Customer’s Perception Of Multi-Brand Retail (Apparel) Loyalty Card

FORE School of Management

PLAN OF ACTION1. Introduction2. Literature Review3. Approach Diagram4. Problem Statement5. Hypothesis6. Research Methodology7. Analysis8. Findings and Conclusion9. Recommendation10. Limitations11. Bibliography

INTRODUCTION

LOYALTY

“A deeply held commitment to re-buy or re-patronize a preferred product/service consistently in the future, thereby causing repetitive behavior reflecting purchase of the brand despite situational influences and marketing efforts having the potential to cause a switching behavior.”

--Keiningham,T.L.,Vavra,T.G.,Aksoy,L. & Wallard.H.” Loyalty Myths John ” Wiley & Sons Inc, 2006 edition.

Creating and maintaining customer loyalty

Using a variety of means to encourage loyalty

Measuring and changing purchase behavior is a critical component of loyalty programs, so it’s obvious that tracking that purchase behavior is paramount.

Customer retention is more important and more cost-effective than customer development

Loyalty programs/cards have become one of the most critical means by which companies manage their customer relationships

Do these loyalty programs really work?

Do customers choose to go to a specific store due to the loyalty cards they have or are there more pressing reasons for preferring that store?

How do customers perceive these loyalty cards?

Can a loyalty program change how customers behave and get them to spend more money with a specific retailer?

Does loyalty card usage and store loyalty go hand in hand ?

LITERATURE REVIEW

Real brand loyalty results from an emotional bond created by trust, dialogue, frequency, ease of use and a sense of value and added satisfaction. Loyalty is the reflection of a customer’s subconscious emotional and psychological need to find a constant source of value, satisfaction and identity

-- Jenkinson, A. (1995), “Retailing and shopping on the Internet”,

International Journal of Retail and Distribution Management, 24, (3), pp.26-37

There is a range of conceptualizations as to what constitutes loyalty. These range from repeat purchases to a lifetime .The different types of loyalty could be: No loyalty, spurious loyalty, latent loyalty, and sustainable loyalty. Loyalty schemes can only offer value as part of a coherent value proposition in the context of sustainable loyalty; a key role is in converting spurious loyalty, in which relative attitude is low and patronage behavior high repeat, to sustainable loyalty. This involves converting convenience–based loyalty to commitment, and reduces the customer’s inclination to defect.

--Dick A. and Basu K., Customer Loyalty: Toward and Integrated Conceptual Framework,

Journal of the Academy of Marketing Science, vol. 22, Spring 1994, pp. 99-113

A recent contribution from Huddleston et al. (2004) confirms that food store customers exhibited spurious loyalty, i.e. high repeat patronage, but low relative attitude towards preferred stores, which would suggest a role for loyalty schemes. --Huddleston, P., Whipple, J. and van Auken, A. (2004), “Food

store loyalty: application of a consumer loyalty framework”, Journal of Targeting,Measurement and Analysis for Marketing, 12, (3), pp.213-230

Whyte (2004), on the other hand, suggests that loyalty programmes may only create spurious loyalty, and may not be very successful in translating such loyalty to commitment. They suggest that frequent flyer programmes in Australia create spurious loyalty, and that repeat purchase is not a proxy for customer satisfaction or commitment. --Whyte, R. (2004), “Frequent flyer programmes: is it a

relationship, or do the schemes create spurious loyalty?”, Journal of Targeting, Measurement and Analysis for Marketing, 12, (3), pp.269-280

There are two important attitude-type constructs.

• The first is affective commitment (Morgan and Hunt 1994; Verhoef 2003), or the factors that create stickiness in a relationship. This commitment is affected directly by the degree of personal interaction between a customer and a company and how the company manages the customer’s account over time (Bendapudi and Leone 2002).

• The second is brand equity, which is influenced by factors such as repeated performance and satisfaction (Keller 1993; Selnes 1993), word of mouth or the “buzz” about the brand (Rosen 2000), the degree of identification with the brand, and its relevance to a customer’s situation (Aaker 2004; Keller 2003).

As the market grows and customer experience accumulates, more affective attitudes toward the relationship and brand come to drive intentions. With respect to relationship commitment, the implication is that the personal relationship between a customer and a company should be measured, nurtured, and managed effectively (Bendapudi and Leone 2002) through a company’s customer relationship management system. For brand equity, the implication is that the degree to which customers identify with a particular brand and find it relevant to their situation should also be measured and managed effectively.

