IMPACT OF CUSTOMER LOYALTY IN STORE PROMOTION: A CASE STUDY OF SUPERDRUG (UK)

Transcription

1 IMPACT OF CUSTOMER LOYALTY IN STORE PROMOTION: A CASE STUDY OF SUPERDRUG (UK) 1

2 Table of Contents 1.1 Background of the Research: Rationale of the Research: Research Objectives: Research Questions: Literature Review Conceptual Framework: Loyalty: Loyalty Strategies: Factors influencing loyalty: Loyalty life Cycle: Product promotion elements: loyalty and product promotion: Methodology: Research Philosophy: Research Approach: Research Design: Data Collecting Techniques: Data Analysis: Population and Sampling: Ethical Considerations: Limitations of the Research: Future Scope of Study: Conclusion: Reference List

3 1. Introduction The current proposal deals with an investigation as to how customer loyalty impacts store promotion for a retailer such as Superdrug. Using customer loyalty to augment the promotion of a store is a challenge that the Superdrug brand faces in the current market situation. As commented by Babutsidze (2011), store promotion is a marketing strategy that attracts customers into the new outlet and stimulates them to make repeated visits at the store. The main objective behind store promotion is to earn additional revenue by selling more products to the customers, and subsequently expand the existing business. Bemmaor and Mouchoux (2009) opine that there are many benefits of store promotion in terms of attracting more customers into the store, to earn extra revenue, to create brand awareness; and gain more customer loyalty. Many strategies are used in store promotion. Some of the common strategies used in in store promotion are banners, discounts in specific products, TV screens etc. These are effective strategies to draw the attention of the customers to brand message and create preference for the brand. As per Alessandra (2007), store promotion is very much effective in generating loyalty of the customers to a specific brand. 1.1 Background of the Research: This research has been conducted on Superdrug. Goldstein family established the organisation in 1964 (Superdrug.com, 2014). This organisation is the second largest beauty and health retailer in the UK and has 800 stores in the UK (Superdrug.com, 2014). In the stores of Superdrug, health and beauty products of various brands are sold. Though, Superdrug uses many effective marketing strategies such as online marketing, TV advertisements and social media marketing to create brand awareness among the customers, due to the lack of effective store promotional strategies, the loyalty of the customers to some specific brands is getting negatively affected. In this context, the research is conducted in order to understand how formulation of effective in store promotional strategies will be helpful for Superdrug. 1.2 Rationale of the Research: The main issue related to the research is the decrease in the customer loyalty level towards some specific brands, the products of which are sold by Superdrug. 3

4 As put forward by Chu and Liu (2008), a proper combination of the effective marketing strategies is helpful in creating and retaining the loyalty of the customers. If an organisation emphasises on a specific marketing strategy such as social media marketing due to cost effectiveness, that can have negative impact on the sales and brand awareness. This will eventually affect customer loyalty. Therefore, all the channels of reaching to every kind of customers need to be properly utilised by an organisation. The organisation is having many effective strategies in order to increase the brand awareness and create customer loyalty. Nevertheless, due to the lack of effective in store promotional strategies, Superdrug is lacking the loyalty of many potential customers. This research will be helpful for Superdrug, if the findings of the research are considered by the organisation. 1.3 Research Objectives: o To understand how customer loyalty impacts the promotion of a store o To analyse the store promotional strategies used by Superdrug as a result of customer loyalty o To identify the limitations of Superdrug s store promotional strategies o To recommend Superdrug with appropriate suggestions 1.4 Research Questions: How do store promotion strategies influence customer loyalty? What are the marketing strategies including store promotional strategies of Superdrug? What are the limitations of Superdrug s store promotional strategies? 4

