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IKEA DISSERTATION
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An analysis of the impact of loyalty membership on customer purchase decision in the
retail industry:
Contents
Chapter 1 Introduction:............................................................................................................................4
1.1 Background:......................................................................................................................................4
1.2 Rationale for the research:.................................................................................................................5
1.2.1 What is the research issue?.........................................................................................................5
1.2.2 Why is it an issue?......................................................................................................................5
1.2.3 Why is it an issue now?..............................................................................................................6
1.2.4 What would the research study shed light on?............................................................................6
1.3 Research aims:...................................................................................................................................6
1.3.1 Research objectives:...................................................................................................................6
1.4 Research questions:...........................................................................................................................7
2.0 Literature Review and Conceptual Framework..................................................................................8
Chapter 3 Research Methodology..............................................................................................................13
3.1 Research prepositions:.....................................................................................................................13
3.2 Research approach:..........................................................................................................................13
3.3 Research strategy:............................................................................................................................14
3.4 Data collection:................................................................................................................................14
3.4.1 Primary data collection:............................................................................................................15
3.4.2 Secondary data collection:........................................................................................................16
3.5 Research philosophy:.......................................................................................................................16
3.6 Generalization of the research:........................................................................................................17
3.7 Validity and reliability of the data:..................................................................................................17
3.8 Research ethics:...............................................................................................................................18
3.9 Sampling size and sampling technique:...........................................................................................18
3.10 Future recommendations:..............................................................................................................18
3.11 Limitations of the research:...........................................................................................................18
3.12 Summary of the chapter:................................................................................................................18
Chapter 4:..................................................................................................................................................20
4.1 Introduction.....................................................................................................................................20
4.2 Results.............................................................................................................................................20
2
4.3 Discussion and Analysis..................................................................................................................26
4.3.1 Secondary research findings.....................................................................................................27
4.3.2 Customer experience in a retail environment............................................................................27
4.3.3 Customer loyalty management..................................................................................................28
4.3.4Retaining customer loyalty........................................................................................................29
4.3.5Developing and sustaining profitable customer loyalty.............................................................31
Chapter 5: Conclusion and Recommendation............................................................................................31
5.1 Introduction.....................................................................................................................................31
5.2 Summary of the findings of data analysis........................................................................................32
5.3 Linking with Objectives..................................................................................................................33
5.4Recommendation..............................................................................................................................34
References.................................................................................................................................................36
Appendix...................................................................................................................................................41
3
Chapter 1 Introduction:
1.1 Background:
The incorporation of the concept of the customer-centric approach had brought along a number
of significant changes with it. With the increasing competitiveness and the ever evolving nature
of the external market environment and customer behavior, the adoption of the customer centric
approach has become indispensable for the management of the business firms and they have
engaged in a continuous and consistent endeavor to seek to devolve ways to ensure customer
satisfaction, customer loyalty and customer retention at all costs (Hofmann, 2007).
As a matter of fact, the devising of strategies to ensure the sustained satisfaction and retention of
the customers and ways to attract new ones towards the brands has emerged to have become one
of the core areas of concentration of the marketing department managers of the modern day.
Among the various strategies and measures adopted by the management of the different business
firms, the aspect of the loyalty programs deserve special mention owed to its uniqueness and
modernity and the ways they have strived to ensure the long-term loyalty and retention of the
customers and the extent to which they have been successful in attracting the attention of the new
customers (Nagle and Holden, 2002).
The present report would deal with the loyalty program of the IKEA Company, which is the
leading furniture retailer of the world and deals in furniture, accessories, camping goods and
works related to interior designing. The IKEA Company has been at the very forefront of the
international market and it can be safely attributed to its leadership in cost control, product
development, continuous improvement, customer relationship management and innovation and
incorporation of modern technology.
The IKEA Family Card has been a very successful tool for the company and has attracted and
helped retain a lot of customers as the company expanded into new paradigms in the
international market.
4
Hence, keeping the present state of affairs in the backdrop, the present report seeks to examine
and analyze the aspects related to loyalty programs and customer loyalty, retention and purchase
decision making with the case of the IKEA Company as the company under investigation
(Tanner, 2000).
1.2 Rationale for the research:
1.2.1 What is the research issue?
The research issue can be related to the effectiveness of the customer loyalty programs as
initiated by the business firms in line with the customer-centric approach to satisfy, retain and
ensure the long-term loyalty of the customers and also seek to attract new ones towards the
brand. The present topic of customer satisfaction and customer loyalty have become more
important than ever owing to the increased competition among the rivals, the technological
advancements, the ever evolving dynamics of the internal and external environment of the
business organizations and the ever changing expectations, aspirations, demands and
requirements of the customers in the modern times. The situation being such, the management of
the business firms have continuous strived to devolve methods to ensure sustained and
continuous loyalty and satisfaction of the customers so as to ensure that the rivals do not take
them away and for this purpose have implemented a range of tools and policies to retain the
customers. The aspect of loyalty programs being the latest of such, hence, demands special
attention and detailed examination (Stahlberg and Maila, 2010).
1.2.2 Why is it an issue?
The aspect identified above is an issue especially in the contemporary times owed to the fact that
the aspect of loyalty programs has emerged to have become a core concept that has occupied the
centre stage in the modern marketing strategy discourse and hence, forms an important matter of
modern studies and researches for academicians, students, marketing managers as well as
management research scholars. The effectiveness of the loyalty programs on the part of the
managers to ensure long-term loyalty of the customers has been a subject that has been put to
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multiple tests and has been the subject of a range of discussions and analyses in the modern
times and hence, constructs an important issue of the hitherto management studies discourse
(Soman and Marandi, 2010).
