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1.

Introduction
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New generation of CRM tactics created


The past decade has seen many firms (re)adopt a customer focus often through a formal program of customer
relationship management (CRM) (e.g. Brown, 2000; Kalakota and Robinson, 1999; Peppers and Rogers, 1997).
Recent advances in information technology have provided the tools for marketing managers to create a new
generation of CRM tactics. One such tactic that thousands of firms have considered, and which many have adopted,
is to establish a customer loyalty program. Examples of these schemes can be found in Japanese retailing, US
airlines and hotels, French banks, UK grocery stores, German car companies, Australian telecommunications, Italian
fashion stores, US universities, and many other areas. Typically these programs offer financial and relationship
rewards to customers, and in some instances benefits also accrue to thirdparties such as charities[1].
Two aims of customer loyalty programs stand out. One is to increase sales revenues by raising purchase/usage
levels, and/or increasing the range of products bought from the supplier. A second aim is more defensive by
building a closer bond between the brand and current customers it is hoped to maintain the current customer base.
The popularity of these programs is based on the argument that profits can be increased significantly by achieving
either of these aims[2]. While loyalty programs can have many other peripheral goals such as furthering cross
selling, creating databases, aiding trade relations, assisting brand PR, establishing alliances, etc. we do not assess
these goals in this paper.
But, how effective are these programs in enhancing the number, the loyalty, and/or the sales from customers? Are
they likely to be profitable when fully costed? To answer these questions we first discuss what is meant by the term
customer loyalty. A review of the literature reveals that this task is not straightforward generally people have in
mind one of three different models (section 2). We consider whether these models are based on competing or
complementary theories (section 3). This provides a platform for thinking about a loyalty continuum (section 4). We
show that it is crucial to define and understand customer loyalty if the demandside benefits of loyalty programs are to
be properly evaluated. Next, drawing on these conceptualizations, we review the goals, successes and failings of
loyalty programs (section 5). We show that, at one extreme are programs for niche products that presume customers
are committed to a favorite brand. At the other extreme there are promotional programs that cater to the divided
loyalty of their customers. In between, and widely represented across many different products and services, are
loyalty programs that are best described as for the brands people already buy. Future prospects are discussed
briefly (section 6).
Direct competition between branded products and services
The focus of this paper is on established repeatpurchase markets where there is direct competition between
branded products and services. These markets include most packaged goods, personal services such as banking
and travel agents, food and beverages, hotels, transport, retail, OTC pharmaceuticals, basic cosmetics, and media.
They are hugely important in terms of the share of disposable consumer income for which they account, and they
have been the focus of much research.
2. Customer loyalty
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At a very general level, loyalty is something that consumers may exhibit to brands, services, stores, product
categories (e.g. cigarettes), and activities (e.g. swimming). Here, we use the term customer loyalty as opposed to
brand loyalty; this is to emphasize that loyalty is a feature of people, rather than something inherent in brands.
Popular conceptualizations
Unfortunately, there is no universally agreed definition (Jacoby and Chestnut, 1978; Dick and Basu, 1994; Oliver,
1999). Instead, there are three popular conceptualizations:

1. (1) loyalty as primarily an attitude that sometimes leads to a relationship with the brand
(Model 1);

