The Customer Behaviour Is Highly Unpredictable Marketing Essay

Published Date: 23 Mar 2015

Introduction

In today's dynamic business environment, the customer behaviour is highly unpredictable. They have a number of alternatives to choose from. It makes the importance of customer loyalty schemes enhanced. Companies need to know customer's likes and dislikes properly to react according to their demands. A 'mass customization' is essential especially for highly competitive industries like retail industry. There were a number of studies on the link between the long term performance of an organization financially and customer loyalty (Jones and Sasser, 1995; Reichheld 1993, 2001; Heskett et al., 1994). Even they did not agree on the drivers or the determinants of customer loyalty. They believed the perception of customer changes towards the loyalty towards the firm through different determinants. Heskett et al. (1994) believed that the main driver of customer loyalty is customer satisfaction. At the same time Jones and Sasser (1995) did not agree that customer satisfaction is the main driver of customer loyalty and they believe that more significant drivers of customer loyalty are brand image and quality of the products. These differences in the studies can be explained partly by diverse definitions of loyalty of customer (Baumann et al., 2005; De Ruyter et al., 1998). From these studies, we can understand that how important is the concept of customer loyalty for the long term success of a business.

This research would analyse the significance of perception of loyalty schemes by the organizations in the retail industry by giving focus on the customer loyalty schemes of Tesco. The customer loyalty schemes of Tesco are example to every organization which is eager to win success in the market. With the customer loyalty schemes like Club card, Tesco have the opportunity to interact with its customers as individuals. Club card allowed Tesco to identify the likes and dislikes of the customer through which Tesco could able to execute a mass customization. Mass customization allowed Tesco to produce products in millions according to the demand of customers. This study explores on the customer behaviour according to different customer loyalty schemes of Tesco. This study investigates different subsidiary objectives also with the above said main objective. They are studies on different conceptual models and theoretical frame work on the schemes of loyalty of customers, different techniques and methodologies used to implement different schemes of loyalty in Tesco. It also analyses the implementation of Cub card scheme by Tesco and its comparison with such other schemes by other companies. This research tries to identify recommendations for Tesco for improving its loyalty schemes for increasing the purchasing frequency of its customers. This research would analyse the above said objectives in detail to provide a scientific outputs on the significance of the loyalty schemes by Tesco and the relation of the behaviour of consumer according to those schemes.

The loyalty schemes' main objective is to retain the customers in the organization and to make a commitment and loyalty in them towards the organization. Various researchers says that a company should concentrate more on retaining its customers rather than attracting new customers (Smith & Right, 2004). Getting a new customer is relatively easier task in comparison with retaining a customer in a highly competitive industry like the retail industry in United Kingdom. An unnoticed function of this loyalty schemes are the mouth publicity by the customers. Hee-Su and Yoon (2004) says that "word of mouth publicity cannot be beaten by any other modes of advertisements". It allows a company to retain its valued customers with the firm and it allows the company to attract new customers towards the company. The research would analyse many unnoticed areas with this research.

Tesco- An Overview

Jack Cohen established the first Tesco store in 1919 in East London. From there the operations of Tesco Plc started. In 1924, the first product of Tesco came in to the market. After purchasing a tea shipment from T E Stockwell, Cohen combined first three letters of the name of that shipment company and coined the name TESCO. From there Tesco grows as a retail chain of consumer goods, groceries, financial services, telecommunications and electronics, etc. Tesco is the third largest retail chain all over the world. The two companies ahead Tesco are retail giants Wal Mart and Carrefour. Tesco employs about 440000 people in more than 3750 stores. In 2008, Tesco won the Retailer of the Year award.

Tesco grew organically through various ways such as acquisitions in 1950s and 1960s. Tesco owned more than 800 stores then. The recent history of Tesco is the rea story of the retailers' successful evolution and diversification in to new business and especially to overtake the past number one position owned retail giant, Sainsbury's in UK (Humby et al., 2003). Tesco was concentrated and specialized in food and drink only before. It had further diversified its business in to different areas such as clothing, financial services, car insurance, consumer electronics, telecom, home, health, dental plans, rental of DVDs and CDs, retailing, music downloads, software, internet services etc.

In 1995 Tesco introduced a loyalty scheme named 'Club Card'. It allowed Tesco to catalyse the transformation of the perception in the customers from 'pile it high, sell it cheap', market trader was stuck in the past to a retailer who is progressive which delivers on the promises that 'every little helps' (Humby et al., 2003). Afterwards Tesco introduced onine shopping portal and according to the statistics of November, 2006, Tesco was the only retailer of food who made the online shopping profitable.

