Loyalty programs, do they only mean to limit the consumers?

Loyalty, it comes in different shapes and is generally seen as a highly regarded human trait. It is defined as a commitment to consistently purchase preferred products or services over and over again (Oliver’s, 1999 p.34). A Loyalty Program (LP) is a marketing exercise designed to reward returning buyers (using discount cards; points cards; club cards / discounts; gifts and exclusive services). Some argue that LPs are only made 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 financial advantage. Further, the paper argues that the choice to join or leave LP ultimately rests with the end users. Frequently multiple brands within one category of products are supported simultaneously.

Rational choice theory asserts that economic agents perform market transactions with a predefined and complete set of preferences. Having limited information, budget and time to make a decision – consumers strive for the highest satisfaction, known as utility (Microeconomics). To buy at the same supplier again – previous satisfaction would prevail upon any other argument. Should the expectation have been met or exceeded – the search phase of a new decision process would be shortened, saving consumers valuable time and limiting cost, which in turn helps in maximising perceived value of the product. Hence, LPs would only be successful when designed to maximise customer-perceived value by either increasing the total offering’s benefit or cutting total consumer’s cost”.

A loyalty program is best seen by the consumer when benefits are clear, bringing more value than the costs of participation. A membership card could be a relationshi...

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...he bigger preference should be given to consumer’s satisfaction. Only a marginal effect could be expected from the restrictive policies like switching costs. People would still be weighing their own interest more than losses incurred by leaving the vendor.

-the potential of Loyalty Programs to coerce consumers rational behaviour is put into question. Rational Choice theory provides a compelling argument which claims that numerous reward facilities genuinely strive to satisfy the consumer’s needs in full. Experiments support the statement listing the variety of benefits enjoyed by the program’s members, who prove to be rational in choosing one or more reward schemes looking after their satisfaction first. Loyalty programs appear to hold a firm position in the market, maintaining the balance between their designer’s goals and benefits provided to the consumers.