Table of Contents 1- Introduction1 1. 1 Topic1 1. 2 Background and Context of Study1 1. 3 Rationale of Study2 1. 4 Research Question2 1. 5 Research Objectives2 1. 6 Hypothesis3 2 – Literature Review3 2. 1 Retail Industry (Retailing)3 2. 2 Definition of Strategy4 2. 3 Pricing Strategy5 2. 4 Types of Pricing Strategies5 2. 4. 1 Penetration pricing5 2. 4. 2 Skimming pricing6 2. 4. 3 Competition pricing6 2. 4. 4 Product Line Pricing6 2. 4. 5 Bundle Pricing6 2. 4. 6 Psychological pricing6 2. 5 Customer behaviour6 2. 6 Customer Loyalty7 2. 7 Pricing strategy and customer loyalty8 3 – Research Design and Methodology8 . 1 Research Strategy8 3. 2 Research Methods9 3. 2. 1 Qualitative Method9 3. 2. 2 Quantitative Methods10 3. 3 Type of Data11 3. 3. 1 Primary Data11 3. 3. 1. 1 Questionnaire11 * 3. 3. 1. 2 Telephonic Interviews11 3. 3. 2 Secondary Data 12 3. 4 Sampling12 3. 4. 1 Quantitative Sampling12 3. 4. 2 Qualitative Sampling12 3. 5 Data Validity12 3. 6 Data Reliability13 3. 7 Ethics 13 * * Gant Chart14 Bibliography15 1- Introduction 1. 1 Topic Impact of pricing strategy on the customer loyalty in the retail industry: A case study of Tesco 1. 2 Background and Context of Study Tesco is retail market leader in United Kingdom.
The core business of organization is selling grocery but it also sells electronic products, clothes, jewellery and many other products (Pet Insurance, Car 1. 4 Research Question “What is the impact of pricing strategy on customer loyalty in Tesco, Croydon? ” 1. 5 Research Objectives * To examine impact of customer buying behaviour on pricing strategy * To determine the importance of customer loyalty on growth of Tesco, Croydon * Find out the suitability of existing pricing strategy of Tesco, Croydon and suggest new pricing strategy if existing pricing strategy is not generating optimal revenue . 6 Hypothesis Null Hypothesis (H0): Tesco strategy to make customer loyal is working well Alternative Hypothesis (H1): Tesco strategy to make customer loyal is not working well. 2 – Literature Review 2. 1 Retail Industry (Retailing) According to Jones, et al, (2005) Retailers come on the end of supply chain who directly sells their goods and services to the end users. They buy the goods or services in the bulk and sell these goods and services to end users in lower quantity. The goods or services flow to the retailers through the intermediate party or directly through the suppliers.
However, industrial users also can buy the goods from the retailers like uniforms for the schools and stationary for the offices, etc. The places where retailing activities carried on are called the shops or stores. The retailers play very important role in providing the information about the customers. They directly interact with the customers and gather information through the interaction with the customers. The customer services, customer care and customer relation are different ways which extract and generate information.
This information flows back from the retailer to other part of supply chain. On the back end, different parts of supply chain get their required information and design their manufacturing strategy. The goods also include utilities like electricity and gas. These utilities also flow through the chain of organization and they deal with their customers just like the retailers of physical goods (Davidson and Simonetto, 2005). The shops can be in the streets, in the busy shopping malls, or these can be corner shops. These are types of physical shops.
Like all other organizations, the main purpose of each retail store is to earn profit for their owner or shareholders. In the modern era of science and technology, there is increasing trend of virtual shops. The marketers have online stores; the customers can visit these stores, see the product of different types and buy these products. This is most convenient way of buying and selling. The marketers of goods and services through internet have number of competitive advantages over the traditional physical store. The main benefit is their cost effectiveness.
This gives them more control over the prices of goods or services (Jones, et al, 2005). In retail industry, the term shopping is used when a customer has true intention to buy goods or services. Some time customers are not intended to buy the goods. They visit the store just for information purposes. However, these window shoppers can be potential future buyers. 2. 2 Definition of Strategy D’Souza and Prentice (2002) explained that through, the strategy some guidelines for the business set. These guidelines help the organization to set their short and long term objectives in future.
