What Is Customer Loyalty and Why Is It Important?

An alternative approach Boots could use is a loyalty card, which means that after every purchase in a Boots store, a customer would receive points. A single point could be the equivalent to a penny so if a customer collects 500 points they would be able to purchase goods worth up to Five pounds.

Loyalty cards have advantages for customers and the stores. Customers have the benefit of receiving points, which means discounts on many items in Boots shops so they save money. Boots have the advantage that they will keep customers returning to their shops because of the card. It appears that customers like the idea of loyalty cards, these cards were to be stopped but customers objected. Other businesses have also started using loyalty cards; an example of this is the Nectar card.

The Nectar card is a new reward programme created by Sainsbury's, Barclaycard, Debenhams and BP. It has the same idea as a Boots card as when you pay at the till at any of the shops, the Nectar card will be swiped and any points added to your account. When you pay by Barclaycard anywhere in the world your points will be added to your Nectar account each month. The screen shot below shows the Nectar Card.

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Screen shot 1

Once you've collected enough points for the rewards you want, you can choose from a range of free meals, days out e.g. to theme parks or museums, flights abroad e.g. to European cities or resorts, cinema tickets and discounts on goods, groceries and wine. The points can also be used to save money at Sainsbury's or Argos.

If Boots introduced the card then this would increase customer loyalty, as customers will keep returning to the store to make use of the card. Machines in the store will be set up to allow customers to check their points. As customers are receiving points for their purchased products and they can then use these points to buy other items this gives the idea that they are 'getting something for nothing'. On Boots website there could also be section where customers can check their points. Customers could type in their personal identification number found on the card and then access the information. (See screen shot 1)

Another approach could be for Boot's to 'push' their own products. This means, within Boots stores they could make customers more aware of Boots own brand products e.g. deodorants, shampoo and moisturiser. In a Boots store within the cosmetics section there are stands for Max Factor and Maybelline, Boots also already offer own brand names such as No7, 17 and Botanics. Boots could have their own section for No7 products for example. Sales Assistants as these counters could help customers select cosmetics from Boots own brand items which would mean it is more likely for these items to be bought.

Screen shots of some of Boots own products

Another way of doing this could be to start offers on selected Boots items. An example of this could be 'buy one get one free' or if three items are bought get the cheapest one free. Also using the loyalty card suggested in the first alternative approach Boots could have 'double points' on own brand items. If customers begin to see that Boots products are better than other leading brands, e.g. Boots deodorant compared against Sure deodorant, then they will start buying more of own brand products. This will in turn lead to a bigger turnover for Boots as more customers are buying their items instead of other brands. A benefit of this to Boots employees is within the production process. If more own brand items are demanded then more will have to be produced which means more jobs required for the production process.

For the loyalty card to happen, Boots would need to introduce appropriate swipe machines in all shops at each till or cashier desk. This machine would need to be able to read the card to see who the customer is, how many new points have to be added and how many are already on the card. A computer may also be needed for customers to check how many points they have collected.

For customers to check the number of points they currently have on the website a number of functions may need to be involved within the business. The ICT department may need to spend a lot of money on maintaining and designing the website. The administration department would need to hold details of the customers and transfer them to the ICT department to be used.

Staff would also have to be trained with the knowledge of how to work the swipe machine. They would also have to be able to explain to customers how the card works and how to use the computer for checking points. The may add extra cost to Boots as training and development section of Boots may need to be brought in.

In the Administration department of Boots they would have to send out all the paper work to customers with such details of registration forms for the loyalty card e.g. if customers change their name or address. Leaflets and fliers may also be sent out to tell customers about new offers on the points, e.g. double points for selected items. The administration function would also have to do this.

For pushing Boots own brand products the layout of the store may need to be changed to put more emphasis on these products e.g. stands to place Boots shampoo on. This may involve the Boots store to be re-arranged. Posters and leaflets may be needed to advertise the products, which would be put up on windows and the ceiling. Administration department would be responsible for sending customers information on special offers concerning their own brand products.

All this would cost Boots a lot of money as it involves bringing in new machines and computers to deal with the advantage swipe cards. A lot of expense is needed for the software to deal with customers accessing details on the website. The maintaining of the website would also be very costly to Boots. For new staff to work with the swipe machines would also cost money and time would have to be spent for the training of it. All the paper work and leaflets, which need to be sent out to customers detailing them of special offers, would also cost Boots money.

However, customers would be satisfied as they have the advantage of saving money on products with the advantage card and with special offers on the own brand products, which may mean they begin to shop at Boots more often spending money. They also may then begin to shop at Boots for items other than cosmetics e.g. at the Boots opticians or at Boots Photo. Ultimately, Boots would be achieving its objectives as it would be increasing turnover which the increase in sales which these alterative approaches should bring.

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