after sales support. With an effective marketing strategy, all

these can be coordinated effectively so that high value of products can be provided which

in turn can generate many loyal customers.

When a company is following the strategy of loyalty based marketing, it should

concentrate on specific customers in order to gain their complete trust. This can be

achieved when the company understands some basic things such as more benefit can be

got when the existing consumers are retained rather than attracting new consumers. The

cost involved in attracting new customers is 5 to 10 times higher than the cost involved in

retaining the existing customers (Christopher et al., 1991). In support to the previous

statement, loyal consumers will be more willing to spend large amounts of money with

the company they trust and tend to place frequent orders which are consistent (Evan and

Laskin, 1994). When a company has many loyal customers, it is very to create brand

awareness and the profits can be increased as well by spending less amounts on the

promotions and advertising. Moreover, loyal customers market or promote the product of

a certain company by word of mouth which is highly effective (Little et al., 2003).

Little et al., 2003 also states that the companies which have failed in the established

business venture did not concentrate much in understanding the relationship between the

profitability and the retention of the consumers and concentrated highly on attracting new

consumers. Bruhn (2003) supports the previous statement by stating that in order for a

business to succeed, the key elements for a business are considered to be loyalty and also

the profitability.

Various tools and techniques have been developed in order to measure and understand

‘customer satisfaction’. The highly powerful and effective technique is considered to be

the ‘customer retention’, in which the levels of satisfaction are measured by the rate of

the number of customers who have been retained or the Customer retention rate (Payne et

al., 2001). The rate of loyalty of a customer depends on the rate at which he is satisfied.

Two critical factors that determine the retention rate of the consumers by the company

are the product and the services that are being offered.

2.6 Customer Relationship Management

The CRM (Customer Relationship Management) assists in building stronger customer

relationships by providing highly sophisticated software and various analytical tools so

that the information of the consumers can be integrated from various sources and the

results can be applied to ensure that stronger relationships between the customer and the

company can be made (Kotler et al., 2005). According to Peelen (2005), both the

dialogue and customization can be made of use in order to maintain long lasting

relationships with the most valued customers who have been identified with the help of

CRM. According to Kotler (2003), in order to gain a competitive advantage and to

maximize the customer loyalty, CRM helps the companies to find out the details of every

customer so that they can be targeted individually and custom products or packages can

be offered to them. The past records are being used by the companies to create a

relationship which has been developed by understanding the profiles of the customers

(Jobber, 2007). The future needs or requirements of the consumers can also be

understood or assessed when the information from these past records has been pointed

out.

However, according to Palmer (2001), consumers have become highly aware of the

products and services being offered by the competitors at lower prices which made it very

harder for the companies that are trying to satisfy the customers. The CRM needs to

combine the sales forces and the call centers with the new IT such as e-mails and

websites so as to be highly effective. In this way, higher level of customer satisfaction

can be provided which even facilitates the process of communication between the

consumers and the companies by giving various opportunities to the consumers in the

ways in which their suppliers can be contacted (Peelen, 2005). For an organization to

have an effective management relationship, it needs to determine its position in the

market in comparison to the competitors, and understand the way in which they can

achieve the required results and finally needs to evaluate the various opportunities and

the threats. In order to reinforce and build the relationships of the customers and the

financial benefits respectively, the companies need to consider the different relationships

they have with the individual customers and the decisions need to be made accordingly

and the communications need to be established (Payne et al., 2001).

2.7 Loyalty Program

According to Brassinghton et al., 1997, the Loyalty programs consider the long-term

successful programs and provide the highly frequent and loyal customers with an

alternative to currency such as either vouchers or award points. These points and

vouchers can in turn be traded for either different services or various products based on

their value. The initiatives for customers to find the information on such programme is

provided by the organization and most of the customers find it when they shop with the

company either on the website or in store. Though the loyalty schemes initially saw a

high boom from the 1990s, the loyal consumers were offered discounts from the

companies starting from the earlier days when the commercial activity has been started.

This was done in the earlier days so that the customers are encouraged to return to the

same supplier from time to time. According to Yuping and Rong (2009), though it’s been

a long time since the loyalty programs are been offered to the consumers, the customers

still embrace them and stay enthusiastic which has made it grow over and over through

the years.