Importance of Research

The loyalty of the customers is highly significant in today's competitive business environment. When the customer becomes loyal, he would be retained as a valued customer of the firm. The retention of customer is more significant than attracting new customers to a firm. In today's tough economical conditions, only a firm with loyal customers can survive in the market. So the organizations are implementing various customer loyalty schemes to make their customers loyal towards the firm.

These loyalty schemes are implemented by companies in order to identify the customers' likes and dislikes. With the identification of this likes and dislikes, the company can provide the products in accordance with the needs and demand of the customers. This will allow the company to make the customers committed and loyal towards the organization. A valued committed and loyal customer is always an asset for the company. These customers will help a company to survive in any difficult circumstances.

Tesco is an example for companies who want to implement such schemes of customer loyalty with a pertinent implementation of schemes of customer loyalty such as Club Card. This is the era of relationship management and Marketing (RM). Various schemes of loyalty are ways to attract and retain customers through this relationship marketing and enhance the relation with the customer of an organization. These are the main importance of this research. The focus has been given to the loyalty schemes of Tesco as it is the world's third best retailer and Tesco has implemented schemes of loyalty successfully and became an example to organizations who are interested in implementing various loyalty schemes for success in their business.

Research objective

This is an explanatory study of the loyalty schemes in the UK retail supermarket sector. So the general objective of the study will be to explore the loyalty schemes and their effects on the customer behaviour. Nevertheless the specific objectives include the following but are not limited to it.

To review the conceptual models and theoretical frame works related to customer loyalty scheme.

To investigate the techniques of customer loyalty schemes currently being used in Tesco.

To find out the extent of success of 'Club Card' loyalty scheme in comparison with the loyalty schemes of other organizations.

By considering wider research and come to the recommendation on how TESCO can improve their customer loyalty schemes in order to increase the frequency of purchasing

By the analyses of the above listed objectives, the research would reach in its aimed destination.

Research Questions

According the main objectives of the research, the below enlisted are the significant questions which should be analysed as a part of this research

Why should an industry practice customer loyalty schemes?

What are the issues faced by customers in absence of customer loyalty scheme?

How local society is affected by customer loyalty scheme?

In what ways supermarket loyalty schemes influence customers buying decisions?

What are the factors that need to be considered in the implementation of customer loyalty?

What are the advantages and disadvantages of the loyalty scheme?

How does it increase the frequency of purchases?

Firstly this study enquires about the practise of customer loyalty schemes by different organizations and its significance in the success of organization. Even if the customer loyalty schemes of Tesco are focused for this research, with this, comparisons of the customer loyalty schemes of other companies would also be analysed. Various literatures on the practices of the customer loyalty schemes by different firms would be reviewed in the literature review. These practices and their significance would be analysed in comparison with Tesco's schemes of customer loyalty and a reasonable methods would be used to collect various primary data. These primary and secondary data would be analysed to reach in the main objectives of this study.

Secondly, this research analyses the issues the customers might have been faced in the absence of the various schemes of customer loyalty. The customer loyalty schemes allowed Tesco to identify the likes and dislikes of the customer properly and to respond in accordance with the customer demand and needs. In the absence of this the customer will be forced to buy the available goods in the market. This is a simple after affect of lack of customer loyalty schemes. The research would analyse these matters in detail.

The effect of customer loyalty schemes on the local society would be analysed in the research further. The research then would analyse the influence of the customer loyalty schemes on the buying decisions of customers. The buying decisions of the customers will be affected greatly by the customer loyalty schemes and customer will be more committed towards the products of the firm which provide the customer loyalty schemes and he or she may ignore a better product from other organization because of the loyalty scheme by one firm. These changes in decision making by the customers would be examined as a part of this research.

The factors or determinants which are significant for the implementation of customer loyalty would be analysed further. Product quality, service quality, customer satisfaction, brand image, etc. are various factors which should be considered while implementing the customer loyalty schemes in an organization. Only with the customer loyalty schemes, an organization cannot achieve success in its business. All the above discussed factors should be considered before implementing various customer loyalty schemes in an organization.

There are various benefits and disadvantages for the customer loyalty schemes. The research would analyse these advantages and disadvantages in relation with the performances of Tesco and its various customer loyalty schemes. The research would try to provide recommendations to avoid the disadvantages faced by Tesco with its customer loyalty schemes. Finally this research would analyse how the frequency of purchases increases with these customer loyalty schemes. These schemes make a commitment in the minds of the customers and this commitment forces them to purchase frequently because of the benefits of the customer loyalty schemes.

