Examination On Customer Loyalty In Coffee Industry Marketing Essay

The purpose of this research is to observe the approaches implemented by companies over the last years to establish loyalty among customers. Additionally, this research defines the shortcomings of these approaches and particular technological and societal transformations, that have further influenced on the possible success of these approaches in the future. The author implements knowledge functioning with hundreds of companies around the world growing, controlling, assessing, observing and establishing customer loyalty tactics and strategies. The author merges these practices with assessment of particular dynamics in the marketplace, that have transformed the method companies which should communicate with customers. Lastly, the author has merged his analysis and experience to make a perception about the influence on marketing plans in the future. Many of the early attempts implemented through companies to establish customer loyalty have been unproductive, as they have been supported on methods implemented in other business. These shortcomings will become wider in the future unless companies transform their approaches. Business scandals have battered the trust that consumers have in companies and, so, marketing attempts should be more authentic and simply recognised or customers will response doubtfully. Organizations should step back and establish completely particular that their attempts are supported on customer demands and wishes, and do more to increase customer faith than to corrode it. Marketing programs and strategies should be realistic. One of the most considerable elements of customer relationships moving ahead will be the expansion of trust, that further increases the customers’ eagerness to contact with particular companies and brands. A great deal of discussion is there in the marketplace about customer loyalty. This research observes to bring the dialogue down to earth and integrate the customer’s perception, rather than only the theoretical marketing perception. This research recommends that Costa Coffee must work smarter and work harder to make sure that their plans are important to customer’s loyalty.

An Examination on Customer Loyalty in coffee industry-Case Study on Costa Coffee

Chapter 1 Introduction


The partial search of customer loyalty started in earnest, in the early 1980s with the introduction of frequent flier programs. Since then, different organizations have established, assessed and applied some types of customer loyalty-building plan. The attempts are based in the similar essential desire. They are all grounded on the wish to maintain customers longer, thereby enhancing general sales and profits (Ulrich, 2004). The methods applied to grow customer loyalty have developed to some level, over the last 2 decades. These methods will need considerable transformations in 2005 and beyond, grounded on particular transformations in the marketplace that make it more complicated than ever to make permanent connection with customers. In this research, author will reveal these transformations and the affect they will have on the marketing background. Author will observe the attempts of an important brand in the situation of these transformations and define the important considerations, that companies should remember to be winning at acquiring customer loyalty in the long run.

1.2 Background

Strategy of customer loyalty started in essence as a chain of tactical strategies. The frequent flier programs demonstrated the first extensive efforts to acquire customers, to combine their purchasing behaviour with a single brand in a defined category (Addis, and Holbrook, 2001). These strategies began as simple promotions but developed into longer-term plans, that some companies in that day could have anticipated or foreseen.

Different organizations started assessing the application of customer-focused, considering with a purpose toward developing customer retention through making customer loyalty. These attempts normally materialized in the marketplace, searching much like frequent flier programs. Customers connect these strategies and become members. They show a particular required behaviour and earn different promotional currency, that is utilizable in the future for particular rewards. The method was fairly straightforward and, in different matters. Several organizations are there that have observed, planned, assessed and applied these programs (Addis, and Holbrook, 2001). The consequences have been mixed. Some strategies have kept in the marketplace over different years. Others have lived and died for different causes (Ulrich, 2004). But to some level there has been a decline in considering in the past, with respect to the connection between these strategies and the essential perception of customer relationships, that lead to long-term customer loyalty.

1.3 Costa Coffee Background

Costa established from a coffee roaster, which was started in the Lambeth area of London in 1971. This presented caterers and coffee shops in the region with the slow roasted mocha Italian blend that was speciality of Costa. Bruno and Sergio Costa, the brothers who establish the organization up, soon developed their aim, and their first retail outlet was started in 1978 in Vauxhall Bridge Road, London. In 1995, the Costa chain was obtained by Whitbread, the large Restaurant and Hotel Company. This has supported them develop, making Costa the largest coffee chain in the UK and the second largest in the world – after Starbucks. In fact, as the UK can be Costa’s main market, they have shops in 28 nations. Actually, the biggest Costa shop is situated in Dubai and seats over 320 customers (Addis, and Holbrook, 2001). Wherever individuals are in the world, any Costa shop will be simply recognisable and thanks to the logo – a stylised coffee bean that has been synonymous with the brand for several years.