APPROACH DIAGRAM

CUSTOMER STORE LOYALTY

Store’s attractive interior design

Ease of product return

Quality of product

STORE LOYALTY

CARD

Notify cardholders about upcoming promotions/discounts

Special discount on cardholder's special days

Cash back facility

Accumulate points and redeem it at a later stage

Variety of products

Transportation

convenience

Helpful sales

people

PROBLEM STATEMENT

OBJECTIVE

To determine the Customer’s Perception Of Multi-brand Retail(Apparel) Loyalty Card

HYPOTHESIS

1. Loyalty card possession for males is not different from females.

2. Family income does not affect the number of loyalty cards a person has.

3. People who have higher number of loyalty cards, rate importance of loyalty cards same as people with lesser number of cards

RESEARCH METHODOLOGY

RESEARCH DESIGN

CONCLUSIVE Research Design

CAUSAL Research

DESCRIPTIVE Research

LONGITUDINAL Design

CROSS-SECTIONAL

Design

EXPLORATORY Research Design

DESCRIPTIVE STUDIES

Sales Studies

Market

Potential

Sales Analysis

Market

share

Consumer Perception and Behavior Studies

Image

Product Usage

Advertising

Pricing

Market Characteristic Studies

Distribution

Competitive

Analysis

Three basic approaches that have evolved to conceptualize loyalty: a behavioral (purchase) approach, an attitudinal (feelings) approach, and a hybrid approach incorporating consumer characteristics and purchase situation

Behavioral Loyalty

Historical purchasing of

brand and competitors

Satisfactory experiences

(reinforcement)

Loyalty mainly expressed in terms of Revealed behavior

DIVIDED LOYALTY=“POLYGAMOUS BEHAVIOR”

The Behavioral Model of Loyalty

Attitudinal Loyalty

Attitudes and beliefs Toward The brand or company

Social factors, influence of

significant others and community

Loyalty as an attitude that sometimes leads to an ongoing relationship with a brand

STRONG LOYALTY=“MONOGAMOUS BEHAVIOR”

The Attitudinal Model of Loyalty

Co-determinants

of Choice

Situation and usage occasion

Consumer’s characteristics and desire for variety

Loyalty as behavior moderated by the customer’s characteristics, circumstances, and/ or the purchase situation.

WEAK LOYALTY=“PROMISCUOUS BEHAVIOR”

The Situational Model of Loyalty

ANALYSIS

About the Sample

GENDER

INCOME

STORE LOYALTY CARD

Summary of Results

Hypothesis P value Decision

Loyalty card possession for males is not different from females.

.304 Accept

Family income does not affect the number of loyalty cards a person has.

.479 Accept

People who have higher number of loyalty cards, rate importance of loyalty cards same as people with lesser number of cards

.744 Accept

FINDINGS and CONCLUSION

Factors like • quality and variety of products that the store offers

weigh at the top while • helpful salesperson, • ease of product return • Store’s attractive interiors and• transportation convenience are the other crucial

factors towards the determination of a store’s loyalty.

Amongst all the important factors that determine a store’s loyalty, holding the loyalty card of a store is the least important factor towards determination of store loyalty.

Although companies are able to gather some very useful information about their consumers and they benefit from this accumulated knowledge as they develop marketing strategies. By doing so, companies are able to segment their markets more effectively, serve their target markets more successfully. However, many customers (18 % of our sample chose not to opt for a loyalty card) complain about this fact and privacy invading matter that companies get their hands on such personal information while many customers (25 % of our sample who chose not to opt for a loyalty card) state that they dislike being contacted for offers.

Amongst the sample of customers who own one or more than one loyalty cards, 40% confessed that having a loyalty card of a particular store does not prevent them from going to other retailers as they feel they benefit more by visiting a variety of stores and utilizing a range of cards while 33% of them either don’t use them or use them very rarely.

Amongst the sample of customers who own one or more than one loyalty cards confess that their frequency of purchase at a particular store has not changed after the store has issued a loyalty card.

The most attractive benefit that the customer seeks from a loyalty card is special discount on cardholder’s special days. This shows privilege seeking as well as discount seeking behavior of the customer. This requirement of the customer could be fulfilled by giving more discounts or by developing healthy and long term relationship with the customer.