These areas would be the crux of this research. Various previous literatures would be analysed to find out the opinions of different scholars on these fields of customer loyalty and the customer loyalty schemes in organizations. Different methods of primary data collection would help me to examine the current issues in the customer loyalty schemes faced by both the customers and firms. The data would be analysed to reach in a pertinent outcome of the research. Further, appropriate recommendations would be provided to improve the functionality of the customer loyalty schemes in the organizations particularly in Tesco.

Method of Analysis

A phenomenological paradigm is the philosophy of this research design. According to this research methodology, the qualitative research is given more importance than the quantitative research for the study of this research because the qualitative research methodology looks beyond categorization and attempts to identify the irregularities in the data by proper comprehension of the meaning of the action or test (Saunders et al, 2003).

The Researcher would try to use appropriate research methodology in accordance with the situation even if the importance will be given to the qualitative methodology. This would help the research to reach its real destinations.

Structures of the Research

'Introduction', the chapter one presents the intellectual to concentrate this research particular to the importance of the customer loyalty schemes in retail super markets specifically in Tesco. Secondly the significance of this study is described. Finally in this 'introduction', the overall structure of this study is presented.

The second chapter is 'Literature Review' and it explores the previous literatures on the loyalty schemes by organizations. it begins with the inception of customer loyalty schemes to its stages of development. The main interest of the literature review is to provide an overview of the vital areas of research which creates the crux of the problem of research.

The third chapter is 'Research Methodology' which explains the different methodologies used for this research purpose. It includes different methods of data collection, number of interviews conducted for this data collection for this research and the types of questions asked for these interviews. In this chapter, a variety of related documents are analysed such as various books and articles which says about the questions of research.

In the chapter four, 'Findings and Analyses', the discussions on the findings of the research would be analysed in a systematic and scientific manner. The information from the collected data from the examination of documents and interviews are construed by the researcher to provide an explanation about any emergent and significant information which might accept or reject the intention of this research.

In chapter five 'the conclusion and recommendations', the research concludes with various recommendations for the improvement of customer loyalty schemes for the retail industry particularly for Tesco Plc. In the conclusion, a final discussion would be given on the research starting from its preliminary stages to the research findings and analyses.

Chapter Two

Literature Review

Introduction

The literature Review of this research covers the concept of customer loyalty and the importance of the customer review schemes. This chapter analyses different literatures on the concept of customer loyalty and it compares the views of the different scholars on this concept. The development of the schemes of customer loyalty is also focused by a large number of scholars and their literatures are analysed as a part of this research. The goal of the customer loyalty schemes is the loyal customers. Practical means are created by the marketers in order to enhance the loyalty of customers, it is necessary to discuss the elements which constitute loyalty (Arantola, 2001). So this chapter begins with the analysis on the literatures on customer loyalty. It will help us to understand the concept in detail and it will allow us to comprehend why the marketers adopt different schemes to enhance the loyalty of their customers.

Customer Loyalty

Definition

The concept of customer loyalty has been analysed since the introduction of this concept in 1920s (Lichtlé & Plichon 2008). Because of many prevailing descriptions, it is difficult to provide a conclusive definition for customer loyalty. According to Litchtle and Plichon (2008), the concept of customer loyalty has widened and the present trend is highly dynamic, relational and situational approach. The different definitions have many similar elements which would be discussed for developing a good comprehension of variety of perspectives.

Uncles et al. (2003) denoted three most popular formulations of loyalty which are attitudinal approach, behavioural approach and contingency approach. Lichtle and Plichon (2008) and Peppers and Rogers (2004) also denoted behavioural and attitudinal approaches of loyalty. Lichtle and Plichon (2008) identified a third approach named mixed or composite approach. These different approaches can be discussed next.

The attitudinal approach says that a customer who is loyal is one which has acquired a favourable attitude for the brand (Lichtle & Plichon, 2008). At the same time some scholars are in the view that there should be a strong commitment of attitudes to a brand for existence of true loyalty (Uncles et al. 2003). This way of loyalty is called emotional loyalty also as the purchases of customers are followed through favourable attitudes and positive feelings for the brand. Peppers and Rogers (2004) explains that attitudinal loyalty will exist when a committed customer will be willing to purchase with a payment of premium for the name of the brand even though a competitor provides a similar, more cost effective product. According to this approach, the loyalty of a customer has greater links with the satisfaction of the customers.

