Customer Loyalty Schemes in the Retail Sector SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
Sales & Marketing
Strategy / MBA Resources
Case Study SWOT Analysis Solution
Case Study Description of Customer Loyalty Schemes in the Retail Sector
Customer loyalty schemes (or programs) are explicit efforts by retailers to gain long-term patronage from customers. Loyalty schemes are developed for a variety of reasons: to reward loyal customers, to generate more robust information about customer behavior, to influence consumer behavior, and as a defensive measure to combat a competing scheme. The purpose of this note is to describe the objectives of these schemes, including their origin and evolution; to highlight key aspects of their implementation; and to suggest approaches to maximize their impact. While this note focuses on the U.S. and U.K. retail sectors, most of its content is applicable to other economies.
Swot Analysis of "Customer Loyalty Schemes in the Retail Sector" written by Jose B. Alvarez, Aldo Sesia includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Schemes Loyalty facing as an external strategic factors. Some of the topics covered in Customer Loyalty Schemes in the Retail Sector case study are - Strategic Management Strategies, Customers, Entrepreneurship, Strategy execution and Sales & Marketing.
Some of the macro environment factors that can be used to understand the Customer Loyalty Schemes in the Retail Sector casestudy better are - – wage bills are increasing, increasing transportation and logistics costs, geopolitical disruptions, central banks are concerned over increasing inflation, there is backlash against globalization, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices,
supply chains are disrupted by pandemic , challanges to central banks by blockchain based private currencies, etc
Introduction to SWOT Analysis of Customer Loyalty Schemes in the Retail Sector
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in Customer Loyalty Schemes in the Retail Sector case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Schemes Loyalty, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Schemes Loyalty operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Customer Loyalty Schemes in the Retail Sector can be done for the following purposes –
1. Strategic planning using facts provided in Customer Loyalty Schemes in the Retail Sector case study
2. Improving business portfolio management of Schemes Loyalty
3. Assessing feasibility of the new initiative in Sales & Marketing field.
4. Making a Sales & Marketing topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Schemes Loyalty
Strengths Customer Loyalty Schemes in the Retail Sector | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Schemes Loyalty in Customer Loyalty Schemes in the Retail Sector Harvard Business Review case study are -
High switching costs
– The high switching costs that Schemes Loyalty has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– Schemes Loyalty has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study Customer Loyalty Schemes in the Retail Sector - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Ability to lead change in Sales & Marketing field
– Schemes Loyalty is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Schemes Loyalty in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Low bargaining power of suppliers
– Suppliers of Schemes Loyalty in the sector have low bargaining power. Customer Loyalty Schemes in the Retail Sector has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Schemes Loyalty to manage not only supply disruptions but also source products at highly competitive prices.
Sustainable margins compare to other players in Sales & Marketing industry
– Customer Loyalty Schemes in the Retail Sector firm has clearly differentiated products in the market place. This has enabled Schemes Loyalty to fetch slight price premium compare to the competitors in the Sales & Marketing industry. The sustainable margins have also helped Schemes Loyalty to invest into research and development (R&D) and innovation.
Learning organization
- Schemes Loyalty is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Schemes Loyalty is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in Customer Loyalty Schemes in the Retail Sector Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Highly skilled collaborators
– Schemes Loyalty has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in Customer Loyalty Schemes in the Retail Sector HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
Strong track record of project management
– Schemes Loyalty is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
Cross disciplinary teams
– Horizontal connected teams at the Schemes Loyalty are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Sales & Marketing segment
- digital transformation varies from industry to industry. For Schemes Loyalty digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Schemes Loyalty has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
High brand equity
– Schemes Loyalty has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Schemes Loyalty to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Superior customer experience
– The customer experience strategy of Schemes Loyalty in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Weaknesses Customer Loyalty Schemes in the Retail Sector | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Customer Loyalty Schemes in the Retail Sector are -
No frontier risks strategy
– After analyzing the HBR case study Customer Loyalty Schemes in the Retail Sector, it seems that company is thinking about the frontier risks that can impact Sales & Marketing strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
Interest costs
– Compare to the competition, Schemes Loyalty has borrowed money from the capital market at higher rates. It needs to restructure the interest payment and costs so that it can compete better and improve profitability.