1.2.3 Why is it an issue now?
This particular matter has emerged to be a significant issue now as with the passage of time and
the evolution of the dynamics of the external marketing environment and with the changes in the
trends of the customer behavior, the effectiveness of the loyalty programs holds special value as
the vital aspects of influencing customer purchase decision making, customer satisfaction and
customer loyalty are influenced by it and would necessarily be a vital aspects in the days to come
in the wake of greater and more intense competition and complexities (Nagle and Holden, 2002).
1.2.4 What would the research study shed light on?
The present report would shed light on the effectiveness of the loyalty programs on the customer
satisfaction, customer retention and customer loyalty and the ways the loyalty programs initiated
by the IKEA have been effective in satisfying the customers and ensuring their long-term loyalty
towards the brand the ways the management of the IEKA company would seek to improve the
loyalty programs to ensure the same in the upcoming days when the competition and associated
complexities are bound to gain greater heights (Hofmann, 2007).
1.3 Research aims:
1.3.1 Research objectives:
The research objectives can be summarized as under:
I. To investigate and examine the factors influencing customer purchase decision making
II. To examine and analyze the extent to which and manner in which the loyalty program of
IKEA has been effective to meet its objectives
6
III. To identify and examine the factors that have contributed the outcomes of the IKEA
Family Card initiative with special reference to the uniqueness of the program
IV. To interpret relevant theories and concepts and link the same with practice
1.4 Research questions:
I. What are the factors that influence the purchase decision making of the customers?
II. How does the IKEA Family Card, “the loyalty program with a difference”, make a cut
above the rest to attract more customers towards the brand?
III. What has been the positive influence and what can be the probable negative impacts of
loyalty programs on customer purchase decision making?
7
2.0 Literature Review and Conceptual Framework
According to Rapacz et al. (2013) customer retention is much profitable and feasible for a
business organization rather than acquiring new customers as because cost of retaining existing
customers is far lesser than cost of turning potential customers into real customers in any
business organization in retail industry. As almost every business organizations want to retain
their existing customers not only to reduce various marketing costs and expenses but also to
improve overall business structure by increasing customer purchases such as up-buying and
cross-buying(Hayes, 2009). Eventually it is also true that existing customers want to buy goods
and services at premium prices. Hence customer retention and customer loyalty program is
hugely important prospect in any business organization in retail industry. Although it is also true
that customer retention and customer loyalty program is far easier said rather than done.
Recently a case study has been conducted in Ikea which is one of the famous retail brands in
United Kingdom. From the case study it is revealed that customer retention program as well as
customer loyalty program is very important proposition in this business organization. Hoffmann,
(2013) mentioned that this organization also believes that customer retention is far better policy
than acquiring new customer base in the organization as because cost of retaining existing
customers is far lesser than acquiring and forming new customer base. From that particular
research study it is also found that at least three customers out of every five customers are pretty
much loyal to their favorite brand Ikea. This organization is concerned with customers’
expectations and requirements. Ikea, as leading retail brand in United Kingdom always try to
meet customers’ requirements and expectations by delivering goods and services according to
their needs on feasible price(Lobo, 2008). It always try to retain their existing customer base by
meeting their requirements within stipulated period of time, hence retain their existing customer
base and in return customers also become loyal to their favourite brand Ikea, for their retail
products related needs which eventually positively impact in customers’ purchase decisions. For
retaining existing customers in retail industry, business organizations also implement customer
retention tools such as e-mail promotions, customer loyalty programs etc for retaining existing
customers in the business. If the example of Ikea is taken, this organization have introduced
specific customer loyalty programs with the positive intention of acknowledging and rewarding
those customers who are maintaining their business relations with the organization over the years
and continuing their patronage as well as purchase of retail commodities and services over the
8
years. The organization has already given some rewards and recognitions to some of those
customers and has already made clear promise to reward rest of the customers who have been
really loyal with the organization over the years. As Ikea have already conducted those customer
loyalty programs in place, it has helped the organization to reduce customer switching from their
organization to another organization by forming several exit barriers. After induction of
customer loyalty program, the management of the organization has ably started to resist business
promotional program of competitor organizations in retail market domain in United Kingdom
(Sathi, 2011). After introduction of customer loyalty program, the organization has started to
spread positive word from their mouth to the existing customers and have also started to
encourage customers to join into customer loyalty program. Lobo, (2008) mentioned that the
previous researches of Ikea, it has been also seen that the organization has designed their
customer loyalty program in such a way so that customer-firm relationship bond are strengthened
over the longer period of time which have helped the organization to retain their existing
customer base more solidly and that have positively impacted into customer (Existing
Customers) purchase decision in their organization more smoothly. If review of all literatures can
be summed up which are available in different websites and web portals, it will clearly reveal the
fact that customer loyalty program effectively impact in customer retention of the organization in
overall retail industry. Already several literatures on customer loyalty program of Ikea, UK have
been reviewed which clearly suggest that customer loyalty program is first and foremost tool for
customer retention agenda for the organization. From a particular study conducted on Ikea, (Liu,
2007) has observed that loyalty membership program has led to enhancement in overall purchase
graph among lightweight and moderate customers and has also helped to improve loyalty of
those customers to this particular business store. From another research it’s have been also found
that customer loyalty agenda membership have also positively impacted in existing customers’
wallet sharing with their patronized retail brand, Ikea in small, crisp yet tremendously significant
manner. However Huang and Huddleston, (2009) opined that customers are not always affected
by customer loyalty program in the large scale of the business(Vesel and Zabkar, 2009).