Regular purchase of a similar brand is considered as the behavioural loyalty. This approach of loyalty can be assessed by the behaviour of actual purchase like retention rate or sequence of purchase (Lichtle & Plichon, 2008). According to the definition of Peppers and Rogers (2004), this approach the activity of repurchases which do not regard any preferences of the brand or internal attitudes. Uncles et al. (2003) is of the opinion that very few customers are loyal to only one brand and he says they are polygamous. Lichtle says they share the loyalty to more than one brand. So Uncles et al. (2003) define the customer loyalty in accordance with the behavioural approach as "an ongoing propensity to buy the brand, usually as one of several". So it is to be remembered that the disloyalty is differed from having more than one loyalty (Lichtle & Plichon, 2008). According to Uncles et al (2003), behavioural approach of loyalty leads to only a commitment which is very weak in nature because the loyalty of a customer towards a brand is resulted only because of repeated satisfaction of the customer. A consumer purchases a product of a brand which provided the most satisfaction to him or her. The identification of an alternate product of another brand is time consuming and difficult and due to this fact, the same brand is purchased again and again without any commitment or loyalty to the brand.

Arantola (2003) defines the loyalty of the customer with the behavioural approach. She is in the point of view that the loyalty is an amount of repeat purchase from the similar supplier under a particular time period. According to her, however, the definition is wider and repeat purchases are combined with positive attitudes in relation to the approach of attitudinal loyalty (Arantola, 2000).

In accordance with the combination of the re buying behaviour and positive attitude, the vision of the loyalty can be said as two dimensional. This above definition of Arantola leads to a mixed approach provided by the Lichtle and Plichon (2008).

Huddleston et al. (2004) provides a definition which denotes loyalty as the relationship between patronage behaviour and relative attitude. This model was proposed originally by Dick and Basu in 1994 itself. They identified the specific antecedents which affect the relative attitude for a brand which include conative, affective and cognitive antecedents. The loyalty relationship is also affected by situational influence and different social norms accoding to this definition.

In addition to the mixed approach, Lichtle and Plichon (2008) came with the ideas of stability over time (persistence) and resistance to the pressures of switching. According to this, a loyal customer is identified as one, who remains truly loyal to the brand and its products despite the influence of the competitors who persuade the consumer to switch from the brand. Loyalty can be denoted as biased, coherent, persistent and constant response which dissent the competitors initiatives (Lichtle & Plichon, 2008)

In the definition of Dick and Basu (1994), situational factors and the norms of society are seen to be affected with the relationship between the patronage behaviour and relative attitude. Uncles et al, (2003) says about the third model in the three conceptualizations of loyalty, contingency approach, which says that the relationship between behaviour and attitude is moderated the circumstances of the individual like effects of budget pressure of time or situation of purchase e.g. availability of products and promotions. This approach says that although a there is a strong attitude for the brand, these elements decide whether the brand has been seen worthy when a demand or need for such a product forms. Comparing to the approach of behavioural loyalty in which satisfaction is the determinant to repurchase, here in this approach, a much more complex consideration for the prediction of the next buy.

This discussion denotes that the loyalty of customers has a variety of definitions and when one talks about the loyalty of the customer, it is necessary to understand that what kind of loyalty he meant. The concept of loyalty does not mean a mere re purchase of same brand. The factors like attitudes of the customers, persuasion of competitors to switch from the brand etc. should be considered when we consider the concept of loyalty. Uncles et al gives a much more comprehensive definition for loyalty which was written by Oliver (1997), "A deeply held commitment to re buy or patronize a preferred product/service consistently in the future, thereby causing repetitive same-brand or same brand set purchasing despite situational influences and marketing efforts having the potential to cause switching behaviour."

True Loyalty

Bloomer and Kasper (1995) have researched on the relationship between brand loyalty and the satisfaction of the customer. In their definition of loyalty also the repeat buying is differentiated from the loyalty towards a brand. In repeat purchases, the degree of commitment of the customer is not taken in to consideration as in the customer loyalty. The concept of loyalty is further divided in to spurious loyalty and true loyalty. In true loyalty, the concept of the commitment of the customers towards the brand is taken in to consideration and with this true loyalty, a customer makes repurchases and he cannot be persuaded by the competitors easily. At the same time in spurious loyalty, the buyer may not have attachment towards the brand and he can be easily persuaded by the competitors of the brand.