Since 2006, Costa has supported the Costa Book Awards, planned to celebrate good storytelling and literary merit. As different Costa shops can be revealed in Waterstones book shops, supporting this award ceremony prepares a lot of sense. Costa has also currently started to apply coffee beans sourced only from farms certified through the Rainforest Alliance. This supports to make sure that farmers acquire a fair price and works to decrease the environmental influence of farming. Costa has also started to publish the nutritional knowledge about all their food and drinks. They are functioning with the Food Standards Agency to decrease the amount of fat and salt in their products, without impacting the flavour.

Like other companies, Costa has started a Costa club card. This means usual customers can gather points and apply them to secure money on future purchases. Ever since the organization was established, customers looking Costa Coffee jobs have been competently trained in the art of coffee making. This has supported them become the largest chain of coffee shops in the UK.

1.4 Aim of Research

Aim of this study is to assess how customer loyalty is established and to observe its place in making a sustainable aggressive advantage for Coffee business with supporting customers.

1.5 Objectives

1. To decide the dynamics of customer loyalty and how it can be established.

2. To recognise the advantages of relationship marketing and its implementation for customer loyalty plans

3. To decide as how the customer loyalty can be reviewed with the Costa Coffee. Do these strategies actually work? Does it acquire customers to the organization?

1.6 Research Questions

What are the dynamics of customer loyalty and how it can be established?

What are the advantages of relationship marketing and its implementation for customer loyalty programmes?

How the customer loyalty can be observed with the Costa Coffee?

1.7 Research Structure

This research pursues the standard framework and relates the Harvard citation style.

Section one defines the subject to be observed different backdrop knowledge and presents objectives and aim of research.

Section two will define an evaluation of the studies pertaining to the subject.

Section three will define the methodology implemented in this research. It describes the research plan, performed research approach and the methods of data collection.

Section four will define the result from the methodology.

Section five will define the discussion of the results and give conclusion for this study

Chapter 2 Literature Review

2.1 The Concept of Consumer Loyalty

Two keys to success were to hire talented people and to listen very carefully to the consumer. Before recalling its definition, seems important to note that loyalty is not a fad additional marketing (Kumar, 2009). It is not, as has sometimes have read, a phenomenon born of the proliferation of brands. The explanation was attractive; especially as the latter probably contributes explain part of the problem, in the sense that a larger number of brands available inevitably alter the easy distinction between those marks made ​​by the consumer. But some brands have declined in terms of loyalty during this proliferation new brands; it is mostly because unlike their feelings, they enjoyed not just a loyalty from their consumers. Whether in for any agency or the activity of clients, it is obvious that the cost of acquiring a customer is as necessary to amortize the years / purchases (Bhatnagar, and Ratchford, 2004). Therefore, retention is vital.

In developed economies that are ours, the market has become for the vast majority of goods, a replacement market, where the growing points are now much more difficult to obtain. A replacement market is characterized by a logical saturation phenomenon, encountered for most categories product. In fact, if after the Second World War, the Western world entered the Thirty Glorious Years with consumers eagerly looking for products to be consumed, people are now in a situation where they are paradoxically reversed (Kumar, 2009). Many products are now seeking customers willing to buy. Certainly, it would be easy to program very artificially short-lived products to generate artificially renewal. But it would certainly risk discontent delivered to the consumer.

