Loyalty programs

656 Words3 Pages
Loyalty is generally seen as a highly regarded human trait. It is defined as a strong commitment to consistently purchase and favour certain products or services regardless of external influences and marketing attempts to persuade to switch to competitors (Kotler & Keller, 2012). Companies implement various inventive strategies to retain customers. Loyalty program (LP) is a marketing activity designed to reward returning buyers. Discount cards, points systems, club membership benefits are examples of LPs. Some people claim that LPs are only created to make consumers dependent on specific brands. This essay provides evidence that LPs mean to deliver benefits to consumers covering a multitude of their needs beyond mere corporate financial gain. Further, the paper argues that the choice to join or leave a certain LP ultimately rests with the end users. Rational choice theory asserts that economic agents act with a complete set of preferences. Behaving rationally, consumers search for the best affordable options within their budget constraints. They rank feasible sets in order of preference and strive for the highest satisfaction, known as utility (Frank & Cartwright, 2013). Previous satisfaction would be the first to call upon when deciding to buy from the same supplier. If the expectations were met or exceeded – the search phase of a new decision process shortens, saving consumers valuable time and limiting cost, which in turn helps in maximizing perceived value of the product. Hence, LPs would only be successful when designed to maximize customer-perceived value by either increasing the total offering’s benefit or cutting total consumer’s cost. A successful LP brings more value than the costs of participation. In the eyes of a cu... ... middle of paper ... ...hould be given to consumer’s satisfaction. Only a marginal effect can be expected from the restrictive policies like switching costs. A perceived value would always outweigh a potential cost incurred by leaving the vendor. The potential of loyalty programs to constrain consumers’ rational behaviour is put into question. Rational choice theory provides a compelling argument which claims that numerous reward facilities genuinely strive to satisfy consumers’ needs and maximize their utility. Experiments support the statement by listing the variety of benefits enjoyed by the LP members, who prove to be rational in choosing one or more reward schemes. An overwhelming popularity of different reward schemes shows a mutually beneficial balance between their goals and benefits provided to the consumers. Only by having consumers in mind one creates a worthy loyalty program.
Open Document