In other words, it is like a plan and though acting on this plan organization gets success. On the basis of vision of the top managers’ strategy and action plan for the organization set. However, strategy is not end word. The modern organizations work in the competitive world changes, adjust and re-adjust their strategy during their operations. The changes are made to align the organization output with the external environment, goals and objectives of organization. Chaffey (2009) does not think strategy as an effective tool. He believes that strategy makes the organization less responsive.
The business environment changes very quickly. It is better to adjust with the environment according to requirement. The organizations work flexible and team based follow this type of setting. Their organization structure is matrix in nature which enables them to adjust with the changing business environment. This is going on debate whether the organization should plan them for a long time or they just adjust and re-adjust with the changing conditions. With all these, the word strategy is most used in the business world. The organizations formulate their strategy in some shape.
While making the strategy the organizations analyze their strengths and weaknesses. The main consideration in the formulation of strategy is price of product, defining the market, distribution of product, etc. though formulation of strategy is purely subjective issue, but still some of the organizations use some historical information for the strategy formulation. The financial data of company is most important information used for the strategy formulation. The main aim of the organization is to stay and operate in the market is to get more revenue and increase their profit.
They use different strategies and processes. The pricing strategy in this context is most important focus of most of the organizations (Duffy, 1998). 2. 3 Pricing Strategy Davidson and Simonetto (2005) tell that pricing is one of the most important components of marketing mix. It is only element of marketing mix which generates revenue for the organization. Other three elements of marketing mix are simply the cost. The cost of the product cost of promotion of product and cost of distribution of goods and services. The prices need to set according to the demand and supply of the product or services.
Setting too high prices or lower then expectation of customers, both become the reason of loss of revenue and hence profit for organization. While setting the prices of goods and services an organization should consider the following factors; * Fixed Cost * Variables cost * Objectives of company * Level of competition * Targeted segments and their willingness to pay for product offered (Davidson and Simonetto, 2005) 2. 4 Types of Pricing Strategies According to Lin and Chang (2010), there are number of pricing strategies. The pricing strategy of an organization depends on the goals and objectives of organization. . 4. 1 Penetration pricing Many firms offer lower prices to their customers in the beginning of their life cycle to increase their market share. Once they achieve this objective then they increase the prices up to certain level to increase their profit. (Lin and Chang, 2010) 2. 4. 2 Skimming pricing Some organization set higher prices at the beginning of their life cycle. They get more profit in the beginning and then they gradually lower down the prices to reach more customers at the bottom line. The purpose of this pricing strategy is to skim the profit from the market layer by layer (Lin and Chang, 2010). 2. 4. Competition pricing Lin and Chang, (2010) further explained that an organization can set the prices according to the prices available in other competing organizations. The prices of an organization can be higher than competitors, same like competitors or lower than competitors. 2. 4. 4 Product Line Pricing In the product line marketing strategy prices are set according to the features of the products offered. The greater would be the features of the product more expensive it would be. This type of pricing strategy allows the marketer to get more profit through differentiating the products (Lin and Chang, 2010). . 4. 5 Bundle Pricing The marketers offer lower prices when customers buy the products in bundle like buy one get one free promotional strategy (Lin and Chang, 2010). 2. 4. 6 Psychological pricing Lin and Chang, (2010) tell that this makes psychological impact on the customers like charging 99p instead of 1 pound and charging 1. 99 pound instead of 2. 00 pound. These frictional prices inspire the customers that a price of a product is lower than a certain threshold. 2. 5 Customer behaviour Customer behaviour is about understanding the organization about the buying behaviour of the customers.
Customers with different profiles have different liking and disliking. Following are some parameters of customer behaviour understanding. * How the customer think about a brand, retailer or product. * The psychology of customer that how they get inspired by the environment like cultures, family, media and signs. * Customer behaviour while they make buying or other marketing decisions. * The customer decision strategies are different in case of different products. The marketers have to understand the psychology of the customer about their feeling for particular organization’s products. The information level of customer also influences the buying behaviour of customer. A well informative customer is more difficult to influence as compare with the customers with less knowledge about the product. * How the marketers can improve their strategies to reach the customers more effectively (Stauss, et al, 2005). The behaviour of an individual is formulated with the help of different social factors like family, friends and society in general. The marketer needs to know how and how much these factors influence on the buying behaviour of an individual. It is also important to know that how the product is used.
