If one of the competitors is an EDLP

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Loyalty systems are most valuable for Hi Lo market leaders players who target both ends of the spending spectrum. As loyalty systems are first and foremost effective in retaining customers the market leader has the most to gain from using these systems. Market leaders having more shoppers also have an informational advantage over their followers. It is more difficult to make loyalty systems effective for smaller followers in the market because they tend to have fewer customers and therefore an informational disadvantage.

Tesco s loyalty system in Poland is getting little traction because they lack shopper critical mass they are a distant middle of the pack player in the country. Although they try to use the same loyalty approach as in the Chinese Overseas America Number Data UK the Polish application cannot reproduce the benefits accrued to Tesco s UK market leadership position. The lack of success of Tesco s loyalty system in Poland is also in part due to a very strong market leader Biedronka which is a world class Every Day Low Price EDLP retail operation.  player the final outcome of the competition between the Hi Lo loyalty retailer and the EDLP retailer is less predictable. In theory and assuming all retailers want to maximize profits the Hi Lo retailer should be able to hold on to its shoppers for which it has an informational advantage and therefore for whom it can offer a more appealing offer. It will be difficult for the loyalty retailer to attract loyal shoppers from the EDLP retailer because it doesn t have the necessary shopper information. The EDLP player can however be a real cause of concern for the loyalty retailer. The shopper population of the loyalty.





Hi Lo retailer can be classified in three groups those redeeming their loyalty card offers those who are price sensitive but for some reason don t redeem their loyalty card offers and those who are loyal for non price reasons. It is the second group that is vulnerable to aggressive offers from the EDLP competitor. The latter retailer might offer a price guarantee of lower prices for the total shopping bill of a minimum sized shopping basket of comparable products. A significant proportion of the second group of shoppers might find this offer appealing and switch to the EDLP player. This is a concern for the loyalty retailer because this is probably a sizeable group.