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A research proposal focusing on theRetail sector: Can large companies foster customer loyalty in today’s challenging climate?

A research proposal focusing on theRetail sector: Can large companies foster customer loyalty in today’s challenging climate?

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An essay for the 2012 Undergraduate Awards Competition by Sarah Green. Originally submitted for Business Studies at Jordanstown, with lecturer Mary Boyd in the category of Business & Economics
An essay for the 2012 Undergraduate Awards Competition by Sarah Green. Originally submitted for Business Studies at Jordanstown, with lecturer Mary Boyd in the category of Business & Economics

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Published by: Undergraduate Awards on Aug 30, 2012
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05/13/2014

 
Sarah GreenB004406701
Retail sector:
Can large companies foster customer loyalty in today’s challenging
climate?1.1 Background Information/ Literature review
The supermarket environment, in the UK is one of the most competitive, complex anddynamic sectors in the world, in which standardisation is a strong feature with very littledifferentiation between competitors and the products they offer. Another feature of the sectorthat has emerged over the years is the ever increasing demands of customers in terms of overall service and product quality. This has meant competition levels in the sector areintense. Against this back drop the issue of trying to foster and maintain customer loyalty hasbecome of critical value to businesses not just for profitability but for survival. (
0’Loughlin
and Szimigan, 2006).This has resulted in a global trend by businesses and academics towards
the topic of ‘loyalty’.
As outlined competition in the food retailing market is intense with competitors seeking tonot only boost profits but to maximise a share of a customer loyalty in order to try andensure / develop repeat business is gained (Aaker . D, 2007).However, how companies cangenerate and foster loyalty remains a continued challenge to businesses.In recent years the overall retailing environment has had to contend with developments in theexternal environment including regulation changes, technological advancements andchanging consumer dynamics which all have led to a great transformation in the industry.This can have a great impact on a customer
s loyalty towards a company (Durkin &Howcroft, 2003).Within this report I will examine and analyse loyalty strategies. In particular
I will focus on Marks & Spencer’s and their attempts to foster 
and maintain customer loyaltyin today
s challenging economic environment.
 
Sarah GreenB004406702
1.2 Introduction-customer loyalty
There has been considerable research directed at the topic of customer loyalty particularlyfocusing on trying to define and measure it. However, there is still confusion over what isactually meant by loyalty due to the lack of a universally accepted definition (Dick and Basu,1994; Lam and Burton, 2006), one of the most popular ways that it can be defined is:
 
“....a deeply held commitment to re
-buy or repatronize a preferred products or serviceconsistently in the future, despite situational influences and marketing efforts having the
 potential to cause switching behaviour”
(Oliver, 1999, p.34).The definition above shows that loyalty has both attitudinal and behavioural dimensions to itsconstruct (Dick and Basu, 1994), which has been the main basis of debate within the loyalty
literature (Berry 1995; O’Malley and Tynan, 2000). The benefits of customer loyalty to a
provider are numerous for example Beerli et al, (2004) link customer loyalty to an
organisation’s profitability, implying that any organisation with loyal customers has
considerable competitive advantage. This makes studies on customer loyalty essential forretailers. Other advantages associated with having a loyal customer base are shown in Table1.2
Benefit Author
 
 
Recruiting a new customer isestimated at 5-10 times moreexpensive than retaining one
 
Gilbert, 1996
 
Sarah GreenB004406703
 
Loyal customers are less pricesensitive and spend moreDoyle, 1998
 
Loyal customers are linked tobrand equityDekimpe, 1997
 
Loyal customers are a sourceof positive word of mouth
 
Doyle, 1998
 
Reduces the marketing cost of operatingBeerli et al, 2006
Table 1.2: The benefits of loyal customers(Sourced and adapted from Beerli et al 2006)1.3 Loyalty in the retail sector
Due to today’s challenging economic environment supe
rmarkets have had to focus theirefforts on maintaining a loyal customer base, which has become an essential activity forsurvival (Leverin and Liljander, 2006). However as the literature highlights true loyalty mustnot be mistaken for the factor of inertia (Bennett and Rundle-Thiele, 2004). When the relativeattitude is negative but the customer stays with the organisation
, it is a question of ‘BrandLoyalty’ (Dick and Basu,1994).
 Brand loyalty is the consumer's conscious or unconscious decision, expressed throughintention or behaviour, to repurchase a brand continually. However, this loyalty has comeinto question about whether it actually exists in today
s competitive environment. Due to therecent recession this has caused customer-supermarket relationships to breakdown. The main

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