Reference no: EM133319371
Assignment:
In many consumer product/service industries we find that the largest competitors in these industries all have introduced loyalty programs. That is, customers get points for every dollar they spend, and they can use these points for discounts on future purchases. What types of companies should introduce loyalty programs?
• Companies selling products/services that are purchased frequently - multiple repeat purchases
o Creates opportunity for switching cost for consumers
• Companies that offer customers their own branded credit cards
o Provides opportunity to offer additional services (e.g. financial services)
o Collect data on customer purchases for individualized marketing
o Provides another method to compete on price - monthly cost to consumers
• Companies that can engage in price discrimination
o Third degree price discrimination where customers self select
o Provides opportunity for bundling - different product/different reward combinations
• Companies where product differentiation strategies imitated
o Price competition important, and loyalty programs provide another means to compete on price