UNIVERSITY OF WALES

HOW EFFECTIVE IS CUSTOMER RELATIOSNSHIP MARKETING FOR

WINNING CUSTOMER SATISFACTION, LOYALTY AND RETENTION? A
CASE STUDY OF SAINSBURY’S NECTAR CARD

By
Sandeep Kumar
0811866890953

MASTER IN BUSINESS ADMINISTRATION

27th November 2009

 DECLARATION

I declare that this dissertation is the result of my own independent investigation and that
all sources are duly acknowledged in the bibliography.

Student: _____________________
Sandeep Kumar

University Student ID: 0811866890953

Supervisor: _____________________
Mr. Mervyn Sookun

Date: 27th November 2009

 ACKNOWLEDGMENTS

I would like thankful for the blessings of God almighty who gave me the grace and
wisdom throughout the course of my study and to carry out this research project.

I sincerely thank to my guide Mr. Mervyn Sookun who with his support, feedback and
guidance and invaluable suggestion enabled me to complete this project within time
frame and right track

I am equally grateful to my family and friends who has always prayed for me. I also
thank profusely to my colleagues and management staff at Sainsbury’s and all the
respondents who have helped to fill the questionnaires and conduct interviews.
 ABSTRACT

The purpose of this dissertation is to find out the major contributions of relationship
marketing with reference to the specific industry for a specific organization with relations
to the loyalty. It gives a comprehensive definition of relationship marketing and
framework highlighting the integration of building and maintaining of relations with the
customers and other networks. More specifically this work states and explores the
customer relationship marketing (CRM) initiatives undertaken by one of Sainsbury’s
branch in Central London. The numerous customer service efforts of the branch are
discussed and the application of loyalty card scheme at the branch is examine by
analyzing how the data generated through this scheme was used to modify the branch’s
marketing strategies and explores the role played by the scheme in making Sainsbury’s as
the emerging market leader. The study also considers other measures Sainsbury’s adopted
to have a long term constructive solutions for the business with utilization of its resources
optimally through continuous interaction, coordination and networking among the
stakeholders to create superior value for all of them in a trustworthy atmosphere. Finally
Sainsbury’s future prospects are evaluated in the light of changing dynamics of the
market and loyalty card schemes recent criticism.
 LIST OF CONTENTS

CHAPTER ONE: INTRODUCTION..............................................................................7

Definitions and Concepts...............................................................................................1

Industrial Background...................................................................................................3

Aims and Objectives......................................................................................................5

Structure of Dissertation...............................................................................................5

CHAPTER TWO: LITERATURE REVIEW.................................................................7

The Brief History of relationship marketing...............................................................7

Various CRM theories: An overview..........................................................................11

Scope of relationship marketing.................................................................................18

Sainsbury’s CRM techniques......................................................................................25

The Results of Relationship Marketing......................................................................29

CHAPTER THREE: RESEARCH METHODOLOGY AND.....................................31

METHOD.........................................................................................................................31
Research philosophy....................................................................................................31

Research approach.......................................................................................................33

Research Strategy.........................................................................................................34

Time Horizons..............................................................................................................36

Data Collection Methods.............................................................................................38

CHAPTER FOUR: DATA DESCRIPTION AND PRESENTATION........................42

CHAPTER FIVE: DISCUSSION..................................................................................54
Secondary data.............................................................................................................55

Primary Data................................................................................................................57

CHAPTER SIX: CONCLUSION...................................................................................68

CHAPTER SEVEN: RECOMMENDATIONS.............................................................73
CHAPTER EIGHT: BIBLOGRAPHY..........................................................................75
APPENDICES..................................................................................................................80
Questionnaires..............................................................................................................80

Interviews......................................................................................................................81
CHAPTER ONE: INTRODUCTION

Customer Relationship marketing is a form of marketing that evolved from direct

response marketing in the 1960s and emerged in the 1980s, emphasizing on building
longer term relationships with customers rather than on individual transactions. It stresses
on the products and services to existing customers needs with full involvement and
understanding of their life cycles. Many academicians and practitioners have elicited
much interest and attention as to what benefits an organization stands to gain by forming
long term relationship with its key customers. The issue of enhancing customer retention
and loyalty through increasing customer satisfaction has gained prominence in both
managerial and academic worlds of marketing in recent time. Although initial discussion
on strategic activities geared towards building long-term relationship mainly focused on
services and business to business, there has been resurgence in recent years of the
application and study of strategic activities geared business to customer relationships.
Expansion of customer relationship management and internet-based transactions were
two of the foremost development in the last decades. Rigby, Reichheld and Schefter
(2002) stated that these two have received high appraisals, but there is a cautious
optimism with respect to CRM continuous emphasis, be it technology and multiple
process implementation or primarily web-based. Despite the fact that many organizations
have rushed towards the adoption of CRM, investing heavily on technology and its
implementation, recent research suggests that the increased profitability promised by
such strategy adoption is yet to be attained (Rigby, Reichheld and Schefter 2002).
This research highlights the assumption of customer relationship management concepts
and examines that up to which extent these techniques can create closer relationship
between an organization and its customers in terms of their loyalty.

Having a better customer insight is very essential for the marketers both offline and
online especially when the competitors are just a mouse click away, so there is
requirement of strong bonding which can yield strong relationship with customers to
make them loyal to organization and be repetitive.

To achieve customer loyalty is main motive of relationship marketing. Every interaction

with the customer is a learning experience which enables to provide an opportunity to
know about his individual motivations which leads the relationship to a new level. It also
make customer more attached to the organization. If any organization gets successful in
getting deep insight of customer behaviour at every stage of his lifestyle, it means it has
achieved a high success rate as far as the relationship marketing is concerned.
Nowadays there is no scope for fragmented view of individual transactions, businesses
must have to move beyond all that and establish a lifetime relationship.

Definitions and Concepts

There are numerous definitions of relationship marketing, customer satisfaction, loyalty

and retention. The commonly used definitions which are postulated by influential authors
are outlined below:
Gummersson (1994, p.12) views marketing as “relationship networks and interaction”,
according to Moller and Wilson (1995) , “relationship marketing is creation and
understanding of relationships between various channel partners of a link which starts
from service providers, suppliers, business partners, manufacturers, sellers and finally
end up at consumers” Morgan and Hunt (1994) say that relational marketing is cultivated
efforts which directs towards the establishment, development and enhancement of
successful relational exchanges, while Kotler (1997) gives a new dimension to
relationship marketing which involves with establishment and satisfaction of business
relations between important targets such as customers, suppliers and distributers. Watland
and Cole (1997) said that “To determine customer value CRM emphasize on four main
aspects which are customer combination management, value addition role, sharing of
values and reward and shining”. Gronross, (1997) mentioned that “relationship
marketing identifies, establishes, enhances and when mandatory terminates relationship
with consumers and other stakeholders but that in the case when all involved parties are
having profits, so this is all mutual understanding and fulfillment of each others
promises”.

Oliver (1997) described customer loyalty as “ a deeply held commitment which despite
any circumstantial influences and switching behaviors patronizes and buys a particular
products or services with consistency” on addition to it he quoted that when customer
without any incentive or demands becomes advocacy for the specific organisation then it
exhibits customer loyalty. Anderson and Jacobsen (2000) defined loyalty oppositely
where the organization must have to favour the customer continuously so that he will be
maintain or increase his purchases from the organization.

Hansemark and Albinsson (2004) viewed satisfaction as an emotional reaction which

reflects the attitude of the customer towards the service provider, between what he
expects and what he receives, regarding the achievements of his desires and motives.
According to Hoyer and Maclnnis (2001), customer retention can be described as efforts
to maintain long term relationship with customer and continuously working towards it.
On the other hand Zineldin (200) describes retention as “A commitment to continue to do
business or exchange with a particular company on an ongoing basis”.

Industrial Background

UK supermarket industry dates back to the early 1850s.This growth is somewhat due
marketing sophistication and visually impressive product displays, as well as customers
direct advertising and national brand development. The big chain stores were launched in
the UK following the successful development of the US market. This resulted in mergers
between colonial and home stores and grocery firms in the 1920.Which led to 3000
braches being established. The Second World War witnessed a downturn but the
supermarket industry re-emerged with the new offerings including economies of scale.

The number of supermarkets had increased dramatically by 2000 from the low hundreds
in the 1950s to approximately 8000 by 1998/99 (competition Comission, 2000 p.4).. The
latest figures from IGD, the leading research body which monitors the grocery market,
indicate there are 55,854 supermarkets and convenience stores in UK. There had also
been a transformation of the shape of the industry due to steady shift from new local
dominance markets to few national dominance markets.
 Supermarkets Market shares in the year 2008-09 in comparison with year 1998-97

Sainsbury’s as an organization

Sainsbury’s as an organisation was established in the year 1869 at Holborn, London as a

retail outlet for food which was later expanded for groceries foods. In the year 1922 it
was incorporated as a private company and was UK’s largest grocery selling group.
Sainsbury’s had its heyday till the late seventies and has been reckoned as market leader
till stiff competitions from new emerging big retail houses like Tesco and ASDA. In 1996
Sainsbury’s lost its market leadership to Tesco. In 1999 with it unveiled its new corporate
identity with new logo and slogan “making life taste better” but this slogan was again
replaced in 2005 with “Try something new today”. Sainsbury’s now having more than
800 hypermarkets, supermarkets and convenience stores all across the UK and now
invested heavily in banking and property sector also. It is now in number 3rd position as
far as the market share is concerned. Sainsbury’s has total market share of 16.4% in the
year 2008-09, behind Tesco’s 31.4% and marginally behind ASDA’s 16.9%.
Aims and Objectives

Aim

The aim of the research is to identify an effective approach to the customer services and
build up a personal relationship with the customers through the use of database marketing
in an organization.

Objectives

The research objectives are as under:

 To conduct a literature review on Customer relationship Marketing and its effects

on an organisation.

 To conduct a primary research on various effects of relationship marketing which

lead customer to be satisfied and loyal

 To conduct the study of loyalty programs initiated by Sainsbury’s and specifically

the impact of loyalty card (nectar card).

 To outline the empirical result from the literature review and primary data
outlining the outcomes.

Structure of Dissertation

The first chapter highlights the introduction of the dissertation, in which definitions and
concepts of the relationship marketing is illustrated, also it covers the general overview of
the industry and Sainsbury’s as an organisation particularly. In the end Aims and
objective of the research are mentioned.

The second chapter reviews the literature regarding the customer relationship, describing
the brief history of it and various theories and scope. Finally the relationship marketing
tools adopted by Sainsbury’s are discussed along with the result generated by relationship
marketing in the organisation.

The third chapter outlines the research methodology framework chosen for this study. In
which the researcher uses the “onion” theory. The five elements of research methodology
are discussed. Which are research philosophy, research approach, research strategy, and
time horizons and data collection methods where quantitative and qualitative both data
collection methods are mentioned. It also gives the necessary analysis and presentation
that pertain to the collected data.

The fourth chapter presents the results obtained from the questionnaires and interviews
and other various responses received. It also presents the most important and the basic of
the quantitative results from the questionnaire.