If critical review is done all available literatures on Ikea’s customer loyalty program it will be
seen that five different kinds of loyalty programs have been already organized by the
organization in the past, such as reward program, appreciation program, rebate program, affinity
program and partnership program. This specific aspect was identified and recognized by business
9
analyst Johnson (Johnson, 2008). As per his views, each and every above-mentioned loyalty
program has separate and unique structure which have been used by the organization to attain
specific business goals and objectives. On the other hand, according to the views of other
business experts (O’brien, Jones, 2005) five basic elements which are needed to be considered at
the time of designing customer loyalty program in retail industry, those are – cash value reward,
specific choice of reward, inspirational and motivational value tagged to that reward, relevance
of the reward to the target customer group and convenience for getting the reward. From the
previous literatures of researches it has been also found that Ikea, as one of the market leaders in
retail domain in United Kingdom have also kept in mind all those aspects when they have
designed their customer loyalty program to retain their existing customer base for longer period
of time in their business organization(Makasi, 2014). Some business experts also revealed that
customer loyalty program is designed for short term purposes also in some
occasions(Czarniewski, 2014). Suppose, a particular business organization, in retail industry in
UK is going through crisis period due to several business related issues like inadequate
deployment of capital, inadequacy in raw material and labour supply etc. Hence company’s
business production and sales are going through scratches. Huang et al. (2009) further evaluated
that, the company will experience lot of attrition in their labour supply, their sales volume will
decrease and eventually lot of customers can evoke their business relation with the organization
(Rapacz et al. 2013). In this scenario, that particular business organization has to implement
customer loyalty program on short term basis in order to resurrect the drowning business growth
of the organization in order to ensure that existing customers’ do not consider to switch over
their business relation to one of the competitor business entity under same retail domain in the
locality (Inghilleri, et.al. 2010). As per some study, customers also reject loyalty agenda and
program memberships from their concerns if those program benefits are unattractive and if they
perceive various personal losses such as loss privacy and social status. These kinds of instances
are specially seen in retail industry. Many retail brands conduct customer loyalty programs and
offer program benefits to its existing customers, however customers reject those program
benefits treating them unattractive and irrelevant to their purposes. Actually it is also true that, in
retail industries, branded organizations are very limited in numbers in comparison to other
industries (Kreis and Mafael, 2014). Hence customers are left with very minimum brands to
choose from which retail brand they would tie up with. This loss of freedom in choosing retail
10
brands and obvious presence of several contractual bonds like minimum levels of purchase also
discourage many customers to accept loyalty membership program. According to Rapacz et al.
(2013) the perception of loyalty program in this situation is about usefulness, its inherent
complexities, customer’s proximity, number of proper loyalty cards also influence the
acceptance and rejection of customer loyalty program memberships in retail industry especially.
According to the researchers customer loyalty in the form of attitudinal loyalty and behavioural
loyalty also heavily influence the chance of a particular customer to accept the membership of
customer loyalty program (Chen and Xie, 2007).
However in this particular issue, some relevant debates have been also captured. According to
research scholars Demoulin et al. (2009), customer loyalty program is everywhere in retail
business industry. Customers interact with employees and staffs of the various retail outlets for
multiple times even in a single day (Winters and Ha, 2012). Hence staffs of the retail outlets
become convinced that it is pretty much possible to buy loyalty of overall customers’ base.
However some experts have also raised specific question whether these kind of loyalty program
really work or several retail companies simply waste money in order to conduct customer loyal
program(Stock and Zacharias, 2013). They have also raised question whether customer loyalty
program can completely change overall behaviour of existing customer base so that they remain
loyal and faithful to the products and services of the retail brand which they are attached
with(Azila, 2011). Another valid and relevant question have been raised by them whether
customer loyalty program can reduce the possible likelihood that existing customers of a specific
retail brand will shift their business relation to competitor retail brand. As this specific study is
focused on overall impact of customer loyalty cards on customer purchase behaviour, it is clearly
found that customers really want and demand greater level of service than commodities and
products (Berman, 2006). Retailers of branded retail organizations should focus on good
delivering and selling behaviour as well as experience along with the goods and commodities
they sold to their customers (Ha and Stoel, 2014). It has been evaluated in the studies of
Demoulin et al. (2009) that customers are not always satisfied with only goods and commodities
they purchase from retail outlets they also expect the employees and staffs of the retail outlets
would behave generously with them. If staffs of the retail outlets behave badly or rudely with
them, they tend to evoke their business relations with the existing brand and tie up with other
competitor retail brand under same business domain in their locality.
11
If a link has to be made between existing literature and current research, it has to be suggested
that several retail brands should offer more easier and convenient way to make use of the loyalty
card. Few options can be indicated in this regard which can be adopted by several retail brand
such as one loyalty card for all customers, code based usage of loyalty cards and making
integrity between loyalty card and credit card. In modern days, Kim et al. (2013) researched and
highlighted issues like retail business organizations should offer these modes or methods of
usages of loyalty cards to its customers to make customer loyalty program more appealing and
sensitive to existing base of customers and keep them attached with business organization which
will increase loyalty membership of the business in return and will positively impact on customer
purchase decision in overall retail industry domain. Eventually, Ikea, one of the leading retail
brands in United Kingdom is offering more convenient ways their customers to use loyalty card
such as one card for all customers of the organization, code based usage of all loyalty card
among overall customer base of the organization and also integrating customer’s loyalty card
with credit card. From the overall analysis it is completely evident and clear that customer
loyalty membership program impacts on customer purchase decision in the retail industry to
large extent.
12
Chapter 3 Research Methodology
The research methodology chapter forms in integral part of any research paper and is significant
in the sense that it specifies the methods and techniques that would be employed by the
researcher to meet the envisaged aims and objectives of the research. This chapter also mentions
the research philosophy, the research approach and the methods that would fit with the case in
hand and would lead to the convenient and successful collection of the relevant and important
data and information from different sources so as to provide the necessary inputs for data
analysis and to form the base on which the research findings and observations would be arrived
at (Bellamy, 2012).
3.1 Research prepositions:
The research is aimed to devolve and examine the dynamics and aspects related to the customer
loyalty, influence on purchase decision making vis-à-vis the loyalty programs initiated by the
IKEA Company in the form of the IKEA Family Card. As such, in the course of the research the
researcher was required to go deep down information and data sources to understand the factors
that governed the purchase decision making the extent to which and ways in which the loyalty
programs can lead to sustained customer satisfaction, help in retention management of the
customers and enable long-term loyalty on the part of the customers. The research methods and
techniques implemented and employed for the purpose is thus ensured to be appropriate and
effective in accessing the information sources and gathering data and information from such
sources (Booth, et al., 2005).
