CRM Impact on Tesco Consumer Buying Behaviours

Relationship marketing is high-touch, person-to-person communication. And it is the most powerful and time-consuming marketing technique. The philosophy or foundation of relationship marketing is the belief that strengthening ties with existing clients heightens customer satisfaction heightens our abilities to serve clients. (Claycomb; 2001) it can be seen that the customer market is increasingly gaining greater importance and thus there is the need to focus on building or fostering relationships (Lindgren; 2005). Customer loyalty, as we conceptualize it, focuses on a customer’s repeat purchase behaviour that is triggered by a marketer’s activities.

The purpose of this dissertation is to identify the positive relationship between relationship marketing and consumer buying behavior which helps the firm in strengthening its profitability. Also, an important part is to establish the different ways by which relationship marketing can be implemented in the supermarket industry in order to increase its market share. The main theme is to understand the concept of relationship marketing and influence it in a way that the purchasing decision of consumers can be influenced. Evolving out of, and contradictory to, early definitions that were solely behavioural, customer loyalty today is usually viewed as comprising both behavioural and attitudinal components (Day 1969; Jacoby and Kyner 1973).

Loyalty is a primary goal of relationship marketing and sometimes even equated with the relationship marketing concept itself (Sheth 1996). The connection between loyalty and profitability has been the focus of both theoretical and empirical studies (Oliver 1999; Payne and Rickard 1997; Reichheld and Sasser 1990). Customer loyalty is also reported to contribute to increased revenues along the relationship life cycle because of cross-selling activities and increased customer penetration rates (e.g. Dwyer and Schurr 1987).

Positive word-of-mouth communication, defined as all informal communications between a customer and others concerning evaluations of goods or services, includes “relating pleasant, vivid, or novel experiences; recommendations to others; and even conspicuous display” (Anderson 1998; p 6). Largely because personal communication is viewed as a more reliable source than non personal information (e.g., Gremler and Brown 1994; Zeithaml and Bitner 1996), word-of-mouth communication is a powerful force in influencing future buying decisions, particularly when the service delivered is of high risk for the customer (e.g., Sheth, Mittal, and Newman 1999).

AIMS AND OBJECTIVES

The main aims and objectives of this study is:

• To examine the structure and various dimensions of a customer’s psychological attachment towards a firm.
• To investigate into the various dimensions of relationship marketing and their impact on direct consumer buying behavior.
• To analyze the various methods of relationship marketing adopted by Tesco plc and how it affects its consumer’s buying behavior.
• To recommend some practicable ways in which relationship marketing can be implemented.

RESEARCH QUESTIONS

What are the main areas of relationship marketing that Tesco concentrates on and how it affects the profitability of the company?

What are the various ways of strengthening relationship marketing in order to improve consumer buying behavior?

Do the key variables such as trust, satisfaction, commitment and relationship building affect the consumer buying behavior directly?

BACKGROUND OF THE STUDY

Tesco plc is the UK’s largest retailer in terms of both sales and market share, and the third largest global retailer in terms of both sales and revenue. With operating income of £3.1bn in 2009, the company has embarked upon a major expansion phase in the past decade, and as of December 2009 has more than 2,300 stores across the UK (including Tesco Metro, Superstores, Express and Extra branches), more than any other supermarket. The company has branched out into an extremely wide range of area and has also set up its own distribution network as part of a drive towards greater vertical integration within the company.

As an extension of the Relationship Marketing approach, many companies have introduced loyalty schemes. Initially, such schemes simply offered discounts for regular customers. However, companies such as Tesco have rolled loyalty schemes out to other areas. Tesco’s Clubcard scheme, for example, can be used in a number of different environments and also provides valuable information for the company, which it can use to assess the specifics of a customer’s shopping habits and target that customer’s habits in a very specific manner.

LITERATURE REVIEW

Relationship Marketing:

There are numerous definitions of relationship marketing and interested readers are directed toward Harker (1998) for a thorough review. Some of those most commonly used are the definitions offered by particularly influential authors, which are outlined below: Marketing is the process of identifying and establishing, maintaining, enhancing and when necessary terminating relationships with customers and other stakeholders, at a profit, so that the objectives of all parties involved are met, where this is done by a mutual giving and fulfilment of promises. (Gronroos, 1997, p. 407)

All marketing efforts directed towards establishing, developing and maintaining successful relational exchanges. (Morgan and Hunt, 1994, p. 23) Relationship marketing is about understanding, creating, and managing exchange relationships between economic partners; manufacturers, service providers, various channel members, and final consumers. (Moller and Wilson, 1995, p. 1) Marketing is mainly seen as relationships, networks and interaction. (Gummesson, 1994, p. 12)

However, one of the most frequently cited definitions is that of Grönroos who states that “(the purpose of) marketing is to identify and establish, maintain and enhance, and when necessary terminate relationships with customers (and other parties) so that objectives regarding economic and other variables of all parties are met. This is achieved through a mutual exchange and fulfillment of promises” (Grönroos, 2007, 22).