2.2 Brief Overview of Marketing Evolution

Marketing is closely linked to the knowledge of consumer buying habits. According to Godin, the evolution of marketing comes in 3 periods: prehistory, ancient marketing and new marketing (Bhatnagar, and Ratchford, 2004). According to study, the proposed changes would rather as follows: mass marketing, “the customer can choose the color of his car, as it is black, segmented marketing, “to each according to his needs and individualized marketing,” Yesterday, companies needed to find customers for their products, now they must find products for their clients (Ulrich, 2004). The prehistoric era is marked by the presence of small traders and small local shop, or village, who knew their customers by name. They were able to know the preferences, needs and buying habits of each of them. The customer loyalty began, according to Godin, at this time, although the competition was minimal or virtually non-existent. It is a personal relationship between the seller and the consumer that characterizes the prehistoric era. The use of direct shipments to consumers somehow marked the beginning of former marketing. The expedition catalogs began in 1884 by Ward, who used the list members of the Grange Society in the United States. Sears, in 1897, introduced his catalogue with the motto: satisfaction guaranteed or your money back. The former marketing took off at the beginning of the century with technological messages, national brands and supermarkets standardized. “Products became symbols as customers became statistics”. These symbols or products were limited and consumer choices too. This first phase of the former marketing indicates the distance between sellers and consumers (Kumar, 2009).

The arrival of new media and technology media (television, newspapers, magazines, computers, etc.) has contributed to the explosion of new products for the consumer (Anderson, and Narus, 1990). This proliferation of products and the number of competitors, coupled with methods to reach mass consumers and, therefore, opening a potential market for companies, announces the gradual transition that will take us from the old to new marketing. In terms of loyalty marketing, this era brings the advent of premiums (Sweeney, 2006).

Today, when purchasing products cash, debit card or credit card with the store, a certain percentage of the value of the purchase is delivered to the customer in the form of money CT. Today, few people who have never heard of this loyalty program, which is proof of the huge success (Bhatnagar, and Ratchford, 2004). The new marketing makes extensive use of the arrival of the computer. The widespread use of computers allows traders to better manage information and, thus better know its customers and consumers through the Internet, be more easily informed. Traders try by all means to get closer to their customers (Anderson, and Narus, 1990). To do this, use some old media while others innovate with targeted advertising that facilitate the existence of databases and the Internet. This new focus on customer marketing is reminiscent of the prehistoric period, where the trader knew needs and habits of its customers and relied on this knowledge to target sales. Loyalty marketing now takes up new avenues through the Data Marketing and Relationship Marketing (Kumar, 2009). “The new marketing or relationship marketing is prehistoric marketing return, but only use new technologies to achieve its business objectives”.

2.3 Goals of a Loyalty Programme

Prior making a loyalty strategy, it is essential to have an apparent consideration of the aims which drive the loyalty strategy (Ghauri, and Gronhaug, 2005). Literatures have defined most inspiring aspects in customers are non-cash rewards (Cermak, File, and Prince, 1994). Beyond value of the price comparison from another opponent, customers transform their attitude and responds to rewards. Executive level repeated clients (VIPs) are implemented to impact current and possible new customers. So, these VIPs are rewarded with wider access to the brand, presenting additional range of services. When making aims to a loyalty programme, it’s considerable that programme must have a innovative and flexible style which implements to transforming situations (Ghauri, and Gronhaug, 2005). Despite of just pursuing the style of loyalty programs, it is essential to recognise the customer preferences.

2.3.1 Building a Bridge

The major aim of a loyalty programme is to make a relationship with the consumer. A constructive, sustainable relation between organization and the consumer is the important predictor of a brand’s repurchases (Hakim, and Arruda, 2007).

2.3.2 Attracting New Customers

The second major aim is to acquire fresh customers. If the major aim is an achievement, word-of-mouth acquires additional consumers. Moreover, if the loyalty strategy is competitive than other plans in the market, the individuality of the programme is applied as a turning point to acquire additional consumers (Hakim, and Arruda, 2007).

2.3.3 Brand and Image

If a loyalty plan has constructive impacts through its actions, potential is there to enhance brand, sales, and image (Chaudhuri, and Holbrook, 2001). Below are few models of loyalty actions presently in the market.