Fifth chapter will examine the outcomes and propose explanations to the quantitative
data, by means of the qualitative data obtained through the interviews, follow up
interviews and questionnaire. Particularly this chapter throws light on the perception of
the staff and customers about the Sainsbury’s relating it to the success of the relationship
marketing in the Sainsbury’s which could enable it to satisfy and retain its customer’s
with loyalty.

Sixth chapter will be the conclusion and reflection of the current research. It points out
the success and limitations of customer relationship marketing pertaining to customer
loyalty and satisfaction.

Finally the seventh chapter gives some recommendations for the improvement in the
Sainsbury’s which can be easily implemented in its marketing strategies related with
customer satisfaction.
CHAPTER TWO: LITERATURE REVIEW

Undertaking a literature review provides insight and background knowledge into the
topic and area to be studied. It gives an understanding into the topic and any existing
research that has already been carried out. There are numerous ways to carry out and
research the literature from a number of sources with the access of the internet, journals,
thesis, books, articles and many more. The review of literature encompasses sources
ranging from online journals, books and articles from peer reviewed sources.

The Brief History of relationship marketing

Relationship marketing exists since centuries but earlier it was termed as traditional
marketing. The history of modern relationship marketing originated from the passage by
Schneider( 1980) in which he explains "What is surprising is that in traditional marketing
it is always pursuit by researchers and marketers to have more concentration on to lure
consumers towards products and services and thus the very vital part of retaining the
consumer is ignored". Gronross C. (1982) did the initial research on marketing as also
referred it as “interactive marketing”. Len berry (Berry, L. 1982) gave the term
“relationship marketing”. Levitt, T. (1983) also did the initial research related with
modern day marketing techniques which is “relationship marketing”.

If we see practically relationship marketing was initially practiced in business to business

and industrial markets where there were always long term contracts are in tradition.
These practices and marketing applications were re-examined by Barber bund Jackson to
postulate them properly. Now there is partial shifting of this marketing as the research is
now exclusively done in service marketing, as it is quite costly affair for long term
relationship but at the same point it is quite profitable to nurture in the service sector,
Gummesson, E. (1987, from Swedish school of economics)

According to Len Berry (1983), relationship marketing can be applied any where and any
time and there is no reasons as it has several alternatives to choose from for example
when the decision is taken by customer and he has desire for specific product or service.

To reduce customer turnover and increase customer loyalty, Fornell and Wernerfet (1987)
used “defensive marketing” which is totally in contrast with “offensive marketing” which
focuses on acquiring new customers and increasing their purchasing power and
frequency. If on one side defensive marketing focuses on eliminating the dissatisfaction
of customers on the contrary offensive marketing focuses on generating new customers
and “releasing” dissatisfied one. Defensive marketing has two major components, first is
increasing customer satisfaction and second one is increasing switching barriers. In
between the year 1960s and 1970s when traditional marketing originated selling
consumer products was very difficult so a model was set which was suitable for selling
relatively low value products to masses of customers. So over the decades attempts have
been made to change the face of marketing practices, relationship marketing being one of
those endeavors. Even relationship marketing been greatly facilitated by various CRM
softwares and relationship marketing has been greatly enriched by these contributions.

Relationship marketing is another name of wide range of “relationship type strategies”

which emerged phenomenally in service and business sectors interacting with customers
and clients. Now the antecedents of relationship marketing shifted to industrial marketing
and service marketing. Relationship marketing has got such a wide acceptance in a
marketing world that satisfaction of customers has become main characteristic of
corporate profitability and the obvious strategic competitive advantage is no longer
delivered on the basis of product characteristics alone, (John Egan, 2001). Goods
suppliers , business units, service suppliers, functional departments, employees,
intermediate and ultimate customers, government, competitors and non profit
organisations all can play a crucial role for relational exchanges with a firm( Hunt and
Morgan, 1994), relationship marketing can be conceptualized with all mentioned
relational exchanges. It is also stated that (Berry, 1983) “Relationship marketing is
attracting, maintaining and enhancing customer relationships in multi service
organisations”.

Manufacturer, reseller and consumers are three main components of marketing. The
relation between three main pillars of marketing is most important. It is inter-dependent
and shown below in a three-way relationship.

Manufacturer

Resellers Consumers

Figure: Three way relationship

In this three way relationship quality of relationship for any single player is vastly
dependent on the bonding between the other two players. Interestingly both manufacturer
and reseller has to deliver values to the consumer and both are in partnership relationship
which includes competition and conflict (Webster Jr. 2000).

Brodie (1997) suggested relationship marketing application at four levels. In first level it
is referred as technology which is used absolutely as a device to form database. When
database is formed then at second level it focuses on market and consumers with stress on
customer satisfaction and retention. Third level entirely shows the partnership between
customers and buyers and they mutually involved in the designing of products and
services offered to each other. Fourth level which is broadest one incorporates everything
which is pertaining to relationship marketing like databases to customized person
services, organization’s loyalty schemes, and brand loyalty, strategic and personal
alliances.

Relationship marketing has been termed in various other terms or similar concepts, like
customer relationship management, data driven marketing, direct marketing, micro-
marketing, one to one marketing, segment of one marketing, customer partnering, and
loyalty based marketing and interactive marketing. All this suggests that relational
marketing is also an umbrella philosophy for relational approaches in marketing. Leaky
bucket theory suggests that the flow of new customers is very important for an
organization but the company must have restriction on exit of customers also. In
relationship marketing, retention strategies are given priority over the acquisition
strategies. Buttle (1996) said that the customer retention has dual benefits, firstly existing
customers are less expensive to retain than to recruit, secondly securing a customer’s
loyalty over time produces superior profits.
Acquisition costs include

(1) Personal selling

(2) Commission payments
(3) Direct costs and indirect costs of detailed information gathering
(4) Supply of equipment
(5) Advertising and other communications expenditure.

Various CRM theories: An overview

“CRM” is a popular catchphrase in marketing literature as well as in companies’

discussions with respect to marketing strategies. However the acronym may stand for
different wordings, namely “Customer Resource Marketing”, “Customer Relations
Marketing” or “Customer Relations Management”.

Gronroos, Christian (1983) defined CRM as “the process of building mutual beneficial
relationships with customers for developing and understating of the customers needs and
offering products/services to surpass their expectations”. In theory, expanding this
definition will involve the inclusion of “value ads” of a given products such as flexible
payment terms, rapid delivery, and excellent customer services and so on. Cooper, Philip
D and Ralph W. Jackson (1988) observed that “real value is universally understood to be
the price that a given good or service can attain on the open market, while perceived
value is additional, value that is added to the goods or service through value adds, clever
marketing”. Philip Kotler (2002) considers the link from brand value to customer
relationship dimension. He noted that “relationship equity is the customer’s tendency to
stick with the brand, above and beyond objective and subjective assessment of its worth”.
Kotler herewith equates customer loyalty with customer relationship and at the same time
underlines the irrational side in the buying decision of the customers.
B. Donaldson (1998) in his practical approach to the study of CRM argues that a
company’s most important emphasis is its relationship with its customers. He noted that
there exists a unique and unpredictable interaction between the buyer and seller. He
explained that significant competitive advantage can be attributable to a supplier in the
course of building relationships with customers. Although this is difficult to achieve in
practice as long- term relationship requires, among other things direct and close contact
between the customers and supplier.

B Donaldson (1998) observed that the contrasting of relational forms based on trust and
commitment is displayed in the following table:

High commitment Low commitment

High Bilateral Relations Recurrent
Trust
Low Hierarchical Discrete or opportunistic
Trust Supplier/Buyer

Dominant

Table: Relational forms based on commitment and trust

The weaker partner faces a situation of low trust and high commitment, due to the
dominant buying power of the OEM. The target is the high commitment situation, which
is characterized by a bilateral relationship.
B-2-B versus B-2-C markets

Lyer and Bejou (2003) noted that relationship marketing is continuous learning,
managing data of known and unknown consumers’ behaviors and characteristics, macro
and micro segmentation of customer markets which gives a every organisation a
competitive advantage. They further added that, relationship marketing is a successful
way of retaining customers in fully grown market in spite of tough competition. Even if a
premium price has to be given to satisfy loyalty customer needs to make him bound with
organisation is always low than procuring the new customers. The less obvious, though
relevant advantages of the organization include long term sustainability of the
organization of the organization itself, profiting from the mutual interdependence
between the firm and the customer and reduction of demand uncertainty. This broad
approach is very useful and tactfully can be applied in various applications of B2C versus
B2B markets. Lyer and Bejou (2003) emphasized the significance of obtaining the long
term commitment with suppliers and distributors and creating strategic partnerships and
alliances in B2B markets. He noted that specific targeting and micro- segmentation are
stressed in addition to focus on many other monetary and non-monetary approaches that
creates values.

Heide (1994) and Winer (2001) categorically described that the objective of relationship
can be only recognized in the markets when CRM is totally understood and applied in the
different phases of strategic marketing. This process of understanding is summarized into
four stages of consumer and seller relationship, which starts from identifying the
relationship partners, developing the relationship, re-evaluating and maintaining the
relationship and termination of relationship, (Lyer and Bejou, 2003).

On the other hand, the strategic step may include the evaluation of the relationship and
firm performance, customer targeting, relationship marketing and management and
customer/segment identification (Lyer and Bejou, 2003). Researchers of B2B prefer to
understand CRM in terms of stages of its process, whereas researches of B2C usually
conceptualize CRM in terms of its strategic activities. Hence through the building of
commitment and trust among the exchange partners, B2B relationships appear to be
centered on the development of long term relationships (Lyer and Bejou, 2003).

CRM and the internet

Varadarajan and Yadav (2002) observed that the internet has been both a boon and a bane
for CRM. On one hand, competition for customer sales and attention is increased as a
result of lowered costs of market entry, while seller margins are concurrently reducing
through reductions in buyer search costs. This increases the firm’s pressures which result
in the application of strategies and devise programs in order to seek out their most
valuable customers. Fortunately, the internet also helps firms pursue such objectives.
According to Lyer, Miyazaki, Grewal and Giordano 2002, Sheth Sisodia and Sharma
(2000), customer needs can be better understood by firms resulting in the provision of
customized products and services, offering enhanced value through the management of
customer needs and information and the development of amore customer- centric
programs for satisfying needs.

CRM is a useful tool which not only provides a technological advantage to marketing but
it is very cost efficient too. With the services of internet identification of customers,
information of cost efficient data, personalized and customized interaction is quite
effective and convenience, Greenberg (2002). He further added that in the early years of
web enabled CRM technology, the traditional marketing concepts were utilized in parallel
and there was no fusion between these two different aspects but now it is totally inserted
in all the marketing processes of organisations as various softwares are being utilized
which are not only cost efficient, time saving but can always provide a better platform to
communicate with customers.

If CRM is left only over the technology then again it also has its own drawbacks and
demerits like impersonal provision of a much touted personalization, (Ebner, Rigby, Ross
and Weill, 2002). There is lot of evidences which proved that citing the implementation
and adoption failures of CRM softwares which are basically due to over dependence on
the high technology, assuming that it contribute better for relationship marketing rather
than low technology. Though Information technology is a boon for CRM too but leaving
strategies related to corporate businesses and marketing on it is a disastrous move as it is
lacking of business vision and comprehensive relationship strategies, (Rigby, Reichheld
and Schefter,2002).

