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Research Project Starbucks Assignment

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HI6008 Business Research

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  1. 1. Introduction

     

     

    Customer loyalty is an important aspect that determines the brand image as well as the brand value of an organisation. In the competitive market scenario, this aspect has to be widely focussed upon by every organisation to remain on the top of the charts. In order to retain the existing customers and attract prospective customers a business research is conducted. This is practically made by organisations to identify and critically analyse all the problem areas of the business processes within the organisation. It includes all the data of the departments of the organisations. These are like the financial data or statistics, feedbacks of the customers, research on the products of the organisation and analysis of the market scenario and the competition faced by the company.

     

     

    The project is conducted as to study the importance of loyalty of customers towards an organisation and its impact on the growth of the organisation which may be a positive one or challenging. The project also focuses on identifying the problem areas in the strategies adopted by the organisation and provides recommendations to the problems identified.

    2. Project Objecti

  2. Aim

  3.  

     

    The research aims to shed light on the importance of customer loyalty on business organisations in present time, with special emphasis on Tesco, UK.

    Objectives

     

     

           To acquire an in-depth knowledge of customer loyalty and its impact on business organisations, particularly Tesco, UK.

           To evaluate the current strategies of Tesco and factors that facilitate the company to enhance customer loyalty.

           To study the associated theories and models that explain the relationships of the customers with an organisation and its growth.

           To analyse the problem areas and provide recommendations to the identified issues pertaining to customer loyalty.

     3. Project Scope

     

    The project focuses on studying the impacts of the loyalty of the customers on the growth of the organisation. In such cases, the research work will result in building a clear concept as to what defines the loyalty of customers. It will create an idea of the issues pertaining to customer loyalty such that business organisations are able to stand up on their own feet in the competitive environment and acquire knowledge on strategies of gaining the loyalty of customers. It will, on the other hand, help the organisations to rethink ideas and concepts previously used to create a good customer relationship. Henceforth, this will help the organisation develop new concepts and methodologies on the basis of the research to allow the growth of the organisation.

     

     

    Background of the company

     

    TESCO is a multinational company retailing groceries and general merchandise. The company was established in 1919 by Jack Cohen (tescoplc.com, 2018). It is headquartered at Welwyn Garden City of England in the UK. It also provides the facility of online shopping as well as delivery of food. In terms of profits earned it is the third largest company and on the basis of the revenues collected it is marked as the ninth largest retailer in the world. TESCO has stores in around 12 countries of the world.

     

     

    4.     Literature Review

     

     

     

     

     

     

     

    Introduction

     

    The research work uses the records and results of the business research to refine the ideas of business so as to take up policies to retain existing customers as well as attract new or prospective ones too. However, during the process of the research on business, there are several ethical issues which are identified or raised. These are whether the research harms the participants of the research as it needs to be conducted after an informed consent from the concerned authority and it might invade the privacy of the organisation or certain level of deception might be present in the process. The ethical issues of business research are taken care of so that it does not endanger the career of the researcher due to methodologies and procedures used in the research. An informed consent means that the research is done after a no objectionable approval from the organisation and claims to be a fair motive of the research conducted. IT also denotes that no deceptive measures are used to harm the company in any way.

     

     

    Concept and Importance of customer loyalty on the growth of  organization

     

    Customer loyalty is a fact that is evident when a customer chooses to buy a product from a particular company again and again rather than opting for other companies(Broadbent and  Guthrie, 2008). Thus, when a customer consistently purchases a product from the specific company for a longer period of time it assures of a loyal customer. In the competitive world, creating a base for loyal customers has become very important for the organisation than ever before. Loyal customers act as critical instruments for TESCO and help in spreading the word. On the contrary, Alshurideh (2016, p.384), states that the customers act as brand ambassador for the company. This is because the word of mouth is so powerful that in case the loyal customers have positive reviews regarding a product then they can share their experiences with their known group of people.

     

    As people are more influenced by their known people, it is a great move towards attracting more customers. The loyal customers also provide the new or even the prospective customers to have a positive overview of the company before being acquainted with the company. It gives an opportunity to TESCO a head-start towards a positive branding. The relationship of the loyal customers built with TESCO further leads to referrals. It is believed that in the process of customer loyalty, retaining old or existing customers are more important than acquiring new customers as acquiring a new customer is far more costlier than retaining a new customer. According to research, a five percent of increase in the rate of customer retention cause a stark increase in the rate of profits of the organisation to 25% to a maximum of 95% (Butler,2015). When it is measured globally, it is found that the value of  customer that is lost by an organisation is about $234. Thus, the bottom line of the fact is that customer retention should be of highest priority for TESCO as it is very important for the growth of the organisation in terms of the profits earned. The sales are found to be repeated from the loyal customers more than new customers. The loyal customers even try to buy new products from a company more than new customers. That is, the loyal customers spend 30% more on the company than the new customers. Loyal customers already have a good relationship with the company and they bear more trust in the company. Hence it becomes easier for TESCO to cross-sell the products or services and even increase the volume of sales without much effort from the side of the company. The probability to sell a product to a loyal customer is around 60% to 70% whereas in case of new customers it counts to only 5% or sometimes to a maximum of 20%.  This even reduces the further cost consumption on marketing a product newly launched by the company. In contradiction, Cravens and Piercy (2007,p. 236) state that this method is not appropriate enough as it only causes customer retention but not market expansion. Creating customer loyalty also minimises the cost of service. This is because the customers are likely to be more familiar with the services like the delivery format of the company and are often found to self-serve themselves. In certain cases, they also tend to help the new customers as well. However, Dewhirst and Davis, (2005, p.678) claim that overall growth of the organisation is not about stabilising the profit margin but to increase it. An accurate forecast is very important for a company as it helps them get knowledge about the expenses that can occur in the future and the revenues that can be collected. It even helps the organisation calculate the rate of growth and discounts and even plan for the worst of the conditions. The image of the brand is the interpretation of the customer regarding the company and helps acquire the new customers. The loyal customers are the backbone of marketing as in this competitive market any profit-making product of the company can be suppressed the next day by another company. In such cases, the loyal customers act as saviours. Last, of all, loyal customers provide for positive reviews and feedbacks for the company, thus enhancing the image of the brand.

