Loyalty Card Programs and Customer Satisfaction: A Case Study of Tesco UK

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1. Introduction on A Case Study of Tesco UK

1.1 Background to research

Loyalty card may be defined as strategy undertaken by the supermarket which includes reward for spending money within the organization. This card motivates customers to repurchase from the particular firm and thereby elevates overall organization’s financial position. Furthermore, this card can be presented as the marketing tool which encourages customer to purchase from particular firm that eventually contributes in broadening the customer base (Yo et al, 2021). Customer satisfaction is the measures which define their happiness from the firm’s product & services. Each organization prioritizes customer satisfaction as it helps in developing as well as managing long term relationship with them. Present study will explore the role of loyalty on overall satisfaction & loyalty of customers within Tesco.

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1.2 Tesco’s background

Tesco is the British general merchandise and groceries organization that was established in the year of 1919 at Welwyn. The firm offers diverse products such as superstores, hypermarket, supermarket and conveniences stores (Tesco Plc Company Profile, 2024). Tesco earns annual revenue of 1.192 billion pound and offer jobs to 330000 employees across the globe.

1.3 Significance of study

The current study is highly significant for Tesco’s manager as it defines strategies that should be incorporated for managing customer loyalty and satisfaction. It also defines various benefit of loyalty card that could be adopted by other retail organization (Nguyen, Nguyen and Tan, 2021). Furthermore, this study acts as the reference point on the basis of which future studies could be initiated by other scholar & authors.

1.4 Statement of purpose

Present study is based on identifying the extent to which loyalty card influences overall satisfaction of customers. This is the research topic as each organization aims at retaining customer for the longer time frame which positively influences overall profitability (Tiep Le, Ngo and Aureliano-Silva, 2023). Moreover, majority of the organizations are using loyalty card schemes to ensure customer retention. This creates necessity to analyse the influence of such card on overall satisfaction as it indirectly impacts the firm’s financial position. In this regard, thematic approach will be used to illuminate the role of loyalty card program.

1.5 Problem statement

Each organization focuses over managing overall customer’s satisfaction as it ensures long term stability of the business entity. However, there are diverse factors that influence their overall satisfaction which need to be identified (Tahir, Adnan and Saeed, 2024). Moreover, loyalty programs are latest trend in the retail industry that need to be analysed for determining its influence on customer’s satisfaction.

1.6 Research question

Q1. What is loyalty card scheme and its importance within UK retail sector?

Q2. What are the various theories and models related to customer’s loyalty & Satisfaction?

Q3. What is the influence of loyalty card initiative on loyalty and satisfaction of customers?

1.7 Aim of research

The aim behind initiating current study is to explore the influence of loyalty card program on satisfaction and loyalty of customers within Tesco.

1.8 Research objective

• To study the concept of loyalty card and its significance within retail industry.
• To evaluate theoretical underpinning related to the customer’s satisfaction and loyalty.
• To examine interrelationship between loyalty card and customers; satisfaction within Tesco.
• To suggest competent strategies to Tesco’s manager for elevating overall customer’s satisfaction & loyalty.

1.9 Dissertation structure

• Introduction: This chapter defines aim and objectives of study and rationale behind conducting research.
• Literature Review: It includes analysis of past studies which help in understanding positive & negative information related to topic.
• Research methodology: This chapter define various approach, philosophy, data collection and sampling method used for conducting study.
• Data analysis: This chapter offers foundation for discussion and link raw data according to research question.
• Recommendations & conclusion: Final chapter highlights the key findings of the study and provide strategies to overcome the prevailing issue.

2. LITERATURE REVIEW

2.1 Introduction

Literature review offers overview of the previously published information related to the particular topic and issue (Lim, Kumar and Ali, 2022). This method explores diverse negative & positive aspect of the prevailing issue which offers better insight of the research problem.

2.2 Guided by research question

For gaining in-depth information related to the research question, customer satisfaction & loyalty theories such as cognitive dissonance, equity theory, and value perception, Equity, contrast and congruity theory will be analysed.

2.3 Purpose of LR and its relevance

Literature review aims at determining new manner for interpreting the past research. It also provides information related to the market gap which could be fulfilled through present study (Kraus et al, 2022). The current LR is highly relevant as it indicates the significance of loyalty card program and various factors influencing the customer satisfaction. This information together helps in establishing link between both key variables and thereby broadens overall understanding.