2.4 Towards a Definition of Marketing Loyalty

Marketing seeks to better understand the buying habits of consumers. It aims to promote the product a business-to-customer data. At first glance, the marketing is the set of methods available to the company:

• adapt its offer to: (1) demand, (2) competitors and (3) means available to the company;

• build a “symbolic envelope” around the product / service: the imaginary

• Encouraging behaviour conducive to the achievement of its objectives with diverse audiences. However, there are several approaches (Ghauri, and Gronhaug, 2005).

Different descriptions are there about marketing that use to loyalty programs. Some of them have concentrated these aims from the perception of customer value as useful for businesses. Currently, loyalty programs and cards are revealed everywhere: on common credit cards and department stores in the restaurants, grocery stores, etc (Cermak, File, and Prince, 1994). Loyalty programs are extensive throughout the sections, which give a service or good implemented commonly and unit value comparatively high (Ghauri, and Gronhaug, 2005). They depend on marketing databases constructed based on knowledge from loyalty cards, that recognise the consumers and record data about their attitude. Their terms normally refer to the implementation of procedures from promotional approaches classics, motivating customers to enhance and maintain its purchases to acquiring a reward. In this situation, they can be renowned from sales promotion for their distrustful orientation in the longer term (Berry, and Parasuraman, 1991). The aim of the promotion is offensive, and when it stops, nothing is there to stop customers to suppose their earlier attitudes. A loyalty program looks to keep market share in locking customers, through tangible advantages deferred (promotional methods) or intangible (individualization, capital picture services, and privileges) and performs somewhat like a permanent promotion. The productivity of a loyalty strategy so, depends on its features and tangible advantages, but also intangible, that is to define, the anticipated importance of the possible association that is possible to produce and grow (Addis, and Holbrook, 2001).

The customer connecting a loyalty strategy looks through establishing their purchases or traders in a focused, acquiring dividends, gifts (Farley, 1964). The trader, investing in this strategy, looks to seduce and to imprison the customer. This approach, better recognised as retention, is actually a fairly technical model that the customer is faced with attempts supported in bonus points and the fact of losing everything in matter of abandonment of the plan. A loyalty plan is a connection between the merchant and customer in which, the two parts are the advantages. In encouraging their business, companies perform different activities to acquire consumers. The management of instant rewards they present promotions discount shops. The management of loyalty program rewards they present delayed (Hakim, and Arruda, 2007). “In comparison to the sales promotion where the achievements happen simultaneously the cost or attempt, this research is reversed through rewards deferred as a person should first make an attempt to more or less lasting for the advantage in the future”. Interestingly, this strong motivation is akin to the quest for a reward. In other terms, the effort is motivated by greed (Ghauri, and Gronhaug, 2005).

2.5 Attitude

Different perceptions in the marketing study have proliferated like the notion of attitude. A closer look at literature assessing attitudes as consumers’ feedbacks to marketing attempts, defines an important diversity in views about the perception of attitude and its creation. Attitudes are supposed either compritevly even object-associations, or temporarily established assessments, which are established through memory (cognitive)-based knowledge processing or contextual and influence-based data processing (Rosenberg, 1984). One of the most compulsory phenomena for a social marketer to recognise is that of ‘attitudes’. Having defined this, this is not a major concern as much disagreement is there about the style of attitudes, how they are established, and how they decide customer’ behaviour (Barnes, 2002). Attitude theory study is an important concentration for theorists of consumer behaviour, and derives from the area of psychology.

Different definitions are there about attitude, like, ‘the predisposition of the person to assess some object or symbol or feature of his world in a supportive approach. Differences of views are also there to what contains an attitude. The three major aspects on which researchers concentrate are:

Cognitive component (knowledge or beliefs)

Affective component (feelings)

Conative component (behavioural)

In other words people identify (cognitive component) something, for instance, recycling is excellent for the environment. Individuals also consider that observing the environment is an important thing (Bove, and Johnson, 2002). This establishes their constructive feelings (affect) about recycling behaviour.

