Price fluctuation and customer retention in the UK retail sector

A case study of Asda

By

ACKNOWLEDGEMENT

This research became possible only because of support from my research supervisor and my loved ones. Hence, I would like to say thanks for their support.

DECLARATION

This research is my own work and does not represent the ideas of the university. This project belongs to me and only me.

ABSTRACT

This research will focus on price fluctuation and its impact on customer retention. The researcher used mixed research for this purpose. This study discussed the following research question. What are measures of customer retention? What are the factors which affect the customer retention? Is the EDLP strategy effective for Asda? And what are the strategies for increasing customer retention?

TABLE OF CONTENTS

ACKNOWLEDGEMENTII

DECLARATIONIII

ABSTRACTIV

CHAPTER 1: INTRODUCTION1

Background1

Company background1

Asda1

Problem statement2

Purpose of the Study2

Research aims and objectives3

Research question3

Significance3

CHAPTER 2: LITERATURE REVIEW5

Importance of Pricing5

Pricing and Promotional Strategy9

High-Low Pricing and Loss Leaders9

Price Rigidity and Ending Digits11

Supermarket Competition14

Homogeneous Competition14

Heterogeneous Competition15

Customer Retention16

Groups of Variables Affecting Customer Retention18

Customer Demographics18

Customer Behavior18

Customer Perception19

Macro-environment Variables19

Factors affecting consumer buying decisions for super markets19

Store Location19

Product Quality20

Store Image21

Variety of Brands/Products22

Store Service22

Antecedents of Customer Retention/Loyalty23

Triggers of Customer Attrition/Switching23

The measurement of customer loyalty24

Linking Customer Retention, Value, Satisfaction and Loyalty26

CHAPTER 3: METHODOLOGY28

Research Philosophy28

Research Approach30

Classification of research methods31

Multi-method studies31

Mixed method studies31

Steps in mixed methodology31

Strength and weakness of the mixed research32

Strengths32

Weaknesses33

Instrument for data collection33

Data analysis33

Reliability/Dependability34

Triangulation35

Validity37

Ethical Considerations38

CHAPTER 4: FINDINGS AND DISCUSSION39

Questionnaire analysis39

Discussion55

Frequency of visit55

Variety56

Special promotions56

Supportive staff56

Enhanced shopping experience56

Cost effective57

Convenient57

High quality57

Price stability57

Availability of goods58

EDLP and retention58

Strategies of Increasing Customer Retention58

Satisfaction58

Switching Costs59

CHAPTER 5: CONCLUSION AND RECOMMENDATIONS61

Limitation and Future Study63

REFERENCES66

APPENDICES73

CHAPTER 1: INTRODUCTION

Background

Relationship Management strategies have been used to retain customers and build loyalty. Generally, those strategies involve creating loyalty programs, selling more products or services to existing customers, improving customer service quality and customer satisfaction, developing consumer trust, and increasing customer switching cost (Barich 1991 104). Customer retention and loyalty were usually considered as synonymous by practitioners and academic researchers (Bird 1970 307), while customer retention has been used to measure customer behavioral loyalty. In the current researcher had chosen the company Asda to study the impact of price fluctuation on customer retention.

There are two analytical or statistical approaches used by prior customer retention research. The first one is static and short-term customer attrition or retention analysis. It is usually conducted with a forecast window of less than one year and used to identify customer segments, and set marketing campaigns. The object is to reduce attrition or increase customer loyalty. The second approach is dynamic. Long-term retention forecasting is conducted to calculate customer lifetime value and guide long-term business strategy, while aiding short-term marketing campaigns.

Company background

Asda

Asda is a British supermarket chain, specializing in the retail sale of food, clothing, toys and consumer goods. It is the second largest supermarket in the UK after Tesco, having crossed the Sainsbury's in 2003. Asda Stores Limited the Company was founded as Associated Dairies & Farm Stores Limited in 1949 in Leeds. For a brief period, in the 1980s Asda Stores Ltd was a subsidiary of Asda -MFI plc following the merger of both companies. Other companies were part of the ...