Effect of customer loyalty programs on performance of Nakumatt supermarket in Western region in Kenya

Abstract

Kenya’s worth of retail industry has reached 1.8 trillion with increase in 13% of consumer spending in the industry. However, in spite of being Kenya’s biggest retail chain, Nakumatt supermarket is currently facing unprecedented performance related challenges. Report by Proctar and gamble of 2017 indicate a rise in the debt level from 4.7 billion in 2012 to 18 billion at the start of 2017. The net effects have been near empty shelves, delayed staff salaries, closure of branches and complaints by unpaid suppliers. Financial problems have manifestations in the dwindling customer base. Yet customer related problems can be cured by good relationship marketing such as adoption of customer loyalty programs which can increase customer traffic and hence more revenue and customer retention. Even though past empirical studies have linked loyalty programs and organization performance, none has focused on the collective effects of three dimensions of loyalty programs namely: point system, upfront fees for VIPs and non-monetary program, on organizational performance. Consequently, the effect of customer loyalty programs in regard to the said dimensions is unknown. Therefore, the purpose of this study is to examine the effect of customer loyalty program along such three dimensions on organizational performance. Specific objectives are to establish the effects of point system on performance at Nakumatt Supermarket, Western Kenya; to examine the effect of upfront fees for VIPs on performance at Nakumatt Supermarket, Western Kenya; and to determine the effect of non-monetary programs on performance at Nakumatt Supermarkets, Western Kenya. The study will be guided by equity theory in correlation study design. The study population shall constitute 83 management staffs and include branch managers, assistant managers and supervisors of the five Nakumatt branches in Western region. A total sample of 73 respondents will be selected using saturated sampling techniques while the remaining 10 respondents shall be used for pilot study.Primary data in form of perception will be collected from the respondents using questionnaires while Secondary data will be obtained from published materials and unpublished academic reports.Furthermore, validity of research instrument will be ensured through expert review while reliability will be established by use of Chronbach’s alpha test of internal consistency. Qualitative data will be analysed using descriptive statistics like mean standard deviation and frequencies and percentages while inferential statistics such as regresion and correlation will be used to analyse quantitative data relating to the study objectives. The results of the study will be useful for the retail industry managers, Nakumatt included, to re-design their customer loyalty arrangements in order to get more revenue and enhance profitability. To the Academia, the study shall add new knowledge by providing empirical evidence on the nature and extent of influence of loyalty programs along its three dimensions( Upfron fees for VIP,point system and non-monetary program) on organization performance.