5 2. Literature Review The literature review engages the current knowledge, learning and approach on the concerned research topic to increase the quality of investigation (Gruebele, 2012). With the engagement of different standpoints and viewpoints of authors the researcher can able to provide a proper support on gathering information related to the factors and elements that influence the customer loyalty to make product promotion in the market place. The engagement of theoretical approach increase more close specification and investigation on the research topic. As per Hallowell (2009), the literature review engages the secondary source of information that provides proper support to the investigation of the particular research topic. 2.1 Conceptual Framework: Negative evaluation New Commitmen Product customers Satisfaction t promotion loyalty pleasure Old Satisfaction Belief positive loyalty customers s commitmen Involvement 5

6 Figure 1: Conceptual Framework (Source: Created by Author) 2.2 Loyalty: In the competitive market place, the business organizations enhance the performance profitability and posit ling in the market place with the influence of potential customers. Thus, every business entities focus on their targeted customers to increase their loyalty in relation to provide quality product and services (Bemmaor and Mouchoux, 2009). As the customers makes the final purchase decisions it becomes necessary for management of the company to evaluate and assess every elementary factors that accurately and prominently effects the customer purchase decisions for the particular product and services (Williamson and Bello, 2005). The business organizations enhances the product quality and performance in the market for these customers as they are the major source of creating differences within the competitors, evaluated accurate demand from the customers. Alessandra (2007) stated that the customer loyalty is stated to be more than behavior that makes a consistency in believing and valuing a particular organizations and product and services been offered in the market place. The valuation of product and services certainly enhances the customer perceptions and estimation that increase performance of the product in the market place. It has been evaluated that the loyal customer estimates that the product and services are been purchased by them are better the competitors, thus in a manner monitoring and measuring customer loyalty certain provide information on the positioning of product and company in the market place (Griffin, 2009). 2.3 Loyalty Strategies: The loyalty business model is a strategic business model that is been introduced by management of the company relation to enhance the customer loyalty for a reticular product or service. Dick and Basu (2010) mentioned that quality of product meets the satisfaction of the customer and satisfaction leads to the customer loyalty for the particular product. There are arte different strategies that is been engaged for creating a proper customer loyalty, defensive strategies is one of the major strategies that are been engaged by most of the business entities that enhances the 6

7 customer satisfaction creating barriers to other factors effecting customer buying procedures (Salanova et al. 2005). There are decision making stages also stated as another strategies that is been engaged in creating a customer loyalty, the management of company evaluates the customer decision making procedures in three major stagers that is defining alternatives of brand, relevant information gathering on brand, application of decision making principles to enhance the customer buying decisions. Brand loyalty one of the major strategies that is been engaged by management of the organization in relation to create product value in the customers mind (Babutsidze, 2011). The costing of brand loyalty is relevantly measures as low-pricing products creates retention of customers to enhance their loyalty along with attracting new customers for the particular product and services in the market place. Loyalty Strategies Defensive strategies brand loaylity decision making strategies Figure 2: Loyalty strategies (Source: Gruebele, 2012, p- 58) 2.4 Factors influencing loyalty: According to Yang and Peterson (2004) there are six major factors that influences loyalty and retention of the customers. It has been stated that the factors plays an important role in creation and retention of the customer s loyalty on particular brand. Core offering is one of the major factors that include the commitments that are made by the companies in relation to enhance the customer s attention based on the locations, service qualities, and product and service performances (Alessandra, 2007). Another factor that includes the customer loyalty is Satisfaction, as per the evaluation it has been stated that the satisfaction is relevant elements to increase the interest and desire to revisit or repurchase the particular product. It has been stated 7

8 that higher level of isolated satisfaction usually declines the sales volume of product that increases development of the loyalty of the customers. Core offerings Factors influencing loyalty satisfaction Market palce Figure 3: Factors influencing customer loyalty (Source: Reinartz and Kumar, 2010, p- 88) The market place is another core element that effects the creation of the customer loyalty for a particular product or services. As per Griffin (2009), the key drivers of market place such as switching the opportunities of rising demands and inaction of loyalty that is usually found when customers are unable to switch their brands form one to another due to lack of availability. 2.5 Loyalty life Cycle: The customer life cycle provides different stages that describe the progression of a customer purchasing, using and retaining the product loyalty. As per the evaluation the steps are engaged to make management understand the steps that is been engaged by a customer in that creates purchase decisions, satisfactions, and strategies need to be implemented for regaining interest to repurchase the product. According to Hallowell (2009), the customer loyalist life cycle steps engages customer reach that includes different source and techniques to target and reach the 8