Forms of relationship marketing:

This definition reflects the expansion of RM’s domain to include all the complex networks of relationships that are established in the market among companies and their customers, suppliers, competitors and other stakeholders. By analyzing the practices in the business environment Gummesson (2008) identifies no less than 30 relationships of this kind and groups them in the following categories such as Classic market relationships where aspects such as the supplier-customer dyad and the supplier-customer-competitor triad or the physical distribution network are included. Special market relationships: the relationships via full-time marketers and part-time marketers, the relationship to the unsatisfied customer, the e-relationship, the Para-social relationships and many more are discussed here;Mega relationships: these exist above the market level and provide a platform for market relationships (those from the previous two categories).

They concern the mega marketing (lobbying, public opinion and political power), the mega alliances (e.g. NAFTA) and the social relationships (such as friendship and ethnic bonds); Nano relationships: these exist below the market level, inside the organizations, and have an impact on external relationships. All these elements add up and contribute to Gummesson’s [2008, 5] definition: “relationship marketing is interaction in networks of relationships”. There are several other broad approaches. One of them is the “six markets” model developed by Christopher, Payne and Ballantyne as an instrument for helping managers identify strategically important stakeholders.

The Customer Markets are placed in the centre of this model to emphasize the idea that organizations “can only optimize relationships with customers if they understand and manage relationships with other relevant stakeholders” (Payne et al., 2005, 859). The other five markets, described below, have a supporting role: Referral markets (satisfied customers that become advocates of the company and recommend it to other potential customers); Influence markets (unions, business press, regulatory bodies, financial analysts, competitors, the government, consumer groups etc.); Recruitment markets (potential employees and the channels used to access them; Supplier and alliance markets (suppliers that the company has partnership relationships with, and other organizations with which the company shares capabilities and knowledge); Internal markets (the organization and its employees).

Similarly, Morgan and Hunt [1994] note the existence of 10 exchange relationships that can be established in the context of four partnership types: buyer, supplier, lateral and internal partnerships.

Kotler (1992) presents, although from a transactional perspective, the 10 critical players from a company’s environment: suppliers, distributors, end-users and employees (in the immediate environment), and financial firms, governments, media, allies, competitors and the generic public (in the macro-environment).

Customer relationship marketing:

The last broad approach that we make reference to is the Contemporary Marketing Practices Framework. This will be further detailed in the next paragraph of the paper. This continuing debate over the breadth of RM’s domain is compared by Payne (2000) with the one generated by Kotler and Levy’s article “Broadening the Concept of Marketing”, published in 1969. The two authors advocated the idea of using marketing in non commercial activities which ultimately led to the development of new fields such as social, educational and even church marketing (Kotler, 2005). But not everyone agreed initially; in his article “Broadening the Concept of Marketing – Too Far” Luck expressed concerns that this proposal, although “intriguing and imaginative may lead to confusion regarding the essential nature of marketing” (Luck 1969; 53).

Payne (2000) believes that the first step in settling the current RM debate is agreeing on a common terminology to distinguish between the broad and the narrow approaches. He suggests using the term customer relationship marketing for the supplier-customer dyad and leaving relationship marketing as a term for the more general perspective. In time, one of the two might become dominant. Egan (2008) considers that the narrow standpoint will prevail as it is, to a certain degree, measurable and it sustains the functionalist marketing approach.

Research Paradigm

Research is defined as systematic approach towards problem solving and phenomenon description. The research paradigms focus on the gathering, processing, interpretation and analyzing the data. According to McNabb (2002) research is process of interlinking from data collection to data analysis. The various researchers to understand the worldview have used research as process.

Interpretivism:

Interpretivist paradigm would be used in our research to find out the impact of relationship marketing on consumer buying behaviors. It is characterized by seeing the social world from a highly subjective viewpoint. It places the emphasis of explanation in the subjective consciousness of the social participants instead of the objective observer (Burrell & Morgan, 1979). Under interpretivism, general rules and external structures of society do not exist and the aim of research is to investigate the meanings and interpretations of actors in specific situations. Because of the highly subjective nature of the interpretive research, studies tend to be small in scale and emphasis is placed on the validity and insight of the research, rather than simply the outcomes or results.

