Do Customer Loyalty Programs Really Work Harvard Case Solution & Analysis

The company, which initiates a program of customer loyalty usually wants to retain existing customers, maintain the level of sales and profits, increased the potential value of existing customers, and to encourage customers to buy other products as well. But, based on the analysis of behavioral studies of loyalty, the authors argue that the scheme does not fundamentally change the structure of the market and, on the contrary, an increase in market expenditure does not actually create any additional brand loyalty. Studies show that only about 10% of buyers for many types of frequently purchased consumer goods are 100% loyal to a particular brand in a single year. Consumers do not buy only one brand. For any loyalty program, to be effective, the authors say, it should use the value of the product to the customer. Thus, the program must have: (1) the direct or indirect effects, such as General Motors discount scheme, which creates savings for a new car (2) the perception of value, such as cash and (3) time-reward-when available. The more the delay compensation, less powerful. The authors suggest ways to create an effective program. Make sure that it adds value to the product or services that are cost program as motivation buyer to purchase again, and consider market conditions when planning the "Hide
by Graham R. Dowling, all Uncle Source: MIT Sloan Management Review 16 pages . Publication Date: July 1, 1997. Prod. #: SMR031-PDF-ENG

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