9 customers in relations to provide specification and information on the product, acquisition of the customer attention and interests by providing relevant benefits, specifications and features of the product (Srinivasan et al. 2002). The life cycle that following steps of customer loyalty life cycle is conversions that engages customers perceptions and interests into buying decisions, following to that the company increases the retention of customers by engaging their interest on the series or range of product and services available in a particular brand that creates relevant customer loyalist towards the every product and services been introduced in the market place. reach inspiring retaintion aquisition development Figure 4: Life Cycle (Source: Babutsidze, 2011, p- 80) 2.6 Product promotion elements: The product promotion is an integrated element of marketing mix that is been engaged for introduction and development of new product in the market place. It has been stated that the elements of product promotions is based on gaining targeted customers retention on the product. Advertising is one of the major elements of promotional mix that engages customer attraction and attention on the products to be introduced. Alessandra (2007) evaluated that engagement of more innovations influences the customers more interests on acknowledging about the product or 9

10 service, personal selling is another relevant option that is been used by companies in relation to provide more close demonstration based on the product benefits can be understood by the customers. The procedure of personal selling engages persuasions and oral presentations of the product in which the customers can able to make a clear idea of the product and different alternative ways it may benefit to them (Gronholdt et al. 2006). In the personnel selling, the sellers easily able to learn different responses of the customers on the product presentations and applies proper strategies and interactions to satisfy them to purchase the product. It has been evaluated that the personal swelling of usually varies from product to product as per the targeted customers (Chu and Liu, 2008). The sales promotions includes different incentives, discounts, rewards and gifts that is provided to the different customers in relation to enhance their attention and attraction by decline the prices or providing some extra benefits with purchases of the product. The direct marketing is another element of promotional mix that includes campaigning, street advertising, promotional invitations, letters and prominently used promotional events that without using any specific mode or channel of providing information about the product in the market place (Williamson and Bello, 2005). 2.7 loyalty and product promotion: The retail market is based on the customer mindset that is been usually estimated higher in relations to make purchase decisions. Thus, they are stated to be kings in the market place, as they always surrounded with alternative products to choice and make purchase decisions. It has been stated by Griffin (2009), one of the major tools of increasing sales promotion of a product is customer loyalty that certain increases retention and new customers to make an attempt for buying a particular product. It has been stated that there are two major formed of customer loyalty that is hardcore loyal customers purchasing same brand for ever time and brand switching customers which refers two or more brands at a time (Reinartz and Kumar, 2010). The customer decision making based on the quality of the product, quality of the services, pricing of the product and promotional strategies been applied by an organizations. The customer loyalty is been directly related to the promotional activity for a particular product as the promotional activities not only increase the interest and attention but also enhances purchases by providing certain incentives, rewards and extra benefits (Yang and Peterson, 2004). 10

11 Cusrtomer decision making Product quality Service quality Pricing Promotional strategies Figure 5: Factors of customer decision making (Source: Andreassen and Lindestad, 2010, p- 20) 11

12 3. Methodology: In this section, the researcher has discussed his selection of the research tools and methods. In doing so, the researcher has discussed about the available research tools and has justified his selection for a specific research tool. The success of a research depends to the selection of appropriate research tools (Jha, 2008). 3.1 Research Onion: Research onion is a helpful research tool that helps the researcher to select required research methods and techniques step by step. Figure 6: Research Onion (Source: Saunders et al. 2009) 3.2 Research Philosophy: Realism, Interpretivism, Positivism and Post-positivism are the major schools of philosophy (Easterby-Smith et al. 2006). Out of these, the researcher has used Positivism in this study. This particular philosophy is chosen mainly because Positivism is the most appropriate philosophy for 12