2. (2) loyalty mainly expressed in terms of revealed behavior (i.e. the pattern of past
purchases) (Model 2); and
3. (3) buying moderated by the individuals characteristics, circumstances, and/or the
purchase situation (Model 3) (seeFigure 1).
Loyalty as primarily an attitude that sometimes leads to a relationship with the brand (Model 1)
Many researchers and consultants argue that there must be strong attitudinal commitment to a brand for true loyalty
to exist (Day, 1969; Jacoby and Chestnut, 1978; Foxall and Goldsmith, 1994; Mellens et al., 1996; Reichheld, 1996).
This is seen as taking the form of a consistently favorable set of stated beliefs towards the brand purchased. These
attitudes may be measured by asking how much people say they like the brand, feel committed to it, will recommend
it to others, and have positive beliefs and feelings about it relative to competing brands (Dick and Basu, 1994). The
strength of these attitudes is the key predictor of a brands purchase and repeat patronage. This is what Oliver (1997,
p. 392) has in mind when he defines customer loyalty as:
A deeply held commitment to rebuy or repatronize a preferred product/service consistently in the future,
thereby causing repetitive samebrand or same brandset purchasing despite situational influences and
marketing efforts having the potential to cause switching behavior.
Where brand loyalty increases revenue streams become more predictable
In the fields of advertising and brand equity research this model receives much conceptual support (e.g. Aaker, 1996;
De Chernatony and McDonald, 1998; Keller, 1998). The approach also appeals to many practitioners in advertising
and brand management because it is empathetic with the search for strategies to enhance the strength of consumers
attitudes towards a brand. Moreover, there is some evidence to suggest it is a profitable strategy. Ahluwalia et
al. (1999) have shown that attitudinallyloyal customers are much less susceptible to negative information about the
brand than nonloyal customers. Also, where loyalty to a brand is increased, the revenuestream from loyal
customers becomes more predictable and can become considerable over time as analyses of cases such as
Federal Express, Pizza Hut franchises, and Cadillac dealerships have shown (Gremler and Brown, 1999).
An extension of the attitudes define loyalty perspective is to suggest that consumers form relationships with some of
their brands. A good example of this perspective is provided by Fournier (1998), who sees loyalty as a committed and
affectladen partnership between consumers and brands. It is a partnership that will be even stronger when
supported by other members of a household or buying group, and where consumption is associated with community
membership or identity. Examples in support of this argument include Skoal smokeless tobacco among some North
American cowboys, loyalty to particular European soccer teams (Arnould et al., 2002), the Beanie Babies craze
(Morris and Martin, 2000), Jeep brandfests (McAlexander et al., 2002), and the classic case of HarleyDavidson
bikers (Schouten and McAlexander, 1995).
Little systematic empirical research
Despite the psychological and sociological richness of the attitudes drive behavior and relationship approaches to
understanding customer loyalty, these conceptualizations of loyalty are not without their critics (e.g. Dowling, 2002).
They are thought to be less applicable for understanding the buying of lowrisk, frequentlypurchased brands, or
when impulse buying or variety seeking is undertaken, than for important or risky decisions (Dabholkar, 1999). Also,
as Oliver (1999) has noted, there is little systematic empirical research to corroborate or refute this perspective of
customer loyalty. The examples above are isolated cases, often cited as illustrative of the revenueeffects that might
be achieved, rather than the profit impacts that have been achieved.
Loyalty mainly expressed in terms of revealed behavior (Model 2)
Paradoxically, Model 2 is arguably the most controversial but the best supported by data. The controversy comes
about because loyalty in this model is defined mainly with reference to the pattern of past purchases with only
secondary regard to underlying consumer motivations or commitment to the brand (Ehrenberg, 1988; Fader and
Hardie, 1996; Kahn et al., 1988; Massy et al., 1970). Researchers have gathered impressive amounts of data about
these purchase patterns over many years across dozens of product categories and for many diverse countries
(Uncles et al., 1994). They have found that few consumers are monogamous (100 percent loyal) or promiscuous
(no loyalty to any brand). Rather, most people are polygamous (i.e. loyal to a portfolio of brands in a product
category). From this perspective, loyalty is defined as an ongoing propensity to buy the brand, usually as one of
several (Ehrenberg and Scriven, 1999).

