Customer loyalty and private label kpmg

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Customer Loyalty & Private Label Products

© 2004 KPMG LLP, the Canadian member firm of KPMG International, a Swiss cooperative. All rights reserved.

KPMG Global Consumer Markets

Retailers are facing increasing pressure from all fronts. The competition is getting tougher, customers are more discerning and demanding, and the traditional barriers between products and services aredisappearing. On top of this, the phenomenal growth of e-commerce is increasing customers’ expectations for more competitive prices and 24-hour service. To keep ahead, retailers need an increasing range and depth of expertise in customer management. KPMG’s Global Consumer Markets group, in partnership with the Oxford Institute of Retail Management (OXIRM) has undertaken research across Europeinto retail trends and the impact of customer loyalty. There have been many recent developments in loyalty schemes, with varying degrees of success. The loyalty of customers, who can switch freely between retailers, has been influenced by several factors including:
s advances in technology – magnetic/chip cards, card scanners, falling KPMG is one of the world’s leading professional serviceorganisations, with over 103,000 staff in 159 countries. We have a deep industry orientation, focused on anticipating and meeting our clients’ needs. KPMG brings lasting and measurable benefits to our clients through the delivery of integrated solutions that combine business strategy, industryfocused people, the latest processes and technology. OXIRM links sound academic scholarship to the practical needsof retail and related service companies. OXIRM is a leading centre for retail management education, with an active programme of high quality applied research, based at Templeton College, the graduate College of business at the University of Oxford.

data processing costs – enabling millions of daily purchases to be analysed, tracked and rewarded;
s decline in store numbers and the accompanyingincrease in store size; s moves out of town by stores, leading to a decline in shopping

s increase in store size via out of town developments permitting an

increase in the range of categories stocked;
s increased usage of private label, as both a store loyalty builder and a

ready alternative to branded products, reducing the customer’s resistance to switch brands;
sinclusion of pharmacies, post offices, dry cleaners and petrol stations

creating the facility for “one stop” shopping and providing traffic store generators. This report confirms that customer loyalty is complex and covers many retail strategies and operations. We believe that the findings, published here, will provide valuable insight to retailers, who are looking to introduce, or already have,private label products.

Contents 1 2 3 4 5 6 7 8 Executive summary Private Label, retail branding and loyalty What are the commercial implications of Private Label? What is the right Private Label strategy? How does Private Label strategy affect retail brand loyalty? How should Private Label strategy be implemented? Methodology Acknowledgments

page 1 3 8 15 23 25 27 30

© 2004 KPMG LLP, theCanadian member firm of KPMG International, a Swiss cooperative. All rights reserved.


Executive summary

Customer loyalty cannot be built in a day. Increasingly it is built through longer term customer relationships with a valued brand. Private label products1, we find, play an important role in developing a retail brand. As part of KPMG’s series of research reports on customer loyalty,this report focuses on the role of private label. Successful private label development is the result of harmonised strategies and effective implementation, which are specific to each individual retailer and product category. We believe there are several routes to success. High performing retailers align their private label strategy with their overall marketing strategy. By identifying the strategic...