RECOMMENDATION

Loyalty cards looks like an important component in a whole program of efforts designed to increase customer commitment to a store. They represent the opportunity to build long term customer loyalty. But they are not the sole factor in a customer’s store loyalty development. Results of this study show that customers also focus heavily on the availability of a wide variety of products, salespeople’s positive attitudes and ease of transportation as their top factors for developing store loyalty. Therefore, companies have to take the whole package into consideration. They must aim to build a connected network of customers, partners and vendors, enabled by technology, all working towards profitable, and mutually beneficial relationships.

Hence we suggest the companies to bury the loyalty cards for a while and relook at how they can get customer loyalty by some sustainable means.

LIMITATIONS•Marketing Research (MR) is not an exact science though it uses the techniques of science. Thus, the results and conclusions drawn upon are not very accurate. •The research was carried out on consumers, who are humans. Humans have a tendency to behave artificially when they know that they are being observed. Thus, the consumers and respondents upon whom the research is carried behave artificially when they are aware that their attitudes, beliefs, views, etc are being observed.

•We faced time constraint during our research, as we had only 8 weeks for the completion of the research.

•Money constraints: We haven’t had the proficiency to carry wide surveys for collecting primary data, and hence were not also able to hire specialized market experts and research agencies to collect primary data. Thus, we had to go for obtaining secondary data that is cheaper to obtain.

•Sample size: Due to time and money constraint, we had to go for convenient sampling.

•The research was conducted in open marketplace where numerous variables act on research settings.

D ’ Andrea , G . , Schleicher , M . and Lunardini , F .( 2006 ) ‘ The role of promotions and other factors affecting overall store price image in Latin America ’ ,International Journal of Retail & Distribution Management , Vol. 34 , No. 9 , pp. 688 – 700 . Dick A. and Basu K., Customer Loyalty: Toward and Integrated Conceptual Framework, Journal of the Academy of Marketing Science, vol. 22, Spring 1994, pp. 99-113 Dobson , J . ( 2007 ) ‘ Aesthetics as a foundation for business activity ’ , Journal of Business Ethics , Vol. 72 ,No. 1 , pp. 41 – 46 . Donthu and Gilliland (1996) (Donthu S Naveen and David I. Gilliland (1996). “The Infomercial Shopper,” Journal of Advertising Research, 36 (2), 69–76.) East, R. (1996), Consumer behaviour: advances and applications inmarketing, Hemel Hempstead, Prentice Hall Hallowell, R. (1996), “The relationship of customer satisfaction, customerloyalty and profitability: an empirical study”, International Journal ofService Industries Management, 7, (4), pp.27-42 Huddleston, P., Whipple, J. and van Auken, A. (2004), “Food store loyalty:application of a consumer loyalty framework”, Journal of Targeting,Measurement and Analysis for Marketing, 12, (3), pp.213-230 Jenkinson, A. (1995), “Retailing and shopping on the Internet”, InternationalJournal of Retail and Distribution Management, 24, (3), pp.26-37

BIBLIOGRAPHY

McGlone, J. (1980). “Sex Differences in Human Brain Asymmetry: A Critical Survey,” The Behavioral and Brain Sciences, 3, 215–263. Otieno , R . , Harrow , C . and Lea-Greenwood , G .( 2005 ) ‘ The unhappy shopper, a retail experience:Exploring fashion, fi t and affordability ’ , International Journal of Retail & Distribution Management , Vol. 33 ,No. 4 , pp. 298 – 309 .) Samuelson, B. and Sandvik, K. (1997), “The concept of customer loyalty”,EMAC Conference Proceedings, University of Warwick, pp.1122-1140 Stephanie M. Noble, David A. Griffith , Mavis T. Adjei (2006),” Drivers of local merchant loyalty: Understanding the influence of gender and shopping motives “Journal of Retailing 82 (3, 2006) 177–188)

Vicdan , H . , Chapa , S . and de Los Santos , G . ( 2007 )‘ Understanding compulsive buyers ’ online shopping incidence: A closer look at the effects of sales promotions and bargains on Hispanic Americans ’ ,Journal of Customer Behaviour , Vol. 6 , No. 1 , pp. 57 – 74 .Kyrios , M . , Frost , R . O . and Steketee , G . ( 2004 ) ‘ Cognitions in compulsive buying and acquisition ’ , Cognitive Therapy and Research , Vol. 28 , No. 2 ,pp. 241 – 258 . Whyte, R. (2004), “Frequent flyer programmes: is it a relationship, or do theschemes create spurious loyalty?”, Journal of Targeting, Measurementand Analysis for Marketing, 12, (3), pp.269-280

QUESTIONS PLEASE