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A Supermarket Has A Customer Loyalty Scheme Whereby One Point Is Given For ...

A supermarket has a customer loyalty scheme whereby one point is given for every £1 spent, rounded down to the nearest pound. Additionally, extra points may be earned when special offers are purchased. These are limited time offers which are marked as such. Apart from these special offers, at certain times there are bonus points for shopping in certain departments. These are also announced. In order to redeem their points, a £10 voucher is given for each 1000 points accumulated. This is redeemed from the supermarket where the points were earned or the loyalty card issued. Its value can be used to pay a portion of a shopping bill, but cannot be exchanged for cash.
In order to understand the effectiveness of the loyalty scheme, I will look at two areas: expenditures from the period of June 2006 to June 2007 (I am excluding July 2007 as the data is incomplete) and then the effect of special offers on total spending, by analysing three distinct products that have had a special offer for a week during 8 June 2007 to 7 July 2007. To facilitate this analysis, the company has provided me with a classification of their customers.
According to the company's records, for the 12 month period under study (1 June 2006 to 30 June 2007), the company had:
Total Number of Customers
6179

Total Sales
£1723325

Total
67811

Average Sales (per visit)
£278

Average Visit (per customer)
11


Based on this information, four customer categories were defined: best, spenders, frequent and uncertain. The criteria for classifying a customer with a loyalty card under one of these headings are as follows:
Best
Spending > £278, Visits > 11

Spenders
Spending > £278, Visits < 11

Frequent
Spending < £278, Visits > 11

Uncertain
Spending < £278, Visits < 11


Using these, I will first examine how the points awarded with shopping have behaved during the period in question so the company can have an idea of how the four categories are earning points. In order to do this, look at the graph below showing how expenditures have been behaving for the 4 categories and the number of visits each category has made:

As can be seen from the graph, the Best category has indeed made the highest monthly spending and most number of visits per month as shown by the top two lines. In the last year they have been increasing, albeit at a moderate pace There seems to be a decline in both spending and visits in April 2007, which is not reflected in the other categories, so it might be worthwhile to undergo further research to determine what factors may have affected this client category at that time. The graphs of the other three categories reflect their definitions, with Spenders and Uncertain having the least visits and Frequent customers having more, but less spending.

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