The main concern which is always associated with the technology based CRM is its
negligence to develop and nurture a human factor which is broadly seen as personal
relation in the buyer seller relationship (Bressler, 2001), this human factor is sometimes
missed in otherwise user friendly design and deployment of CRM. Developing and
sustaining trust, emotional and structural bonds, displaying commitment and sincerity are
the main components of relationship marketing. When left to technology alone
relationship marketing sometimes looses its trust overlooking the traditional complexity
of the traditional marketing approaches and provides improper and partial solutions. For
example sometime while dealing with internet based CRM programs, there is no
guarantee of secure and private services when dealing with consumers via websites, so
somewhere the recognition of trust is lost which is very important as far as relationship
marketing is concerned (Keen, balance, chan, Schrump (1999) and Winer 2001).
Moreover sometimes it also creates a big doubt in the mind of consumers about the
guarantee of privacy from the organizations when it is written in small print in their
websites that they have rights to change their policies related with privacy at any time.
It will be absolutely unjustifiable if CRM is discarded as failure, it has its own popularity
and lot of organisations have deployed various CRM softwares to improve their relations
marketing it only misapplication of it which sometime can break the core linkages
between customer satisfaction, firm profitability and loyalty. Logically customer
satisfaction is the first step towards obtaining loyalty from the consumers as they are
always profitable to companies as compared to seeking new customers.

Figure: Customer management model

Theories beyond CRM

Federcik Newell (2003) takes CRM approach one step further. An even more customer
centric approach is the model of Customer Management Relationships (CRM). His
idea is displayed in the chart below:

CRM
The company is in control
Makes business better for the
company
Takes customers as transactions
Treat customers as segments
Forces customers to do what you
believe they’ll want
Customer feel stalked
Organized around products and
services
CMR
The company is in control
Make business better for the
company
Understands customer’s unique
needs
Treat customers as individuals
Lets customers tell you what
they care about
Customers are empowered
Organized around customers

Table: Difference between CRM & CMR

Newel’s approach is based on the assumption that customers only want to be managed up
to a certain degree by the supplier. He argues that people are more comfortable when they
feel they are in command. The question of how much empowerment and how much
individual treatment the customers should be given is obviously an industry dependent
question. Newell concludes as well that it’s a giant step form CRM with its goal to make
business better for the supplier to CMR, trying to make life better for the customer.
Scope of relationship marketing

To have precise description of relationship there must be two characteristics to be

required for an exchange situation (Barnes and Howlett, 1998). First of all the
relationship should be mutually perceived to exist and must be accepted and
acknowledged by both partners. Secondly it must have special status and goes steps
ahead of occasional contact. But again “recognition of status in a relationship” always
creates a doubt for development of it for example in a supermarket; the “special status” is
literally absent. From customer point of view three characteristics are important for
continuity with provider; those are variability, involvement and complexity (Berry, 1995).
The author further says that relationship marketing occurs at three levels. In level one to
secure loyalty of customers it depends primarily on pricing incentives. However at this
level competitive advantage can not sustain for long at as the competitors can easily
match the pricing moves. Though pricing is always an important factor when it turns to
marketing, because it all can change lot of dimensions but relationship marketing always
relies heavily on social bonding involving personalization and customization of the
relationship. In level three of relationship marketing structural solutions to customer
problems is given prime importance for example federal express providing computer
terminals in offices of high volume customers. After all the above discussion it can be
easily presumed that relationship marketing is the establishment, identification,
maintenance, modification and termination of relationships with customers/consumers to
create value for them and profitability for organisations by a series of relational
exchanges that have both history and future.

Relationship marketing has been strongly influenced by reengineering process, which

states that rather than relying on functions, organisations should have structured to
complete tasks and processes to achieve their objectives. They must have to establish
cross functional teams which should be responsible for whole process from one
functional department to another to get the work done efficiently. According to Gordon
(1999) traditional marketing which is following functional department approach and four
P’s of marketing mix like pricing, product management, placement and promotion is too
limited to provide a useful framework for the assessment and development of customer
relationships in many industries and should be replaced by an suitable alternative model
where the focus should be on consumers and relationships rather than markets and
products. So the solution is relationship marketing which is multi-functional system
which is structured around the functions involving all core activities of marketing. In fact
sometimes relationship marketing is also referred as relationship management because of
its broader approach to synthesis between customer, service and quality management
impeccably. Thus forming service and marketing as inseparable identify, (Martin
Christopher, Adrian Payne, and David Ballantyne, Cranfield Graduate School of
management). Relationship marketing is applicable to the all parts of the organization
and fundamentally emphasizes that every employee is “part time marketer”. The way
Regis McKenna (1991) puts it: "Marketing is not a function, it is a way of doing
business, where it has to be all pervasive describing everyone's job, from the receptionist
to the board of directors."

The six markets model

Adrian Payne (1991) from Cranfield University identified six markets which he claimed
are central to relationship marketing. They are: internal markets, supplier markets,
recruitment markets, referral markets, influence markets, and customer markets.

Internal marketing: It is integral part of the relationship which applies marketing

techniques within the organization itself, conceptualizing the traditional marketing
concepts. It shows that every employee related with any functional department and
division of the organisation is simultaneously is a customer and supplier to the services
and products rendered by the organisations. Effective internal marketing program is a
prerequisite for effective external marketing efforts (George. W, 1990) which encourages
every employee to understands their roles and performances to meet the organisation
strategic mission.
Referral marketing: It is related with the development and implementation of a
marketing plan for the stimulation of referrals. Though it is process which is quite
engrossing and takes time to display the desired results but it are most effective part of an
overall marketing plan and best use of the resources.

Marketing to suppliers is another integral part of relationship marketing ensuring long

lasting, conflict free relationship in which all parties compliment and compensate each
other’s expectation.

Wide range of sub-markets are included in influence marketing like government

regulatory bodies, standards bodies, lobbyists, stockholders, bankers, venture capitalists,
financial analysts, stockbrokers, consumer associations, environmental associations, and
labour associations. These activities are typically carried out by the public relations
department, but relationship marketers feel that marketing to all six markets is the
responsibility of everyone in the organization.

Payne sub-divides customer markets further into existing customers and potential
customer, yielding seven rather than six markets. He claims that each market will require
its own strategies and recommendations to separate marketing mixes for each of the
seven situations than in others.

Customer retention

Customer retention is the core of relationship marketing. Fulfillment of promises and

mutual exchange is basic pillar of marketing. In Long relationship trust only grows when
we keep promises (Gronross, 1989). So it is quite imperative to understand the economics
of customer retention. It is now proved by studies in various industries that cost of
retaining an existing customer is about 10% of the cost of gaining a new customer.
Nevertheless in traditional marketing it is still ignored and the marketers spend to less on
customer retention than spending on customer acquisition. Reichheld and Sasser (1990)
claimed that if we improve the retention of customer by 5% then it can tremendously
increase profitability from 25% to 85% (in terms of net present value) though it may be
depending on the industries also. However Carrol (Carrol, P. and Reichheld, F. 1992)
disputes these calculations, claiming they result from faulty cross-sectional analysis.

It is fact that the cost of acquisition occurs only at the beginning of a relationship and
once the customer is loyal to an organistaion and longer he has association with the
organization lower is the amortized cost, (Buchana and Gilles, 1990). Once the customer
becomes loyal its very obvious that he tends to be less sensitive to price and more
importantly less inclined to switch to different brand. Relationship marketing plays a big
role here those customer who have satisfaction with a particular brand they are less likely
to have switch over, it is win-win situation to both regular customer is already familiar
with processes, so require less “attention” and “education” and is consistent in his order
placement, so ultimately it a virtuous circle where loyalty and retained customer is
productive for the employees in the organization and make their job easier and satisfying
and in turn they render delightful customer service which leads to satisfaction.

There is a ladder set by marketers in relationship marketing which is also termed as

“relationship ladder of customer loyalty, it also categorize customers according to their
loyalty. Prospective customers are always put in the ladder first, which is followed by
customer then supporter of the organization then the consumer who advocates for the
organization and finally partner. Relationship marketers always fascinates to help
customer to climb as far as possible in the ladder by providing more professional
personalized service and quality of service which excels at every steps of ladder.

Customer retention efforts involve three steps:

Customer retention measurement: Customer retention rate is simply the percentage of

customers who are with the organization at the beginning of the year and remain there till
the end of the year, this method of measurement is calculated by Dawkins and Reichheld
(1990). In accordance with this statistic, an increase in retention rate from 80% to 90% is
associated with a doubling of the average life of a customer relationship from 5 to 10
years. This ration can be fairly used for calculating the comparisons between market
segment different products and over time.

Determine reasons for defection: There can be various possible ways that customer can
be defected so an intelligent marketer will always go for root cause which could be
subjected for the problem not merely for the symptoms. He would approach the former
customers and probe the details. Analysis of customers’ complaints and competitive
benchmarking are other techniques for probing.

Develop and implement a corrective plan: To eliminate the basic cause of defection an
organization must have to take serious steps to rectify an error in the system and
practices. This can involve corrective actions to improve employees’ service practices.
Those practices and processes must be followed which are benchmarked in the industry,
there must be adjustments to organization’s reward and recognition systems and in the
end proper use of recovery teams. Relationship marketers also developed a technique
which can valuable to the firm to measure the sustained customer relationship which is
typically called customer lifetime value.
Customer switching can also controlled by retention strategies. This can be done by
various steps firstly by product bundling where several products and services are
combined and offered together at the same price. Second step is cross selling where
related products are sold to existing customers. Thirdly cross promotions where discounts
and other promotional schemes are delivered to purchasers of related products. Then it is
loyalty program where incentives are given to frequent buyer and finally increase in
switching costs so that customer can not able to switch from one product to another
swiftly.

To secure more bonding in the relationship, team based approach is also used by many
marketers in relationship marketing, as it provides more communication mediums and
contacts points between the organisations.

Customer satisfaction

It is term which always highlights the customer expectation and is used to measure how
the expectation are met or surpassed by the product and services provided by an
organisation. Customer satisfaction is purely a business term and is an indicator of key
performance in the business and is the part of four perspectives of balanced scorecard. In
a fully fierce competitive where technology quality are almost at the same level customer
satisfaction is seen as a key differentiator and increasingly has become a key element of
business strategy. Measurement of customer satisfaction not only gives an opportunity for
an organization to find out there success in the market but also provides the methods of
retaining the existing customers and targeting the non existing customers. But still
measurement of customer satisfaction is not so straight method it is an ambiguous and
abstract concept and it is purely depends on the perceptions of individual customers and
vary from person to person to product/ services to product/ services respectively
manifesting their ideas and thoughts.
Level of satisfaction also depend on the other options which customers perceives like the
comparison between the products of various organisations, so it basically the union of
both psychological and physical variables which is correlated with the satisfaction
behaviors such as return and recommend rate of the customers. Since satisfaction is more
or less a psychological state so fair amount of delicacy must be taken while its
quantitative measurement. Belly (Bart Allen) and Brodeur ( between 1990 and 1998)
defined ten “Quality value” which influence customer satisfaction behaviour which is
further expanded by Berry as “ten domains of satisfaction” which are, quality, timeliness,
value, efficiency, environment, ease of access, inter departmental team work , front line
service behaviors, commitment to the customers and innovation having part of an
integrated model which are architecture for organisational satisfaction measurement as an
integrated model. To find a quantitative and objective “satisfaction gap” for the
measurement of customer’s expectation of performance and perceived experience of
performance, Parasuraman, Zeithaml and Berry (Leonard L) between 1985 and 1988 did
lot of hard work. This was further continued by Cronin and Taylor, who proposed the
“confirmation/disconfirmation” theory of combining the “gap” described by
Parasuraman, Zeithaml and Berry as two different measures (perception and expectation
of performance) into a single measurement of performance according to expectation.
Nowadays most of the organisations are using Likert technique or scale as a standard
scale to find out the customer satisfaction measurement by surveying with a set of
statements in which customer is asked to evaluate each statement in terms of their
perception and expectation of performance of the organization is measured in this way.

