Loyalty Cards Essay Sample

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Essay on Loyalty Cards and Sales

Do Loyalty Cards Increase Customer Loyalty and Boost Sales?

Introduction

Customer loyalty is one of the most researched topics in the marketing field. It is a critical measure of brand building and a testimony of a buyer’s journey from being a product consumer to a brand advocate. Several surveys confirm that customer loyalty is directly proportional to revenue generation. In practice, the impact of loyalty programs such as loyalty cards on maximizing customer loyalty and boosting sales still falls under the equivocal category.

Relationship Between Customer Loyalty and Sales

Customer loyalty is a function of value creation, especially in financial terms, for a company. The cost of retaining a customer is 5 to 25 times cheaper than acquiring a new one (Gallo). Meanwhile, Baveja et al. highlighted in their research that the average repeat web shopper spent 67% and 23% more on apparel and groceries, respectively, in months 31-36 of their shopping duration than in the first six months. In another study on financial services, Reichheld found that a growing customer retention rate of 5% accelerates profit by 25% to 95%. 

However, a Forbes Insights and Sailthru report revealed that the companies increased 79% of the acquisition budget over the previous year compared to 42% of retention budgets. In this global study, 300 media and retail executives participated. The imperative for companies to extract maximum benefits from customer loyalty programs is clear. 

Impact of Loyalty Card Programs

Most loyalty programs in the market feature loyalty cards filled with transactions, point systems, and rewards. A survey report by Invesp found that 69% of respondents said that the opportunity to earn better loyalty rewards influenced their choice of retailers, whereas 50% of them changed their shopping behavior to reach a higher level in their loyalty card programs. Out of these 57.4% of consumers said that they subscribed to consumer loyalty programs for monetary benefits, and 37.5% of them joined to receive rewards (Saleh).

Even with such remarkable results, many businesses do not execute robust loyalty programs due to a lack of substantive evidence of effective loyalty resulting from such programs based on prior studies. When it comes to designing and executing loyalty card programs, companies often consider them as short-term reward systems (O’Brien and Jones). On the flip side, customers felt that loyalty offers are very much alike and monotonous. This approach doesn’t guarantee customer loyalty because a customer often regularly visits multiple stores. If another company has s better offers, he/she can easily switch. The current strategies fail to sustain the broader benefits of the customer loyalty card mechanism (Zakaria et al.).   

Designing Loyalty Card Mechanism as Company Asset

A loyalty card program should be designed such that it focuses on enhancing consumer experience and value creation over a period. It should also be noted that consumers are not homogenous, thus different styles of loyalty card programs will have different value to different customers. The loyalty cards, therefore, should consider a flexible design.

Consumer preferences are dynamic, so the loyalty program needs to modify consequently. In the KPMG survey, over 80% of loyalty customers mentioned that they would favor surprise offers or gifts over time-saving deals, exclusive privileges, sales updates, or similar conventional benefits. Such changes in a loyalty program will probably witness a rise in sales (Harmony and Black). The companies can also consider collaborations with related products/services to make a loyalty card program more affordable as well as valuable to consumers.

Loyalty cards are basically a bundle of data that organizations utilize to personalize the customer shopping experience. Various studies show a positive relationship between loyalty card programs and increased customer loyalty, eventually leading to higher sales. Organizations have to commit to proper planning and execution strategies to reap maximum benefits from loyalty card programs.

Works Cited

Baveja, Sarabjit Singh, et al. “The Value of Online Customer Loyalty and How You Can Capture It.” Bain, Bain & Company, 1 Apr. 2001, https://www.bain.com/insights/the-value-of-online-customer-loyalty-and-how-you-can-capture-it/. Accessed 22 Mar. 2022.

Forbes Insights and Sailthru. “Retentionomics: The Path to Profitable Growth—A Global Study of 300 Retail and Publishing Executives.” Forbes, Forbes Insights and Salithru, 14 Sept. 2016, https://www.forbes.com/forbesinsights/sailthru/index.html. Accessed 22 Mar. 2022.

Gallo, Amy. “The Value of Keeping the Right Customers.” Harvard Business Review, Harvard Business Review, 29 Oct. 2014, https://hbr.org/2014/10/the-value-of-keeping-the-right-customers. Accessed 19 Mar. 2022.

Harmony, Matt, and Katherine Black. “Is It Time to Rethink Your Loyalty Program?” Kpmg, KPMG, 2016, https://assets.kpmg/content/dam/kpmg/be/pdf/Markets/is-it-time-to-rethink-your-loyalty-program.pdf.

O’Brien, Louise, and Charles Jones. “Do Rewards Really Create Loyalty?” Harvard Business Review, Harvard Business Review, May-Jun. 1995, https://hbr.org/1995/05/do-rewards-really-create-loyalty. Accessed 21 Mar. 2022.

Reichheld, Fred. “Prescription for Cutting Costs.” Bain, Bain & Company, 25 Oct. 2001, https://www.bain.com/insights/prescription-for-cutting-costs-bain-brief/. Accessed 23 Mar. 2022.

Saleh, Khalid. “The Importance of Customer Loyalty Programs – Statistics and Trends.” Invesp, Invesp, 11 Apr. 2018, https://www.invespcro.com/blog/customer-loyalty-programs/. Accessed 22 Mar. 2022.

Zakaria, Ibhrahim, et al. “The Relationship between Loyalty Program, Customer Satisfaction and Customer Loyalty in Retail Industry: A Case Study.” Procedia – Social and Behavioral Sciences, Elsevier, 26 May 2014, https://www.sciencedirect.com/science/article/pii/S1877042814028250. Accessed 21 Mar. 2022.

Loyalty Card Program and ROI

A properly designed loyalty card program can provide companies with an impressive return on investment (ROI). It has been repeatedly found that organizations should not focus exclusively on customer acquisition but rather allocate more resources toward retention.

Moreover, they need to design a personalized experience for their customers which goes beyond discounts and offers. Such strategies will help them reach deeper into the pockets of existing customers, creating revenue opportunities as well as enhancing customer fidelity. 

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