2.6 Behaviour

People live in a customer -driven community. Consumers are important, whether as people, organisations or groups, whether as customers of services provided or of tangible products (Grönholdt, 2005). Considering the psychology of a customer, and how a customer communicates with their socio-economic and traditional environments to obtain their aims is an important benefit in current community (Bove, and Johnson, 2002). An in-depth consideration of consumer behaviour defines all activities of marketing, policy formulation and service provisions. It is essential to the success and profitability of any organization, service provider, trade organisation or policy think-tank, in the public, corporate, or voluntary sectors in this world (Rosenberg, 1984).

As a company, individuals spend an inordinate amount of time observing how to grab the focus of customers, and no lack of new marketing theories is there being started commonly through academicians and business veterans (Mark, 2007). That defined, the language can transform and the analogies can put latest spins on old facts, but the fact is customer attitude hasn’t transformed a whole lot since companies started tracking it and applying it to sell products, ideas, and the occasional bridge.

2.7 Manage Customer Expectations on Loyalty

Customers are presently making their views about what they ‘deserve’ as loyal consumers. Costa Coffee must be very clear about the anticipations they set with regard to loyalty reward and identification in propositions of their customer value (Till, 1970). When companies fail to fulfil these anticipations, customers either shifts towards a better offer or remain where they are, but become a harmful detractor. Companies should form consumer anticipations.

2.8 The Economics of Customer Loyalty

Customer loyalty is an essential aspect influencing the monetary performance in the long term. Organizations are revealing that if they do not keep consumers loyal and happy, the competition (from others) will alienate consumers (Grönholdt, 2005). But opponents are not the single obstacle to customer retention; not meet the requirement of customers about the quality of products and, friendly and effectual service can also participate to the massive loss of consumers. Loyalty is the attraction of a consumer to staff, services and products of a company (Mark, 2007). A loyal consumer is someone who:

Or Buy regularly

Or Buy covering product lines and services

Or refers to other

Or shows indifference to attract competition

2.9 Loyalty Facilitates Healthy Development

If good customers begin to retire, their volume may remain paralyzed because new customers simply substituted for customers who have retired, and those who withdrew as loan balances were higher than their substitutes, may now observe its portfolio decline. An organization that focuses on loyalty and satisfaction of existing customers (and a reasonable amount of new) will have much more success with customer retention and a portfolio of low risk (Barnes, 2002).

2.10 How to Improve Customer Loyalty

To improve loyalty, the first step is to measure it. With reference data established, Costa Coffee can measure whether their efforts to improve loyalty are or not successful. Although loyalty, which is defined as a feeling or a union, might look like an elusive and subjective feature, company can watch it (Mark, 2007). To measure loyalty, Costa need to measure the actual attitude of customers buys again. To measure the extent of the relationship, Costa needs to have an information system that is arranged around the customer, besides the product, and if possible, provide the opportunity to establish family ties. Not only the information of family ties is useful to measure loyalty, but also helps company to oversee the excessive services, and noted that, if a member this family is unhappy and decides to leave, it is possible you suffer a great loss when others decide (Black, 2002).

Exclusivity is an important indicator of loyalty and measuring the depth of a customer relationship with his institution. In fact, the fundamental measure of loyalty is the part of the customer’s purchases (the extent to which the customer uses his institution all your needs for financial services). Some companies have created institutions specifically regulated financial to provide customers’ purchases one-stop (Banerjee, 1998).

An institution can improve customer loyalty by creating customer value through product design, customer service, building relationships and reputation, but efforts to create customer value, and therefore, improve loyalty need observation through a realistic situation (Banerjee, 1998). Costa Coffee could enhance the value of product not charging, and can enhance the value of the service if it were open 24 hours a day, possibly doubling wages would result in a value of staff better – but it may not remain in business for long. With regard to control, efficiency and satisfaction, a strategy of customer loyalty requires that managers focus and inquire about their assumptions (Andaleeb, 1996).

Undoubtedly, the answers to these questions will vary depending on the circumstances local, but the point is to inquire into the assumptions, and in doing so, analyze each appearance of products and services to achieve a balance between control, efficiency and customer satisfaction (Anderson, and Fornell, 1994).