2.3 Required skills

Research, reading and critical thinking are three crucial skills required for conducting literature Review. Researching skills aids in identifying all the relevant databases and scholarly articles. Reading skills support in determining the key findings, implications, method and arguments within each source. Critical thinking skills contribute towards identifying controversies, gaps and limitations of past data which discovers the new insight and perspectives.

2.4 Respond to research question

Meaning and significance of loyalty card

Based on the perception of Putri, Yuliansyah and Sandi (2024) loyalty card is the identity card offered by retailers or supermarket chain to the customers for providing additional discounts on the future transaction. This card consists of rewards and exclusive discounts that are provided to the customers for repeat purchase. Gunawan, Sudarma and Siwiyanti (2025) assessed that loyalty card serves as the tool for building customer’s trust which eventually boosts their overall retention. This card promises customer to gain additionally benefits on repeat purchases which enhances overall loyalty. This facilitates towards retaining customers for the larger time period which eventually improves the firm’s reputation. Along with this, Rose, Dolega and Rowe (2024) defined that loyalty card enhances customer engagement that ultimately boosts overall profitability and financial position. Loyalty card holders are more likely to communicate with organization, evaluate the firm’s offers and discount which eventually boost overall engagement. For example: Tesco’s has recorded over 20 million club card holders which indicate the higher customer’s retention rate. There is 6.2% increase in the club card holders that helps firm in boosting overall sales (Serving our customers & communities, 2025).

Additionally, Pratihar and Pati (2024) explicated that loyalty card offers rewards and additional points on buying which increases the purchasing frequency. For example; Tesco’s club card program provides an opportunity to earn points on every purchase which increases the overall buying frequency. This point could be redeemed through additional discount on specific goods, gaining monetary incentives and diverse vouchers. In this line, Rains and Longley (2021) explained that loyalty program increases overall customer lifetime value (CLV) which boosts firm’s profitability and financial position. It has determined that members of loyalty program are expected to spend 13-20% higher than others which eventually boosts the firm’s profitability (Navigating for Program loyalty to Customer loyalty, 2025). Loyalty program helps in gaining higher rewards, encourages more spending that ends up with the elevation of firm’s financial position. According to Mallika (2022)’s perception, loyalty card program improves communication process which strengthen customer’s relationships and ensures retention. Loyalty program aims at providing regular updates related to the exclusive offers, rewards and touch points that enhances customer’s engagement and thereby forms adequate customer relationship.

Theories and models related to customer satisfaction and loyalty

Xu and Meng (2024) stated that there are diverse theories and models which define the factors that impact customer satisfaction & loyalty. Cognitive Dissonance theory explicated that customer’s overall satisfaction is impacted by the organization’s capability in fulfilling their expectation (Important customer satisfaction theory, 2024). In this line, entities that are unable to align with its promises generally face issue in attracting the customers and ultimately impact the overall sales. For example: Tesco promises to offer personalised product & services which is successfully fulfilled by the firm. This develops positive image in the industry and thereby elevates overall profitability. On the other hand, Yeboah and Afrifa-Yamoah (2024) explained that customer loyalty is highly impacted by the quality and performance of the product. According to contract theory, customers do not focuses over firm’s promises rather concern on overall performance of the product. In this context, customers generally compare product quality with price which eventually influences their loyalty.

Tran and Nguyen (2025) defined that comparison level theory is significant for managing the overall customer’s satisfaction. This theory states that customer loyalty is highly impacted by the ability of firm’s product & services in fulfilling the customer’s perceived value. In this line, consumer generally compares the actual product with expected price, quality, performance and features. However, Brown, Johnson and Wilson (2024) said that customer’s overall satisfaction is based on the situation prevailing within the market. According to attribution theory, customer judgments are rational because of which they are involved towards identifying the factors that may cause particular outcome. This indicates that particular product could offer higher satisfaction in one situation and causes dissatisfaction in another. In addition to this, Momen et al, (2024) expressed that customer’s satisfaction is highly influenced by the perception and mind-set of other customers. In the current times, customers usually analyse the comment section of firm’s website which support in identifying others experiences based on which their overall perception is formed. These feedbacks are setting down as the benchmark on the basis of which customers usually analysis product performance that end up forming their overall perception.