    Factors that enhance the loyalty of customers to an organization

     

    TESCO has adopted several means so as to gain loyalty from customers. It is found that every company takes up several ways to market their products and create a brand image. The means that are adopted are like to advertise by using different forms of media platforms, offer discounts and even indulge in promotional campaigns. However, the underlying issue is whether the customers are satisfied with the products and the services provided to them by the company. Loyalty of customers is not only a scale to measure sales but also act as advocate to promote the brand in the social circles.

     

     

    Impact of loyalty of customers (Positivity and Challenges)

     

    TESCO has always strategies to gain loyalty of the customers. These strategies have an overall positive effect on the growth of the organisation while some pose as challenges to company’s growth rate.

    Theories and Models

     

    In order to understand the theoretical aspects of customer loyalty, the organisations follow the Apostle's Model as to enhance loyalty of the customer. According to the model, there are two important factors that determine customer loyalty. These are customer satisfaction and likelihood of repurchase. Customer loyalty stems from satisfaction of the customer which describes the extent to which the company is able to fulfil their needs (Alexander and Hill, 2006, p.346). On the other hand, the feeling of attachment of the customer to the company is what denoted as loyalty. According to the model, one who is highly impressed by the company will be its apostle and the one who is dissatisfied will be a terrorist. Mercenaries are those who are satisfied with the company's products as well as services but can be easily swayed by better offers and discounts (Anderson and Swaminathan, 2011, p.230). TESCO idealises the concepts deduced from the Apostle Model so as to identify its loyal customers, mercenaries as well as the defectors or terrorists. This helps them analyse the grounds on which the loyalty management with the customers has to be enhanced.

     

    Literature Gap

     

    The research is conducted to cover issues and concepts that were not discussed and worked upon in the academic researches done earlier. It has added to the views and models to be established to develop better relationship with the company with the customer. Moreover, not much of the theories and models were established previously which deals with the factors to determine customer loyalty.

    5.Conclusion

     

    The study on the impact of customer loyalty suggests that it is the basic factor that creates the brand image and on the whole affects the growth of the organisation. The loyalty of the customers assures that the company has been able to fulfil the needs of the customers by following the trends of the market. The organisations are required to advertise more about its achievement, ethical practices of business and valid services or products to remain on the top of the chart in this extremely competitive market. It is required to focus on diversifying the range of the products available to attract more customers.

    References

     

     

     Alexander, J., and Hill, N. (2006). Handbook of Customer Satisfaction and Loyalty Measurement (3rd ed.). UK: Gower Pub Co.

    Alshurideh, M.T., (2016). Is customer retention beneficial for customers: A conceptual background. Journal of Research in Marketing, 5(3), pp.382-389.

     Anderson, R. E., and Swaminathan, S. (2011). Customer Satisfaction and Loyalty in E-Markets: A PLS Path Modeling Approach. Journal of Marketing Theory and Practice, 19(2), 221-234

     Armstrong, G., and Kotler, P. H. (2011). Marketing an Introduction (10th ed.). New Jersey: Pearson Education.

    Auh, S., and Johnson, M. D. (2005). Compatibility effects in evaluations of satisfaction and loyalty. Journal of Economic Psychology, 26, 35-57.

    Bayraktar, E., Tatoglu, E., Turkyilmaz, A., Delen, D.,  and Zaim, S. (2011). Measuring the Efficiency of Customer Satisfaction and Loyalty for Mobile Phone Brands with DEA. Expert Systems with Applications

    Bee, A. H. (2009). Market share strategies in the pharmaceutical industry. Unitar e-Journal, 5(1), pp.129-169.

    Bennett, R., Hartel, Ch. E. J., and McColl-Kennedy, J. R. (2005). Experience as a moderator of involvement and satisfaction on brand loyalty in a business-to-business setting. Industrial Marketing Management, 34, 97-107.

    Bodet, G. (2008). Customer satisfaction and loyalty in service: Two concepts, four constructs, several relationships. Journal of Retailing and Consumer Services, 15, 156-162

    Broadbent, J., and Guthrie J. (2008). Public sector to public services: 20 years of “contextual” accounting research. Accounting, Auditing & Accountability Journal, 21(2).

    Butler, S (2015) Tesco - six challenges in store for Matt Davies  Available at: https://www.theguardian.com/business/2015/may/11/tesco-six-challenges-in-store-for-matt-davies [Accessed on 23 March 2018]

    Collins, M., and Parsa, H. G. (2006). Pricing strategies to maximize revenues in the lodging industry. International Journal of Hospitality Management, 25, 91-107.

    Cravens, D. W. and Piercy, N. F. (2007). Strategic Marketing (9th ed.). New York: MC Graw Hill.

    Dewhirst, T., and Davis, B. (2005). Brand strategy and integrated marketing communication (IMC). Jtiuniat of A/itvrliiwg, (4), 81-92. American Academy of Advertising.

    Smithers, R (2018) Tesco delays Clubcard changes after customer backlash  Available at:

    tescoplc.com (2018) TESCO PLC   Available at: https://www.tescoplc.com/ [Accessed on 23 March 2018]

 

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