The authors say that a direct effect is there between the motivation of the customer to evaluate their choices of brand and the true loyalty of the brand. But when the customer has more capacity to measure his or her choice of brand, the effect on the true loyalty of the brand becomes negative. This denotes the fact that when a person is involved highly with the decision of purchase, he or she will be more loyal to the brand. When a customer has multiple options in the market as well as in his mind, loyalty may not develop strongly in such case (Lichtle & Plichon, 2008).

The Degree of Loyalty

The degree of the loyalty can be traced from the development of relationship in different stages. Arantola (2001) and Payne (2009) identified different stages of loyalty of customers. Payne makes his classifications of different stages with the name 'loyalty ladder' where the relation emerges from the prospect to partner. From this prospect, the consumer becomes a buyer after a purchase from the firm once. The customer is a repeated buyer without any special feelings for the firm. The customer likes the firm and advocates and promoted word of mouth about the firm. Payne (2009) says that shifting a customer from one step of the ladder to another is not a difficult thing but definitely with the interest of the firm. These customers act as the advocates of the firm and these advocates are most significant marketers of the firm they act as referees to other customers and referrals are considered as the most believable and effective sources of information.

Arantola (2001)'s classification is based of continuous commitment where we can identify various stereotypes of loyalty of customer. On the other hand, the consumers are considered rational and comparing, who can never be loyal as they vary the supplier whenever it becomes rational. The next type of customer is a consumer who believes on learned behaviour and habits, so repeat purchases from similar supplier. The third type of loyalty is considered as the better one in comparison with other types. The nature of the customers with this loyalty approach can be described as decision making based mainly on emotions. In this case, the product of the brand plays an ideological and very strong role in the life of the consumer and a deep commitment from the customer towards this brand.

Deep Commitment in the relationship with customer

Loyalty towards good brands

Repeat purchase from the similar supplier

Customers are not loyal

Different types of loyalty of customer

(Arantola, 2001)

Advantages of Loyal Customers

It is essential to discuss about the advantages of having loyal customers for a brand. Especially in case of super markets, it is through the loyal the loyal customers, they forecast their sales. It has been indicated by Huddleston et al. (2004) as the customers spend 78 percent of their budget for food in one primary store and loyal customers spend 32 percent more in comparison with other customers.

Permanent customers are very beneficial for the company. Acquiring new customers is a task which costs five times more than retaining one. A loyal permanent customer brings cash flows which are continuous in nature. That may be increased further as the consumer gets familiar with different services and products of the company. It is called as cross selling or additional selling. Loyal customers can also afford cost of operation advantage in fewer markdown forms and forecasting of simplified capacity. Sensitivity of price may be increased or decreased in accordance with the customer (Aranola, 2003; Huddleston et al. 2004)

A growing customer base can be made with the help of loyal customers are they are expected to spread the word of mouth for the brand. Loyal customers help the company to improve its services with their complaints and the company would handle those complaints with due respect. Loyal customers are considered to ignore the marketing communications by the rival firms (Arantola, 2003).

Criticisms towards the advantages of loyal custmer

Every business strives to make profits. It is considered to be a way to cost advantages and for many non measurable benefits to have a loyal customer. But Reinartz and Kumar (2002) argue that the relationship between the profitability and the loyalty of a customer is much weaker and very complicated than the organizations may be dared to think.

It is considered as loyal customers are less expensive than an ordinary customer. But researchers suggest that they are more expensive than ordinary customers. They are expected to be achieved some rewards like discounts in cost of products or in terms of better service for their loyalty. Another criticism is that a loyal customer is willing to pay premium because changing the supplier may be more expensive for the customer because of the costs of switching and this is because they are loyal to the company.

Reinartz and Kumar (2002) suggest further that organizations must segment their customers on the basis on their potential and profitability because sometimes even a long term customer will not be profitable always. Identification and focusing of the most profitable customers is the basic idea in customer relationship management.

Customer Loyalty Schemes

The development and needs of the customer loyalty schemes are examined in this part of studies. Customer relationship management is also discussed in this part as customer loyalty schemes are generally used as a tool of CRM (Customer Relationship Management).

Customer Relationship Management

Customer loyalty schemes can be considered as a tool for organizations to spread customer relationship management (Uncles et al. 2003). While examining loyalty schemes, it would be appropriate to begin with customer relationship management and the predecessor of CRM, the relationship marketing (RM).