When the companies are focusing on these long term programs, the promotional

programs such as different programs offering either one time or immediate bene fits

through scratch cards that allow for winning instantly and even the discount programs

from various retail outlets can be excluded. Two main factors constitute the relation to

the programs, which are the design of the program and the way in which the particular

program is being managed. According to Yuping and Rong (2009), every loyalty

program needs to have 3 specifications that are considered highly crucial which are:

1. Rewards

2. Requirements for participation and

3. Point structure

The types of Rewards that can be provided can be understood from the following figure:

Figure The type and the timings of Rewards

Source: Adapted from Dowling and Uncles, 1997

The design of a loyalty program determines the effectiveness of that particular program.

Many benefits are provided to the customers from the loyalty programs such as rewards

that help the customer save money and discounts. These are highly essential in order to

make such kind of programs more popular and the regular customers get attracted to such

things immediately. According to Kumar and Reinartz (2005), loyalty programs are

considered to the best program by many retailers so that the loyalty of the customers can

be enhanced. According to Van et al., (2005), the amount of expenditure by the customer

differentiates the major difference between the members and the non-members. This

makes the members of a loyalty program enrolls the non members in to that particular

loyalty program (Leencher et al., 2006).

2.7.1 Advantages and Disadvantages of Loyalty Programs

Now let us consider the various Advantages and Disadvantages of the Loyalty

Programs being offered by the companies. We shall consider both these from the

perspective of the consumers and the companies as well.

Advantages from the perspective of Consumers

Consumers can save money which indirectly helps in the consumers

making money (Shugan, 2005)

The consumers are offered various special offers and discounts when

enrolled in a loyalty program (Stauss et al., 2005)

Various custom magazines are rolled out to the consumers (Liu, 2007)

Consumers can feel that they belong to the organisation (Stauss et al.,

2005)

Various factors of convenience are given to the consumers (Shugan,

2005)

Consumers can receive various financial services under some

circumstances (Evan and Laskin, 1994)

Advantages from the Perspective of Organizations

Consumers can be identified and understood in depth (Dowling and

Uncles, 1997)

The overall turnover or sales can be increased (Van et al., 2005)

High level of damage is impacted on the competitors (Liu, 2007)

The consumer is contacted more often which can enhance the

relationship with the consumers (Liu, 2007)

Increased Customer satisfaction (Dowling and Uncles, 1997)

An opportunity enabling cross marketing (Liu, 2007)

The behaviour of the consumers can be analysed (Liu, 2007)

The trends of the consumers can be analysed which helps the

organisation to roll out products based on the trends (Liu, 2007)

The benefits can be spread by the consumers word of mouth (Dowling

and Uncles, 1997)

The possibility of differentiation (Liu, 2007)

Possibility of many new consumers enrolling in to the scheme

(Leencher et al., 2006)

A chance to conceal the real prices and enabling high prices (Liu,

2007)

Disadvantages from the perspective of Consumers

Customers may be forced to purchase some goods in certain times

(Shugan, 2005)

A chance of ending up paying higher prices for the goods being

purchased (Shugan, 2005)

Disadvantages from the perspective of Companies

The cost involved in the promotion of these cards is higher (Liu, 2007)

The available information of the consumers may be misleading in

certain (Liu, 2007)circumstances (Dowling and Uncles, 1997)

The real satisfaction as well as the loyalty levels can be concealed

(Liu, 2007)

The loyalty might be built towards the money instead of being to the

brand (Dowling and Uncles, 1997)

Profits might be lost when the rewards or bonuses are being offered

(Liu, 2007)

It is highly difficult for the companies to get out of such schemes when

ones implemented (Liu, 2007)

When the required levels of appreciation is not got, the scheme may

prove to be a big failure based on the expenditure involved (Shugan,

2005)

2.8 Economic Benefit of Loyalty Programs

According to Yi and Jeon (2003), taking in to consideration the economic observation of

these loyalty programs, the members are given a benefit economically and in the form of

rewards out of which the major features are the savings and discounts. The discount

feature in the loyalty program offers the consumers with the price discounts on various

ranges of products or services pertaining to the members of the loyalty program. The

consumers are given immediate rewards for all the purchases they have made.