Sainsbury’s CRM techniques

Sainsbury surged back from the gloom of unsuccessful years in the recent past and
gradually moving forward to gain back its past glory, now it is much closed to ASDA and
in last financial year it achieved the highest rate of profit percentage in terms of sales and
revenues. There are plenty of reasons which worked out in their favour, first and the
foremost important one is the appointment of Justin King as CEO of company, he derived
many operations and projects to achieve the confidence of customers and retention and
last not the least the satisfaction of them. “Making the Sainsbury’s great again” was the
mission which Justin king decided to perform unveiling his three years business plans in
year 2004. It was overwhelmingly accepted by stakeholders. It implemented with
improving the quality and service of the organization and maintaining the stock
availability. The hard work and the structured planning paid out. Till October 2009
Company has achieved nineteen successive quarter of sales growth.

Relationship Marketing: Tool to success

Direct approach to customers: Justin King started a direct mail campaign to 1 million
Sainsbury's customers as part of his 6 month business review asking them what they
wanted from the company and where the company could improve.

Customer satisfaction & Retention: Customer satisfaction is the main Moto of the
Sainsbury’s since last few years and they have left no stone unturned to enhance it years
after years. Lots of price strategies, store extensions, massive employment in shop floor
and sophisticated customer handling techniques Sainsbury’s has adopted to acquire the
customers satisfaction and retention as well.

Sainsbury’s loyalty Card: After Tesco’s successful loyalty card campaign J Sainsbury
also unveiled its new loyalty programme Nectar, a scheme run in association with
compatriot companies Barclaycard, Debenhams and BP. This was a welcome move, now
40% of Sainsbury’s customers are being benefited by the loyalty card. Program, it not
only provide them discount at Sainsbury’s stores but also at some other shopping places.
Internal Marketing: Relationship marketing also stresses with internal marketing which
refers to using a marketing orientation within the organization itself. Attributes like
loyalty, collaboration, trust are the attributes which are also applied to internal
customers.. According to this theory, every team, individual or department in the
company is equally important and simultaneously a supplier and a customer of services
and products. Their dedication and commitment plays a crucial role also an employee
obtains a service at a point in the value chain and then provides a service to another
employee further along the value chain.

Sainsbury’s Loyalty Program

Sainsbury’s unveiled its loyalty programme Nectar which was started in association with
in association with few compatriot companies like Barclaycard BP and Debenhams in
the autumn of year 2002 with the believe that it would soon surpass the popular Tesco
club card scheme. Now it is a comprehensive reward program which is rapidly emerging
as the most popular loyalty card. Now customers enjoy the benefits of using the nectar at
more than 3000 combined outlets of Sainsbury’s, Debenhams and BP, whenever they visit
these places for shopping. Nectar is offering a variety of outlets and other collections to
get the redemption at range of outlets throughout the UK and can be used to get the
reward from numerous services like groceries, merchandise, restaurant meals and
holidays, cinema tickets, family day outs. Since the points can be achieved at lot of outlet
this means that the rewards can be achieved more rapidly.

Benefits to Customers

With the usage of nectar card Sainsbury's shoppers effectively receive 1% discount on
goods purchased there. After spending £250 (with each receipt rounded down to the
nearest pound) 500 points are earned, which translates to a rebate of £2.50 to be
redeemed at the next shop. Customer must have to buy something from the store to be
eligible for redemption. Extra points may be earned when shopping online, buying certain
products or during particular promotions as well as not using plastic bags to carry one's
shopping home.

Benefits to Sainsbury’s

 It is estimated that the organization will receive more than 50 % return on

investment.
 Increased retention — Since nectar card is applicable to various other places also
because to the multi tie up of Nectar scheme is very beneficial to the shoppers, a
customer who shops regularly with more than one partner company can gain
points faster. This reduces the chances of disillusionment or fatigue.

 Overlapping – Most of the customers may find nectar tie up with partners very
useful as this may attract them to use the same place where nectar card is
applicable once they complete their one purchase like people who use nectar card
at BP filling station can always ended up shopping in nearby Sainsbury’s to
increase their nectar points which they might not do in other case.

 To turn "tertiary" or secondary buyers into "primary buyers" — i.e. (to use the
Sainsbury's example again) to turn a customer who buys just the essentials at their
local store into a customer who does the main shopping at that store.

Establishing how Loyalty schemes benefits customers to be satisfied, loyal and

retained
Dowling and Uncles (1997) described that whatever the benefits loyalty cards offer,
customers immediate rewards are psychological, namely a feeling of participation, the
anticipation of future rewards and sense of belongings. Different loyalty programs are
devised in such a manner that they suit to different segment of customers. Sainsbury’s
also working incessantly to also come up with different schemes and loyalty programs
which are exciting for all of its users. Like very recently they have SSA (Sainsbury’s
social association for colleagues) in which Sainsbury’s in collaboration with many tour
packagers, amusement parks etc. providing discounted holidays packages, participation in
local events and Corporate events, many lucky customers through lucky draws will also
get an opportunity to avail the uses of these packages. These are just value added
programs which are not only motivational to staff members but to loyal customers too.

Financial performances of the firms are predominantly dependant on the customer loyalty
(Jones and Sasser, 1995) and it is very much true for service firms where slight increase
or decrease in the loyalty can substantially affect the profits of the organisations. Service
firms are totally committed to achieve customer loyalty by rendering superior services
but the challenge for them is to identify the critical factors which determine the customer
loyalty and satisfaction.

To develop a link between customer loyalty, satisfaction and retention, lot of assumptions
are considered. Commitment is synonymous with loyalty a customer who is committed to
any brand will always show his loyalty to it but still there is consensus on these issues
among the researchers. There are lot of studies been done earlier on the behavioral loyalty
and commitment in marketing. In the end it widely accepted that emotional bonding is
always effective than economic benefits as far as magnitude of loyalty is concern.

The Results of Relationship Marketing

Drive Customer Response

It gives the organization to develop and modify different online and offline marketing
programs based on the specific preferences and motivations of the customers. With the
relevant information from target customer behaviors from marketing warehouse
organization can generate real time visitor list to drive targeted and relevant
communications with the customers. The fist step which relationship marketing provides
to drive the customers is to identify potential buyers, applicants or registrants and
immediately offering them product specific offer to compel them to convert. Secondly
personalizing the contents and offers based on online behaviour and offline customer data

Build Brand Engagement

Relationship marketing teaches how to engage with your content and your brand. It gives
an opportunity to reward the loyal customers and re-engaging the inactive customers by
revealing the loyalty programs.

Increase Customer Loyalty

Once learning relationship is established with the customer, then it’s a just like a
partnership relation. Even sometimes customer’s expectations can be exceeded by just
anticipating their needs. The more intense and complex relationship with customer
formed the more they appreciate though sometimes they can take the advantage of it
also but there are slight chances that they will go to some where else.

The steps to increase customer loyalty:

  Improve customer service. Identifying the high value customers who use the
online support system and or they shop physically and never let their issues
unresolved by either solving it in front or launching a proactive customer service
calls to help resolve the problem.
 Increase sale and sales opportunities by collecting the demographic data and
purchase pattern of all online and offline customers regularize after sales
promotions including the products and services which attract customers most.

CHAPTER THREE: RESEARCH METHODOLOGY AND

METHOD
For any research purpose, there are several techniques in which data can be collected and
several types of data that can be gathered. It is essential to assemble data because it
enables the researcher to find possible solutions to his or her researchable questions and
objectives (Saunders, Lewis and Thornhill, 2000). This chapter examines the
methodology used to carry out this research by giving the reasons. In this section the
researcher will use the “onion” research process by (Saunders, Lewis and Thornhill,
2003) to give a step by step break down of what methods are going to be use in the
research. It consists of five layers which are the research philosophy, the research
approach, the research strategy, the time horizons and the data collection methods.

Research philosophy

Deals with the research philosophy the researcher adopts to develop the knowledge
needed in order to carry out the research. Research philosophy mainly depends on three
processes which are realism, positivism and interpretivism. When scientist takes the
philosophical stand then positivism is reflected in the research philosophy, (Saunders,
Lewis and Thornhill, 2003). As one would prefers “Working with an observable social
reality and that the end product of such research can be law- like generalizations similar
to those produced by the physical and natural scientists” (Remenyi , 1998)

In this tradition the researcher assumes the role of an objective analyst, coolly making
detached interpretations about those data that have been collected in an apparently value
free manner. Although “there will be an emphasis on a highly structured methodology to
facilitate replication,” (Gill and Johnson, 1997) and on quantifiable observations that lend
themselves to statistic analysis. “Those researchers critical of positivism argue that rich
insights into this complex world are lost if such complexity is reduced entirely to a series
of law- like generalizations”.
Thus if you sympathies with such a view your research philosophy is likely to be nearer
to that of the interpretivist. The necessity to discover what Remenyi said is “the detail of
the situation to understand the ability or perhaps a reality working behind them”. Realism
on the other hand is “Applied to the study of human subjects, recognizes the importance
of understanding people’s socially constructed interpretations and meanings or subjective
reality within the context or seeking to understand broader social forces, structures or
processes that influence and perhaps constraint, the nature of people’s views and
behaviors” (Saunders, Lewis and Thornhill, 2003). The researcher will use a mixture of
positivist and interpretivist philosophy and may reflect the stance of a bit of realism.
Positivist because, the research has data already collected and it is just to interpret those
date, to make an objective analysis for a better understanding. Interpretivism because, the
need to explore the subjective meaning of motivating people’s actions in order to be able
to comprehend them.

Research approach

The researcher would use both inductive (which is the collection of data and developed
theory as a result of data analysis) and deductive (which develop a theory and hypothesis
and a design a research strategy to test the hypothesis) approach in this research. The
approach is already a theory in practice and the use of hypothesis through data analysis
can be used to test it. An inductive approach is useful in that it allows patterns themes and
categories to emerge from the data as it is collected and interpreted, rather than imposing
them onto the data at the onset (Patton,1990) . Finding out the reasons why people prefer
one thing over another or why they do things in a certain way is a tricky affair since
people tend to be wary of divulging details about any aspects of their lives especially to
strangers.

