Introduction and Background of Research
It is a primary goal of any company to develop customer’s loyalty and this has been achieved through loyalty programmes for customers. These programmes encourage the customers to purchase products offered repeatedly since they are rewarded (Saxena, 2009). There are different loyalty card programs depending on the type of service offered by an organisation. Local cards are used as a tool in developing sales promotion (Lee, 2002).
For example, in a supermarket, customers with loyal cards activate them by swapping them in special sensors that are located by the entrance (Mauri, 2003). Consequently, a customer can be in a position to locate all the products that have promotional offers.
The advantage of loyal cards that are computerized enables displays of promotional offers that are specific to each individual customer’s shopping profile with respect to the product as well as the brand. In case there is a customer who is interested in any of the offers, then the right promotion coupons are given (Lancastand Massingham, 2010).
Information Technology and Loyalty Programs
Technology is largely depended on in loyalty programmes and its contributions include the following;
- The point of sale (POS) systems that help in the recording of actual transactions
- Software programs that help in analyzing varying customer transactions which are useful in coming up with promotions (Egan, 2007).
In the modern retail and service industry, demand for customers is increasing rapidly and marketing is also very competitive. As such, loyal cards can be used to attract customers by giving them a reward or discount and in return more products are purchased than if there was no motivation (Wilmshurst, 2011). This research is geared towards establishing the benefits of loyalty cards to a retailer. In order to do so, the nature of the research to be conducted will seek to answer the following questions;
Research Questions
1. What is the customer’s buying pattern?
2. What are the advantages of loyalty cards to the customers?
3. What are the customers’ needs and their different preferences?
4. What does all these questions (1, 2, 3) beneficial to the retailer?
Aims and Objectives
General Objective
- The overall objective of this research is to establish the benefits of establishing a loyalty card scheme.
Specific Objectives
- To find out the purchasing pattern of different customers.
- To find out the benefits derived from a loyalty card scheme.
- To provide viable recommendations to the retailer on loyalty cards.
Hypothesis
- There is no purchasing pattern for different consumers.
- There are no benefits that are derived from a loyalty card scheme.
Proposed Research Methods
Qualitative Research
Surveys are mainly used to carry out marketing research (Blythe 2006). However, there exist many limitations such that many researchers use quantitative techniques which should not be the case. In order to adequately achieve the stated objectives, qualitative research will be used. This will involve the use of unstructured questionnaires, interviews, and use of focus groups. This choice is informed by the fact that objectives do not require to be quantified.
Data Collection
Data will be collected from primary sources as well as secondary sources. The secondary sources will include books, magazines, journals, internet among others. The primary sources include interviews, questionnaires and focus groups discussions.
Unstructured Questionnaires
Both open and closed questionnaires will be used. The respondents will therefore be in a position to give their different opinions in the open questionnaires and the closed questionnaires will help the researcher to analyze quickly and also avoid ambiguity.
Interviews
The respondents will be asked open ended questions and they will be encouraged to express themselves freely by giving their own ideas. However, the researcher will be keen so as not to ask questions that are biased.
Focus Groups
Those customers that will show an interest on the subject matter will be grouped and expected to constructively and exhaustively contribute. A focus group is advantageous since it enhances a wide range of ideas from the members (Fernie, 2003).
The sampling Design Process
The target population will be the loyal customers and those in major retail outlets. The process will be precise in order to give the required results. The sampling frame will then be determined and it will constitute the sample frame which will be a representative of the target population.
The sample size will be 60 people in which 30 females and 30 male are targeted. Judgemental sampling will be used since it is a non-probability technique in sampling. It is predicted that about 95%-99% of the 60 respondents will be reached (Malhotra, Hall and Shaw, 2004).
Data Presentation and Analysis
Data will be presented and analysed by use of descriptive statistics, inferential statistics as well as associative statistics. Descriptive statistics involves summarising of data into a way that it can easily be interpreted and analysed (Lancaster and Massingham 2010). It involves the use of such tools as averages, standard deviation, frequency, maximum, minimum and percentages in distribution (Ray, 2010).