The members of the loyalty program are provided with various saving points that are

based on the overall money that has been spent on the company. When the member has

collected enough points, he can redeem all those points for any product worth the amount

of points. According to Zhang et al., (2001), the costs can also be switched when such a

characteristic is enabled. All the points that have been accumulated by the consumer are

lost when the consumers stops buying from the company. When the saving feature has

been enabled in the loyalty program, the entire range of products are benefited and not

the specific products. Much effort is required by the consumers in order to take benefit of

the savings reward scheme. The consumers tend to receive an instant reward instead of

simply waiting for it to happen in the future. Hence, the points should not be given to the

consumers on a random basis (Yi and Jeon, 2003).

2.9 Nectar Card at Sainsbury’s

The Nectar loyalty scheme is not run by the Sainsbury’s but by the Loyalty Management

Group UK. When the customers of Sainsbury’s spent £1 at the checkouts, they will

receive 2 Nectar points. When the customer has collected 500 Nectar points, they can

redeem their points at the tills (checkouts) so that they will get £2.50 off on the current

transaction. (Appendix)

2.9.1 Nectar Card Association

The Nectar Programme is not operated by Sainsbury’s but by Loyalty

Management UK. It owns and operates the entire Nectar cards. All the queries

regarding the Nectar cards are dealt by this organization. The Groupe Aeroplan

Inc owns the Loyalty Management UK. (Appendix)

2.10 Depth of Review

The review of literature has been conducted at such a depth that it answers all our

unanswered questions and all our objectives are fulfilled accordingly. The literature

review has been conducted adequately and no compromise was done when the sources

are being collected in order to understand the different terminologies as well the different

marketing strategies used. The literature starts from the marketing strategy and goes

further in to how a relationship can be maintained with the consumers and what are the

points that need to be taken care of.

So the information available was used to the best so that complete knowledge can be got

regarding the topic.

2.11 Hypothesis

Based on literature review and survey with the customers and the managers, it can reach

to the following hypothesis.

The organisations concentrate marketing on the higher price items as the

points given to the customer will be high and hence the customer will be

satisfied which can be considered as one of the steps for the customer being

loyal and hence retaining customers.

The organisations create an impact on customers by offering the regular

promotions to them so that they become accustomed and hence return to buy

the same product as it offers high value to the customer. The customer will

keep returning to buy such regular offers making the customers loyal to the

organisation.

The customers can be offered extra points when own brand products of the

organisation are used constantly. In this way the customer can be made to

switch brands. The highly targeted areas are the products related to bread and

household. Hence it is possible for the organisation to introduce various offers

on such departments and hence adding value to the customers shopping.

Many customers look for the nectar offers that have come in the store and tend

to buy the products that are on offer so that they get value from both the sides

i.e. the value of nectar and the product as well. Hence this can increase the

loyalty of the customers. So organisations implement such everlasting

strategies.

When the customers are given double or triple nectar points in some

occasions, they tend to buy more and save on their shopping as well as

accumulate points so that they can use those points to redeem when they are

making purchases for a holiday or occasions such as Easter or Christmas.

Customers do feel that they are not enough offers in Sainsbury’s related to the

Nectar. This needs to be overcome so that the customers feel that they are

being taken care of and given a value on every shopping being made in

Sainsbury’s.

2.14 Conclusion

Based on the study of all the major aspects of the project, related to applying many

techniques of marketing narrowing our criteria in to the retail secto r, it can reach the

following conclusions.

The efficient way to increase the market share of an organization in this highly

competitive market is the use of programs such as frequent shopper. Such programs allow

the consumers to be loyal to the organization as well can increase the number of satisfied

customers. This leads to the increase of brand awareness as the returning customers make

repeated purchases finally resulting in the low costs of operation.

The modern approach out of the marketing strategies can be considered as implementing

the loyalty programs. These programs have changed the way in which the organizations

approach customers. The organizations have now become customer centric rather than

concentrating on the products they provide. The CRM (Customer Relationship

Management) has made this possible on a large extent. Due to CRM, the organizations

are continuously striving to meet the demands of the consumers which is increasing the

rate of customer satisfaction which drives the customers to become loyal to the

organization and finally retaining the customers.