Furthermore, Lakshman and Faiz (2021) expressed that convenience and accessibility is another significant factor that influences satisfaction and loyalty of customers. Based on the Gitnux Market Report, 97% of total customers prefer convenience while making purchase decision. Convenience includes various elements such as user-friendly website, optimum customer services and higher accessibility. For example: Tesco has managed convenience by providing various payment options, home delivery facilities and user-friendly website which enhances the accessibility of diverse customers. Along with this, Thomas, Singh and Gangwar (2023) said that after sales services and response time is another critical element that impact overall satisfaction of the customers. On the basis of survey initiated by Liveperson, 48% of customer switches to another firm if they did not get responses within 10 minutes. Customer generally expects quicker and adequate responses as to resolve their queries and issues. Any delay in the customer services result in higher frustrations which end up losing large number of customers. A timely respond denotes firm’s concern and dedication to offer adequate services which develop emotional connection with customers and ultimately enhances their satisfaction.

Interlinked between loyalty card & customer’s loyalty& satisfaction

Based on the view point of Tien et al, (2021) loyalty card provides various types of discounts and offers to customers which eventually boost their satisfaction. This card provides an opportunity to gain particular services within the limited cost which ultimately boosts their satisfaction. For example: Tesco’s Club Card support customers in gaining additional discounts on every purchase which ultimately boost repeat purchase and thereby managing overall loyalty. Contradictory, Tzeng et al, (2021) expressed that many customers faces issue in gaining advantage of available loyalty program which eventually reduces their trust. Customer encounters issue in redeeming all the loyalty points that vain the benefit of such program and thereby reduces their overall satisfaction. For example: Tesco’s club card member faces issue in utilizing their loyalty point while placing orders that impact on their satisfaction (Tesco app Down, 2024). This IT problem reduces customer’s trust and confidence towards such loyalty card program which impact the overall firm’s sales.

Chatzoglou et al, (2022) explicated that loyalty program includes collecting information related to customer’s perception and needs. Through this information, entity offers tailored marketing content, provide personalized services and suggestions which eventually elevate customer’s satisfaction. Furthermore, personalization builds strong relationship with customers that help in manage their loyalty. On the negative view point, Huo et al, (2022) said that loyalty card collects customer data which increases scope of data breaches and develop privacy issues. This reduces customer trust and confidence towards business entity that ultimately influences firm’s reputation and thereby impacting their retention. For example: Tesco has observed some fraudulent activities related to Club Card that impact on more than 600000 customers (Tesco send security warning to 600000 club card holders, 2024). Vouchers of club card holders have been redeemed automatically which reduces their trust and thereby influences overall loyalty.

2.6 Research Gap

In past time, studies had been initiated for determining the significance of loyalty card for enhancing overall profitability & financial position. Further, concern has been laid over identifying the necessity of such tools in managing organization’s long term stability. Contradictory, focus has not been paid over examining the role of loyalty card in forming overall perception and mind-set of customers. The current study aims at bridging this gap which in turn enhances overall understanding related to the topic.

2.7 Chapter Summary

By summing up chapter, it has been identified that loyalty card enhance customer’s retention, engagement, boost purchasing frequency and overall customer lifetime value. Customer’s satisfaction is influenced by product quality, price, others perception, convenience and overall accessibility. Moreover, loyalty cards provide personalized services, offers access to various discounts and new offers that maximise customer satisfaction. However, loyalty card increases privacy issue, data breaches cases that negatively impact on overall loyalty.

3 RESEARCH METHODOLOGY

3.1 Introduction

Research methodology expresses the manner through which a researcher is planning to carry out the study (Taherdoost, 2022). This comprises of diverse tools, strategies, procedures and techniques that are used for determining and evaluating information related to the topic. The current chapter depicts on diverse methods, approaches and techniques that used for identifying the impact of loyalty card on customer’s satisfaction.

3.2 Research philosophy

It refers to the set of assumption, beliefs and principles that define the manner through which information related to phenomena is gathered and analysed (Kamper, 2020). This has been classified into two different manners which consists of interpretivism and positivism. Researcher will opt for interpretivism method that discloses hidden information related to the complex topic. Moreover, this method explores subjective experience and social phenomena related to the topic based on which accurate conclusion could be formed.

3.3 Research approach

Research approach is the rigorous and systematic processes that used for conducting, analysing and reporting study (Mulisa, 2022). There are two different approaches of research that can be undertaken by the scholar such as inductive and deductive. In the course of determining the influence of loyalty card, inductive approach will be utilised that offer an opportunity to generate new theory according to the prevailing issue. This method follows bottom to top approach that offers in-depth information regarding to prevailing issues based on which new theory is formed.

