Loyalty Cards’ Effectiveness in Supermarkets Proposal Essay

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Due to the recurring recession and the poor economic conditions all over the world, it has become pertinent for all the supermarkets and hypermarkets to be competitive. The loyalty cards present a platform for the supermarkets to be competitive in the market. Loyalty cards are cards which are similar to the credit card in shape, size and aspect ( Pride and Kapoor 2011, p. 52). They also contain a bar code, which is scanned to give the owners information.

The holder of the card accumulates points, which can be redeemed in the long run for discounts and also give the holder unlimited access to partake in raffles and competition. All the information contained in these cards is private and confidential. Loyalty cards are now being used in countries all over the world by supermarkets and hypermarkets (Manfred & Murali 2010, n.d).

However, a loyalty card requires both the card design and management. Design mainly incorporates three perspectives, which are the participation rules of engagement, point structure, and the outcome gains or benefits. There has been research by different scholars in the past, which has given rise to a different outcomes depending on the researcher (Mullins and Walker 2010, p.33). A study by Fairfield (1999) concluded that loyalty marketing could be defined as relationship marketing, frequency marketing, and one-to-one marketing and as a customer centric marketing (p.21).

Another study conducted by in the year 2007 found that the loyalty cards were rather effective in enhancing customer’s loyalty but as it was discovered, other factors were more likely to increase customer’s loyalty (Donnellan 2007, p.123). Therefore, it was concluded that loyalty cards alone were not a sufficient tool to retain customers since frequent users of loyalty cards were highly likely to use loyalty card from other supermarkets.

Participation constitutes both the convenience and cost of participation. A research conducted by Lacey discovered that the loyalty programs differed in terms of how convenient it was for consumers to participate (Lacey 2009, p.56). The aspect of point structure involves how reward points are issued, and the point thresholds are redeeming rewards (Lacey 2009, p.57). In 2007 Ergin and Ozsacman found out that although threshold was equal, the way the points were issued over each purchase affected consumers’ choices (Ergin and Ozsacman, p77). Lacey suggested a reward ratio, variety of reward redemption options, and value of rewards as important considerations (Lacey 2009, p.58).

A research conducted by Lars Meyer-Waarden should provide a higher level of usefulness, but it may not reach such levels if the customers do not entirely devote a large sum of their earnings to this purpose (Meyer-Waarden 2007, p.224). In another research conducted by both Natalie T.M Demoulin and Pietro Zidda, it was concluded that loyalty cards were only effective if the customers highly valued the rewards associated with them making them less price sensitive (Demoulin and Ziddda n.d.).

Consumers have been divided into many dynamic categories ranging from socio-demographics, shopping orientation, future orientation, and price seeking and price sensitivity. Only future orientation and price sensitivity have received support and backing since the loyalty cards have been set to reward the customers at some point in the future. A research by Ergi and Ozsacman in 2007 discovered that the information given by the customer when getting these loyalty cards was retained by the organizations (Ergin and Ozsacmac 2007, p.78).

This information can later be useful in case the organization wishes to advertise its products directly. Ergin and Ozsacman saw this as a potential that the card had and could be tapped to the organizations’ benefit. In 2008, Hair proved in his research that loyalty card programs had not been able on their own to highly impact the behavior of the customers of a given store but it was mainly influenced by the stores (Hair 2008, p 396).

Another research conducted by Lacey in 2009 concludes that the customer loyalty is one of the critical key to any business success since the retention of an existing customer costs far less than acquiring new ones (Lacey 2009, p400).

Loyalty cards and loyalty programs are important to any business entity including a supermarket. Loyalty cards in supermarkets ensure that the organization keeps its customers. It may be costly since the loyalty cards involve giving out rewards and discounts but keeping the customers in the long run is of higher value. The loyalty cards help supermarkets to keep track of their most loyal customers, what they buy and how often they visit the supermarket.

Also in case they want to directly contact their customers, it is easier to track them. Loyalty cards are also advantageous to the card holder because it helps one to accumulate wealth in terms of points, which they may redeem in future. Therefore, loyalty cards used in the supermarkets are an important marketing tool, which needs extensive research in order to be effectively implemented. Although it is a tool that has been associated with people of the high class, it is becoming more popular making it a core subject of study in marketing.

References

Demoulin, N & Zidda, P (n.d.), The impact of loyalty cards on store loyalty: does satisfaction towards rewards matter, 13th International Conference on Recent Advances in Retailing and Consumer” Services Science. Web.

Donnellan, J 2007, Merchandise buying and management, Fairchild Publications, New York.

Ergin, E & Ozsacmac, B 2007, Impact of Loyalty Cards On Customers’ Store Loyalty, international business and economics research journal, 6, pp. 77-82.

Fairfield, L 1999, Human resource management applied research reports: Class 109, 1999, Geneva College, Beaver Falls.

Hair, J 2008, Essentials of marketing research, McGraw-Hill/Higher Education, Boston.

Lacey, R 2009, Limited influence of loyalty program membership on relational outcomes, Journal of Consumer Marketing, 26, pp. 394-404.

Manfred, K & Murali, K 2010, Retailing in the 21st Century, Springer Berlin Heidelberg. Web.

Meyer-Waarden, L 2007, The effects of loyalty programs on customer lifetime duration and share of wallet, Journal of Retailing, 83, pp. 223-236.

Mullins, J & Walker, O 2010, Marketing management: a strategic decision-making approach, McGraw-Hill, New York.

Pride, W & Kapoor, J 2011, Foundations of business, South-Western Cengage Learning, Australia.

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