Researchers tend to adopt a market focus


These researchers tend to adopt a market focus as opposed to an individual focus (e.g. key performance measures
are brand shares, penetration, average purchase frequencies, repeatbuying for a defined period). Stochastic
modeling techniques describe the observed patterns of customer buying. Given these descriptions, loyalty is inferred
to operate in the following manner. Through trial and error, a brand that provides a satisfactory experience is chosen.
Loyalty to the brand (measured by repeat purchase) is the result of repeated satisfaction that in turn leads to weak
commitment. The consumer buys the same brand again, not because of any stronglyheld prior attitude or deeply
held commitment, but because it is not worth the time and trouble to search for an alternative. If the usual brand is out
of stock or unavailable for some reason, then another functionally similar (or substitutable) brand (from the portfolio)
will be purchased (e.g. East, 1997; Ehrenberg et al., 1997; Ehrenberg et al., 2003). There is little reason to spend
much effort weighing up the alternatives when all are likely to be satisfactory. However, over repeated purchases a
weak commitment to the (limited) number of brands bought in a product category can form.
Uncertainty about true loyalty
All these studies are grounded in considerable amounts of market research data and analysis. But, despite the weight
of empirical evidence, controversy persists. Those who subscribe to the attitudes drive behavior and relationship
approaches expressly ruleout revealed behavior as a dominant measure of loyalty. That, they argue, may merely
reflect happenstance. Even combined measures of revealed behavior and satisfaction may not probe deeply enough
for us to be sure there is true loyalty (Arnould et al., 2002; Oliver, 1999).
Buying moderated by the individuals characteristics, circumstances, and/or the purchase situation (Model 3)
A threefactor model emerges
Proponents of Model 3, the contingency approach, argue that the best conceptualization of loyalty is to allow the
relationship between attitude and behavior to be moderated by contingency variables such as the individuals current
circumstances, their characteristics, and/or the purchase situation faced[3]. That is, a strong attitude towards a brand
may provide only a weak prediction of whether or not the brand will be bought on the next purchase occasion
because any number of factors may codetermine which brand(s) are deemed to be desirable (Belk, 1974, 1975;
Blackwell et al., 1999; Fazio and Zanna 1981). Individual circumstances include budget effects (e.g. the desired
brand is too expensive), and time pressure (e.g. the need to buy any brand in the category at the next available
opportunity). Individual characteristics are reflected in the desire for variety, habit, the need to conform, the tolerance
for risk, etc. Purchase situation effects include product availability, promotions/deals, the particular use occasion (e.g.
gift, personal use, family use), etc. A threefactor model emerges, based on antecedents (including weak prior
attitudes and characteristics of the consumer), contingency factors (including type of use occasion and the purchase
situation), and consequences (updated attitudes, intentions and the actual purchase behavior).
The difference between this contingency perspective and the attitude perspective is that the contingency variables
are elevated from the status of loyalty inhibitors in Model 1 to loyalty codeterminants in Model 3. For example, in
Olivers (1997, 1999) definition cited earlier, attributes of the individual and the purchase situation are conceptualized
as nuisance variables that inhibit the natural evolution of customer loyalty, whereas in the contingency model these
variables are seen as playing a primary and inescapable role in explaining the observed patterns of purchase
behavior. This is even more evident where attitudes are weakly held. Here it is repeated satisfaction and weak
commitment that together with other relevant contingency variables codetermine future brand choices.
Unified concept of customer loyalty
Figure 1 poses two questions about customer loyalty. First, do the three models suggest different courses of action
for marketing managers especially in the context of developing and using customer loyalty programs? Second, is it
possible to combine these three approaches to develop a more unified concept of customer loyalty and therefore to
provide a more complete guide for program management? These questions are addressed in sections 3 and 4
respectively.
3. Competing or complementary theories of customer loyalty?
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Depending on the model one adopts, the implications for practice can be significantly different. For example,
advocates of the attitude approach (Model 1) aim to increase sales by enhancing beliefs about the brand and
strengthening the emotional commitment of customers to their brand. Moving customers up a loyalty ladder through