3.2 Research approach:
Generally speaking, there are two broad categories in which the research approach can be
divided into. One is the inductive approach and the other is the deductive research approach. In
13
the case of the former, the research is conducted in a manner so as to devolve a theory based on
the findings and observations of the research and in the case of the latter, the research is based on
an established theory on the basis of which the observations ad findings are arrived at and the
data and information so collected in the course of the research are interpreted accordingly. For
the purpose of this present research, the deductive approach has been chosen as the subject
matter of the research topic involves the examination and interpretation of the various theories
and concepts discussing about the factors the define and explain the aspects of customer
satisfaction, customer retention and customer loyalty and help establish a conceptual link
between such theories, on one hand, and the initiatives and activities on the part of the marketing
managers in the form of the loyalty programs on the other and helps explain the core concept of
the research topic (Jha, 2008).
3.3 Research strategy:
The research strategy forms another important component of any successful research endeavor
and specifies a planned and sequential approach towards the research in the meetings of the
envisioned aims and objectives. Keeping in mind, the aims and objectives of the research topic in
hand, the methods and techniques for the collection of data and gathering of information and the
subsequent steps of data analysis have been framed in a sequential and well-planned manner so
as to enable the researcher have ease at managing the various research activities and meet the
aims and objectives in the desired manner (Ketchen & Bergh, 2004).
3.4 Data collection:
The data collection constitutes the most important part of the research as the collection of the
relevant and necessary data and information from the useful sources are done in this very stage.
Based on these very data and information the researcher would be able to come to findings and
observations and based on which the conclusion would be based.
For the purpose of this present research paper, the researcher would collect both, primary as well
as secondary data from a range of sources and respondents so as to conduct a comprehensive,
14
detailed and effective research on the given topic and devolve meaningful and logical findings
from the endeavor (Ketchen & Bergh, 2004).
3.4.1 Primary data collection:
For the purpose of the research at hand, the primary data would be collected from the managers
of the IKEA Company so as to understand the ways in which the management seeks to ensure
customer satisfaction, customer retention and long-term customer loyalty and the extent to which
the loyalty programs serve the purpose. For this purpose, the primary qualitative data would be
collected from the managers of the IKEA Company to understand the strategic vision behind the
loyalty programs and the aims and objectives the management seeks to attain through them in
terms of the factors of customer satisfaction, customer retention and long-term customer loyalty
(Kothari, 2004).
The primary quantitative data would be collected from the customers of the IKEA Company to
understand the dynamics of their behavior and attitude and perception towards the brand and the
loyalty programs. The endeavor would also shed light on the ways the loyalty program of the
IKEA has been able to positively influence the purchase decision making and the brand
perception of the IKEA Company in the eyes of the customers.
3.4.1.1 Qualitative data collection:
The qualitative data would be collected form the managers of the marketing department of the
IKEA Company. The collection of the primary data from the managers would be done with the
help of a set of questions contained in a questionnaire is response to which the managers would
be required to answer.
The questions have been so framed so as to bring out the logic and creative thinking that had
backed the idea behind the initiation of the loyalty program and this would serve to be of great
help in understanding the strategic vision ad aims and objectives behind the loyalty programs,.
There would also be questions that would relate to the facts related to the extent to which this
tool of loyalty programs has been successful in achieving the desired results and hat have been
15
the flaws or shortcomings identified by the managers or are theory any chances of this measure
proving to be counter-productive and hampering the brand perception and image of the company
in the eyes of the customers (Kumar, 2005).
3.4.1.2 Quantitative data collection:
As mentioned in the preceding sections of this paper, for the purpose of effective conduction of
the research and take within the ambit the views of the customers, which is a necessity for the
research topic and subject matter, the views of the customers and their attitudes, behavioral
trends and perception towards the brand as a result of the loyalty programs would be devolved by
virtue of subjecting them to an interview. The interview would involve the questioning of the
respondents based on some specific questions contained in the questionnaire and their responses
to such questions would form the base of the quantitative primary research and help identify the
affects of loyalty programs on the psyche of the customers and the ways and extent to which the
same helps in positively influencing customer behavior and purchase decision making towards
the well-being of the business of the organization (Newman & Benz, 2008).
3.4.2 Secondary data collection:
As mentioned above, for the purpose of the effective and comprehensive conduction of the
present research, the secondary data would be collected from a range of literature sources
including relevant journals, research articles, books, online sources as well as company reports.
The collection of the secondary data from the sources would enable the efficient understanding
of the concepts and theories related to the subject matter and would help the researchers and read
link theories with practice and lead to more logical and meaningful findings and observations
(Scruggs & Mastropieri, 2006).
3.5 Research philosophy:
The philosophical base for a research forms a vital part of any research endeavor and the
specification for the same is necessary to provide the guiding force to the research and for the
16
efficient and effective conduction of each of the component stages to arrive at the culmination
stage.
In general terms, Interpretivism and positivism are the tow most commonly used philosophies of
research and in the case of the present research topic under investigation, the positivist research
philosophy would be adopted by the researcher to attain the envisioned aims and objectives
specified in the first chapter of this research paper (Welman, et al., 2005).
3.6 Generalization of the research:
The research findings and observations have been aimed to make general and to be able to make
them accessible to different categories of readers for their various purposes. As such, the
research has been conducted with the help of the responses as gathered from the managers of the
marketing department of the IKEA Company and the customers of the company and hence, the
findings and observations arrived at, at the stage of the culmination of the research, would be
generalized and made conveniently accessible (Scruggs & Mastropieri, 2006).
