Customer loyalty schemes have attracted considerable interest as companies practice one of marketing’s most familiar strategies — “If you see a good idea, copy it.” Some banks have offered regular customers credit cards with a range of valuable benefits. In business-to-business markets, loyal customers have traditionally been treated better than those who buy on the spot market. Other well-known customer loyalty schemes are the frequent-flyer programs of the major airlines. These and other well-patronized programs were originally hailed as imaginative ways to instill and maintain loyalty, but, over the years, more and more doubt has been cast on them. Both the academic and trade press have criticized the programs with headlines such as: “A Failure in Competitive Strategy,” “War in the Air: The Scramble for Points Hits Turbulence,” “Frequent Flyer Offers Fail to Boost Loyalty.”1
Loyalty programs that seek to bond customers to a company or its products and services by offering an additional incentive pose an interesting dilemma. Although these schemes often attract widespread customer interest, they are difficult to support, using our current knowledge of competition and buyer behavior. This research suggests that most schemes do not fundamentally alter market structure. They might help to protect incumbents and might be regarded as a legitimate part of the marketer’s armory, but at the cost of increasing marketing expenditures.
Many senior managers now... To read the complete article, login or sign-up using the form below.
Get a premium subscription today to read this and all MIT Sloan Managmeent Review articles.
More Info.
Buy this article. Purchase one or more copies of this article as a PDF.
Subscribe today to read the most recent articles and the current issue of MIT Sloan Management Review.
Upgrade to premium
Current Subscribers: Do you subscribe to MIT Sloan Management Review? Register for online access.
- Register for free access to recent articles and the current issue of MIT Sloan Management Review.
- Subscribe and read articles from the past three years online.
- Premium subscription—access to the entire archive of articles.
