CUSTOMER LOYALTY PROGRAMS AND ITS EFFECT ON BUSINESS COMPETITIVENESS

CUSTOMER LOYALTY PROGRAMS AND ITS EFFECT ON BUSINESS COMPETITIVENESS

Rationale

            Businesses that use customer loyalty programs have become more successful than those that do not embrace it. The reason behind this study is to discover why companies were so successful with their customer loyalty programs and how it was instrumental in maintaining the loyalty of the consumer. The theory behind the concept is relationship marketing, which has acted as a catalyst for business growth. The background of the research title deals with the highly competitive market where the businesses have to endure and uphold their competitive advantage to stay ahead or survive the downfall when appropriate. The unrestricted majors are taken, and a significant amount of money and capital is allocated to luring clients to bring revenue to the corporation. It is challenging to enjoy a competitive edge in a sector or industry characterized by many competitors. It is important to understand the significance of giving offers and discounts to clients and its merits to make strategic decisions. Corporations provide many such schemes for their clients to retain and uphold client loyalty for their business. There are many other aspects behind these customer loyalty programs where corporations reap benefits.  Customer loyalty programs are beneficial to both organizations and clients.

Objectives

• To establish the effect of coalition loyalty programs on the competitiveness of business
• To understand the relationship between customer loyalty programs and business competitiveness.

Literature Review

2.1 Customer Loyalty Schemes 

Customer loyalty schemes are structure as lasting marketing efforts that offer rewards to clients who portray loyal purchasing behavior (Meyer-Waarden 2007). A company can apply many techniques to reward its clients and make repetitive purchases by providing its esteemed clients with decreased price offers and discounts on goods. This can be significant to the retail business as they foster a new relationship with prospective clients and bolster the relationships of existing clients. Successful client loyalty schemes are designed to encourage clients in a target market of business to return always, make occasional purchases, and shun the business competitors. Recently, there is a trend in organizations investing in customer loyalty schemes ad this significance the corporate necessity to recognize, retain, and maximize the value of most lucrative clients and the necessity to customized the product portfolio of the organization (Kim et al., 2009). The organizations need to be knowledgeable of the fact that clients do so with anticipations that the corporation will reciprocate and acknowledge loyalty with suitable rewards (Gee at al. 2008). When firms can provide target clients with value-adding merits that are problematic or costly for their business rivals to offer and that is not readily available elsewhere, they develop a strong basis for upholding and improving sustainable competitive advance (Leenheer & Bijmolt 2008).

2.1.1 Coalition Loyalty Programs 

Coalition loyalty programs are schemes that provide inducements to clients of at least two businesses in return for enabling them to gather the data of the user. They present a cost-effective way to provide clients with a diversity of attractive benefits that they would not be capable of offering without the support of other businesses (Soriano et al. 2012). Businesses can share client data regarding lifestyle, preferences, and organization. The partners reap benefits from integrated deals and cross-promotion. From a client point of view, a coalition loyalty program provides many incentives linked with a single card (Ang & Buttle 2006).

2.2 Customer Loyalty Programs and Business Competitiveness

Customer loyalty improves the amount of income earned by an organization, determines the profit and market share of the business (Lewis & Soureli, 2006), demands less attention and time (Zeithaml 1988), and behaves soundly towards an organization in many ways (Kotorov 2003). According to Chaundhuri & Holbrook (2001), high client loyalty depicts a higher market share and a capability to demand comparatively higher prices compared to those of business rivals. Customer loyalty schemes enhance the business as a loyalty customer offers a communication route to bolster the organization image and make it problematic for competitors to entice clients and enables establishing higher prices (Yen & Gwinner 2003).

2.2.1 Learning Organization Model 

An organizational ability to collect, analyze, and apply information is a necessity for the success of a business. The capability of businesses to effectively and efficiently access and use information helps to attain business competitiveness in the respective sector. Business competitiveness can be achieved by the organizations that make themselves more appealing to the clients than their business rivals and launch a strategic position in the marketplace (Walters et al. 1989). Whereas business competitiveness was earlier grounded on the achievement of low cost, today, companies are stressing on capabilities that will allow delivery of superior value of its clients.

2.2.2 Customer Loyalty Effect Model 

The majority of the modern strategic plans concentrate on a profit target and work backward to arrive at the specific revenue growth and decrease of expenses. The motive of the Reichheld model was to create value for the clients. He clarified that workers, clients, and investors are instrumental in the organization because they foster loyalty. Loyalty is inherently linked with value creation, both as an effect and cause. As an effect, the measures of loyalty measures whether or not the corporation has delivered superior value. The lack of value for the client can explain the defects. In addition, as a cause, loyalty creates a chain reaction. The revenues and market share increase because the value proposition of the organization increases and can afford to be more selective in new client acquisition and to focus the invest on the most lucrative and likely loyal prospects, thereby simulating sustainable growth. Sustainable growth allows the organization to lure and retain the best workers. Consistent delivery of significant value to the client increases the loyalty of the worker by providing them with pride and contentment in their work. In addition, as long-term employees get to know their lasting clients, they understand how to provide more value, which buttresses the client and worker loyalty.