Even though many schemes are being implemented, the main focus is made on the

customer loyalty. The loyalty programs, satisfying the customers by meeting their regular

demands and retaining the customers is being done so that the customers turn loyal

towards the organization which can create a big difference to the brand name of the

organization. As the retail industry is highly competitive, before starting a loyalty

program, the organization needs to audit the available information such as the satisfaction

levels of the customers, and the number of customers that have been retained as a whole

etc., so that the loyalty programs do not wind up creating a negative impact on the

customers and one more reason for doing this is that the cost involved in implementing

such programs is generally high.

It can be understood finally that a highly efficient program of loyalty is required in order

build an everlasting relationships with the customers.

3. CHAPTER THREE – METHODOLOGY

3.1 Introduction

A rationale for the methodology that has been selected is made when both the primary

and the secondary data is gathered. We also explain the preferred methods considered in

order to do this research as well as the advantages and the disadvantages of the methods

that have been considered is also explained. All the limitations are detected taking in to

consideration the validity, ethics and also the reliability. The questionnaire, analysis of

data and the sampling has also been utilized and respective conclusions have been drawn

by recommending the possible developments at the end.

In order to complete a research, a methodology is required which is the considered

concept behind the research. The major difference between the terms method and

methodology lies in the concept of using a particular past action that has been successful

and the later is considered to be the one that shows the research procedure that is being

implemented or taken care of (Clough and Nutbrown, 2002). In order to collect the data

and analyze it as well, assorted methods can be made of use. The degree of the choice

that has been made depends on the focus that is being made by the study and the required

amount of data so as to analyze the topics effectively (Kinnear and Taylor, 1996).

3.2 Primary Research

The primary method of research is used to obtain the up to date information on the

chosen topic for research purposes. Hence, this type of data is collected in order to satisfy

a specific purpose which can also be considered as an empirical type of research in which

the collected data can be argued as well as interpreted so that it contributes to the

respective theory (Bryman and Bell, 2007).

Moreover, the research topics are favored by the collected primary data. The primary data

can be collected using various mediums such as through questionnaires and conducting

interviews. Though it is not very easy to be understood on the hold, in order to

understand the primary data, the secondary analysis as well as the conducted research

will be highly useful.

3.3 Secondary Research

A considerable amount of secondary sources are reviewed in order gain an in depth

knowledge on the subject taken in to consideration i.e. the consumer loyalty programs in

the industry of retail. This type of resources i.e. the secondary type comprises of all the

material that has been made a note of on a later date of the commencing of the event

which includes comments on those events and the situations as well (Birley and

Moreland, 1998). In order to conduct an in-depth literature review, the relevant and the

existing information has been taken as the base (Silverman, 2005). The secondary data

has been gathered from various electronic journals that could be accessed from the

EBSCO host. All these journals were related to the service and the marketing industry.

Moreover various reports and online sources have been used in addition to the textbooks

acquired from the library. The main intention of using the textbooks was to evaluate and

inspect the similar and the non similar results and also to demonstrate the criticism made

on the disagreement.

The major difficulty in approaching this particular method of research was the quantity of

the available secondary sources of information on marketing. The data was available in

vast numbers which made it very hard to choose the right information that needs to be

placed in our research.

3.4 Qualitative and Quantitative Research

The surveys are a way of Quantitative type of approach while the interviews are

considered to be a qualitative type of research taking in to consideration small samples to

which open questions are being asked (Silverman, 2005). Moreover according to Bryman

et al., (2007), the questionnaire that needs to be completed by self can also be considered

as a qualitative research due to the difference being that there will be no interviewer who

will ask questions and hence the respondents need to read the questions and answer them

on their own.

According to Kinner and Taylor (1996), the qualitative type of research does have

complications when the questions are not appealing to the population. In addition to this,

the respondents may face difficulty in answering the questions and there is no one

available to assist (Bryman et al., 2007). In order to analyze the different aspects in

relation to a particular event, the questionnaires can prove to be highly effective (Hansen,

1998).

Gunter (2008) argues that the quantitative methodologies are being used in order to yield

much data regarding the behaviors of the participant and their reactions. However this

type of research helps highlight the point of understanding it over the considered quantity

and also assists in discovering the requirements, inspirations as well as the activities of

people.