13 a business research. This philosophy helps the researcher to gather factual knowledge gained through physical perception. In this study, Positivism has helped the researcher to collect observable and quantifiable data. With the help of this philosophy, the researcher has learned not to be subjective at the time of conducting a research. 3.3 Research Approach: Out of Inductive and Deductive approach, the researcher has selected Deductive research approach for this study. As a rule of Positivism, Deductive approach goes well with Positivism (Bryman and Bell, 2007). The main difference between the two research approaches is the placement of theories and hypothesis. In case of Deductive approach, a range of hypothesis is adopted by the researcher and hypothesis is built at the end of the study in case of Inductive research approach due to the lack of relevant theories. As, in this study, the researcher has been able to access to lot of relevant theories, models and concepts, Deductive approach is chosen by him. 3.4 Research Design: As commented by Zikmund et al (2012), research design is nothing but the framework of the research. Exploratory, Descriptive and Explanatory are the main categories of research designs. The chosen design for this research is Descriptive. In a Descriptive study, the demographic profiles of the respondents are connected with the research-findings. In case of Explanatory research, only secondary data are explained in detail and in case of Exploratory research, research questions are explored, but the researcher does not recommend any solution for the problem. It is evident that only Descriptive research design goes well with this particular study. 3.5 Data Collecting Techniques: In this research, the researcher has collected birth primary and secondary data. Secondary data are collected by reviewing the relevant literature in books, journals and academic websites. Primary data are collected by taking mixed method (both qualitative and quantitative), as the researcher has identified the need of collecting both kind of data in this research. 13

14 3.5.1 Quantitative Technique In order to collect quantitative data, the researcher has used this technique. As commented by Ryan et al (2009), this kind of data can be measured and written down in numbers. There are many methods of collecting quantitative data such as experiments, psychometric tests, surveys etc. Out of this, the researcher has used survey in order to collect data from the customers of Superdrug. the close-ended survey questionnaire was ed to the customers of this organisation Qualitative Technique Brace (2008) comment that qualitative data are descriptive and narrative in nature. The open-ended qualitative responses of the participants take the researcher deep into the study. The commonly used qualitative data collecting techniques are interviews and case studies. in this study, some of the managers of Superdrug were interviewed telephonically, as they did not permit to conduct face-to-face interview. 3.6 Data Analysis: Statistical Analysis both statistical and qualitative data analysis methods are used to analyse the quantitative and qualitative data (Jha, 2008). The quantitative data collected from the customers of Superdrug are represented in tables and charts to enable the readers to understand the data easily. The data are converted into percentage so that the responses of the customers can be compared easily Qualitative Analysis the responses of all the managers are compared and represented by the researcher so that the points of agreement and argument can be easily understood. 3.7 Population and Sampling: In this study, the population is the entire group of people who are connected with Superdrug. As it is not possible for the researcher to involve the entire population in the research, he has selected some people (sample) who hold all the characteristics of the entire population. The sample size for the quantitative research is 50 customers of Superdrug. The researcher ed the survey questionnaire to 65 customers but only 50 customers responded back. The sample size for the qualitative research is 5 marketing managers of Superdrug. Therefore, the total sample size is