3.7 Validity and reliability of the data:
The validity and reliability of the data and information collected from the different sources is
another important factor that determines the effectiveness and meaningfulness of the research
endeavor and the water the observations and findings arrived at hold.
The secondary data and information have been collected from relevant and authentic sources of
information and great care has been taken to select the information source based on the
authenticity and reliability of the sources. In the case of the primary qualitative data, the
responses of the managers of the IKEA Company are very unlikely to be false or manipulated
and being collected from official personnel and official sources comply with the reliability and
validity criteria (Scruggs & Mastropieri, 2006).
The primary quantitative data have also been collected from the respondents and they were
allowed to respond freely and independently in response to the questions of the questionnaire.
17
Their responses were recorded as they are and were incorporated into the data and information
base of the research and hence, also comply with the reliability and validity criteria.
3.8 Research ethics:
The research ethics form an integral component of any responsible and transparent research. In
the case of the present research, due permission was granted by the research ethics committee
and the research proceeded after the grating of the same.
the areas where the aspects of the research ethics applied the most can be related to the collection
of the primary data where the respondents were provided with a free and independent
environment wherein they were supposed to provide answers to the questions contained in the
questionnaire and no external pressure and biases of any kind were exerted and no efforts to
influence their opinion were done. The data collected were not manipulated and were recorded as
they were (Kumar, 2005).
3.9 Sampling size and sampling technique:
For the qualitative primary data collection, a total of 5 managers from the CRM and marketing
departments of the IKEA Company would be selected and a total of 50 customers of the IKEA
Company would be selected as respondents. The respondents would be selected by virtue of the
random sampling method.
3.10 Future recommendations:
Though the research techniques and methods are absolutely appropriate and in sync with the
aims and objectives of the research, the conduction of primary qualitative interview comprising
of managers of rivals firms would have helped understand the matter even better and would have
led to more comprehensive and detailed findings and observations.
3.11 Limitations of the research:
Being an academic research the present research suffers from time and cost constraints and also
from the barriers related to social, technological and organizational aspects and has limited the
scope and success of the research (Newman & Benz, 2008).
18
3.12 Summary of the chapter:
The various methods and techniques chosen for the research are appropriate and would lead to
the desired results. The future recommendations are also logical and would help future
researchers and readers to a great extent.
19
Chapter 4:
4.1 Introduction
This chapter is one of the vital parts of the entire research work as it deals with the analysis and
interpretation of the varied data gathered during the course of the research. This chapter consists
of the results, analysis and discussions which would further help the researcher to bring out the
findings of the research work. The primary research has been further segregated into two
portions into the quantitative and qualitative. The qualitative parts deals with the analysis and
interpretations of the responses provided customers of IKEA and the qualitative part comprises
of the interview results conducted with the managers of the business organization to get in
insight on the affectivity of the customer’s loyalty program.
4.2 Results
1. Do you think that the IKEA Family Card helps in positive purchase decision
making on the part of customers?
Table 1:
Sl. No Category
No of
Responden
ts
Total
Number of
Responden
ts
Percenta
ge
1
Strongly
Agree 17 50 34%
2 Agree 21 50 42%
3 Neutral 5 50 10%
4 Disagree 6 50 12%
5
Strongly
Disagree 1 50 2%
Chart:
20
34%
42%
10%12%
2%
No of RespondentsStrongly Agree Agree NeutralDisagree Strongly Disagree
Interpretation:
It is evident from the above chart that IKEA Family card has helped in the process of
positive decision making by the customers as opined by the most of the respondents. 34
per cent of the respondents highly agreed with this view and there are also 42 percent of
customers agreed with it. While there are only 10 percent neutral and ret of the 14 per
cent of the people disagreed to it. However, from the overall it is apparent that the card
system has a positive impact on the customers as well as on the company.
2. Do you think that the IKEA loyalty programs help develop positive brand image and
perception?
Table 2:
Sl. No Category
No of
Responden
ts
Total
Number of
Responden
ts
Percenta
ge
1
Strongly
Agree 21 50 42%
2 Agree 14 50 28%
3 Neutral 9 50 18%
4 Disagree 3 50 6%
5 Strongly 2 50 4%
21
Disagree
Chart:
43%
29%
18%
6%4%
No of RespondentsStrongly Agree Agree NeutralDisagree Strongly Disagree
Interpretation:
It has been further stated by most of the respondents that the loyalty program or the
strategy adopted by the IKEA group has affected in the positive manner on the brand
perception of the customers and which is clearly reflected from the above chart. Yet there
are less percent of the respondents who are of the different view point and 18 percent are
neutral, however, basing the majorityit can be interpreted that IKEA loyalty programs
help develop positive brand image and perception.
3. Does being a part of the loyalty programs of IKEA help in better overall shopping
experience?
Table 3:
Sl. No Category
No of
Responden
ts
Total
Number of
Responden
ts
Percenta
ge
1
Strongly
Agree 15 50 30%
22
2 Agree 26 50 52%
3 Neutral 4 50 8%
4 Disagree 4 50 8%
5
Strongly
Disagree 1 50 2%
Chart:
30%
52%
8% 8%2%
No of RespondentsStrongly Agree Agree NeutralDisagree Strongly Disagree
Interpretation:
It is true that the loyalty program conducted by the IKEA has helped develop the overall
shopping experience of the customers, as opined by majority of the customers during the
process of the survey and which is further reflected in the chart above prepared basing on the
feedback provided by the customers of IKEA. On the other hand there is very less portion of
the respondents who are either neutral or have disagreed.
4. Does being a part of the loyalty programs of IKEA help get better value for money in
terms of discounts and offers?