2.11.1 Build Loyalty from Day One

Generally new customers feel low levels of loyalty about their companies. So, companies have a chance to concentrate on maintaining currently achieved customers whereas not overlooking their longer held connections. Loyalty concentrated value propositions will support companies to established loyalty more quickly (Anderson, and Fornell, 1994). Rather than leaving these consumers to their devices, they must be rapidly reviewed for other needs of product (Andaleeb, 1996). The latest products customers obtain with their company, the more rapidly loyalty will develop. Customers with multiple products and longer tenures are possible to keep loyal, though this does not mean companies can rest on their laurels with this part. Presently, multiple product holders understand unrewarded and unappreciated. As a simple, but effectual action, Costa must recognise long-standing consumers and their product holdings in all contacts (Banerjee, 1998). The hazard with loyal consumers is that they are normally the ones with the higher hopes on loyalty, so if they do shop around and get better offers elsewhere they are possibly to rapidly become detractors who will either shift to the other presenter or keep on, detracting and disgruntled.

Chapter 3 Research Methodology

3.1 Introduction

One of the many things that intrigued author most about looking at customer loyalty in the specialty Costa coffee is that there has been very little academic research, done on the determinants of consumer loyalty in industries that rely on both their product and their level of customer service for success. In a more popular vein, the UK is becoming increasingly caffeine dependent in order to make culture’s fast-paced. Because of this, the coffee industry, especially the Costa Coffee, is nourishing. For both of these reasons, author wanted to look deeper into customer attitude about where to purchase a cup of coffee. For many people a bad cup of coffee in the morning ruins the day. By choosing to get their coffee from a particular coffee shop, they are putting a lot of trust in that establishment. Below, author explains and discusses his research methodology in detail. first discusses why chose Costa Coffee, and then move on to the specific coffee shops. This is followed by why chose to survey research, will then discuss the four categories of question that make up the survey, next reflect of the methodological complications.

3.2 The Coffee Shops

The reason author picked Costa Coffee is that did it first because this is located across the street from each other on the main commercial street in London. The proximity of this coffee shop is a perfect example of Costa Coffee’ marketing strategy of placing their coffee shops as close as they can to a competing coffee shop.

3.3 Why Surveys?

Author chose to do a small qualitative study. this would be the best way to study customer loyalty attitudes among coffee shop patrons. used a non-probability convenience sample. Author only chose customers who happened to visit the Costa shop. All of the customers who visited that coffee shop before or after author was there, were not even considered in his selection process. also only chose customers who sat at the coffee shop for more than just a few minutes, so this leaves out the entire group of grab and go customers who visited the coffee shop while was there. It is unfortunate that was not able to survey these grab and go customers because they would have made for some interesting results. So much of the coffee industry is about providing speedy service so that customers can run in and grab their coffee to get quick caffeine and get right back to where they need to be.

It is hard to effectually quantify customers’ telling towards a brand or reasons for picking a particular brand over another (Bloemer, and Lemmink, 1992). Because of this, any kind of statistical or quantitative research methods would not sum up the same valuable results as qualitative research. Customer loyalty lends itself to a more personal research style. Using a qualitative survey method for studying customer loyalty allows author to understand customers’ attitudes towards specific aspects of the coffee shop. Being able to ask the survey-takers to explain their answers instead of a simple yes or no enables author to get a richer understanding of their coffee drinking habits and reason for going to that coffee shop. It would be difficult to do a study based on interviews instead of surveys, because it has no way of knowing before interview someone if they are a first time coffee drinker or a loyal customer. Administering surveys instead allows him to reach more people so that gets a wider variety of responses.

3.4 Surveying Coffee Drinkers

Author created an extensive survey that has four categories of question: demographic and background questions, questions that help him identify the type of coffee drinker at hand. Questions are about loyalty behaviours and added Costa-specific questions for the people being surveyed at Costa coffee. Author discusses each of these types of questions below in turn. The demographic questions (questions 1-10) are the least important for the information was trying to get out of this study. But I wanted to include them, so there was a little bit about each survey-taker. Background information may also come into play, in the event that there turns out to be some interesting trends between the demographics and their coffee drinking habits or

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