Loyalty Programs

Ashish Pahuja – wmp7085

Karan Manchanda –wmp7098
Kumar Mangalam-wmp7099
Poulastya Dutta- wmp7110
Priyank Pathak-wmp7113

09/30/2023
12:17:34 PM
09/30/2023
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 Presentation Outline

1. Introduction

2. Why talk about loyalty

3. Loyalty Program Tools

4. How to foster loyal relationships

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1.
Introduction

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1.

A Loyalty Program is:

• The practice of finding, attracting and retaining customers who
regularly purchase from you and refer new clients to you.

When the customer feels so strongly that you can best meet his or her
relevant needs, your competition is virtually excluded from the considered set, and
the customer buys almost exclusively from you — referring to you as “their
restaurant” or “their hotel.”
Winning maximum share of heart, mind and wallet.

• Over 75% of consumers have at least one loyalty card

• American firms spend over $1B annually on loyalty programs
• Loyalty cards account for 80% of all general purpose credit cards
issued
• 77% growth in loyalty programs 2000-2009

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 2.

Why talk about Loyalty

• Mature Industry
– increasing competition

• Focus on getting more customers

– Market share Vs. share of customer

• Competitive advantage
– Price
– Service quality
– Loyal relationships

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 2.
The bottom line
• Reduction of 5% of defective customers may result in
80% increase in profitability (Reichheld & Sasser, 1990)

• 60% to 80% of lost customers were satisfied (King, 1996)

• 90% of customers who love a company will repeat but

only 30% of customers who like the company will
repeat (Opinion Research Corp.)

• 20-40% of your customers bring 80% of your profits

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 2.
What to expect from loyal customers

• Behaviors:
– Come back frequently
– Buy most expensive products
– Recommend provider to friends
– Give important suggestions

• Emotions:
– Are attached to the provider/staff
– Trust the provider
– Resist changing despite competitors’ persuasion
– Willing to forgive mistakes
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 3.

Loyalty Program Tools

• Software
• Card programs
• Points programs
• Newsletters and E-zines

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 3.
Current Loyalty Program
Trends
• Immediate rewards
• Targeted deals – birthday, previous
purchase by genre
• Souped-up Membership – tied to
credit card programs
• Manufacturer rewards
• Reward consortiums or partnerships

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 3.

Successful Loyalty Programs

• Meet or exceed organizational KPI’s
• Communicate one-to-one, not one-
to-many
• Deliver relevant, timely messages
• Updated consistently and frequently
• Recognize customer needs

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 Example of Loyalty card

Airport Lounge Loyalty Programme

Priority Pass.pptx

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 3.
Types of Loyal Customers
+ Frequency of Purchases -
+

High loyals Latent loyals

Attachment

Spurious loyals Low loyals

-
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 Differentiated Strategy to 3.
Loyalty Segments
“Not all customers were created equal”
• High loyals – most profitable, make them feel like family
(20% of your customers)
• Latent loyals – find out why they can’t come more often,
find other ways they can help, don’t discount
• Spurious loyals – come but don’t care, make them
connect with you, make them wish for special treatment
• Low loyals – don’t get distracted with them, but make
sure they are satisfied (approx. 40-60% of your
customers)
?
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 4.

How to foster loyal relationships

• Current loyalty programs

– Ineffective in creating a bond
– Most are simply frequency programs
– Make people shop around and look for deals
– Make customers price sensitive
– Erode profits
We can identify loyal customers but we don’t
know how to generate customer loyalty

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 4.
The Love Triangle
Social Network

B.
C.
R.I.M.

Provider Customer
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 Loyalty Steps (McKinsey & Company)

Value of the customer

Advocate

Repurchase

Select

Use
Depth of relationship

Indifference Satisfaction Preference Loyalty

“I’m resigned- “I choose to “I would gladly “I buy repeatedly and
I don’t have any buy” repurchase” Encourage others to do so too”
choice 09/30/2023
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 R.I.M. 4. RIM

Resource Investment Model

Retribution to Protect customer’s

the provider equity

Provider’s Customer’s Customer’s

investment of investment of loyalty to
special resources special resources provider

Loyal relationships facilitate

special treatment

09/30/2023 Morais, Dorsch, & Backman (2004)

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 4. RIM

Love

Status
Services
Types of Resources

Information Goods

09/30/2023 Money
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 4. RIM
Types of Investments
Give – to your valuable customers
1. Make sure that your special customers receive special treatment
2. Send cards for birthdays rather than just for the holidays
3. Make them feel unique (use name, compliment them for helping)
4. Educate them about front and back stage

Receive – from customers

5. Give them opportunities to get to know you (your staff)
6. Help them become advocates of your company (merchandize, web)
7. Seek their opinion
8. Allow them to commit to you with a long term program
?
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 4. BC
B.C.
Brand Communities

• Definition: group of individuals united

through the consumption of your products
– Harley-Davidson’s “HOGs”
– Club Med’s “Gracious Members”

• Characteristics
– Communality – help and expect help from others
– Brandfests are used to share history
– Keep consuming to stay connected
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 4. BC

Building a Community

Community
1. Use a newsletter to share news about customers
2. Develop an online forum for customers to stay in touch
3. Organize annual events “by invitation” for VIP customers
4. Facilitate picture / story sharing
5. Help customers help each other
6. Give a name to the community

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 4.
Action Outline
1. Select your market segment
– Identify most valuable customers (what criteria?)
– Identify customers who might become valuable

2. Design a relationship-building service culture

– Identify what type of treatment promotes customer loyalty
– Identify what loyal customers want to give to you
– Identify potential for the development of a brand community

3. Implement a loyalty treatment

– Design specific communication strategy and message
– Train staff to understand the importance and the process
– Create opportunities to invest and receive investments
– Generate a sense of community among your customers

4. Measure effects of program and redesign

– Maintain constant communication with your loyal customers
– Monitor costs and results of your program 09/30/2023
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 4.

Like a Marriage
• “The sale merely consummates the courtship.
• Then the marriage begins. How good the
marriage is depends on how well the relationship
is managed by the seller.
• It is more a matter of what the buyer wants.
• He wants a vendor
– who will keep his promises,
– who'll keep supplying and stand behind what
he promised.

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