The researcher had to apply diplomacy and bit of charm to reassure the respondents that
firstly, their anonymity was secure and there was no way of finding out who had filled in
a particular questionnaire and also explained the purpose for which the questionnaires
would be put to use. The use of questionnaires to conduct research generates data that can
be both quantitative and qualitative by nature. A study or research can be entirely
qualitative in nature or can have aspects of qualitative and quantitative approach. For
those like the author who find dealing with complex calculations can be experienced in
quantitative research too daunting, qualitative research is a welcome alternative as
Malhotra and Birks, (2000) states that, qualitative research technique are widely accepted
as an exploratory mechanism to gain information. Popular theory which carries out both
qualitative and quantitative research ends up with more credible results, for instance
Bryman (2002) justifying the adoption of a mixed method approach to achieve an in-
depth insight into consumer behaviour at the same time it is possible to take up one or the
other.

In the field of business studies, surveys and questionnaires are considered to be the most
popular data collection method, with questionnaire being either descriptive or analytical
depending upon the research problem and the purpose of the study. The main research
instrument was questionnaire and a semi structured interview, filled in and handed back
to the author, not just because it’s appropriate but also because of time, budgetary and
skills constraints put on the researcher and the fact that it can be a very quick process
enabling more people to take part in the study or research. This method was preferred to
ensure a prompt reply and avoid the loss of data in the post and a non response as
experienced before for example, postal questionnaire have a rather high proportion of
these the elements. The other issue with postal questionnaires that the researcher has
experienced is that they usually tend to be rather extensive in the form of the number of
questions to be covered, an exercise that can take more than half an hour. Also
questionnaires can yield an elementary level of qualitative data they allow a single
researcher to collect large amount of data and data analysis is relatively straightforward.
As time is critical and scarce for researchers but more so, a first time researchers this last
point embodied the appeal for this method from the author’s point of view. Therefore the
analysis will be mainly of a deductive, nature, meaning data collecting driven by theories.

Research Strategy

Examining the research strategy and the researcher will use the multi method approach as
in case study and survey strategy. The researcher was able to gain access from
Sainsbury’s Solane avenue branch at London for the research work. The researcher
choose Sainsbury’s because he himself working there as part time so its been bit
convenient to approach the management, staff and customers for research study rather
than other organisations. As this store is in heart of the city with posh location with
commercial and residential touch so the researcher gets enough exposure with all sort of
customers and staff.

The respondents or shoppers were randomly selected for the purpose of getting a
representative sample population, in order to avoid coming up with a skewed or biased
result from what would be a pre-determined data sample. The researcher introduced
himself briefly to the willing participants explaining the purpose of the questionnaires
and what the results would be used for, without appearing to influence the respondents
mind or leading them on. Since the writer was handing out questionnaires randomly, it
was not possible to get an equal ratio of say male to female or young to old.
Thus as Robson (2002) defined case study as “a strategy for doing research which
involves an empirical investigation of a particular contemporary phenomenon within its
real life context using multiple sources of evidence”. The use of literature and
information from various sources will be analyzed during his research to help the
researcher gain more understanding on relationship marketing and loyalty schemes. The
researcher used the case study strategy as the use of both primary data in the form of
interviews and questionnaires as well as secondary data in the form of interviews and
questionnaires as well as, secondary data in the form of different journals written on the
chosen topic which was implemented during the research. Thus as mentioned earlier the
survey strategy was implied with the use of forty questionnaires and ten interviews, to
generate an idea of what some of the customers and staffs think of loyalty schemes. The
researcher chose the survey strategy as it made it possible for a large amount of data to be
collected from a sizeable population, at a very low cost through questionnaires and are
much easier to, compare as the questions were standardized. Also due to the fact that the
research is the researcher own ideas, it gives the independence to work at the researchers
own pace, designing and piloting questionnaires and analyzing the results to meet
targeted dates.

Time Horizons

Considering the time horizon that is used to carry out the research the “snapshot” or
cross-sectional approach is used to conduct the research, which means that “The study of
a particular phenomenon or phenomena at a particular time”, this is due to the fact that
most research projects for the purpose of academic courses are set at particular deadlines
and can be necessarily time constrained. Thus as this research is for the purpose of an
academic study, it is best to use the cross- sectional approach as put up by Easter by-
smith, “Cross-sectional studies often employs the survey strategy” (Easter by-Smith ,
2002; Robson, 2002). That they also use qualitative methods and the fact that many case
studies are based on interviews conducted over a short period of time; where all the
qualities that the researcher used in conducting this research. First and the foremost, the
research was set at a due date at the end of the academic year, which made it time
constraining. The researcher chose the qualitative strategy as it was the best for the
chosen topic being researched as the researcher carried out a survey at Sainsbury’s branch
at Solane Avenue, London in order to find out that if loyalty card actually contributes for
customer loyalty and retention through relationship marketing? In this survey researcher
gave 50 questionnaires to both staff and customers at the store to analyze what they think
about store credit and loyalty cards. Also the researcher conducted ten semi-structured
interviews with staff at the branch. The objective was to get acquire honest and candid
opinions or views of the all the respondents.

The researcher also used the multi-methods approach this is due to the two reasons, one
being that the approaches and strategies used to carry out the research do not exist in
isolation and usually be combined, which is more beneficial to this research. Two
employing the multi-method in this research has major advantages like for instance; the
researcher could use different methods such as interviews and questionnaires for the
purpose of this research. Also multi-methods enabled triangulation to occur in the
research “Triangulation refers to the use of different data collection methods within one
study in order to ensure that the data are telling you what you think they are telling you”
(Saunders, Lewis and Thornhill, 2003).

Within secondary data, there are two categories in which it can be divided. They are
known as quantitative and qualitative data. Quantitave data is usually utilized when a
research is concerned in statistical-related topic. Qualitative data, on the other hand, is
often concerned with the re-classification of a concept or theory. In order to simplify the
differentiation between qualitative and quantitative data, Saunders (2000) has constructed
a table in which it highlights three distinct differences between these data.
Quantitative Data Qualitative Data

Based on meanings derived from Based on meanings expressed through

numbers words

Collection results in non standardized

Collection results in numerical and
data requiring classifications into
standardized data
categories

Analysis conducted through the use of Analysis conducted through the use of
diagrams and statistics conceptualization

Table: Distinctions between quantitative and qualitative data

From the table above and referring to Dey (1993) and Robson (1993), Saunders (2000)
state that “a constant can thus be drawn between the “thin” abstraction and description
which results from quantitative data collection and the “thick” or “through”
abstraction or description associated with qualitative data”. Qualitative data, therefore,
can be considered as more subjective or richer than quantitative data. Consequently,
the analytical technique most likely to be utilized is by creating a conceptual
framework, which the researcher would have to produce by him or herself. Both types
of data can either be raw data where there has been little or no processing or complied
data where it has already been processing such as selection or summarizing (Kervin,
1999). Additionally both quantitative data and qualitative data can be used in
descriptive research, where it is used to portray an accurate profile of people, events or
situations (Robson, 1993) and in explanatory research where it is used to establish a
casual relationship between variables (Saunders, 2000).

Data Collection Methods

The final section refers to the data collection methods. The researcher will be using
secondary data by collecting data on the chosen topic from the internet written by
other authors, in the form of academic journals, text books and business reviews and
later on use primary data through the use of interviews and questionnaires. As put by
Churchill, “do not by-pass secondary data, begin with secondary data and only when
the secondary data are exhausted or showing diminishing returns, proceed to primary
data,” (Churchill, 1991).

Primary Data

This is the collection of new data especially for the purpose of the research. The use of
primary data was employed through tactics such as questionnaires and semi structured
interviews.

Secondary Data

It is the data that have already been collected for some other purpose. The reason for
choosing to start with secondary data is due to the fact that there is easy access to a
wide range of literature written on the chosen topic, thus it is easy to get information if
one looks at the right place. Also it is less time consuming to use secondary data than
primary data, cheaper and less stressful to use secondary data than primary data.
Secondary data was used mainly in the literature review chapter, in order to illustrate
what different authors point of views is both in support and against the chosen topic.
Questionnaire

A questionnaire is a method of obtaining specific information about a defined

problem, a list of questions carefully structured, selected after process of testing with
the aim of getting reliable responses from the particular sample. The purpose of a
questionnaire is usually to explore what a particular group of people think.
Questionnaires are popular method of collecting data and a questionnaire survey is
usually cheaper. The most commonly used questionnaires techniques are by post, by
telephone, face to face group distribution, individual distribution.

Interviews

Interviews are popular form of collecting primary data. An interview has been defined
as a conversation directed to a definite purpose other than satisfaction in the
conversation itself. Interviews are used to obtain in depth information on a specific
topic. There are three types of interview available according to researcher, first the
structured interview, where the researcher delivers a set of questions and the
interviewee chooses from alternatives. Second the semi structured interview where it
is not attempted to get same class of data from interviewee what we receive in
structured interview, the interviewer may probe into follow up questions. This gives a
true opinion. The third type is the depth interview where an interviewer formulates
questions and the interviewee responds accordingly, interviews may be face to face,
voice to voice, or screen to screen and may be undertaken a group of individuals. The
researcher was able to conduct 10 semi structured interviews with Sainsbury staff all
of which was successful attempt. There were five interview questions out of which
three were closed questions and two were open. It was deliberate by the researcher to
design the interview questions in such a way, as it was intended to help to gather as
much information from the management staff as possible, rather than limit them to
options on closed questions. The questions were structured in a manner the researcher
thought was polite with every effort made to ensure that the questions were irritating,
offensive or provocative to the respondents. This in turn helped with specifying the
type of information needed on the basis of trying to find out the link, if any exists at
all, between ethical imagery and purchase behaviour. The questions were not intended
to be interpreted differently, but as accurately as possible and at the same time not too
complex as to render the respondent unwilling to give answers. Another point to note
is the “ripple” effect that occurs when an intended respondent declines to take part in
the survey in full view of other potential respondents. What tends to happen is that the
other potential respondents would follow suit, “zombie-like” and turn down the
opportunity to be interviewed. This is an example of real life experience that can be
witnessed in parts of central London, what with the many charity fund raisers about.
This presented the researcher with a dilemma; either confronts people openly
regardless of the perceived consequences or conduct the whole affair discretely. In the
end, the former method of approach came out triumphant as openly carrying out any
work always scores highly against surprise tactics.

Sampling

“Sampling techniques provide a range of methods that enable you to reduce the
amount of data you need to collect by considering only data from a subgroup rather
than all possible cases or elements” (Saunders, Lewis and Thornhill, 2003). The
sampling techniques can be divided into two types which are probability or
representative sampling and Non-probability or judgmental sampling.

The probability or representative sampling was used to carry out the research, as the
probability of each case being selected from the population is known and is usually
equal for all cases. As a result, it is possible to answer research questions and to
achieve objectives in order to estimate statistically the characteristics of the population
from the sample.

The researcher carried out a survey type random sampling, at one of Sainsbury’s stores
located in central London. The store has about 60 members of staff out of which about
seven are on middle and top management levels. Ten members of staff and randomly
chosen customers filled in ten questionnaires. All the management staff was
interviewed.