On the other hand, inferential statistics includes use of hypotheses in order to infer the true characteristic of the population (Roddy, 2010). This is basically based on the data acquired from the sample size. Associative analysis tries to find out whether the variables in the model do relate and the type of relationship if any (Griseli, 2010).
Examples of these tools include correlation cross tabulation and regression. Graphs will also be used to present data. Graphs give the pictorial presentation of data and therefore ease interpretation and analysis (William and Babin, 2012). They include; charts, pie charts bar graphs, line graphs among others.
Accessibility to the data
This research will work under the assumption that the necessary data will be easily accessed from the respondents since they will be willing to give the needed information. It also assumes that the respondents will not be biased in on the ideas that will be issued.
Time, Resources and budget constraints
The data will be collected in two months. The resources that will be used in this research is basically the researchers that will aid in collecting information and cash that will be used for transport, accommodation and typing and printing of questionnaires. The tools used to collect data will first be pre-tested in a small population and any mistakes will be corrected by the researcher. A sample size of 60 will be selected due to limited time and resources.
Validity of Data
Data validation is very important and it involves instituting measures that will ensure meaningful information is collected from the respondents for effective research (Bellizzi and Bristol, 2004).
In order to achieve this, all the questionnaires will be reviewed to ensure that they are duly completed to ensure that they will be viable for interviewing. Reviewing ensures that the questionnaires used are accurate, consistent and also avoids ambiguity responses from the respondents. Moreover, the respondents will be expected to be honest and give valid information.
Ethical issues
Loyalty cards require personal information from the respondents which is confidential. Therefore, this research will ensure that no information will be availed to third parties without the consent of the customer.
Secondly, the information will be in databases that will only be accessed by authorised persons and this reduces the risk of information disclosure (Kotler, 2000). The staff members will also be expected to uphold a high degree of ethics by not engaging in a behaviour that will invade the privacy of the customers (Winn, 2006; Clarke, 2006).
Another issue of ethical concern entails a possibility of misuse of the royalty programs to do unfair market that may not be based on full disclosure that would guarantee the freeness of the decision making process. This may result to a rise of a possible way of having putting the organisation’s profit motive beyond ethics.
To ensure that this aspect is not introduced to the retail chain due to its adverse effects of high returns within a short run, but future negative implications, there is a need that the research process will have an established code of ethical conduct during the establishment of the loyalty program as well as during the actualisation of the program. Lastly, persons who will violate the set policies on customers’ privacy will be punished and compensation to the customer whose profile information has been affected will follow.
Potential use of the research findings
After carrying out the research, the results will be used to determine the buying pattern of the customers which will be used by the retailer to establish the type of loyalty cards that will be used in retailing. This is because customers have different purchasing powers and also the purchasing frequency differs.
Some are light, medium and others are heavy users (Coussement, Demouline and Charry, 2011). It will also help in identifying the tastes and preferences of different customers and this information will be used in promotional offers. The information will also be important to other stakeholders in order to determine the financial allocation to different products as given by the customers.
Conclusion
The benefits of loyalty cards to the clients and the stakeholders cannot be overemphasized especially in developing markets. Purchases are increased and therefore the profits are maximized. Consequently, the business expands and the products or services are sold at low prices due to the effect of economics of scale. The retailer is also able to establish the loyal customers and can easily predict the future financial position of the business. The clients are also motivated by rewards and thus enjoy extra satisfaction without payments.
Recommendations
In order to achieve the desired results from this research report, there are some areas that need to be improved. For example, the retailer should establish those customers that have multiple loyalty cards that help them benefit from the reward issued in different markets.
Instead, he should offer those multiple loyal cards for his own gain. Lack of security is a barrier to customers purchasing the loyalty cards and thus a very comprehensive security system should be put in place in order to make sure that the customers’ personal information is not interfered with.
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