Loyalty Programs Essay

Topic 3. The perks and benefits of a loyalty program

In a reward point economy, customers spend to receive rewards, incentives and product updates. In a retail industry where there may appear to be little differentiation in product offerings, a good loyalty program may influence store choices. Retailers however may have an uphill battle in their quest to offer differentiated customer service as consumers are becoming more wary of joining yet another loyalty program.

Essay Question:

What factors make it reasonable for retailers to offer loyalty programs for their customers

Loyalty programs are programs run by retailers that aim to reward customer’s purchases. The outcome of offering this incentive is that firstly retailers can collect purchase behaviour information, and secondly that customers are encouraged to make repeat purchases from one brand, as opposed to switching between competitors’ products, thus establishing loyalty to the company. (blah blah) Argues that a large portion (??) of a company’s profits is made through repeat purchases, or loyal customers, and so it is important area for investment. This essay will identify relevant factors that successful loyalty programs should implement, as well discussing potential problems that can occur.

Firms aim at increasing customer-specific turnover and profit margins by intensifying customer dialog, developing customized service packages and thereby stimulating repurchase and cross-buying behavior

[21] Demoulin and Zidda, 2009; [59] Omar and Musa, 2011; [76] Smith and Sparks, 2009; [81] Vesel and Zabkar, 2009) emphasize the importance of both material and non-material/emotional attributes in a loyalty programme such as staff support, interaction quality, programme quality, reward mechanism, timing and types of rewards as crucial success factors of loyalty programmes.

Stauss et al. (2005) suggest that loyalty programmes can cause frustration for customers due to a few factors linked with the programme such as the difficulties of meeting the programme requirement, programme inaccessibility, worthlessness of rewards and the additional cost needed to use the benefits of the programme. All these factors can have an inverse influence on the loyalty programme and on the entire relationship between the customer and programme supplier

Introduction:

Loyalty Programs are marketing efforts which aim to increase the loyal purchasing behaviour of customers through creating benefits to customers, rewarding loyalty. Characteristic of all loyalty programs is the underlying principle of reinforcement, which infers that rewarded behaviours will be repeated. In this way both the customer and the retailers benefit. Retailers benefit from the increased repeat purchases, information generated on purchasing behaviour and overall increased revenue (Levy et al 2014). Consumer benefits come in both monetary and non-monetary rewards, and range in great variety. In practice retailers attach different amounts of value to the purchases and purchasing volumes made by customers (Rapp & Decker 2003). Recent literature has looked into the overall effectiveness of loyalty programs, questioning whether the cost of implementation is economically feasible. This essay aims to discuss the benefits and costs of loyalty programs.