CHAPTER FOUR: DATA DESCRIPTION AND PRESENTATION

Researcher who also works at Solane avenue branch of Sainsbury’s took interview of
eighty customers and asked them to fill the questionnaires of whom 53 (66%) were
Female and 27 (34%) were male. Since most of the time females only at home do the
household shopping so higher ratio of them is quite obvious.

.
 Figure: Gender Population

The maximum numbers of shoppers who visit the store are in the age group of 30-40,
out of eighty 40% were in that age group. Since these people are the back bones of
economy and also they only do the shopping for family. The shoppers are categorized
according to their age group.

a) below 20 yrs- (10% i.e. 8)

b) 20-30 yrs- (28% i.e. 22)

c) 30-40 yrs– (40% i.e. 32)

d) 40-60 yrs – ( 17% i.e. 14)

e) 60 above yrs– ( 5% i.e. 4)

Figure: Age group

A whopping 90% (72 shoppers) do the shopping for themselves only and balance 10%
(8 shoppers) were engaged in shopping for someone else.
 Shoppers

Others
10%

Self
90%

Figure: Shoppers

As supermarkets are basically for groceries items and food products, so visitors will
come their quite frequently as they always require fresh food products like vegetables,
fruits, ready meals etc. when surveyed by researcher it was found that weekly visitors
are maximum. The following figures were found out after research about the time
schedule of shopping.

a) Daily – ( 31% i.e. 25)

 b) Weekly – (55% i.e. 44)

c) Fortnightly- (9% i.e. 7)

d) Monthly- (5% i.e. 4)

Time Table of Shoppers

60.00%
50.00%
40.00%
30.00%
20.00%
10.00%
0.00%
Daily Fortnightly

Figure: Time table for shoppers

Though nectar is known to everyone but only 40 % (32 shoppers) who filled the
questionnaires were having nectar card. Since this store is only retail outlet in that
particular area so shoppers shop their irrespective of loyalty card.
 Sainsbury's Card owners

Yes
40%
Yes
No
No
60%

Figure: Nectar card holders

Customers who were holding the Sainsbury’s loyalty card i.e. nectar card when asked
that how long they are using their nectar card then there were various responses.
Following figures came out of findings about the association with cards.
a) below 1 year – 36% ( 12)
b) between 1-2 year- 44% (14)

c) more than 2 years- 15 % (5)

d) Do not know- 5 % (1)

Fig: Length of time

It is quite interesting to know from the observations that most of the customers are
associating them with the loyalty card. This indicates the surging popularity of nectar
card

When shoppers who filled the questionnaires asked that how do they utilize their
nectar points, most of them replied that money off (discount) is the best option, in fact
80% (26 shoppers) of total prefer this option while 14% ( utilize the nectar points at
other places than Sainsbury’s (like Argos, vue cinema etc) and rest for other places
like child trust funds.

How do use your points?

80%
70%
60%
50%
40%
30%
20%
10%
0%
Sainsbury's others

Fig: Card utilization

Majority of the customer replied affirmatively when asked about the importance of
loyalty cards. Even those who were not having it they also accepted it.

Do you think loyalty cards are worth having

Don’t know
8%

No
10%

Yes
82%

Fig: Worthiness of loyalty card

 Importance of loyalty cards

Maximum numbers of customers were having loyalty cards of other stores too, which
are competing with Sainsbury’s. As these cards are free available so most of the
customer pick them up even if they go for shopping to those places.

Do you have any other store cards

No
25%

Yes
75%
 Figure: Other store cards

Discount on the bill after shopping is the main reason, which was answered by most of
the shoppers when asked what which way does Sainsbury’s encourages loyalty for them.
Some said they want to accumulate points to utilize them for some other products and
some of them didn’t have any specific answer for the questions but they are attached with
Sainsbury’s since years and always wanted to be attached with it.
 In what way does Sainsbury's encourage
loyalty form you

80%

60%

40%
64%
20% 30%
0% 6%
Money of points do not know

Fig: Reasons for Loyalty to Sainsbury’s

When asked from the customers that how many are satisfied with the Sainsbury’s and
always want to be associated with it then 80% said positively about the services rendered
by Sainsbury’s and the various schemes and programs implemented by the company,
12% were non-satisfied and 8% said they cant say anything.

Fig: Customer satisfaction

Though Sainsbury’s has launched various loyalty programs in the past but when it was
asked to the shoppers who filled the questionnaires that whether the loyalty schemes
really impress them or not, then around 60% were quite enthusiastic about the various
programs, 15% said no and 25% were not sure about it as they believe that every
organization does the same thing to attract the customers.

It is apparently difficult to establish the loyalty of any organisation or its credibility by

just finding the survey of few customers. The researcher also felt that any attempt to
endure customer to press them for loyalty and satisfaction will definitely confuse them
and they would be diplomatic in their approach. Even some respondents can be irritated
by it also as every one has his/ her own opinion and style of expression.
CHAPTER FIVE: DISCUSSION

In this chapter the author has structured his findings on the basis of the objectives which
would help explore more on his findings in chapter four.

Secondary data

From the secondary data which includes literature reviews, market analysis and reviews
of prominent market analysts it was established that it was completely a competitive
move for Sainsbury’s to introduce nectar card loyalty scheme to match its market with the
market leader Tesco which was pioneer in launching the loyalty scheme through their
club card program (Palmer, 2000). It was also a step to challenge the supremacy of
Tesco’s which was the market leader and having a distinctive marketing advantage by
launching its club card ahead of its competitors. When Tesco launched its scheme then it
was highly unprecedented move and there was no industry model to follow (O’ Malley,
Patterson and Evans, 1999). The success of Tesco’s club card ultimately inspired
Sainsbury’s to launch its own loyalty card scheme.

The very purpose of loyalty programs is not only motivates customers to buy more from
the stores but also to show them gratitude for previous purchases and subsequently to
strengthen the customer relationship through this model.
Dowling and Uncles (1997) suggested some norms of the loyalty scheme for which these
are successful and profitable are as follows:

 Loyal customers are fewer prices sensitive.

 Loyal customers tend to spend longer time with the company.

 The costs of serving loyal customers are less.

 Loyal customers pass on positive recommendations about their favorite

brands and suppliers.

Though there is no prove or evidence which supports that the norms suggested by
Dowling and Uncles are hard facts, so it cannot be easily accepted that customers who
follow the particular brand or supermarket are always profitable in fact there is evidence
that proves otherwise from behavioral loyalty and reward research suggesting the
opposite. For example we can not assume in every case that loyal customers are less
sensitive to price, even though frequently claimed by various brand equity researchers.
There is correlation between higher prices and brand loyalty but we cannot conclude
automatically that more the loyal customers become for a brand less price sensitivity they
show for prices, (Aaker, 1991). It is highly a customer perception that how much they
like a brand as how much the value propositions that brand offers to them. Some times
they prefer to buy a brand which they believe offering higher brand loyalty that drives
price insensitivity. Now more complex situation occurs when the loyalty customers do
more shopping but at the same time expects a high volume of discounts. Hence loyal
customers may even turn to expect more price discounts and better services as they come
to expect what reward the company will offer them to get benefitted from their loyalty,
(Dowling and Uncles, 1997).
Customers can be always placed inside a three-dimensional cube. The first tube which
focuses on improvement of loyalty from all customers even the losses also is called
“contribution”. It also examines interests, loyalty card and customer profitability.
“Commitment” is the second axis which measures future customer profitability,
containing two elements, first about the loyalty of the customer whether he will be
always remains attached to the same brand and the second is “headroom”. It is to enhance
the value of customer purchasing power in the near future. . The third axis is
“championing” or the potential to become a brand ambassador or, at higher level a “brand
mentor” like hiring of famous celebrity chef Jamie Oliver and try team for their
advertisement to encourage people to cook which forms part of the supermarket's ‘Feed
Your Family For a Fiver', shows Oliver leading a cooking demonstration with a team of
food experts Sainsbury's has dubbed the Try Team.

Primary Data

Through the scheme, Sainsbury’s has been able to maintain its competitive advantage, as
the UK’s top three retailer over the years also the management is claiming that the
company has an increase in customer loyalty that its competitors, as there have been a
three percent (3%) increase in nectar card holders every year. Also despite the high level
competition in UK supermarket industry and hard hitting recession, Sainsbury reported
strong full-year profit growth after the supermarket chain broadened its range of budget
groceries and offered more promotions to attract customers with less to spend during the
recession. Sainsbury has seen a high level of profit margin, its profit surge to 11.3 % from
the last year despite challenging market conditions of the credit crunch even though the
company has come under increased pressure from the rival like Asda, Morrison and
Waitrose etc but it has still succeeded in maintaining its 16.3 % market share and is
constantly trying to keep its customer satisfied as that is what the management of
Sainsbury’s has been asked to make their Top priority.
Identification of nectar card importance to Sainsbury’s customers

Secondary Data

Through the loyalty schemes and especially the nectar scheme, Sainsbury’s has made its
presence felt and has maintained its competitive advantage, as the UK’s top three retailer
over the years also from the markets figures it is quite ostensible that the company has an
increase in customer loyalty than its competitors, as there have been a three percent (3%)
increase in nectar card holders every year. Also despite the high level competition in UK
supermarket industry and hard hitting recession, Sainsbury reported strong full-year
profit growth after the supermarket chain broadened its range of budget groceries and
offered more promotions to attract customers with less to spend during the recession.
Sainsbury has seen a high level of profit margin, its profit surge to 11.3 % from the last
year despite challenging market conditions of the credit crunch even though the company
has come under increased pressure from the rival like Asda, Morrison and Waitrose etc
but it has still succeeded in maintaining its 16.3 % market share and is constantly trying
to keep its customer satisfied as that is what the management of Sainsbury’s has been
asked to make their Top priority.

The researcher believed that though it is very cumbersome job to find out the customers
and staff actual expressions and views on relationship marketing which is pertaining to
customer satisfaction and loyalty, as it is quite a complicated issue so researcher prepared
his questionnaire as simple as possible so that it would be very easy and judgmental for
the respondents to answer without being too much brainstorming. He believes that people
intelligence and knowledge on any subject in terms of importance to company cannot be
taken granted and we cannot underestimate the views of any customer otherwise the
whole purpose of relationship marketing will be ignored.

Management staff of Sainsbury’s has wide opinion about the loyalty schemes lead by the
Sainsbury’s as there are few members who were interviewed were associated with the
organisations since last 10 years have witnessed tremendous transformation in
Sainsbury’s relationship marketing approaches. When asked about the major factor
behind the introduction of Sainsbury’s nectar card scheme, the encouragement of loyalty
among the customer was the specific answer. Some replied to track the customer buying
pattern and behaviour and few said to expand the Sainsbury’s market share. As it possible
for store departments by monitoring short term coupon redemption rates and then
tracking the ongoing transactional activity of the customers to calculate precisely the
return on investment on the loyalty schemes.