3.5 Structure of the Questionnaire

The questionnaire needs to be highly simple and easy to be understood. They need to

be logical and needs to reflect the aim of the research or the survey being conducted

as the relevant information needs to be provided to the researcher from this type of

questions (Jobber, 2007). Furthermore, Jobber (2007), highlights the much important

steps used to design a questionnaire which are three in number and have been

identified as:

Figure: 3.5, Stages in the development of a questionnaire

Source: Adapted from Jobber. 2007

Definition of the research problem

Exploratory research

Information required

Definition of the population

Target groups

Survey methods

Ordering of topics

Type of questions

Wording and instructions

Layout

Scaling

Probes and prompts

Coding

Pilot testing

Re-Design

Final questionnaire

Pilot stage

Design Stage

Planning Stage

3.6 Pilot Testing

The questionnaire was testing before implementing in the real world. The main motive

behind such a step was to ensure and allow the researcher to draw comparisons from the

information collected from various sources (Bryman et al., 2007).

3.7 Sampling

Sampling can be understood as considering a particular section of the targeted population

that is representative in nature to undergo the sample initially and then inferring it to the

whole targeted population (Shuttleworth, 2009). The most appropriate type of sampling

that can be used effectively for our project is the stratified sampling as the principle

categories pertaining to the sampling are sub divided (Clough et al., 2007).

However Jobber (2007) argues that this type of sampling will be best suited for this

research as it can be ensured that taking a specific intention as a base, a random selection

of the population can be done. According to Denscombe (2007), if any other type of

probability sampling has been taken in to consideration, then the chances of the

researcher including the most required features to that population are very low.

3.8 Participants

In order complete the survey, the researcher approached the store manager of Sainsbury’s

and was then decided that the survey needs to be completed in 3 days. 50 customers with

a Nectar Card and the management of the Sainsbury’s were involved.

3.9 Ethical value

The researcher is responsible to maintain all the standards regarding the ethics. The

researcher will certify that every standard pertaining to the ethical values will be taken

care of. The main issues that have been concentrated on were the safety as well as the

privacy of the participants of the survey. According to Clogh et al., (2007), the

participants will be intimated regarding the purpose and the nature of the study and

permission will be taken from them to continue with the study prior to collecting opinions

from them. In this way it can be assured that the identity as well as the personal details of

the participants is protected to the maximum level.

3.10 Analysis of Research

Various tools such as charts have been used in order to analyze the content that has been

collected through the questionnaire. The outcome of the research is the result of the

information that is highly structured.

3.11 Reliability and Validity

According to Bryman et al., (2007), the quantitative type of research deals with the

reliability of the information and the main concern is whether the result of the survey is

reliable when a period of time is taken in to consideration.

According to Kinnear et al., (1996), when the concept is being measured by a particular

indicator then these issues are referred to be valid. The pilot study included customers

with a Nectar card.

3.12 Estimation and Development

The main purpose was to collect the information from a wide range of customers with a

Nectar Card so as to make a connection to the primary concerns which were the retention

of consumers, loyalty programmes and the customer satisfaction.

4. CHAPTER FOUR - ANALYSIS AND FINDINGS

4.1 Introduction

This project aims at finding the effectiveness of the loyalty programmes in Sainsbury’s

and also to determine the satisfaction rate of the customers by analyzing how satisfied the

customers are when they are using such a loyalty program and how the organization can

understand the requirements of the customers with such programs and fulfils them

accordingly. The research questions have all been answered using both the primary and

the secondary data and the analysis will be made using both the sets of data and the

charts, pie diagrams and bar graphs are made using the data collected from the primary

sources.

4.2 Nectar card Participants

The findings from the 50 customers who are Nectar Card holders have given the survey

questionnaire. The participants were 60% (30) males and 40% (20) females out of which

the highest percentage i.e. 50% (25) of the participants fall under the age group of 18-30

range.

Figure: Gender description

G ender

Males

F emales

Source: Based on the survey

The majority of the customers found out regarding the Nectar Card scheme when they

were shopping in Sainsbury’s as told in (loya lty program) of the Literature Review. The

customers that found out regarding the Nectar card Programme in the Sainsbury’s store

accounted to 56% of the respondents. 54% customers with a Nectar card made their

weekly shopping with Sainsbury’s as stated in (loyalty program) of the literature review.