Table 4:
Sl. No Category No of Total Percenta
23
Responden
ts
Number of
Responden
ts ge
1
Strongly
Agree 11 50 22%
2 Agree 20 50 40%
3 Neutral 11 50 22%
4 Disagree 7 50 14%
5
Strongly
Disagree 1 50 2%
Chart:
22%
40%
22%
14%2%
No of RespondentsStrongly Agree Agree NeutralDisagree Strongly Disagree
Interpretation:
On the basis of the above chart it can be said that the strategies which are being taken by
the IKEA team towards offering discount offers and other offers for the card holders has
proved to the beneficial for the business as well as for the customers, as this strategy has
facilitated the customers for the value of their money. There are 62 percent of the
respondents on the whole who are positive on this aspect while there are only 16 percent
of the people who are negative and 22 percent neutral.
24
5. Do you think that the IKEA loyalty programs help in spreading word of the mouth
advertising by the customers of loyalty club attracting new customers towards the brand?
Table 5:
Sl. No Category
No of
Responden
ts
Total
Number of
Responden
ts
Percenta
ge
1
Strongly
Agree 12 50 24%
2 Agree 19 50 38%
3 Neutral 16 50 32%
4 Disagree 1 50 2%
5
Strongly
Disagree 2 50 4%
Chart:
24%
38%
32%
2% 4%
No of RespondentsStrongly Agree Agree NeutralDisagree Strongly Disagree
Interpretation:
On asking that, whether IKEA loyalty programs help in spreading word of the mouth
advertising by the customers of loyalty club attracting new customers towards the brand
there are more than 60 percent of the people who are of the opinion that this strategy of
25
the business has helped the business to attract more customers and retain the existing due
to the advertisement by word of mouth. This is noticeable from the above that a
considerable portion of the respondent consisting of 32 percent is neutral.
6. How does the IKEA family card helps in customer’s satisfaction and retention?
Out of the five managers who are being interviewed, one of the managers said that “from
the customers’ feedback it is apparent that the strategy has a positive impact on the
customers’ perception towards IKEA”. There was also one finance manager who stated
that, “major improvement is apparent from the return growth percentage of the
business”.Moreover, the view point of the other customer relationship managers on this
context is thatthey have found their customers to be very satisfied from the loyalty
strategy adopted by the business.
7. How do the loyalty program help develop better relationships with customers?
This strategy has really proved to be beneficial for the entire group of IKEA by the way
of improving the relationships with customers and that is by satisfying the customers.
“The discounts offer and other promotional packageshave enabled us to satisfy the wide
range of customers and also helping us to retain the existing ones”. The customers
relationship managers stated that the strategy has enabled the business to encourage their
customers to buy more product of IKEA in order to get the better discounts offers and
promotion packages.
8. How and to what extent do the loyalty programs attribute competitive advantage to the
IKEA brand?
This has really considered as an advantageous decision for he business from the context
of gaining competitive advantage. Two of the managers stated that this is one of the
required strategies taken up by the management in order to keep away the increasing
competition in the market. Moreover, their shareholders are also satisfied by the way of
getting enhanced return due to the enhancement of the revenue of IKEA group compared
to the other financial period of the business.
26
4.3 Discussion and Analysis
Therefore, it has been apparent from the interview and the survey conducted with the managers
and the customers respectively, that the customer loyalty program has been a beneficial move
made the business for the purpose to retain the existing customers and also the same time
dragging the attraction of the potential customers towards the brand. From the overall survey it
can be interpreted that the most of the customers are satisfied with the approach made by IKEA
by the way of introducing the system of the family card and this has also helped in proving the
image of the brand in front of the customers as the added facilities given to the customers is
being positively welcomed by the customers. Moreover, it is further apparent from the
statements of the managers that they are quite happy from the performance of the business after
the introduction of this system and they are of the opinion that this would encourage more
customers in the future time by the way of such useful strategies.
4.3.1 Secondary research findingsIt has been evident from the literature review section after conducting a thorough discussion on
different research works studied by researchers from time to time it is evident that customer
loyalty programs ensure customer engagement and enhances customer retaining ability of an
organization. From this research work it is evident that IKEA has incorporated unique customer
engaging strategies which ensure business growth and sustenance (Akın, 2012).
4.3.2 Customer experience in a retail environment
After conducting the research on the specific topic, it has been studied from the journals
published by the scholars and mentioned in the literature review section that retailers now a days
not only focuses on selling but has also identified that customer retention and customer loyalty
program ensures business enhancement, profitability, branding and increases the satisfaction
level of the share holders by increasing returns. It has been therefore studied in the literature
review section that customer loyalty program has helped Ikea evolve as one of the famous retail
brands in UK. It has been also studied and established in the due course of the research study,
that customer loyalty program that has been selected by the organization, the Family card
27
program ensured customer retention (Du and Tang, 2014). Irrespective of the size of the
organization, in this highly competitive market it is has been studied above identified that
customer loyalty program helps in getting an edge in the market. Therefore it is evident from the
studies on Ikea in the literature review section, that the concept of family card to engage
customers in product purchasing ensured business enhancement and branding.
It has been further studied while carrying out the research work that customer retention program
no longer ends with the selling merchandise and earns revenue; instead it begins with the selling
of merchandise (Gustavsson and Lundgren, 2005). The studies of the scholarly work in this
research helps in understanding that including customer retention program such as making the
shopping experience rewarding and engaging or increase the value customers receives from the
respective merchandise helps in business sustenance. Therefore the thoughts established by
Wikstrom is in line with the respective research findings, that is in the post modern world,
business plans are developed by focusing on customer expectation, hence are often identified as
co-producer. It has been there in line with the above studies that engaging customers in the
production process is new concepts which helps in building enhanced relationship between the
buyer and the seller and create value in different ways (Isaksson and Suljanovic, 2006). In Ikea
case study as studied this focuses on ways in which the company evolved as one of the finest
brands in the market. It is evident from research studies that customers no longer wish to see the
same designs of furniture displayed in different places. Hence they incorporated unique engaging
and involving programs like encouraging customers to design the kitchen as per their preference
by discussing with the sales representative (Rahman, 2014). Such customer engaging programs
are unique and help in improving the production of the respective organization.