2.3 Conceptual Framework 

A hypothetical model was constructed that indicated the effect of customer loyalty schemes on business competitiveness. The dependent variable is the coalition loyalty program, whereas the independent variable can be illuminated by an increase in sales, market share, and overall business competitiveness.

CUSTOMER LOYALTY PROGRAMS AND ITS EFFECT ON BUSINESS COMPETITIVENESS

Rationale

            Businesses that use customer loyalty programs have become more successful than those that do not embrace it. The reason behind this study is to discover why companies were so successful with their customer loyalty programs and how it was instrumental in maintaining the loyalty of the consumer. The theory behind the concept is relationship marketing, which has acted as a catalyst for business growth. The background of the research title deals with the highly competitive market where the businesses have to endure and uphold their competitive advantage to stay ahead or survive the downfall when appropriate. The unrestricted majors are taken, and a significant amount of money and capital is allocated to luring clients to bring revenue to the corporation. It is challenging to enjoy a competitive edge in a sector or industry characterized by many competitors. It is important to understand the significance of giving offers and discounts to clients and its merits to make strategic decisions. Corporations provide many such schemes for their clients to retain and uphold client loyalty for their business. There are many other aspects behind these customer loyalty programs where corporations reap benefits.  Customer loyalty programs are beneficial to both organizations and clients.

Objectives

• To establish the effect of coalition loyalty programs on the competitiveness of business
• To understand the relationship between customer loyalty programs and business competitiveness.

Literature Review

2.1 Customer Loyalty Schemes 

Customer loyalty schemes are structure as lasting marketing efforts that offer rewards to clients who portray loyal purchasing behavior (Meyer-Waarden 2007). A company can apply many techniques to reward its clients and make repetitive purchases by providing its esteemed clients with decreased price offers and discounts on goods. This can be significant to the retail business as they foster a new relationship with prospective clients and bolster the relationships of existing clients. Successful client loyalty schemes are designed to encourage clients in a target market of business to return always, make occasional purchases, and shun the business competitors. Recently, there is a trend in organizations investing in customer loyalty schemes ad this significance the corporate necessity to recognize, retain, and maximize the value of most lucrative clients and the necessity to customized the product portfolio of the organization (Kim et al., 2009). The organizations need to be knowledgeable of the fact that clients do so with anticipations that the corporation will reciprocate and acknowledge loyalty with suitable rewards (Gee at al. 2008). When firms can provide target clients with value-adding merits that are problematic or costly for their business rivals to offer and that is not readily available elsewhere, they develop a strong basis for upholding and improving sustainable competitive advance (Leenheer & Bijmolt 2008).

2.1.1 Coalition Loyalty Programs 

Coalition loyalty programs are schemes that provide inducements to clients of at least two businesses in return for enabling them to gather the data of the user. They present a cost-effective way to provide clients with a diversity of attractive benefits that they would not be capable of offering without the support of other businesses (Soriano et al. 2012). Businesses can share client data regarding lifestyle, preferences, and organization. The partners reap benefits from integrated deals and cross-promotion. From a client point of view, a coalition loyalty program provides many incentives linked with a single card (Ang & Buttle 2006).

2.2 Customer Loyalty Programs and Business Competitiveness

Customer loyalty improves the amount of income earned by an organization, determines the profit and market share of the business (Lewis & Soureli, 2006), demands less attention and time (Zeithaml 1988), and behaves soundly towards an organization in many ways (Kotorov 2003). According to Chaundhuri & Holbrook (2001), high client loyalty depicts a higher market share and a capability to demand comparatively higher prices compared to those of business rivals. Customer loyalty schemes enhance the business as a loyalty customer offers a communication route to bolster the organization image and make it problematic for competitors to entice clients and enables establishing higher prices (Yen & Gwinner 2003).

2.2.1 Learning Organization Model 

An organizational ability to collect, analyze, and apply information is a necessity for the success of a business. The capability of businesses to effectively and efficiently access and use information helps to attain business competitiveness in the respective sector. Business competitiveness can be achieved by the organizations that make themselves more appealing to the clients than their business rivals and launch a strategic position in the marketplace (Walters et al. 1989). Whereas business competitiveness was earlier grounded on the achievement of low cost, today, companies are stressing on capabilities that will allow delivery of superior value of its clients.