Figure: Age of the participants

Ag e of the P artic ipants

18 to 30

31 to 40

41 to 50

Source: Based on the survey

4.3 Customers Reaction to the Loyalty Program

By joining the Nectar Card scheme, customers receive varied benefits when they shop in

Sainsbury’s. They receive points on every purchase of over a £1 with restrictions on

tobacco based products and some products.

Based on the survey of customers, the Nectar Card has satisfied many customers. Based

on the scale of 1 to 5 and 5 being the most satisfied customers 64% of the customers rated

4 when asked how well the loyalty card met the customer requirements and expectations.

The customer’s survey revealed that the Discounts and Vouchers are the most enjoyable

rewards by processing a Nectar card and both of them accounted to 44% and 30%

respectively as stated in the (loyalty program) in the literature review while special offers

and spending the acquired points on the bill to get a rebate accounted to 8% and 14%

respectively. The other 4% contributed to the rest of the available resources.

The customer survey revealed that 24% of them thought that the Nectar Card is creating

a high positive experience while 52% rated that it created a considerable amount of

positive experience.

Figure 6: Customer Reactions to the Loyalty Program

0 20 40 60 80

MeetingE xpectations

P os itiveE xperience

C us tomerS atis faction

Average

S ome whatS atis fiedHighly S atis fied

Source: Based on the survey

As stated in the Literature review many customers tend to collect the benefits from the

program and the survey revealed that 76% of the respondents do collect points whenever

they shop with Sainsbury’s which is a very high percentage

Figure 7: Benefits enjoyed the most

B enefits E njoyed the mos t

0 10 20 30 40 50

Dis counts

Vouchers

S pecial O ffers

R ebate on bill

O thers

B enefits E njoyed themos t

Source: Based on the survey

4.4 Nectar Card versus other Loyalty Programs

When the Customers were asked about the Loyalty card being offered, they responded

well that it is effective. When they were questioned how well the Nectar card program is

performing in comparison to other cards, on a scale starting from very good to very poor,

60% of the customers gave a feedback that it was very good in comparison to the other

cards.

Based on these results we can now be assured that the Nectar Card program is doing good

comparatively. In order to check the influence the Nectar Card makes on the customers

shopping, on a range starting from 1 to 5, 5 being the most influence, 58% of the

customers rated 4 and 12% of the customers rated 5. So from this data we come to know

that the Nectar card does impact the purchase decisions of the customers as stated in the

Literature review.

In order to check the offers that were related to the Nectar Card, whether they were

attractive or not, 74% of the customers indeed said that the offers were very attractive and

when asked that whether there is any need of introducing more activities related to the

Nectar Card, the response was as expected i.e. 72% customers felt that there is a need of

introducing more activities related to the Nectar card.

As stated in the (Customer Loyalty and Retention) of the Literature review the custo mers

tend to promote the loyalty program to their friends or relatives. As accordingly the

survey results revealed that 68% of the respondents indeed consider recommending or

have already recommended the Nectar Card to either their friends or relatives which

indeed are considerably a high amount of response making the organization profitable.

4.5 Nectar Card and Sainsbury’s

When the customers were asked their opinion regarding their satisfaction levels with the

Nectar Card related to the Sainsbury’s in particular, 66% of the customer rated 4 on a

scale of 1 to 5 where 1 is for the most dissatisfied and 5 stands for highly satisfied.

Though this is a good score, this area can be highly improved concentrating in more

levels in this area.

4.6 Improving required for the Nectar Card programme with Sainsbury’s

When the customers were asked to express their opinion on the recommendations that

need to be made to the Sainsbury’s Nectar card loyalty so that it meets the daily

requirements of the consumers, most of them said that were satisfied with the current

service provided while some of them suggested that Sainsbury’s must give more Nectar

points when the customers buy the own brand products of the Sainsbury’s and the daily

items such as milk, bread etc. This indeed is a valuable suggestion by the consumers and

can be considered by the organization which will improve the sales of the own brand

products as well as the increased buyers for the daily products. When this will be

implemented by Sainsbury’s they can progress further in to the market. A very few

customers have also stated that the card holders need to treated specially at the check outs

so that they are made to feel that they are important to Sainsbury’s. This can indeed prove

fruitful in some cases.

