Due to limited resources the study was conducted in one area: Hout Bay. The selection of the area was based on the following criteria:
• select area that offer the 3 major/top grocery retailers in South Africa;
• an area that is close and within reasonable travelling distance;
• area that differs in terms of population (income, education and background) and development, which comprises some of the environmental factors that are likely to have an impact on the success of a business and its marketing strategies; and
• area offering a sufficient combination of the three main racial groups mainly black, white and coloured.
CHAPTER TWO: LITERATURE REVIEW
The main objective of any company’s marketing objectives are to retain the loyalty of their customers while also hoping to attract new ones. Loyalty can also be seen in terms of customers store loyalty (Uncles et al, 2003), ”the consumer’s inclination to patronize a given store or chain of stores overtime” (Knox and Denison, 2000, p.34). The growth in use of customer loyalty programs in the retail arena attests to the trend that loyalty receives a great deal of attention from retail management (Bloemer and de Ruyter, 1998) and that the retail sector in particular has attracted the most obvious interest in the development of relational strategies (Egan, 2000).
According to Rayer (1996, p. 8) a retail or any customer loyalty program is a “…mechanism for identifying and rewarding loyal customers,” for being loyal to your organisation in discount, points, coupons and many other prices retailers offer today. According to Yi and Jeon (2003), loyalty programs are marketing programs designed to build customer loyalty through incentives. One can agree that loyalty programs are discriminating in a way that they only reward frequent shoppers instead of everyone or anyone who decides to shop at that particular retailer on that day and moment in time.
Yau et al. (2000) agrees that loyalty programs have a primary purpose to “foster long-term relationships with customers in order to create repeat purchases. However, (Hoffman and Lowitt, 2008) believes that “One of the ways to avoid customer defection in the retailing industry is to adjust loyalty programs to be more customer-centric…” with “…with more precise market segmentation and greater value proposition differentials among participating customers (Lacey and Sneath, 2006). Some people like Ekinci et al. (2008), demonstrated that customer satisfaction mediates the relationship between service quality and a customer’s intention to return. The relationship between the retail buyer and seller will forever remain an important thing to take care of for both parties. Retailers need to consistently monitor what customers want as much customers are monitoring what retailers are offering. The one with the best deal usually wins big time. Nako (1997) and Bolton et al. (2000) found that loyalty programs have a way to positively influence a customer’s choice of company, transaction values, resistance to counterarguments and retention.
Lewis (2004) and Taylor and Neslin (2005) have suggested that retailer’s loyalty programs increase purchasing. Kivetz et al. (2006) found that progress toward a reward can accelerate customer’s purchases.
Previous studies have been done by a number of researchers including Meyer-Waarden & Benavent (2007:01) “the impact of loyalty programs, which target existing customers, on repurchase behaviour in grocery stores”. These studies have shown “empirical insights into the effects of loyalty programs on the non-contractual, highly competitive retail grocery context” Meyer-Waarden & Benavent (2007:01) but failed to highlight the impact of the same programs to the same store’s foot traffic. This study will highlight the “repeat purchase behaviour” Meyer-Waarden ; Benavent (2007:03) when a “program provides adequate level of utilities and lower prices” Meyer-Waarden ; Benavent (2007:03). Back then, effects were (Nako 1997; Bolton et al. 200; Nunes and Dreze 2006a, 2006b) stronger for programs in other sectors such as airlines and similar industries that offer rewards using multiple-tier systems with convex reward schemes.
CHAPTER THREE: RESEARCH METHODOLOGY
In this chapter, I described the methods and techniques used to collect, analyse data and report on the findings. I furthermore gave an understanding of the study area and the reasons for selecting the study area, techniques and methods of data collection. As stated above, secondary data of the subject area is limited, therefore this research was carried out using qualitative research methods including the use of exploratory research through interviewing industry experts with the intention of extending the body of knowledge. I developed a questionnaire for my respondents.
3.1 RESEARCH DESIGN
This study was carried out using a qualitative research approach. According to Susan E. DeFranzo (2011) qualitative research is primarily exploratory research. It is used to gain an understanding of underlying reasons, opinions, and motivations. It provides insights into the problem or helps to develop ideas or hypotheses for potential quantitative research. Qualitative Research is also used to uncover trends in thought and opinions, and dive deeper into the problem. Susan agrees that qualitative data collection methods vary using unstructured or semi-structured techniques. Some common methods include focus groups (group discussions), individual interviews, and participation/observations. The sample size is typically small, and respondents are selected to fulfil a given quota.
3.2 DESCRIPTIVE RESEARCH SAMPLE ; FINDINGS
According to GasBuddy and Cuebiq’s report (2018) the $600 billion convenience store and fuel retailing industry is a competitive but growing sector and establishments that prioritize expanded in-store offerings and loyalty programs are winning the day. In the category of brands with over 1000 locations, four of the top five-foot traffic winners are convenience brands that emphasize their in-store offering rather than prices at petrol stations (GasBuddy and Cuebiq, 2018). Pick n Pay, which captured the top spot in this category did so by following improvements to its fresh food service and placing a stronger emphasis on its loyalty program. According to the store manager (Derrick, 2018) when fuel prices are somewhat similar customers seek out the brands that can offer them some form of a service and that reward the actions they take naturally while on the road (buying coffee, filling the fuel tank etc.) with loyalty points or discounts.
I then decided to observe 3 fuel stations for 5 consistent days for 30 minutes each. About 53% of the visits to the fuel stations and convenience stores lasted less than minutes. Figure 3.2.1 below details the number of cars that entered a fuel station on the 5-day period.
DAYS STATION 1 STATION 2 STATION 3
1 12 13 6
2 9 21 11
3 13 15 8
4 15 16 6
5 18 19 14
It is clear that Station 2 is the most popular fuel station in Hout Bay. I realized that in addition to loyalty programs real time offers mattered. Below Figure 3.2.2 details how the 100 respondents choose where to fill their vehicles.
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