Success and Failure of Loyalty Programmes Essay

Success and Failure of Loyalty Programmes - Essay ExampleThis has led to a plethora of customer-focused programs created with the help of customer relationship management tools, to increase company profitability (Brown, 2000 Kalakota and Robinson, 1999 Peppers and Rogers, 1997). The motive behind commitment programs is to establish customer loyalty by rewarding a certain oftenness of repeat purchase by customers. As pointed by Uncles et al Loyalty programs are schemes offering delayed, accumulating economic benefits to consumers who buy the brand. Usually, this takes the form of points that can be exchange for gifts, free product, or aspirational rewards such as air miles. Airline frequent-flier programs have been a prototype for many of the schemes. However, there is no consensus on the definition of loyalty exhibited by consumers (Jacoby and Chestnut, 1978 Dick and Basu, 1994 Oliver, 1999). While some claim that satisfaction is an indicator of loyalty, others debate this point. R eichheld (1994) points out that despite being fulfil or very satisfied many customers still defect. In the UK, Ogilvy Loyalty Centre found out that 85 % of its automotive customers claimed to be satisfied but only 40 % do a repeat purchase, and 66 % of packaged goods customers who identified a favorite brand actually ended up buying another brand in the recent past. Gremler and Brown point out that Federal Express, Pizza Hut franchises, and Cadillac dealerships have been able to forecast the sales from loyal customers with more certainty.