4.7 Response of the Sainsbury’s and the Loyalty Management towards the

Nectar Card

The management who are reviewing the performance of the Nectar Card and the

Sainsbury’s as well has provided their valuable feedback. They do believe that Nectar

Card indeed contribute its share towards retaining the customers and increasing the rate

of satisfied customers as well at the same time. This can make the customers become

loyal towards the organization. The management also tells us that the Nectar Card is in

partnership with many other brands and due to this, the customers will have many options

of collecting points and even if they forget their nectar card when any transaction is being

made, the customers do have 2 weeks time and can add the eligible points on to their card

when they have produced the receipt of purchase. This is an example of the value added

service the Nectar Card provides to its customers.

The management of Sainsbury’s also states that the higher the amounts of purchase made

with Sainsbury’s, the greater amount of benefits the customers get. The customers will be

provided double or triple nectar points based on their shopping behaviors at Sainsbury’s.

The chance of becoming eligible for them is that the customers need to be highly frequent

and make considerable amount of purchases with Sainsbury’s. This has brought made a

deep impact on the nature of shoppers as they are getting triple nectar points on their

purchases which is increasing the sales figures as well as the number of satisfied

customers. And all these benefits are only for the Nectar card holders shopping at

Sainsbury’s.

The management has also told us that the Services provided by the Nectar card indeed is

meeting the customer’s requirements and the high quality service provided by the Nectar

Card is contributing towards this. However, the management is not happy that the

expected results are not got about the customers feeling important when they possess a

Nectar card and the management indeed feels that this area does require a lot of

improvement and the features or the services need to be improved in such a way that the

customer need to feel that they are important as when a customer feels like this, then the

satisfaction rate drives up to the maximum which can in turn make them loyal towards

the organization.

The management is happy that the customers are happy that the services and offers that

the Nectar Card is providing is in a timely basis hence making the customers more

satisfied and loyal towards the organization.

4. CHAPTER FIVE – CONCLUSIONS

The conclusions have been drawn upon carefully reviewing the aims and objectives

stated earlier in the project. The research questions have successfully been answered

apart from accomplishing the stated aims and objectives. All of these acco mplishments

have been possible due to the collection of both the Primary and the Secondary data. All

the Analysis and the findings were in relation to the stated aims and objectives which has

made it very easy to reach the conclusion based on the collectio n of data from the

primary as well as the secondary sources.

The aim of this project was to analyze the importance of the loyalty card programmes

pertaining to the retail industry and in particular to Sainsbury’s. In the literature review it

was mentioned that the Loyalty card programmes indeed increase the customer

satisfaction rate and make the customers loyal towards the organization (Yuping and

Rong, 2009).

The following conclusions can be made based on the literature review and the survey

performed:

The Loyalty program indeed helps in satisfying the customers and retains the

existing customers. According to Yuping and Rong (2009), this does really

happen in most of the cases. This statement was proved after the survey was done

which gave us the exact results and after analysing them, 64% of the customers

felt that the Nectar card indeed meets their requirements and more than 70% of

the customers felt that it made a positive point towards the organisation which

indeed has increased their loyalty towards the organisation. The survey that has

been done with the management reveals the same in support to the statement.

Many marketing strategies are involved taking in to consideration the Nectar card.

Sainsbury’s provides double and triple nectar points to the customers based on

their shopping experience which drives the customers to make considerable

amount of purchases and either saving their points for events such as Christmas or

using them for special benefits when required.

The loyalty program contributes a high percentage towards making the customers

loyal towards the organisation and this has been supported through the evidence

collected from both the primary and the secondary sources.

The customer’s choice of purchase is affected by the Nectar card program as

customers tend to make purchases which can provide them more nectar points.

The survey reveals that 70% of the customers agree that their choice of purchases

and the overall purchases are affected by the offers related to the Nectar cards.

The cost of retaining the existing customers is less than the cost involved in

acquiring new customers. The survey reveals that 68% of the customers indeed

consider marketing the uses of nectar card to their friends and relatives which is

highly advantageous to the organisation as this does not involve any cost and is

just done by the word of mouth which is highly effective.

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Appendix 1