4.3.3 Customer loyalty management
Customer loyalty program of Ikea as studied in the literature review section and mentioned that
Family reward card as a customer retaining tool, is effective in helping the brand establish its
image in the mind of the customer. The studies are in line with the findings that evaluate that the
Swedish retailing customer loyalty program on the online stores. The family card helps the
consumer to select the card after acquiring a printable membership card, with the help of the card
a customer is liable to enjoy discounts on the products and services. Besides this, Ikea also offers
free gifts and discounts on the merchandise purchase (Rossat and Larsen, 2008). Mobile is
28
another device which is now used by Ikea to build customer relationship and retain consumers.
The Ikea Family program is facilitated with the help of mobile phones thus ensuring that
connectivity and communication are essential to accelerate customer retention. From the above
research studies, it has been further identified that Ikea employees used to send SMS alerts to the
consumers to update about various products and services incorporated. In order to engage
customers, the loyalty programs are not limited to US instead it is available in other countries as
well (Tode, 2015).
Customer loyalty program helps in identifying conscious customer behavior or attitude towards
the product selection. It has been identified as “a form of repeat purchasing behavior reflecting a
conscious decision to continue buying the same brand” (Wei, 2010), and is evident from the
incorporation of the Family card program by Ikea that ensured buying the same brand for various
schemes such as, offering discount and coupons or special facilities to the card holders. Such an
approach not only includes only the earlier buying behavior of the consumer, but also the attitude
of the customer as well as value system. The loyalty of the customer is therefore evaluated
through repeat purchase within a said time that is when the customer has positive attitude
towards goods purchase (Tode, 2015).
4.3.4Retaining customer loyalty
In the previous chapter the definition of the customer loyalty has been studied and also ways in
which Ikea employed customer loyalty programs to retain customers has also been studied,
therefore the research is in line with the analysis that customer loyalty is strictly related to
purchasing which is channelized through engaging customers in a variety of ways. It is also
studied that loyal customers purchase products on a frequent basis. As already discussed that
attitude of the customer is important for customer loyalty (Akın, 2012). Besides this it has been
further studied that there are two stages in the process of developing satisfying customers, one is
to understand the needs and preferences of the consumer, generate loyalty and enhance
satisfaction level. The concept also impacts on the product development process, that is
developing unique product will also help in engaging existing customers and attract new
consumers. Satisfaction and loyalty are linked in a unique way. High quality products are
designed by companies to meet the expectation of the consumer. It has been studied from the
research studies that high level of satisfaction helps in increasing customer loyalty. The
29
relationship in the present competitive market scenario is not linear, instead a specialized one
(Du and Tang, 2014).
Loyalty models are followed. Strategic plans helps in increasing revenue earning by following
loyalty models which help in creating value for the customers. There are three forces, namely,
consumers, employees and investors. These mutually play a significant role in the forces of
loyalty. A close relation between the terms “loyalty”, “value” and “profit” exits has been proved
by the earlier studies conducted in the literature review section. Hence the particular research
intimates that these forces can be measured in the terms of cash flow that is loyalty is
inextricably linked to the creation of value both as a cause and an effect (Gustavsson and
Lundgren, 2005). Loyalty is however mentioned in the context whether the product successfully
delivers superior value to the customer or not. Revenues and market share grows along with the
consumer engagement programs. Sustainable growth helps in attracting as well as retains best
employees. Constant product delivery and increases customer loyalty and revenue earning of the
company. From the above mentioned scholarly research work, it is evident from the studies in
the literature review that businesses with high customer loyalty rates help in achieving high
financial results. As per Buchanan & Gillies there are six reasons that explains the reasons
behind valuing the long –term customers and understand that they help in business enhancement
as they are profitable than others (Isaksson and Suljanovic, 2006). The reasons are, further
studied in the context of the Ikea furniture and therefore could be interpreted that regular
consumer are frequent in purchasing the products and are consistent in placing orders, long
established consumers prefer buying more items from the particular store, it could be mentioned
after studying consumer behavior satisfied consumers often pay more price rates, customer
retention helps the established company to grow while make it difficult for the new players to
enter the market and increase their market share. Thus it is evident from the research that loyal
customers are willing to give feedback on the product quality and are also willing to give
feedback on the new products regarding if they are satisfied with the item and if not then why.
The loyalty program is therefore identified as a sort of quality controller. Loyalty is an excellent
tool which is very essential in evolving as a consumer’s favorite brand in the competitive market
by assisting in increasing retention (Rahman, 2014). Thus loyalty program has evolved as a
unique strategy from business development. It is invisible and takes any shape as desired by the
management. It helps in maintaining interconnection between the key players.
30
Thus from the studies it could be understood that customer loyalty strategies helps in
accelerating market share and earn customer satisfaction which leads to profitability, as
mentioned loyal customers are not necessarily satisfied customers, but satisfied customers tend
to be loyal customers (Rossat and Larsen, 2008).
Key strategies which have studied and proved effective in customer loyalty program and helped
in retaining customers are defensive strategy and offensive strategy that helps in increasing
market share, capture market share, build switching barrier and increase satisfaction level of the
customer.
4.3.5Developing and sustaining profitable customer loyalty
As already studied, that Kumar and Shah (2004) mentioned that the main goal of Ikea is to ear
profit by engaging various customer loyalty programs. However, the research therefore
establishes various forces of customer loyalty program which has evolved as one of the key
strategies for business enhancement in today’s competitive market. There are two types of
loyalty, such as behavioral and attitudinal loyalty which help in engaging the customers in
defined manner and help in business sustenance. The behavioral loyalty as mentioned, help in
earning matchless profit, while the attitudinal loyalty helps in building trust between the
customer and the organization (Tode, 2015). The adaptation of customer loyalty programs have
seamlessly increased among the companies in the past few years. Customers have become the
focus of attention. These typical programs offer financial as well as rewards to customers for
building relationship. Thus it is evident from the studies of the research work published by the
scholars, and is evident in this case study on Ikea’s use of customer loyalty program for retaining
consumers, that the customer loyalty programs, such as Family card, helped in increasing sale of
the products, increased revenue earning, build bond with brand and existing consumers and
enhance customer base. Understanding consumer behavior therefore helped in accelerating
business and ensures sustenance amidst steep competition in the particular domain.