3.4 Research Method

It implies for the process, strategies and techniques that are used for collecting evidence regarding the current topic. In the field of research, methods can be distinguished into three such as qualitative, quantitative and mixed (Hasan et al, 2021). In the context of determining the impact of loyalty card on customer’s satisfaction, qualitative method will be used. This method discloses information related to beliefs, perception and opinion of respondent that assists in forming accurate conclusion. Moreover, impact on customer; satisfaction could not be measured in numerical form because of which qualitative method will be utilized by researcher.

3.5 Research strategy

Research strategies may be served as a methodologies and plans that used to address the research questions and objectives (Suri, 2020). Interviews, case study and survey are the three different types of research strategies. For determining the impact of loyalty card, researcher is aiming to use survey method. This method promotes flexibility and support in collecting in-depth information and original information related to topic.

3.6 Data collection

It refers to the method of measuring and gathering information related to the targeted variables (Char, Abràmoff and Feudtner, 2020). This has been classified into two differential method which consists of primary and secondary data collection method. For collecting information related to impact of loyalty card, both primary & secondary data collection method will be utilized. Primary method facilities towards gaining original and first-hand information that aids in discovering new data related to topic. In this regard, survey will be conducted on 30 customers of Tesco as to understand their perception & beliefs. Furthermore, secondary data will be gathered that provide information related to scholar’s perception & mind-set. In this context, diverse books, journals and scholarly articles related to loyalty card and its influences will be selected.

3.7 Source of data

For gathering primary information, survey will be initiated on 30 customers of Tesco with the help of questionnaires. Thus, survey will contain close ended questions related to customer loylty, satisfaction and related card schemes. This will help in gaining appropriate information in line with the research issue or problem. This method offers topic specific information which assists in gaining better insight of the topic. Furthermore, secondary data will be collected through Google scholar, university’s library and portal that offer access to invaluable books, scholarly articles, journals and other datasets.

3.8 Sampling

It is the process of selecting some of respondent from total population through which primary data is gathered (Newman, Guta and Black, 2021). In this regard, random sampling method will be utilised for selecting 30 Tesco’s customers on which survey will be initiated. This method offers highly representative samples and lacks any type of biasness which enhances overall understanding.

3.9 Data analysis:

Data analysis is the process of examining and modelling datasets to draw accurate conclusion related to topic. SPSS and thematic data analysis are the two methods of analysing collected data. For exploring the impact of Loyalty card, thematic approach will be used that provide insight about the qualitative data. This method also supports in discovering the common trends and patterns based on which accurate conclusion could be formed.

3.10 Research Reliability & Validity

Research validity ensures accuracy of the study whereas reliability aims at managing overall consistency and relevancy (Tamminen and Poucher, 2020). In order to manage reliability, accurate questionnaire will be formulated which exposed all the relevant information related to the topic. No alterations will be done in the respondent’s view for presenting the highly reliable and valid view of the study. Along with this, research will evaluate all the past books and journals referring the time, scope, objective and market condition as to gain accurate information. Further, recently published articles will be considered for making the study’s outcome more valid.

3.11 Research Ethics

It includes diverse activities and strategies that promote fairness and ethnicity while conducting the study (Saliya, 2023). In this regard, researcher will provide consent form to respondents that denote their approval to indulge in the study. Moreover, an information sheet will be provided to the respondents which clarify original objective and reason of study and thereby promotes overall transparency. In addition to this, all the secondary data will be accurately cited which define original sources of information. Moreover, a reference list is attached at end which acknowledges efforts and contribution of past researcher.

3.12 Summary

By summing up the chapter, it can be stated that qualitative data will be gathered for understanding the impact of loyalty card on customer satisfaction and loyalty. In this context both primary & secondary data will be gathered by conducting survey and analysing the diverse books & journals.

3.13 Timeline

Activities /weeks	1	2	3	4	5	6	7	8	9	10	11	12
Deciding topic and developing outline
Formulating aims and objectives
Undertaking literature review
Selecting optimum research method
Drafting questionnaires
Gathering primary data
Organizing raw data
Evaluating data
Recommendation and conclusion
Formatting report
Gaining tutors remark
Modification and submission

REFERENCES

Loyalty Card Programs and Customer Satisfaction: A Case Study of Tesco UK

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