2.2.2 Customer Loyalty Effect Model 

The majority of the modern strategic plans concentrate on a profit target and work backward to arrive at the specific revenue growth and decrease of expenses. The motive of the Reichheld model was to create value for the clients. He clarified that workers, clients, and investors are instrumental in the organization because they foster loyalty. Loyalty is inherently linked with value creation, both as an effect and cause. As an effect, the measures of loyalty measures whether or not the corporation has delivered superior value. The lack of value for the client can explain the defects. In addition, as a cause, loyalty creates a chain reaction. The revenues and market share increase because the value proposition of the organization increases and can afford to be more selective in new client acquisition and to focus the invest on the most lucrative and likely loyal prospects, thereby simulating sustainable growth. Sustainable growth allows the organization to lure and retain the best workers. Consistent delivery of significant value to the client increases the loyalty of the worker by providing them with pride and contentment in their work. In addition, as long-term employees get to know their lasting clients, they understand how to provide more value, which buttresses the client and worker loyalty.

2.3 Conceptual Framework 

A hypothetical model was constructed that indicated the effect of customer loyalty schemes on business competitiveness. The dependent variable is the coalition loyalty program, whereas the independent variable can be illuminated by an increase in sales, market share, and overall business competitiveness.

Bibliography

Ang, L. and Buttle, F., 2006. Customer retention management processes. European journal of marketing.

Chaudhuri, A. and Holbrook, M.B., 2001. The chain of effects from brand trust and brand affect to brand performance: the role of brand loyalty. Journal of marketing, 65(2), pp.81-93.

Gee, R., Coates, G. and Nicholson, M., 2008. Understanding and profitably managing customer loyalty. Marketing Intelligence & Planning.

Kim, D., Lee, S.Y., Bu, K. and Lee, S., 2009. Do VIP programs always work well? The moderating role of loyalty. Psychology & Marketing, 26(7), pp.590-609.

Kotorov, R., 2003. Customer relationship management: strategic lessons and future directions. Business Process Management Journal.

Leenheer, J. and Bijmolt, T.H., 2008. Which retailers adopt a loyalty program? An empirical study. Journal of Retailing and Consumer Services, 15(6), pp.429-442.

Lewis, B.R. and Soureli, M., 2006. The antecedents of consumer loyalty in retail banking. Journal of Consumer Behaviour: An International Research Review, 5(1), pp.15-31.

Meyer-Waarden, L., 2007. The effects of loyalty programs on customer lifetime duration and share of wallet. Journal of Retailing, 83(2), pp.223-236.

Soriano, D.R., Jeng, D.J.F. and Bailey, T., 2012. Assessing customer retention strategies in mobile telecommunications. Management Decision.

Yen, H.J.R. and Gwinner, K.P., 2003. Internet retail customer loyalty: the mediating role of relational benefits. International Journal of Service Industry Management.

Zeithaml, V.A., 1988. Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. Journal of marketing, 52(3), pp.2-22.

Bibliography

Ang, L. and Buttle, F., 2006. Customer retention management processes. European journal of marketing.

Chaudhuri, A. and Holbrook, M.B., 2001. The chain of effects from brand trust and brand affect to brand performance: the role of brand loyalty. Journal of marketing, 65(2), pp.81-93.

Gee, R., Coates, G. and Nicholson, M., 2008. Understanding and profitably managing customer loyalty. Marketing Intelligence & Planning.

Kim, D., Lee, S.Y., Bu, K. and Lee, S., 2009. Do VIP programs always work well? The moderating role of loyalty. Psychology & Marketing, 26(7), pp.590-609.

Kotorov, R., 2003. Customer relationship management: strategic lessons and future directions. Business Process Management Journal.

Leenheer, J. and Bijmolt, T.H., 2008. Which retailers adopt a loyalty program? An empirical study. Journal of Retailing and Consumer Services, 15(6), pp.429-442.

Lewis, B.R. and Soureli, M., 2006. The antecedents of consumer loyalty in retail banking. Journal of Consumer Behaviour: An International Research Review, 5(1), pp.15-31.

Meyer-Waarden, L., 2007. The effects of loyalty programs on customer lifetime duration and share of wallet. Journal of Retailing, 83(2), pp.223-236.

Soriano, D.R., Jeng, D.J.F. and Bailey, T., 2012. Assessing customer retention strategies in mobile telecommunications. Management Decision.

Yen, H.J.R. and Gwinner, K.P., 2003. Internet retail customer loyalty: the mediating role of relational benefits. International Journal of Service Industry Management.

Zeithaml, V.A., 1988. Consumer perceptions of price, quality, and value: a means-end model and synthesis of evidence. Journal of marketing, 52(3), pp.2-22.