31
Chapter 5: Conclusion and Recommendation
5.1 Introduction
In the fifth chapter or at the end of the research work it may be inferred from the extensive
studies and thorough research conducted on customer retention and customer loyalty program
with special focus on IKEA helps in establishing the fact that in the post modern highly
competitive market, customer loyalty programs has evolved as one of the key strategies to ensure
business enhancement, profitability and sustenance. Customer retention is essential as it helps in
improving the brand image in the eyes of the purchaser (Wei, 2010).
5.2 Summary of the findings of data analysis
After studying from the various types of data collected by applying both the primary as well as
secondary methods it could be inferred that consumer behavior changes with time and product
innovation, hence engaging product developing strategies coupled with implementation of
customer loyalty card helped in attracting as well as retaining consumers. The quantitative data
analysis which has been conducted by circulating the questionnaire amidst customers, helped in
understanding that most of the customers are satisfied with the unique customer loyalty program
that is the Family card which helped in engaging them and also helped in attracting new
customers while satisfying most of the existing ones (Rossat and Larsen, 2008). Besides this
qualitative research which has been conducted by discussing open ended questions with the
managers of IKEA, helped in understanding the customer loyalty program is a successful
strategy and has ensured business enhancement and profitability amidst steep competition. Thus
it may be inferred from the above mentioned findings that customer loyalty program plays a
dominant role in business marketing. Application of adequate strategies help in experiencing
competitive advantage and increase market share which boosting overall business.
The above mentioned data analysis further proves that the role of customer retention in customer
loyalty program is unique and helps in influencing the mind set of the new consumers. By
studying the reaction of the customers, it could be mentioned that most customers supported the
Family card program as it offers gifts, rewards and discounts on every purchase (Tode, 2015).
32
Thus from the data collected it is evident that most people supported the loyalty program as it
encouraged company to incorporate new ways of engaging consumers through mobile card and
family card .
5.3 Linking with Objectives
V. To investigate and examine the factors influencing customer purchase decision
making
In order to understand the various factors which influence the purchase decision making of the
customers, the researcher studied from various research works published by the scholars on the
specific topic and discussed the topic in the second chapter of the research work with an aim to
meet with the adequate understanding of the particular topic on customer retention and customer
loyalty program with special focus on business development strategies of IKEA. The research
has been carried out in a systematic manner and helped in understanding ways in which the
customer retention and customer loyalty evolved as an integral aspect of post modern business
world.
VI. To examine and analyze the extent to which and manner in which the loyalty
program of IKEA has been effective to meet its objectives
In order to assess the effectiveness of IKEA’s customer loyalty program the researcher has taken
help from various academic journals that were previously written on the same topic. Studying the
literatures and research work on customer loyalty program, and carrying out primary research to
collect fresh information from customers as well as managers helps in understanding that the
customer loyalty program was a successful strategy and helped in enhancing business by
engaging customers.
33
VII. To identify and examine the factors that have contributed the outcomes of the IKEA
Family Card initiative with special reference to the uniqueness of the program
For the purpose of the research work the researcher conducted a survey by interviewing the
customers and the managers of the organization. The data analysis portion help in evaluating the
most customers are happy with the family card program and managers of the company also
opined that the particular strategy proved effective. It is also reflected from the research studies
that the customer loyalty program and customer retention approaches helped the company, IKEA
to grow business through customer engagement.
VIII. To interpret relevant theories and concepts and link the same with practice
In the literature review section of the dissertation, the researcher has mentioned a number of
theories. The researcher has further mentioned the same and related it in the secondary data
analysis section. Relevant theories as well as concepts were studied as well as interpreted from
different literary sources and in order to relate the topic as well as analyze the same as per the
conceptual framework the researcher has carried out a review on the different models and the
theories connected to customer loyalty and customer retention.
5.4Recommendation
Thus after completing the research work, the following recommendations could be put forward
as there are ample scopes for incorporating business development through customer loyalty
strategies.
Firstly, since IKEA has penetrated the Asian market, it has to develop special customer engaging
strategies focusing on consumers from different countries.
Secondly, develop gender focused strategies, as male and female has separate buying taste and
preferences. The shopping behavior also varies as per genders, hence simply focusing of Family
34
card suffer from limitation and will affect growth in future. Therefore incorporating people
focused strategies will help in customer retention in the long run.
Thirdly, consider impact of the consumer experience when they have participated by offering
feedback or responded as co-producers.
Fourthly, enhance customer experience in the retail environment
35
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Appendix
Survey questions for the customers
1. Do you think that the IKEA Family Card helps in positive purchase decision making on
the part of customers?
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
2. Do you think that the IKEA loyalty programs help develop positive brand image and
perception?
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
3. Does being a part of the loyalty programs of IKEA help in better overall shopping
experience?
Strongly Agree
Agree
Neutral
Disagree
41
Strongly Disagree
4. Does being a part of the loyalty programs of IKEA help get better value for money in
terms of discounts and offers?
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
5. Do you think that the IKEA loyalty programs help in spreading word of the mouth
advertising by the customers of loyalty club attracting new customers towards the brand?
Strongly Agree
Agree
Neutral
Disagree
Strongly Disagree
Survey questions for the managers of IKEA
1. How does the IKEA family card helps in customer’s satisfaction and retention?
2. How do the loyalty programs help develop better relationships with customers?
42
3. How and to what extent do the loyalty programs attribute competitive advantage to the
IKEA brand?
43
