Supermarket Loyalty Cards

This work was produced by one of our professional writers as a learning aid to help you with your studies

Section A: Loyalty cards as a method of making shoppers go to one supermarket

In addition to gaining customer information, marketing the company, developing relationship with its customers, the ultimate objective of loyalty cards is to retain customer loyalty to drive repeat purchases. Hence, through development of loyalty schemes, the marketers / retail companies etc. aim to ensure that shoppers make repeat purchases. One of the most common reasons behind consumers’ repeat purchases is brand loyalty. A research study conducted by Sullivan’s identifies three major drivers of customer loyalty, which are a) economic driver, b) dialogue driver and c) affinity driver. Application of these theoretical implications in the studied case of Tesco, economic driver refers to factors that restrict the purchase power of consumers as a result of which, Tesco extends credit to consumers, holding their share-of-spend and confining them to its brand. The retailer understands the needs of the consumers through processing the customer information and hence offering them credit rewards. The second driver: dialogue driver facilitates the continued streaming of dialogue (obtainment, processing / analysis and management of data) occurring through the loyalty cards and thus establishing the relationship between the retailer and consumer. The third driver; affinity driver expands when mostly up- market customers sign up for the loyalty card since they love the brand, intends to experience relationship with the brand, as well as receiving recognition and reward offered by the brand. The reason behind this driver is not the motivation of the credit offered by the loyalty card just as by Tesco, but an appreciation to the brand.

Data mining is the process of searching through data, seeking formerly anonymous relationships among the data that are interesting to the user of the data . The most common examples of data mining are: a) process of scrutinizing and recording the contents of shopping basket at the checkouts as carried out by Tesco, b) reading and assessing past consumer behaviour so that customer ranking is generated based upon which credits are approved or disapproved, c) analyzing valuable customers through tracking their purchase habits, frequency of visits, length of loyalty etc., d) restoring, organizing and retrieving the personal information of tax payers as in the case of IRS and so forth. The benefits of data mining that have been extracted from two case studies are: a) extending automation benefits to legacy system along with identification of facts about customers, tax payers etc. b) reducing number of honest taxpayers, c) predicting those products that each customer is likely to re-purchase, d) offering customers with value for their money. Establishing a relationship between data mining and loyalty / rewards cards, the positive impact that have been assessed are: leading competitive market positioning , encouraging repeat purchases, effective process of data analysis and most importantly target marketing as observed by Tesco. The disadvantages of the loyalty cards have been assessed as giving up the personal information, hence giving up privacy, misleading customer and tax- payer information, costly process of promotion and deployment of the loyalty scheme etc.

Section B: Digital data vulnerable to misuse and Penetration of corporate networks

The process and management of data mining is inherent to certain risks such as security threats (breach of confidentiality, integrity, and availability- CIA triad) to the digital data. Hence, it can be concluded that digital data is vulnerable to misuse. In the case of Tesco, although the company ensures that all the customer data is encrypted, however security threats such as a) mishandling of private key (private and public key encrypts the data ), b) breach of security of single user password (if used) through which hardware carrying the encrypted data is accessible, c) requirement of greater bandwidth for digital communication to be transmitted in relation to analogue communication, d) since all tax return data is stored within CDW (one database system), in case of internal and external security breach, the confidentiality, integrity and availability link is broken, e) synchronization failure of the legacy and the newly developed system, f) poor measures undertaken during the course of defining the classification and ownership of data, g) poor control measures of defining access controls of the data. These issues are specifically harmful for the Internal Revenue Service (IRS) because the cost of occurrence of threats is likely to result in loss of billions of dollars in tax revenues, missing out the frauds that the tax- payers are likely to make with an ambition of not paying taxes etc. In case of Tesco, the breach of security of digital data is equally costly and is likely to result in loss of business credibility and reputation as well as generating mistrust between the customers and the retailer realized in the form of loss of business revenues.

In addition to above security threat, penetration of corporate networks is also one of the major threats that IRS and Tesco are encountered with. Corporate networks of both the companies can be penetrated both internally and externally. Hence the internal threats arise from disgruntled employees who aim to cause harm to the business credibility etc. In case of IRS, employees may be motivated by manipulating the figures to alter the taxation figures etc. In case of Tesco, employees can be bribed by external parties to disclose the customer data that has been secured by both Tesco and dunnhumby. The corporate network can also be penetrated from externally through remote access to database that is being provided to the employees, supply chain partners, outsourced IT partners by IRS and Tesco. Secondly, motivated by industrial espionage, the intruders / hackers can successfully launch sniffing attacks, war -driving, denial of service attack so that authorized user is denied to get access of the network, while jamming the network etc. There are many more attacks that can be launched on the company network with an ambition of getting access to the valuable data retained and managed by both organizations i.e. IRS and Tesco. However occurrence of any threats that have been identified, pose extreme consequences resulting in loss of billions of pounds / dollars and most importantly loss of business credibility and communication within the industry.