Positivism:

Positivism can be defined as the scientific research where numerical and statistical data and figures are used. It is mainly used for conducting quantitative research. In this research, I use interpretivism because this research study is mainly conducted on the basis of theoretical concept.

Research methodology

Quantitative research method would be used in the research which is a type of scientific research where numerical and statistical things are used. In general terms, scientific research consists of an investigation that seeks answers to a question, Systematically uses a predefined set of procedures to answer the question, collects evidence, produces findings that were not determined in advance and produces findings that are applicable beyond the immediate boundaries of the study.

Grounded theory will be applied in this research (TESCO) to analyze the data collected through research process. As an analysis process grounded theory was developed to build an explanation or to generate a theory around the core or central theme that emerges from researcher data.

GROUNDED THEORY:

It is one kind of systematic methodology of qualitative research in relation to the social science where importance is given towards the theory generation from the data collected by the researcher at the research conducting process.

Thematic Analysis:

Thematic analysis is a search for themes that emerge as being important to the description of the phenomenon (Daly, Kellehear, & Gliksman, 1997).The process involves the identification of themes through “careful reading and re-reading of the data” (Rice & Ezzy, 1999, p. 258). It is a form of pattern recognition within the data, where emerging themes become the categories for analysis. The method of analysis chosen for this study is a hybrid approach of qualitative methods of thematic analysis, and it incorporates both the data-driven inductive approach of Boyatzis (1998) and the deductive template of codes approach outlined by Crabtree and Miller (1999). This approach complements the research questions by allowing the tenets of social phenomenology to be integral to the process of deductive thematic analysis while allowing for themes to emerge direct from the data using inductive coding.

RESEARCH METHOD:

Primary Data

Data is most critical to the whole research, as qualified and relevant data would bring the best results. There are two types to acquire data one is primary source and the other is secondary source. The primary source of collecting data is carried through interviews, surveys, questionnaires etc. The data is directly acquired from the research object to get undiluted and authentic data. In general data could be facts, figures or any other forms of information upon which observation is made. Data are facts, figures, enumerations and other material, which forms the basis for the research.

Research strategy:

For my research I would be surveying the employees and conducting semi-structured interview with Tesco. The survey would mainly focus on the relationship marketing aspects and how this could be used as a ‘tool’ to convince the purchasing decision of the customers. Apart from survey the semi-structured interview would either be telephone based or face-to-face interview. In my research the use of secondary data is limited and would only be used in the form of published reports from organizations such as Mckinsey.

Questionnaire survey and Semi-structured interview: ( DISCUSS EACH UNDER ITS OWN HEADING)

Survey method:

A questionnaire is basic set of questions or statements focused on the research topic with large amount of respondents. A questionnaire is normally used when large number of responses is to be recorded. Questionnaires are certainly the most often employed data collection devices in statistical work. The most well known type of questionnaire is censuses, which is normally used in conjunction with qualitative approach. The method applies set of questions to large number of people (respondents).

Semi structured interview:

The semi structured interviews are one to one communication with the concerned respondents relating to the research. The questions are framed to analyze the research questions without directly letting the respondent know what the researcher is trying to extract from the questions being asked to the respondents. Both these forms of data collection instruments would be used to analyze the data where the questionnaires would be used for the customers and the interviews would be used to analyze the company’s point of view.

Ethical Issues

There are a number of key phrases that describe the system of ethical protections that the contemporary research establishment have created to try to protect better the rights of their research participants.

Voluntary, participation informed consent, risk of harm confidentiality and anonymity right to service.

CONCLUSION

Relationship marketing involves the use of one-on-one communication to earn the loyalty of your target audience. This not only helps in retaining the customers but also in attracting new customers. Today, the market has mostly become a ‘buyer’s market rather than a ‘seller’s market’ and hence, sellers have to try their level best to maintain and attract customers towards their business. This is mainly because the competition in the market is too high and no sellers are in a position to create a demand for them but the only tool they have is marketing, through which they can attract the customers but affecting their purchasing decisions is far beyond their control. While personal marketing helps you to get your message across in a way that will be better received, relationship marketing helps you to strengthen your relationship with your target audience. The research on Tesco would give much enhanced response about the best practises of relationship marketing as it is the leading supermarket of UK and their sales and profit are largely based on their customer relations which influences their long term relationship positively thereby affecting their buying behaviour. This research is basically to analyze and evaluate the practises of relationship marketing and there might be interesting dimensions in the field which the research can invent.

Expected time allocation for the dissertation:

Task

Week

Duration

1

2

3

4

5

6

7

8

9

10

Introduction

Literature review

Methodology

Data analysis

Conclude the findings and analyzing the results

Drafting the research report

Audit and review

Final submission of the dissertation