For the maximization of profit, the marketing thinkers have been focused on singular exchanges and creating purchases since 1980s (Gronroos, 2008). This method of marketing approach is known as transaction marketing and it is relied mainly on marketing mix. But in accordance with the drastic changes in the markets, there was greater need for innovative marketing approaches. It was difficult for companies to acquire new customers in mature markets and firms became pressurised on their profitability. At the same time, the organizations became globalized and the needs of customer became highly demanding. This made changes in the approaches of marketing as well. The focus of marketing was changed from plain customer acquisition to retention of customers also (Payne, 2009)

The competing interests of various stakeholders of an organization like share holders, customers, and employees are focused by relationship marketing (RM). According to Payne (2009), relationship marketing can be differentiated by three principles. They are emphasis on retention of customers, emphasis on multiple markets and marketing's cross functional nature. The main aim of relationship marketing is maximization of life time value of customers. In order to achieve this goal, it is important to identify profitable customers and develop pertinent strategies. Secondly, for achieving long term success in the industry environment, a relationship should be developed between companies and multiple stakeholders. Managing such multiple relationships is handled by the third characteristic of relationship marketing. Marketing should be considered as everyone's business rather than of merely marketing departments and organizational culture should have to realize this fact.

The next generation of relationship marketing is CRM (Customer Relationship Management). In this approach, advanced technologies allow the organizations to collect the customer data and these data allows an organization to provide one to one marketing. Payne (2009) calls customer relationship management as relationship marketing enabled with information. Multiple benefits of CRM are mentioned by this author. The customers are seen as the assets of an organization and most profitable customers are identified with the use of this information by CRM. The organization is allowed to maintain long lasting relation with these customers.

Customer relationship management concentrates on the life cycle of customers because long term relationships and focus on these profitable customers are greatly related to higher profitability through more cross buying and greater transactions. Organizations use different strategies to influence these customers throughout their life cycle by developing the relationship with them for repeat purchase behaviour and for stimulating the product usage. These strategies are called customer loyalty programs (Meyer-Waarden, 2008).

Customer Loyalty Schemes and Development

The relationship marketing made the focus on acquiring and maintains the customers with the organization in the marketing actions. It was identified that in B to B markets, suppliers which have close relationship with customer also have more customers who are loyal to them which gave them a higher share in their business. (Dowling &Uncles,1997). The customer cards and other schemes of loyalty came out for handling the relationship with customers and to gain the identified advantages of loyal customers (Boedeker, 1997). In late 1980s itself, the earlier steps for the loyalty schemes were emerged (Arantola, 2003). Large customer groups made the task of identification and close relationship with individual customers each an impossible one but at the same time the identification of these customers is noticed by the researchers (Dowling &Uncles, 1997). To enhance direct marketing, organizations assumed marketing with the help of database which helped them to acquire personal knowledge about the customers. Various reward programs for customers were invented and introduced. The emergence of such loyalty schemes was happened in such industries which have product range of low involvement, higher degree of competition inside the industry and in such industries the fixed costs were commanded rather than variable costs (Arantola, 2003).

Customer retention and loyalty of customers were focussed and it has been started spreading in the next decade. The schemes of loyalty were branded for creating a competitive advantage in the industry. But most of these schemes were carelessly imitated and altered slightly by the organizations. But they branded these schemes irrespective of these facts.

The capacities of these loyalty schemes have varied towards focussing on recognition and rewarding. More personalized marketing became possible such as one to one marketing with the help of study and development of the information from the customer data (Arantola, 2003). The expenses and investments are also getting increased by all the time for the customer loyalty schemes. Meyer- Waarden (2008) says 16 top retailers in Europe paid out more than $1 million for their loyalty schemes altogether in 2000. The expenses of present time will be multiples of these amounts for sure.

Characteristics of Loyalty Programs

Loyalty schemes can be considered as tools for practicing RM (relationship marketing) as mentioned above. Some authors say these schemes are merely communication programs of marketing while others see these loyalty schemes as plainly customer relationship management systems (Arantola, 2003; Meyer-Waarden, 2007).

Loyalty schemes are depicted as interactive programs which generally targets large groups of customers with the help of data base of customers. Arantola (2003) finds most of the definitions on the customer loyalty schemes lack the idea of commitment of customers and the strive for loyalty of customers. In my opinion the following definition would be more appropriate in accordance with the research subject. Meyer- Waarden(2007) defines the loyalty schemes as marketing actions' integrated system which aims to make the consumers more loyal with the development of personalized relationship with them.