imagebased or persuasive advertising and personal service (recovery) programs are frequently used tactics (Brown,
2000; White and Schneider, 1998). Loyalty programs are also designed to strengthen commitment and create velvet
handcuffs to bond the customer to the brand. This way of thinking has become commonplace in communications,
branding and CRM textbooks.
Consumers have splitloyalty portfolios of habituallybought brands
Alternatively, advocates of the behavioral focus (Model 2) suggest that most consumers have splitloyalty portfolios of
habituallybought brands. Here it is assumed that consumers tend to view advertising and other forms of marketing
communication more as publicity that sustains awareness and offers reinforcement, rather than as highly persuasive
information that fundamentally changes their attitudes and/or levels of commitment (Ehrenberg et al., 1998). While
these customers may participate in loyalty programs, they are also thought to be less influenced by these programs
than the advocates of Model 1 assume (Dowling and Uncles, 1997). Managers who adopt this approach try to
maintain their share of category sales by matching competitor initiatives and avoiding supply shortages, and achieve
growth via increased market penetration (by, for example, securing wider distribution). Under these circumstances, a
loyalty program might be launched for mainly defensive purposes, in a bid to match competitors or as a publicity
generating gesture, but with no expectation of dramatic changes in customer attitudes and behavior.
Advocates of the contingency approach (Model 3) adopt a slightly different approach. They emphasize what might
seem to be prosaic factors such as avoiding stockouts, extending opening hours, offering the appropriate
assortment mix (to cater for various usage situations and variety seeking), having 24hour call centers, providing
online access, etc. They also often use price promotions, deals and special offers to attract the customers of
competitor brands (e.g. as with gasoline retailers). Here the potential for loyalty programs to impact demand is very
limited. Indeed, the product or service provider is likely to gain greater loyalty by responding directly to the contingent
factors, and an imagebuilding program may run counter to such a goal. Nevertheless, loyalty programs have been
launched by companies who operate in markets with very little product/service differentiation many of these can be
seen as continuous promotional programs (Palmer and Beggs, 1997).
Choice of theory becomes important
For management, the choice of theory becomes important when brands competing in a category are functionally
similar and marketing budgets are not big enough to fund the tactics implied by all three models. Even where budgets
are large allowing for the simultaneous expansion of the sales base, advertising to encourage more positive beliefs
about the brand, and tactical promotions the need for strategic focus may preclude one or two of these options. For
instance, as noted above, the launch of a loyalty program may run counter to the creation of a pricecompetitive
image (particularly if it is perceived as an unnecessary expense that inhibits pricecuts from being passed on to
customers). In the next section the conceptual implications of these different approaches to customer loyalty are
explored.
4. Conceptual implications of the different approaches to customer loyalty
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Loyalty patterns profile customers, not brands


In Figure 2 we use the three models of loyalty to introduce the notion of a loyalty continuum. The anchor points are
customer brand commitment (CBC) and customer brand buying (CBB), with customer brand acceptance (CBA)
occupying the densely populated middle ground. All these loyalty patterns profile customers, not brands per se; that
is, consumers are distributed across the curves with respect to their loyalty to a brand. For example, most customers
may accept a number of airlines, while a few customers may be committed to one or two airlines, and some others
may buy purely on the price/route combination. These peoples air travel schedules may result in them having quite a
few brands in their portfolio. Nevertheless, the nature of the market in which customers buy and brands compete will
govern what is normally observed thus, in highly competitive repeatpurchase markets acceptance is to be
expected more often than the other models. We elaborate below.
Brand distinctiveness affected
The concept of CBA is the base case of customer loyalty in competitive repeatpurchase markets. It draws heavily on
Model 2, but also brings together some elements of Models 1 and 3. The contribution of Model 2 is that customers
exhibit loyalty to a number of brands because there is little reason to develop exclusive attitudinal loyalty to any one
of the brands purchased. A prime reason for this is that a proliferation of brands in most markets has destroyed one of