Interviews

When asked from the staff that what is the positive impact which they see of Sainsbury’s
loyalty schemes on customers? Their prompt answer was the loyalty, this true because
the nectar card has gradually associated itself with the Sainsbury loyalty scheme and
created an impression on the mind of the customers as it among the most popular loyalty
cards in the market with around 10 million members. There also could been the
temptation from the customers to spend more as to gain more points because of scheme,
some staff members replied that, it is also helpful for Sainsbury’s to know more about its
customer and use this knowledge for its customer relationship marketing techniques. The
more the information company will have more it will help the company to bridge the
relationship with customers especially who are very profitable and loyal to it.

Another question is that how Sainsbury’s use the scheme to improve Customer
Relationship Management, and the response was very overwhelming from the findings
which signify that it is constantly attempting to make its customer happy. Sainsbury’s
always tires to update its customer regarding the updates about the stores using various
techniques of relationship marketing, like sending magazines and leaflets to certain club
members, like toddler and baby club, healthy living and organic club members, to a name
a few, informing them of new products in store and offering them discounts and extra
points vouchers towards these products. Also these loyalty schemes provides a better
platform to the organization to understand its customer in better fashion, as some staff
viewed there opinion. Suppose if some customer is angry with the Sainsbury’s and he
shows the protest then Sainsbury’s always gives the priorities to that customer concerns
and left no stone unturned to resolve his woes that’s why company is having a customer
manager at every store who is very attentive to solve customer issues, this is very strong
competitive advantage as customers like to be listened to and feel that their points have
been heard and would been dealt with.

Customer satisfaction is the prime competitive advantage that distinguishes Sainsbury’s

from other competitors when asked from the staff that up to what extent the schemes give
Sainsbury’s an edge. Here every customer wants to return back because of the excellent
treatment which he receives from the staff and management, this attitude also help
Sainsbury’s for longer race as it give word of mouth publicity to Sainsbury and this is
most powerful recommendation then other marketing gimmicks. Other managers
responded that the scheme has aided Sainsbury’s to stay in top three since the inception
of its loyalty card and it is assisting Sainsbury to widespread its customer base to increase
its market share and profitability. Since the members of loyalty card are increasing by 3%
every year this is very high time for Sainsbury’s business as not only there is more
revenue for it but also profitability and market share.
Questionnaires

Customers enjoy shopping with Sainsbury’s which is quite apparent with the findings
that when asked from the customers who filled the questionnaires that for whom they do
the shopping, most of them replied for themselves except five who said that they do it for
their partners. Sainsbury’s always give a prime importance to the place they establish
their stores after considering lots of factors moreover there is major stress is given on the
way layouts are designed as Sainsbury’s feels that it is very vital factor not only from the
company’s point of view but customers as well. The pleasing and attractive items like
flowers, cards and vegetables are always stored at the entrance to welcome the customers
with bright colours and lighten up their moods even if they are depress and tired after
whole day hectic schedule. Also the promotions are displayed in such a manner that they
must be visible easily to customers and they really do not have to search out for them or
miss them out. Stock availability is also a major area of focus for Sainsbury’s as they
always emphasis that all the items in the store should be available in the store so that
customers do not have to get disappointed when they require them.

When asked why they got the Sainsbury nectar card, many said that it was for the points
and others stated that it was for convenience. Sainsbury’s nectar card is very competitive
advantage as the same card is used to pay for the shopping as well as for collecting points
for other places also. From the findings it also showed that good number of customers
had other credit card and do not have the Sainsbury’s credit card, this one probably be an
area that Sainsbury still need to develop further on or it could be that customers are not
targeted with the Sainsbury’s finance card as much as it should.
Identifying how Sainsbury’s uses the loyalty scheme to encourage customer loyalty
in the long run with the help of Relationship Marketing

Secondary data

Loyalty in itself, defined as “an identifiable package of benefits offered to customers

which reward repeated purchases” (Palmer, McMahon-Beattie and Beggs, 2000), loyalty
is very crucial component of relationship marketing it provides the support to the
organization for expansion and retaining the customers. It is all about establishing a
rapport with the customers and maintaining it for long time. It is quite imperative to
realize in relationship marketing that a sale is not the end of the process but it is only the
implanting a seed which nurtures further. Earlier lot much organisation work on the leaky
bucket theory of business that is if you are loosing n number of customers but at the same
time if you are acquiring a support of another n number of customers who join you, it is
satisfactorily for them but nowadays you can not afford to show such attitude when the
competition is quite intense and markets are mature and above all there are only few
customers to compete for so it is extremely difficult to win customers back once u looses
them.
Sainsbury’s community and ethical services

Also in its process to get customers to stay loyal to the company as noted in the findings
that most of the approaches that Sainsbury’s uses to encourage customer loyalty works.
Some of the approaches and strategies are discussed below.

Sainsbury’s is always monitoring and consulting with its customers as to what they can
do make life easier for them, as it believes that getting closer to the customer is vital for
nay relationship to work. Sainsbury’s has implemented several activities as well as
development for the community “Sainsbury community”. Sainsbury’s is committed to
make the difference to its community which is also one of the five core values of it.
Sainsbury’s always motivates its employees to reflect this value in their working styles.
The company has set concrete project level strategies and targets for them to be
instrumental in some social schemes like supporting local communities, promotions of
safe society and controlling childhood obesity. It is proved from previous research that if
an organisation is adopting a site-by-site implementation process to their community
programmes they are able to engage their colleagues more effectively. So most of the
stores of the company are more or less involved with one or more social issues of the
local community as the people find it much easier to connect them with the issues or
cause because of personal attachment and its impact on the surroundings they live in.
Sainsbury’s is flawlessly promoting fair trade foundation. It is also generating the
awareness among the UK consumers to buy the fairtrade products as it is directly involve
with the upliftment of producers. The fairtrade products are taken from all across the
world which gives fair prices to the farmers and help them to prosper their business with
long term relationships. Many of individual farmers and their families are benefitted from
this fairtrade system. Sainsbury’s in these locations has build lots of schools, hospitals
and amusement parks for the children to give them a better life.

Today’s business world rules are being implemented to follow ethical behaviors in the
organisations because of that many organization have now change the way they used to
conduct their business because the ethical issues are directly co-related with the influence
on consumer. “Information about a firm’s ethical behaviour is thought to influence
product sales and the consumers overall perceptions of the company” (Mohr, 2001).

So keeping this in mind there is upright demand for saving the environment and people
around the world especially in UK also had become aware of the consequences of the
green house emissions and the need for more to be done to preserve the environment.
Despite of lot of environmental protests and support rallies government is doing little
which ultimately forced people to start caring for the environment, this lead a pressure on
various organisations, mostly multinationals who were highly negligent on their part to
save the environment, the charge being that these organisations were only interested in
profit giving little regard to the aftermath of whatever damage may have occurred in the
pursuits of the said profits. This has led to most large corporation doing a lot more for the
community. Sainsbury’s is also not behind to follow the ethical behaviour, even saving
the environment is among the first five prominent mottos of it, Sainsbury’s wants to
double the volume of cans, cartons, paper and bottles brought in for recycling by its
customers. As a result it has rolled out hundreds of new machines that sort crush waste on
the spot, also the carrier bags of Sainsbury’s are biodegradable, it’s also helping its
customers re-use their carrier bags in order to reduce the number of carrier bags given to
customers by a quarter and adding nectar points each time they reuse the bag. Very
recently Tesco offer “buy one, get one later” deal for its customer to save the wastage of
food as it was found that the free item is not utilized most of the times. Sainsbury’s came
forward with a step ahead by calling the marketing promotion “Buy Now, Free Next
Time”. In this scheme customers get the coupon so that they can claim their second item
whenever they visit the store next time. The scheme is supposed to be launched in
Sainsbury’s 470 stores very soon this is basically kept in mind to save the wastage of
food from this scheme as retailers are being criticized since long to not contributing to
save the household food wastage.

Primary Data

Interviews

Though some of the staffs are not much aware of loyalty scheme but they do believe the
effects of customer loyalty. There believe also get strengthen by the fact that every year
there is substantial increase in the nectar card holders and its every year since time of its
introduction. Some believe that it help customers to have faith in the company and they
spend more to get points. Three points were put forward for implementing the schemes
for customer relationship management, firstly how the company understands it customer
better. Secondly motivating its customer by providing them discounts and vouchers and
thirdly to keep them updated about the new schemes and promotions prevailing in the
stores by sending them news letter, magazines and discounts on certain products and
offers.
Questionnaires

Most of the customers when asked that where do they use their points, they simply said
they would like to use it for Sainsbury’s shopping only few replied that they will make
best use of in other places like Argos, Vue cinema (where also nectar card is applicable)
and make sure about the best deals and the remaining though in very scanty number said
that they are not sure where they are going to utilize their points. As it was observed that
most of the customers timely utilized their points by waiving off the money but many of
them save the points for big occasions like Christmas , new year where they can bargain
the best deals. Most customers that filled the questionnaires believed that Sainsbury’s
loyalty card system works, only sometimes certain vouchers are not relevant to them,
which is quite normal as sometimes the company tries to encourage customers to try new
product or services.

Determining the relationship between nectar card usage and customer loyalty

Secondary Data

It is certain from the findings that the loyalty card scheme works as the usage of loyalty
card is around 50% in every store also the number of redemption of points. It’s been also
observed that loyal customers who are having nectar card spend more than the non card
holders. This is basically on the two tier approaches which were well defined by Duffy,
1998 that “the more you spend the faster you earn”. Which truly encourages customer for
spending rather than saving, it is in reality a cost of defection for a member. The second is
based on balance, which is designed on “the more you save the more its worth” (Duffy,
1998). It encourages customers for both saving and spending as well because its like the
defection in cost which also enhance as the consumer’s balance grows. This is because if
the redemption options are strong enough the structure can create a great deal of powerful
economic cost of defection.
The fact that users of nectar card are increasing every year by 3 % as claimed by
management of Sainsbury, it is clear indication that the scheme is working nicely. It is
also observed that those customers who have Sainsbury’s nectar card do not want to shop
somewhere else and do not want to miss out the discount and offers that Sainsbury’s
provide, as sometimes “ a loyalty strategy can create a reluctance to defect on the part of
customers,”( Duffy, 1998). This can be economic reluctance because the customer would
feel that she would loose something by defecting to other brand or to say everyone wants
to be part of the scheme as “sometime it is psychological reluctance to defect because the
customer feels engaged with the brand and feels that a mutually successful relationship is
lost if he defects” (Duffy, 1998).

Sainsbury’s has worked strenuously and sincerely on customer feedbacks, it’s only the
feedbacks which have given Sainsbury’s the roam for improvement. Customer
satisfaction is Sainsbury’s main motto so to ensure customer delight and standardized
service they send mystery customer very month in every store to the service offered by
their staff and grade the particular store on the basis of various observations by these
mystery customers, also quarterly Sainsbury’s has the customers feedback survey through
external agency to know about their shopping experiences in stores, their feelings and
feedback about the stores products and services and their suggestions for improvement.
Sainsbury’s realize that “ in order to feel loyalty to any organization a customer must feel
that all his needs and desires are not only satisfies but intelligently predicted and
understood” (O’Malley, Patterson and Evans. 1999).
Primary Data

Interviews

It is the percentage of nectar card users which determines the relationship between nectar
card and the loyalty scheme. A mystery customer is assigned by Sainsbury’s every month
who checks the various standards of working set by the organisation and gives his scores
on the basis on certain findings, he also checks that whether customers are being
reminded for their nectar cards or not or to collect their points. Feedback forms also help
customers to find out how well the scheme is moving ahead. The effect of loyalty card
scheme on customer loyalty motivate customers to spend more through vouchers and
increase buying on customers to get more points.

