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 - – cloud computing is disrupting traditional business models, talent flight as more people leaving formal jobs, central banks are concerned over increasing inflation, increasing transportation and logistics costs, banking and financial system is disrupted by Bitcoin and other crypto currencies, increasing energy prices, customer relationship management is fast transforming because of increasing concerns over data privacy,
increasing inequality as vast percentage of new income is going to the top 1%, 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 -
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.
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.
Diverse revenue streams
– Schemes Loyalty is present in almost all the verticals within the industry. This has provided firm in Customer Loyalty Schemes in the Retail Sector case study a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
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.
Training and development
– Schemes Loyalty has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in Customer Loyalty Schemes in the Retail Sector Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
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.
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.
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.
Organizational Resilience of Schemes Loyalty
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Schemes Loyalty does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
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.
Analytics focus
– Schemes Loyalty is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the industry. The technology infrastructure suggested by Jose B. Alvarez, Aldo Sesia can also help it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
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.
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 -
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study Customer Loyalty Schemes in the Retail Sector, is just above the industry average. Schemes Loyalty needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Capital Spending Reduction
– Even during the low interest decade, Schemes Loyalty has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the Customer Loyalty Schemes in the Retail Sector HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Schemes Loyalty has relatively successful track record of launching new products.
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.
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.
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.
Low market penetration in new markets
– Outside its home market of Schemes Loyalty, firm in the HBR case study Customer Loyalty Schemes in the Retail Sector needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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 cash cycle compare to competitors
Schemes Loyalty has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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 -
Developing new processes and practices
– Schemes Loyalty can develop new processes and procedures in Sales & Marketing industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
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.
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.
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.
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.
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.
Building a culture of innovation
– managers at Schemes Loyalty can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Sales & Marketing segment.
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.
Using analytics as competitive advantage
– Schemes Loyalty has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study Customer Loyalty Schemes in the Retail Sector - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Schemes Loyalty to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Low interest rates
– Even though inflation is raising its head in most developed economies, Schemes Loyalty can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
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.
Better consumer reach
– The expansion of the 5G network will help Schemes Loyalty to increase its market reach. Schemes Loyalty will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
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 -
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 .
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 .
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.
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.
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.
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.
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.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Schemes Loyalty with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
Consumer confidence and its impact on Schemes Loyalty demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
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.
Environmental challenges
– Schemes Loyalty needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Schemes Loyalty can take advantage of this fund but it will also bring new competitors in the Sales & Marketing industry.
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.
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.