the key reasons for exclusive loyalty, namely brand distinctiveness. Weilbacher (1993) and Ehrenberg et al. (1997)
argue that in many product categories, both the functional and the perceived differences among competing brands
are small, so it is not surprising that customers perceive few critical and meaningful differences across competing
brands. For many of these brands the advertising messages and loyalty programs are fundamentally similar too
(compare the similar car hire advertisements in travel magazines or the nearidentical benefits of alternative airline
frequentflier programs).
Need arousal is a trigger to the purchase process
Figure 3 summarizes the concept of CBA in terms of the familiar fivestage model of consumer choice. Need arousal
is included as a trigger to the purchase process but this operates mainly on product category decisions, not brand
based ones. For instance, because of a desire to stay sober the need is for lowalcohol beer, but not necessarily for
any particular brand of lowalcohol beer. Since this is a model of ongoing CBA for frequentlypurchased products, the
(external) information search and evaluation stages are assumed to have been completed after the initial one or two
purchases in the category, and so are not explicitly included in the diagram. Choice among the functionally equivalent
alternatives will reflect the accessibility, availability and conspicuousness of a brand at the point of purchase. Most
likely, this will be seen as a set of acceptable brands that are ordered as first favorite, second favorite, third favorite,
and so forth (Hammond, 1997)[4]. Typically, the relative likelihood of buying each brand will endure over successive
purchase cycles, assuming the brands remain functionally adequate and accessible. Satisfaction with past
purchases, and any consequential habit formation, explain most of a persons ongoing propensity to buy one or a
number of acceptable brands.
Unexpected purchase situation circumstances (e.g. an existing brand being on sale) may influence the actual brand
chosen on a specific purchase occasion (drawing on Model 3). The introduction of new brands or the reformulation of
current brands may alter the purchase propensities, although the aggregate impact on short to mediumterm brand
loyalty is likely to be marginal.
Similar attitudes reported for descriptive attribute beliefs
This is not to suggest that attitudes will not form towards these brands over time (Model 1), but they will be of
secondary importance to the functional adequacy of the brand. Indeed, for the markets which are the focus here,
research shows that these beliefs may simply be a playback of the message content of the brands advertising or
publicity that is, simple learning (Barwise and Ehrenberg, 1985; Castleberry et al., 1994). This can be seen in the
very similar attitudes reported for descriptive attribute beliefs (e.g. Volvos are safe, United Airlines is friendly,
Woolworths offers fresh food) by both brand users and nonusers (DallOlmo Riley et al., 1997; Hoek et al., 2000).
Furthermore, the discussion of CBA suggests that having a favorable set of beliefs about one brand does not
preclude having an equally favorable set of beliefs about other functionally similar brands in the category and their
almost identical loyalty programs (as is the case with many airline and retailer programs). For customers who are
buying on a routine and mundane basis, it is not necessarily important to have a set of strong valueladen beliefs
towards the brands that are purchased, as long as these brands are believed to do the job. Research suggests that
to the extent that a customer does express a consistently favorable attitude about a brand, it is more likely to be
based on frequent satisfied use than on valueladen beliefs (DallOlmo Riley et al., 1997).
CBC
Brand component that drives choice and commitment
The first exception to CBA concerns those consumers who value psychological and social value more than function.
This is easiest to see when these consumers are buying highidentity products (luxury goods, expensive cosmetics,
etc.) and thinking of lifechoices (education, sporting allegiances, etc.). Here there may be a brand component that
drives choice and commitment for a significant number of customers, especially the initial adoption of some distinctive
brands such as the Apple Macintosh, the Sony Walkman and HarleyDavidson motorbikes. We label this CBC. In this
situation, attitudes, values and social norms are seen as having a major influence, and the consumer can develop a
relationship with the brand in keeping with Model 1. Because these relationships are defined in the consumers
head, they may help to differentiate one brand from another and they may support a price premium for that brand
(Kapferer, 1999). It is presumed consumers have a consistently favorable set of stated beliefs towards the brand
purchased.
Frequent flyers tend to use a number of different airlines

However, none of this is guaranteed especially when the focus is on frequentlybought brands. First, even for cases
where the level of consumer involvement is high, differentiation among brands may be relatively low (such as with
most airlines and hotel chains) resulting in the type of behavior best described by CBA. For example, frequent flyers
tend to use a number of different airlines; research on international travelers indicates that these people are typically
members of multiple frequentflyer programs and therefore show multibrand loyalty to both the airlines and their
programs (OAG, 1998). It is mainly the infrequent flyers who are loyal to a single frequentflyer program, but
invariably, these are the less profitable customers. In most markets, the sociopsychological elements of competing
brands may in fact offer limited scope for creating meaningful differentiation.
Second, when a brand is designed to have a distinct and unique personality, it does not mean customers will
recognize and value this. Likewise, a manager may want to create a meaningful relationship between the brand and
the customer, but customers do not necessarily desire this or reciprocate (Fournier et al., 1998; Hart et al., 1999;
Horne and Worthington, 1999). When the type of loyalty is defined by the customer, it means that the same brand
may be the object of commitment for one person but merely acceptable to another.
HarleyDavidson was forced to instigate a quality improvement program
Third, even where a relationship develops, it may not be the only one in a particular product category. For example,
Fournier and Yao (1997) quote instances of customers having compartmentalized friendships with different brands
of coffee perhaps Starbucks in the morning and Folgers in the afternoon. Moreover, with CBC, while the non
functional sources of value may be strong, they will not eliminate the need for the brand to do the job. Harley
Davidson, one of the strongest personalityrelationship brands, was forced to instigate a quality improvement
program to save the brand from Japanese competition.
CBB
The second exception to CBA concerns those consumers who exhibit very low levels of loyalty. Their choices are
shaped by considerations of immediate availability, price, promotions, etc., and at most weak attitudes (e.g. users
of an online travel agency may express liking for it because it obtains for them best price airfares). The concept of
CBB is closely allied to Model 3, where contingencies are the codeterminants of choice, and not simply nuisance
factors.
In summary, our contention is that CBC and CBB are the exceptions rather than the rule in most repeatpurchase
markets. One way to see this is as a sampling problem (Figure 2). Consider the example of car rental: if we were to
draw from a large sample of the population, most customers of Avis or Hertz would be characterized by CBA, and
only a few by CBC (committed to my Hertz) or CBB (renting from literally any car hire firm that happened to be
discounted at the time of purchase). Some researchers however have used highly selective sampling to highlight the
exceptions and thus convey a very different impression of the relative importance of CBA, CBC and CBB in repeat
purchase markets (a point previously noted by Uncles and Laurent, 1997). A distinction must be drawn between the
loyalty of some customers to some brands, and the loyalty of most customers to most brands.
Our review of customer loyalty provides the necessary basis from which to evaluate the aims and potential
commercial effectiveness of loyalty programs at least in terms of the customerrelated (demandside) issues.
5. Implications for the management of customer loyalty programs
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Loyalty resembles habit