Need for greater diversity
– Schemes Loyalty has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Workers concerns about automation
– As automation is fast increasing in the segment, Schemes Loyalty needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Skills based hiring
– The stress on hiring functional specialists at Schemes Loyalty has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Products dominated business model
– Even though Schemes Loyalty has some of the most successful products in the industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. firm in the HBR case study - Customer Loyalty Schemes in the Retail Sector should strive to include more intangible value offerings along with its core products and services.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study Customer Loyalty Schemes in the Retail Sector, in the dynamic environment Schemes Loyalty has struggled to respond to the nimble upstart competition. Schemes Loyalty has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
Increasing silos among functional specialists
– The organizational structure of Schemes Loyalty is dominated by functional specialists. It is not different from other players in the Sales & Marketing segment. Schemes Loyalty needs to de-silo the office environment to harness the true potential of its workforce. Secondly the de-silo will also help Schemes Loyalty to focus more on services rather than just following the product oriented approach.
Lack of clear differentiation of Schemes Loyalty products
– To increase the profitability and margins on the products, Schemes Loyalty needs to provide more differentiated products than what it is currently offering in the marketplace.
High bargaining power of channel partners
– Because of the regulatory requirements, Jose B. Alvarez, Aldo Sesia suggests that, Schemes Loyalty is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the industry.
High operating costs
– Compare to the competitors, firm in the HBR case study Customer Loyalty Schemes in the Retail Sector has high operating costs in the. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Schemes Loyalty 's lucrative customers.
Opportunities Customer Loyalty Schemes in the Retail Sector | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study Customer Loyalty Schemes in the Retail Sector are -
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Sales & Marketing industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Schemes Loyalty can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Schemes Loyalty can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Sales & Marketing industry, but it has also influenced the consumer preferences. Schemes Loyalty can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Schemes Loyalty can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Schemes Loyalty can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, Customer Loyalty Schemes in the Retail Sector, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Manufacturing automation
– Schemes Loyalty can use the latest technology developments to improve its manufacturing and designing process in Sales & Marketing segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Leveraging digital technologies
– Schemes Loyalty can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Schemes Loyalty in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Sales & Marketing segment, and it will provide faster access to the consumers.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Schemes Loyalty can use these opportunities to build new business models that can help the communities that Schemes Loyalty operates in. Secondly it can use opportunities from government spending in Sales & Marketing sector.
Use of Bitcoin and other crypto currencies for transactions
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Schemes Loyalty in the consumer business. Now Schemes Loyalty can target international markets with far fewer capital restrictions requirements than the existing system.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Schemes Loyalty to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Creating value in data economy
– The success of analytics program of Schemes Loyalty has opened avenues for new revenue streams for the organization in the industry. This can help Schemes Loyalty to build a more holistic ecosystem as suggested in the Customer Loyalty Schemes in the Retail Sector case study. Schemes Loyalty can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Schemes Loyalty can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Buying journey improvements
– Schemes Loyalty can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. Customer Loyalty Schemes in the Retail Sector suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Threats Customer Loyalty Schemes in the Retail Sector External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study Customer Loyalty Schemes in the Retail Sector are -
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Schemes Loyalty business can come under increasing regulations regarding data privacy, data security, etc.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Schemes Loyalty will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
High dependence on third party suppliers
– Schemes Loyalty high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Schemes Loyalty.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Schemes Loyalty in the Sales & Marketing sector and impact the bottomline of the organization.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Technology acceleration in Forth Industrial Revolution
– Schemes Loyalty has witnessed rapid integration of technology during Covid-19 in the Sales & Marketing industry. As one of the leading players in the industry, Schemes Loyalty needs to keep up with the evolution of technology in the Sales & Marketing sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Easy access to finance
– Easy access to finance in Sales & Marketing field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Schemes Loyalty can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Shortening product life cycle
– it is one of the major threat that Schemes Loyalty is facing in Sales & Marketing sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Regulatory challenges
– Schemes Loyalty needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Sales & Marketing industry regulations.
Stagnating economy with rate increase
– Schemes Loyalty can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the field.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study Customer Loyalty Schemes in the Retail Sector, Schemes Loyalty may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Sales & Marketing .
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Schemes Loyalty can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study Customer Loyalty Schemes in the Retail Sector .
Weighted SWOT Analysis of Customer Loyalty Schemes in the Retail Sector Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study Customer Loyalty Schemes in the Retail Sector needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study Customer Loyalty Schemes in the Retail Sector is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study Customer Loyalty Schemes in the Retail Sector is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Customer Loyalty Schemes in the Retail Sector is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Schemes Loyalty needs to make to build a sustainable competitive advantage.