15 The researcher has selected Simple Random Sampling for the customers and Convenience Sampling for the marketing managers. 3.8 Ethical Considerations: The respondents participated in the research voluntarily. The researcher has taken permission from the authority of Superdrug for conducting this research. He also ensures that the findings of the research will not be used for commercial purpose. The secondary data, used in the research are cited. 3.9 Limitations of the Research: This is a cross-sectional research. Due to the lack of sufficient budget and time, the research cannot be longitudinal. It can also not be ensured by the researcher that the primary data, used in the research are authentic. Due to the biasness to the company, the customers and the managers may have a tendency to produce false data Future Scope of Study: In this research, only the in store promotional strategies of Superdrug are considered in the research. There are scopes of conducting future researches on the other marketing strategies of Superdrug. A comparison between the marketing strategies of Superdrug and its competitors can also be the future research topic. 4. Conclusion: In this proposal, the researcher has clarified the rationale, objectives and research questions for the research. In order to build the academic base of the research, a brief literature review has been also added in this proposal. The readers will be able to have the basic idea of customer loyalty and in store promotion by reading the literature review. In the later section of the proposal, the methods, used in the research are clarified. 15

16 Reference List Books: Alessandra, A. (2007). The stairs of customer loyalty. 1st ed. [S.l.: Electronic & Database Pub.] Brace, I. (2008). Questionnaire design. 1st ed. London: Kogan Page Bryman, A. and Bell, E. (2007). Business research methods. 2nd ed. Oxford: Oxford University Press Easterby-Smith, M., Thorpe, R. and Lowe, A. (2006). Management research: An introduction. London: SAGE Publications Ltd Griffin, J. (2009). loyalty. 1st ed. New York: Lexington Books Jha, N. (2008). Research methodology. 1st ed. Chandigarh: Abhishek Publications Ryan, B., Scapens, R. W. and Theobald, M. (2009) Research method and methodology, 4 th ed. New York: Nova Publication Zikmund, W. G., Babin, B. J. and Carr, J. C. (2012) Business Research Methods, 6 th ed. New York, London: Routledge Journals: Andreassen, T. and Lindestad, B. (2010). loyalty and complex services: the impact of corporate image on quality, customer satisfaction and loyalty for customers with varying degrees of service expertise. International Journal of Service Industry Management, 9(1), pp Babutsidze, Z. (2011). Returns to product promotion when consumers are learning how to consume. Journal of Evolutionary Economics, 21(5), pp Bemmaor, A. and Mouchoux, D. (2009). Measuring the short-term effect of in store promotion and retail advertising on brand sales: A factorial experiment. Journal of Marketing Research, pp Chu, H. and Liu, S. (2008). The impact of manager promotion programs on store performance: evidence from 3C chain stores in Taiwan. The Service Industries Journal, 28(9), pp

17 Dick, A. and Basu, K. (2010). loyalty: toward an integrated conceptual framework. Journal of the academy of marketing science, 22(2), pp Gronholdt, L., Martensen, A. and Kristensen, K. (2006). The relationship between customer satisfaction and loyalty: cross-industry differences. Total Quality Management, 11(4-6), pp Gruebele, J. (2012). Effects of In store Promotion Techniques on Sales of Selected Products. Illinois Agricultural Economics, pp Hallowell, R. (2009). The relationships of customer satisfaction, customer loyalty, and profitability: an empirical study. International journal of service industry management, 7(4), pp Reinartz, W. and Kumar, V. (2010). The mismanagement of customer loyalty. Harvard business review, 80(7), pp Salanova, M., Agut, S. and Peir'o, J. (2005). Linking organizational resources and work engagement to employee performance and customer loyalty: the mediation of service climate. Journal of Applied Psychology, 90(6), p.1217 Srinivasan, S., Anderson, R. and Ponnavolu, K. (2002). loyalty in e-commerce: an exploration of its antecedents and consequences. Journal of retailing, 78(1), pp Williamson, N. and Bello, D. (2005). Product, Promotion andâ Free Marketâ Pricing in the Indirect Export Channel. journal of Global Marketing, 6(1-2), pp Yang, Z. and Peterson, R. (2004). perceived value, satisfaction, and loyalty: the role of switching costs. Psychology & Marketing, 21(10), pp Websites: Superdrug.com, (2014). Today Superdrug Site. [online] Available at: [Accessed 23 Sep. 2014]. 17