The effect of loyalty programmes in selected supermarkets In Nakuru Town

Abstract

The business world has witnessed changing fortune over the last decade much of which has been occasioned by liberalisation and globalisation. Increasing competition has meant that it is becoming increasingly important to find new and innovative strategies to remain profitable. The retail industry has not been spared either and management of these retail outlets now see the value of relationship marketing. This is premised on the concept that it is cheaper to sell to an existing customer rather than acquiring a new one. The Kenyan retail industry is becoming increasingly competitive and supermarket management are constantly in search of strategies to give them a competitive advantage over other players. To gain this competitive advantage retailers have devised ways to lock out the competition by building loyalty in their customers. Towards this end, most supermarkets have come up with loyalty programmes designed to reward loyal customers for their continued patronage. The question is whether these programmes as implemented, deliver the sought benefits. To answer this, the study sought to determine the effect of loyalty programmes in selected supermarkets in Nakuru town. The study adopted a descriptive research design. Mixed sampling was used to draw a sample of 420 respondents to whom a structured questionnaire was administered. A combination of both personal and telephone interviews were conducted with the supermarket management. The study received 409 usable questionnaires out of a possible 420 representing a 97% response rate while the interview received 6 responses out of a possible 7 representing a response rate of 86%. The data collected was analysed using measures of central tendency as well as correlation analysis to draw conclusion on the findings. The analysis established a strong positive correlation between LP membership and the choice of supermarket by shoppers (between 0.878 - 0.538). 37% of the customer retention was explained by the LP membership. However the study findings were inconclusive with regard to the differences in retail outlet loyalty levels between LP members and non-members. In two supermarkets the study found a statistically significant increase, another two had a statistically significant decrease in shopping allocation by LP members as measured by CSW. In three supermarkets the study found a statistically insignificant decrease in shopping allocation by LP members. 14% of the LPs sponsors' profits could be explained by the LPs in place. The software used for analysis was Statistical Package for Social Sciences (SPSS). Key Words: Loyalty Programmes, Customer Loyalty, Customer Retention, Supermarkets.