Questionnaires

When asked how often they shop, six shop daily which might be because of their
proximity to the store, ten responded that they shop weekly, 20 shopped fortnightly and
four shopped monthly which is to say that customers with Nectar card tend to be
spending more often. When the customers were questioned that which card they are
owning 80% of them had Nectar card very few of them had Sainsbury’s credit card and
only 2% had Sainsbury’s discount card this might be because they might be somehow
related with Sainsbury’s. This card also collects points and vouchers like normal Nectar
card in addition to the 10% discount. Customer expressed the convenience of Nectar card
by using the same to pay for shopping as well as collecting points and when asked how
often they use their cards most respondents replied every time they do shopping to get
discount and coupons. Also all the respondents preferred to use their Sainsbury’s card for
the right reasons, the points, the discount and the vouchers
CHAPTER SIX: CONCLUSION

In today’s business scenario there has been a vast paradigm shift from one way short
transaction to relationship marketing in market behaviour and thinking. The market is so
intense and competitive that once you lost a customer to competitors than it is extremely
difficult to regain the same customer. Even if the same customer is regained it is quite a
huge economical loss as it is approximately five time of cost to make a new customer
than retaining the old customer. Showing loyalty towards a brand is apparently a
multidimensional construct which means that the particular brand has already achieved a
pre-dispositional commitment from the customer. But at the same time measuring and
establishing a brand loyalty is a complicated issue, which requires several distinctive
psychological processes. Now the focus has been totally shifted towards value laden
relationship marketing instead of individual transaction in theories and practices followed
by organisations. One assumption is that companies can improve their profits by 20% to
80% by reducing customers’ defection by only 5%, (Reichheld and Sassers, 1990).

Brand loyalty is influenced by some key elements like customer satisfaction,

commitment, repeat purchase and perceived value in which repeat purchase and
commitment are above perceived value and brand trust. Any enhancement on brand
loyalty can have vast effects on profitability of the organization, (Fred Reichheld).
Customers’ loyalty schemes have become marketing’s most favorable and familiar
strategies and they have created remarkable response also, though academicians and trade
passers have periodically keep criticizing the various loyalty schemes such as “failure in
competitive strategy, war in the air, scramble for points hit turbulence”, (Dowling and
Uncles,1997). They further added that these schemes do not change market scenario
fundamentally but at the cost of increasing bit of marketing expenditures these are now
vital marketing armory.
There are various customer relationship management softwares which facilitate to gather,
track and analyse lots of data about the customers like their preferences, activities, taste,
likes, dislikes and complaints. This is a powerful tool in any company’s marketing
strategy. Sainsbury’s use its data base to monitor when and how customers repeat buy
their products., the options they choose, the way they finance the purchase etc, this give
them a right tool to customize target sales materials. In return customer can also
communicate back to the company on the products and a service when they are
approached through company’s tracking services schedules. It is very difficult for the
large organisations to follow the steps of small of traditional organisations regarding
customer relationship where business operate on a small scale and where loyalty is a
personal issue and it is dealt between organization and the customer. At the same time
there is no fixed pattern for the firms to follow, as there are different loyalty programs
applicable to all the companies. Also the success of loyalty program is based on the fact
that how the organisations receive the information and how reliable are the information’s
form which companies can gain significantly.

In order to address the issues of how Sainsbury’s Relationship Marketing techniques is

working it can be seen that it very well maintaining customer data base. Different
segments of markets are sent different newsletters and nectar card vouchers, which are
timely published in leading newspapers and magazines to suite their lifestyle and to
encourage them to do more shopping and be loyalty to the organization. It is extremely
difficult to find a proper link between the customer loyalty and nectar card usages and it
is the hardest part of the research also to find a conclusion out of it. Palmer, McMahon-
Beattie and Beggs (2000) had the opinion that it is quite difficult to undergo
intersectional quantitative analysis of loyalty programs and their performances as it is
totally dependent on the divulgence of information provided by the customers themselves
relating to the loyalty programmes they adopt.
The business environment is so diverse that one idea from one sector may fail in other
sector, market has become quite mature now so to achieve the loyalty and to gain the
advantage in loyalty programmes and a organisation must has to continuously reposition
its strategies. However all loyalty programs can only create a significant impact when
markets can be segmented on the basis sought from loyalty programmes and the supplier
must be prompt enough to change particular offer to satisfy customers different needs.

In today’s competitive environment customers have become more sophisticated and

therefore purchasing power has become complex and they require more customized
offering and therefore require individual treatment. Customers are becoming more
susceptible to switching behaviour between suppliers and competition is increasing. To
survive and prosper in today’s market battlefield, developing mutually beneficial long
term relationships with customers is a paramount important.

It is the responsibility of the marketing department to check whether the market in which
they operate is suitable for loyalty scheme or not or if the scheme is bounce back then
how to correct it, so for to take any steps regarding the loyalty scheme the management
must agree on the fact that loyalty schemes work in longer run and deliver positive
results. Then only they can work with much interest on various marketing strategies and
goals that will develop a loyal customer base. It’s the impact of individual brand loyalty
which influences customer decisions regarding brand and stays there for long time
(Keller 1993, 1998). Brand knowledge is comprised of brand related ideas, sentiments
and observations which in general envisioned in the mind of customer as well in the
organisation, it also involves the retrieval of thoughts of positive associations across
successive purchase occasions. Thus along these lines, it is said that loyalty “Occurs
when favorable beliefs and attitudes for the brand are manifested in repeat buying
behaviour’’ (Keller 1993, p.8).
Perceptions of the consumers are continuously shifting towards the commoditized view
of the business work, so methods of traditional marketing are gradually outdated. The
competitive advantage which the big companies were carrying because of mass media is
absolute now; only those organisations can excel now which can view the individual
behaviour and preferences of the consumers with great amount of precision. Now only
those businesses have the long time competitive advantage which is engaged in learning
relationships with consumers and sustaining it. Relationship marketing just simplifies this
process dramatically by building customer loyalty and success in the new world of
marketing.
 CHAPTER SEVEN: RECOMMENDATIONS

Complete business integration is an iterative and continuous process and cannot be

achieved in a month or even in a year. Now when the competition in market is so fierce
that no organization can afford to wait and watch and then decide something related
with enterprise integration, if an organization has to make sweeping changes to its
operations, applications or even for infrastructure than it has to start it from the word go.
Sainsbury’s also has to make some relevant changes pertaining to its loyalty programs
which must create fruitful results to increase customer satisfaction, market credibility,
revenues, operational efficiency and competitive speed to gain the competitive
advantages. Some of the recommended steps are as follows:

 As the customer shows tremendous faith in Sainsbury’s loyalty program and carries
the nectar card wherever they visit the store but the redemption value is quite low.
In practical 1 % redemption value is quite low after waiting for a month (on an
average) nearly; there must be some substantial discount for customers.

 Though Sainsbury’s like other supermarkets has also opened lot of self checkouts
stores but because of frequent failures and tedious process lots of people get
irritated by these facilities especially the old people and they really show their
concerns for these machines as they feel that these really deprive them having a
personal service touch and communication for Sainsbury’s staff which is vital
component of relationship marketing, so the company must have to work on this
marketing move to place these checkout facilities only on those areas where it will
get the support for it and that’s also after an open survey from the customers.

 Like Sainsbury’s nectar card its Sainsbury’s finance card haven’t get that much
popularity as it should get, so customer must be encouraged to be associated with
Sainsbury’s finance as it not only rewards them more nectar points but very
competitive interest rate and above all ensure them to be more close and loyal to the
Sainsbury’s. So the organization should promote the usage of its debit card and
place some of their financial people in main stores to get the attention of the
shoppers.
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Websites

http://en.wikipedia.org/wiki/Relationship_marketing

http://www.huizenga.nova.edu/

http://www.hwswworld.com/wp/
http://en.wikipedia.org/wiki/Sainsbury's
http://www.emeraldinsight.com
http://www.indopedia.org/Relationship_marketing.html
http://www.webtrends.com/upload/wp_RelationshipMarketing.pdf
http://www.aabri.com/manuscripts/09204.pdf
http://www.telegraph.co.uk/finance/newsbysector/retailandconsumer/5316531/Sainsbury-
enjoys-profit-growth-supermarket-proves-recession-winner.html
www.marketingmagazine.co.uk

APPENDICES

Questionnaires
Research Questionnaire for Sainsbury’s Customers

Please select the option/ answer that best describes your view or opinion and circle it

1) Do you have a Sainsbury’s Card?

o Yes

o No

2 ) Which Sainsbury’s card you have?

o Nectar Card

o Sainsbury’s finance Card

o Staff discount

3) How long have you had your card?

o Under 1 year

o 1-4 years

o Over 4 years

4) Have you ever collected discount from you card?

o Never

o Often

o Not often

5) Where you use your Nectar card?

 o Sainsbury’s

o Non-Sainsbury’s

o Other

Interviews

Interview questions from Sainsbury’s Staff

1) What factors led to the introduction of the loyalty scheme?

o To what the customers want

o Loyalty

o Expansion

2) What is the effect of the loyalty and scheme on customer loyalty

o Motivation

o Increasing buying

o Don’t know

3) How does it improve customer relationship management?

o Awarding loyal customers

o Understanding customers

o Keeping customers informed of the changes

4) To what extent does the scheme give the company a competitive advantage?

o More customers
 o Customer satisfaction

o Profitability

5) Do you feel proud working with Sainsbury’s?

o Yes
o No

o Can not say

Semi structured interview questions and responses of 10 management staffs of

Sainsbury’s Solane avenue branch

No Interview Criteria Response

Question

1 What factors led (a) To know what 4

to the customers want
introduction of
the loyalty
scheme

(b) Loyalty 4

(c) Expansion 2

2 What is the effect (a) Increased loyalty 6

of the loyalty
scheme on
customer loyalty

(b) Increased buying 4

(c) No idea 0

3 How does the (a) Points 3

scheme benefit
 customers?

(b) Vouchers (Money 6

off)
4 How does it (b) Awarding loyal 4
improve customers
customer
relationship
management?

(c) Understanding 4
customers
(c) Keeping customers 2
informed of the
changes
5 To what extent (b) More customers 5
does the scheme
give the company
a competitive
advantage?

(c) Customer satisfaction 2

(d) Profitability 3

Table. Semi structured Interview

Classification

1) Gender
o Male

o Female

2) Age

o Below 20

o 20-30

o 30-40

o 40-60

o 60- above

3) How often do you shop?

o Daily

o Weekly

o Fortnightly

o Monthly

4) Who does the shopping?

o Yourself

o Your partner

o Others

5) How much do you spend averagely?

o £0- £ 20
o £20-£40

o £40-£60

o £60-£80