This is helpful for the marketer to increase the consumption of product. If a product is more often used the marketer make the strategy to increase its consumption. They can position their product more appropriately when they know the usage frequency of product they are offering to their customers. It is quite obvious that buying behaviour of services is quite different from the buying behaviour of physical product (Prasad, 1997). 2. 6 Customer Loyalty Customer loyalty is practice of finding, attracting and retaining the customers for the longer period of time.
Some of the customers of the organization are casual and opportunistic. They visit the store only when they get benefit from the organisations. Even repetitive customers cannot be called as loyal customers. Loyal customers are emotionally attached with the organization. When the customers of an organization get satisfaction number of times during their visit to the store then they get loyal to their organization. One point comes when they do not leave the organization even though they are not better off by buying the goods or services from an organization. They just support their origination to excel again (Rowley, 2005).
Loyal customers are assets for the organization as these become loyal after lot of investment which organization spends on them to make them happy. The loyal customers in return not only buy the goods and services from organization but they also do word of mouth marketing for organization as well (Eskildsen and Kristensen, 2008). Organizations encourage the customers to become loyal with organization through recognizing them like distributing loyalty cards, rewarding them by giving them discount and many other techniques are used to keep these customers loyal with the organization.
The organizations keep the profile of their customers and find out different bands of loyalty in different customers. On the basis of these benefits different pricing and promotion strategies are set (Prasad, 1997). 2. 7 Pricing strategy and customer loyalty Though organizations can use different strategies to make their customers more loyal among these strategies pricing is most important consideration. When customers get some economical benefit and feel that they are well off then the competitors of organization.
In other words when they will get more satisfaction by spending each pound on the product and services, they will get more loyal. The loyalty and prices of products have directly proportional relation (Dufy, 1998). The effective marketing strategy not only relies on the prices discount to the loyal customer but they offer other non-financial benefit to the customer as well. It is better to use mix of financial and non-financial benefits to the customers. If the loyal customers are charged, the same prices as non-loyal and opportunistic customers get then this will discourage the loyal customers.
There is stronger probability that these customers will leave the organization after some time. Proper care and diligence is needed to retain the customers for long time (Davidson and Simonetto, 2005). 3 – Research Design and Methodology 3. 1 Research Strategy Author will attempt to solve the research question and achieve the research objectives by using case study research strategy. There are two main reasons of using this research strategy; * It is time saving way of investigation. The author can use single point measurement of variables to be measured.
Though there are number of other ways like using different researches or measuring the variables again and again over the period of time to bring more validity in the data collection however due to shortage of time these techniques cannot be used here. * The author wants to get more focused results specifically applied on the organization under investigation. Case study is most suitable when more focused results are required (Yin, 2008) 3. 2 Research Methods Author in this study will use two different methods in combination to collect the data.
The detail of these methods is given below; 3. 2. 1 Qualitative Method Bryman and Bell (2007) stated that Qualitative method is way to get quality information about the complex variables which are more social in nature. In other words qualitative method goes more in deep to get information about the variables which cannot be expressed in numbers. This method of investigation is traditionally used for social investigation. Though modernization of industries combines it with the quantitative method as well but it solves many kind of research on its own (Bryman and Bell, 2007).
