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Research

Winning the Loyalty Program Race

  • Jun 5, 2019
Winning the Loyalty Program Race

Many businesses use some form of loyalty program to attract and keep customers. However, when the cost to switch to a new business, and new loyalty program, is low, then an effective loyalty program may work to attract new customers as well as keep those customers. The three strategies recommended by Ivey’s Mark Vandenbosch and his colleague, Alina Nastasoiu, can be tailored to the services and goods of a particular business to create a new loyalty program or improve an existing loyalty program. The first strategy is to personalize the program to individual customers. The second strategy is to consider the rewards that are offered. The reward system of exchange of points for tangible items should not be too transparent as this would make the loyalty program easy for competitors to copy (e.g., X number of points are needed to buy exactly X amount of product). Rewards also need to be unique in order to stand out and should be based on the consumption history of the customer. The third strategy is to create benefits that consumers will value beyond the products offered by the company (e.g., a drug store helping a customer track a goal to be healthier). By tailoring these strategies to appeal to their customers a business would be able to provide a loyalty program that makes them stand out from the crowd and that is relatively low cost to implement.

Nastasoiu, A. & Vandenbosch, M (2019). Competing with Loyalty: How to Design Successful Customer Loyalty Reward Programs, Business Horizons, 62, 207-214.