Customer loyalty programs

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Customer loyalty programs

  1. 1. CUSTOMER LOYALTY PROGRAMSLatika ParmarShahrukh TaghvaeiSanika ShahDisha Chaudhry
  2. 2. What is Customer Loyalty? Loyalty is a feature of people ratherthan something inherent in brands Attitude of the consumer Commitment to a specific brand
  3. 3. Oliver, 1997“Deeply held commitment to re-buy orpatronize a preferred product/serviceconsistently in the future, therebycausing repetitive same-brand orsame brand-set purchasing despitesituational influences and marketingefforts having the potential to causeswitching behavior.”
  4. 4. Customer Loyalty Program A customer loyalty program is astructured and long-term marketingeffort which provides incentives torepeat customers who demonstrateloyal buying behavior.
  5. 5. 2 aims of Consumer LoyaltyPrograms:I. To increase sales revenuesII. To increase range of products boughtfrom supplierIII. To build a closer bond between thebrand and current and/or futurecustomers
  6. 6. 3 popular concepts: Model 1 : Loyalty as primarily an attitude thatleads to a relationship with the brandMONOGAMY Model 2: Loyalty mainly expressed in terms ofpatterns of past purchases (revealed behavior)POLYGAMY Model 3: Buying moderated by the individual’scharacteristics, circumstances and/or purchasessituationPROMISCUITY
  7. 7. Model 1: Attitudinally-loyal customers Strong attitudinal commitment towards abrand establishes true loyalty Strength of these attitudes is the KEYpredictor of a brand’s purchase andrepeat patronage Revenue becomes more predictableand considerable with time Attitudes drive behavior Relationships attached with emotion lastlonger
  8. 8. LimitationsModel 1 does not apply to: Impulsive buys Low risk commodities Frequently purchased brands Customers who seek variety
  9. 9. Model 2: Revealed Behavior Pattern of past purchases With regard to underlying consumermotivations or commitment to thebrand “An ongoing propensity to buy thebrand, usually as one of several”
  10. 10. LimitationsI. Trial and errorII. Repeated satisfaction of a particularbrandIII. Results in “weak commitment”IV. Revealed behavior may merelyreflect happenstance
  11. 11. Model 3: Individual’scharacteristics and environment Also known as “Contingency Approach” Relationship between attitude andbehavior moderated by:- current circumstances- individualistic characteristics- purchase situation faced
  12. 12. ANTECEDENTS(weak prior attitudesand characteristics ofconsumer)CONTINGENCY FACTORS(type of use, occasion,purchase situation)CONSEQUENCES(up-dated attitudes,intentions, actualpurchase behavior)Three-Factor Model
  13. 13. Depending on the model one adopts,the implications of practice can besignificantly different
  14. 14. Model 1: Attitudinally-loyal customers Aim: To enhance positive beliefs andstrengthen the emotional commitmentof customers to their brand Image-based or persuasive advertising Personal Service (recovery) Programs
  15. 15. Model 2: Revealed Behavior Split-loyalty portfolios of habitually-bought brands Publicity Advertising + Other forms of MarketingCommunications Matching competitor initiatives Avoiding supply shortages Result: No dramatic changes inconsumer attitudes and behavior
  16. 16. Model 3: Individual’scharacteristics and environment Easy accessibility, avoiding stock-outs,offering appropriate assortment mixextending opening hours – simply tobe more acceptable to the consumer Price promotions, deals, offers Service provider gains loyalty byresponding directly to the contingentfactors
  17. 17. Implications of these concepts Introduction to the three models ofloyalty – Loyalty ContinuumI. Customer Brand Commitment (CBC)II. Customer Brand Acceptance (CBA)III. Customer Brand Buying (CBB)
  18. 18. Customer Brand Commitment Product category: High-end products,luxury goods Target audience: value psychologicaland social value more thanfunctionality Acquired drive of choice/commitment Attitudes, values and social normsinfluence the buyer’s decision Relationship between customer andbrand is personal
  19. 19. Limitations:1. Not all high-end products necessarilyhave single brand loyalty customers. Eg.Frequent air travelers2. Just because the brand is designed tobe unique, does not mean it is distinct inthe eyes of all its potential customers3. Even if a customer is loyal to a brand, itmay not be the only preference of thebuyer in that particular productcategory. Eg. Harley Davidson vs.Japanese Competitors
  20. 20. Customer brand acceptanceSet of acceptablebrands in acategoryBrand attributesNeed arousalIndividualCustomersSatisfaction ofhabit formationPurchase ofacceptableand accesablebrandsUnexpectedpurchasesituation factorsAs long as these brands get the job doneCustomer loyalty mostly based on frequent satisfied use than onvalue – laden beliefs
  21. 21. Consumer Brand Buying Immediate availability Price, promotions Weak attitudes. Eg: Online travelagencies Contingencies are the co-determinantsof choice Loyalty proportional to habit rather thanserious commitment Model 3 – Model 1 (CBB to CBC) Model 2 - CBA
  22. 22. Loyalty Programs from theIndividual’s perspective Increase of single brand loyalty Decrease price sensitivity Induce greater consumer resistence Encourage word of mouth Less chances of buyers choosing asubstitute products Aim: Create bigger group of singlebranded loyal customers
  23. 23.  Very hard to convince an individual toreduce their repertoire of brands Greater access to brands, offers morevariety, consolidate their purchaseswith fewer business providers Cross-selling, an attempt to increaseshare-of-wallet instead of share ofmarket
  24. 24. Loyalty Programs – Market’sperspective1) Increase of CBA category through- Exposure at pt. of purchase- Gaining wider distribution- Suggesting more usage occasions2) Create a niche brand3) Big brand to “super loyal brand”4) Exploit the desire of customers forchange-of-pace (Penetration>Repeatpurchase) Eg. Premium beers
  25. 25.  Aim: To help grow the size of a brandwhen used in combination with othermarketing programs
  26. 26. Loyalty Programs – Profibility Better insight into customer behavior Greater efficiency in targetedmarketing Demographics and lifestyles Too much information No control group method Importance of opportunity costs
  27. 27.  Thank you 

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