Following are main reasons of using this method to conduct this study; * It gives more in-depth information about a variable. The pricing strategy is topic which is related with the human psyche and their buying behaviour. This method gives more relevant information about more complex human psyche. * The respondents are free to explain the issues according to own will and way. They are not bound by the researcher to give answer by being within their certain limits. * The information provided by this method is in the textual format and easy for the reader to understand that what the results are suggesting. It is most suitable to test the concept of people about pricing strategy which is new and never tested before. * * * * Limitations * The information obtained from this method cannot testable with the statistical formulas. * Data gathered not standardized and cannot be generalized to larger population size. * Due to time and cost factor only smaller sample can be tested with this method of data collection. * The Knowledge of researcher or sources of information greatly mould the outcome of research and error in information can come in this way * . 2. 2 Quantitative Methods Quantitative method of data collection quantifies the information. A quantitative method is closer to the scientific method of data collection. Here researcher assumes that social variables are like scientific variables and if social variables kept free to happen they will happen in systematic way (Allen, et al, 2008). Following are main reasons of using quantitative method of data collection in this study; * Quantitative method is time saving, cost effective and gives more geographical coverage to researcher. The data can be tested with the statistical formulas for reliability and validity. * Larger size sample can be tested in limited time period * It gives information in the numerical form which can be used for different test. * Random sampling allows author to generalize information on whole population. * * Limitations * It does not give freedom of expression to researcher * Not suitable to test new ideas * Error of misunderstanding in respondents is possible 3. 3 Type of Data There are two main types of data will be collected for current study.
Following are details of these two types of data and their application on this study; 3. 3. 1 Primary Data Primary data will be collected for some particular purpose. The author will collect primary data through his personal observation and match it up with particular study. Author of this study will use two different tools of data collection (Questionnaire and Telephonic Interviews) 3. 3. 1. 1 Questionnaire Questionnaire is used to collect quantitative information. Author will formulate a set of different questions to test for this research.
The questionnaire will be designed by keeping the research objectives in mind. Basically, author will use secondary data to design questionnaire. In this study, author will keep the number of questions as less as possible to keep respondents more interested in the study. Following are main benefits of questionnaire which impress the author to use this tool for quantitive data collection; * Most known way of data collection * If designed with care more valid information can be gathered * Give privacy to respondent to fill it in their convenient time * No personal influence of researcher Data gathered from questionnaire is ready to use once questionnaires are collected * Less costly as compare with any other method. Only few pounds are enough to print out hundreds of questionnaires. * 3. 4. 2 Qualitative Sampling For qualitative sampling author will use non-probability sampling. Author will choose the officials of organization according to his own choice instead of taking them randomly. Though, sample is not representing the whole population but results from qualitative sampling will be more in depth. 3. 5 Data Validity
Data reliability reflects the property of data which states, how much the result from a study are closer to the main objectives of study. More closely the out coming results will be related with the objectives more valid these will be (Saunders, et al, 2009). Author will take following measures for validity; * Research will be designed according to the objective of study. * The secondary data will be related with the objectives * Researcher will ask the questions which are more closer to the main purpose of study * All the parts of study will be linked with each other to make them more cohesive 3. Data Reliability The data will be reliable if same results will come after repetition of study again and again under the same circumstances (Saunders, et al, 2009). Author will obtain this property of data by adopting following measures; * Author carefully converted the data into tables after double check. * Respondents are asked to give the information according to their best understanding * Promised that their information will not be shared with any other person or organization 3. 7 Ethics Making a study more ethical mean author avoid all the actions, which may harm the society.
Following are steps will be taken to make this study more ethical; * The respondents will be assured that their information will be kept secret. * Author will request the respondents to provide the answer but the respondents will not have any pressure to answer of question. They will be free to leave the interviews or avoid filling questionnaires if they are not happy with any part of questionnaire. * * * Gant Chart Table 1 – Research Project Time Table | Start Date| Finish Date| Days| Introduction| 15-Apr-11| 24-Apr-11| 10| Literature Review| 25-Apr-11| 24-May-11| 30|
Methodology| 24-May-11| 7-Jun-11| 15| Findings and Analysis| 8-Jun-11| 2-Jul-11| 25| Conclusion and Recommendations| 3-Jul-11| 12-Jul-11| 10| Figure 1 – Research Project Time Table Bibliography Allen, M, Titsworth, S and Hunt, S, K (2008) “Quantitative Research in Communication”, London: Sage Publications Limited Bryman, A and Bell, E (2007) “Business Research Methods”, 2nd edition, New York: Oxford University Press, Inc Chaffey, D (2009) “Internet Marketing: Strategy, Implementation and Practise”, 4th edition, Essex: Pearson Education Limited