do customer loyalty programs really work-mm-article-nikita

8/3/2019 Do Customer Loyalty Programs Really Work-mm-Article-nikita

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By: Abhishek Mohanty (01)

Ankur Sikka (07)

Nikita Agarwal (25)

Prerna Jain (28)

Prerna Makhijani (29)

Sushant Juggi (49)


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Customer Loyalty Program


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Better Customers Better Suppliers

Enticing a new customer more expensive than

getting a current one to purchase again

Monitoring customer behavior

Product type decides customers willingness for a

relationship

80/20 law

Customer membership cards


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Maintain sales, margins, and profits

Increase loyalty and value of existing customers

Induce cross-product buying

Differentiate brand

Preempt entry of new brand

Preempt competitors loyalty program


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Strategies designed to replace disloyal

customers

Only 10% of buyers are 100% loyal to a

particular brand Polygamous Loyalty better describes actual

consumer behaviour

It is unlikely that this fundamental behaviour

could be altered with loyalty programs


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Get more people to buy the brand

Gain more distribution outlets

Entice distributors to stock the brand

Build presence in the marketplace

Short term lucky break can be attained by

loyalty prorams


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Functional, economic, psychological benefits sourcesof

customer value 3 Psychological effects

(a) Loyalty to brand or to program ?

(b) How buyers value the reward offered ?

(c) The effect of timing

Low/ high involvement product => big/ small incentive

PRIMARY REWARD : program / product

Ex : Pantaloons / GM

Loyalty to brand or to program


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How Buyers Value Rewards ? Rewards : helps to achieve loyalty to the product

5 elements that determine a programs value:

Cash value of the redemption rewards (ratio of the cost to acc. FF

points) Range of choice of rewards (choice of flight destinations)

The aspiration value of reward (exotic free travel > cash back offer)

The frequency of achieving awards (points are required)

Ease of use of the scheme.

Timing Rewards are powerful when the redemption are not delayed.

Statements of accumulated points.


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Claimed Benefits of Loyalty

ProgramsLoyal customers are less price sensitive

May not be always true

Positive correlation between brand loyalty and higher

prices

Price insensitivity driven by brand value and not brand

loyalty

More frequent buyers, hence expect volume discount


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Loyal customers spend more with the company

Weight of purchase matters most, not necessarily customer loyalty

It is a function of better value offered than of any add-on loyalty

program

E.g. Business air travelers versus holiday travelers

Loyal customers pass on positive recommendations about

their favourite brands or suppliers

Is it loyal customer, customer in a loyalty program or anysatisfied customer who says nice things?

Little research data to demonstrate the percentage of loyal

customers leveraging companys marketing


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Enhances the value proposition of a product orservice

Total cost calculation

Maximizes the buyers motivation to make thenext purchase

Consider specific market situations in planning


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Customer Loyalty Programs that:

a) Neutralize a competitors program

b) Broaden the availability

c) Enhance the product or service

..are worthwhileElse, these programs just provide extra benefits

to the customers and are costly


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do customer loyalty programs really work-mm-article-nikita

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