What gives poignancy to the concept of customer loyalty is the supposed justification it gives for managers to spend
millions of dollars on CRM programs and the costly customer databases that support these. Customer loyalty
programs are a current manifestation of this trend. Proponents tend to focus on the psychological bonding that
eventuates from membership (a customer benefit), and the enhanced customer insights that can be gained from
analyzing the program database (a firm benefit) (Brown, 2000; Pearson, 1996). Critics argue that the loyalty both
attitudinal and behavioral for most customers is quite passive and resembles habit rather than serious commitment.
Also, they argue that these programs are expensive to set up and maintain and that there is little or no evidence that
any changes in behavior justify the expenditure (Dowling and Uncles, 1997). These are strong claims and counter
claims, and to a large extent they rest on the different models of customer loyalty we have outlined above.

Supporters of loyalty programs have in mind Model 1, where the program is seen to reinforce CBCtype outcomes.
Or they envisage a combination of Models 3 and 1, where consumers with no loyalty (CBBtypes) are converted into
singlebrand loyal CBCtypes because of the customer benefits of the program. Critics favor the multibrand divided
loyalty model (Model 2), and assume most customers are CBAtypes who are not strongly swayed by the program. In
evaluating the aims and demandside success of loyalty programs, we take account of these somewhat contradictory
positions. We examine the issues from the perspective of individual customers, markets, and touch on the
contribution to profits of such schemes[5].
Loyalty programs from an individuals perspective
Loyalty programs can increase singlebrand loyalty
Where the focus is on individual customers, loyalty programs can be seen as vehicles to increase singlebrand
loyalty, decrease price sensitivity, induce greater consumer resistance to counter offers or counter arguments (from
advertising or salespeople), dampen the desire to consider alternative brands, encourage wordofmouth support
and endorsement, attract a larger pool of customers, and/or increase the amount of product bought. For instance,
Bolton et al. (2000) found that members of the loyalty program of a financial services company were generally less
sensitive than other customers to perceptions of lower service quality from their company and any price disadvantage
relative to competitors.
In keeping with this focus, the rhetoric of many consultants suggests that the aim of a loyalty program should be to
create a bigger group of singlebrand loyal customers (consistent with Model 1). But the review of customer loyalty
presented in the previous section and the empirical evidence cited, suggests that this is both undesirable for most
customers and unachievable for most firms (the implication of Figure 2). Indeed, if customers are already single
brand loyal, the scheme will only be sales effective if it can get these people to buy more of the brand. This is not
easily achieved when so many singlebrand loyal buyers are light users in these circumstances they must be
persuaded to buy more of the brand and more of the category or other categories offered by the same firm
(Ehrenberg et al., 2003). Something that is exceedingly hard if customers are not particularly motivated by the brand,
category or program.
Most people only buy what they need
Significantly, in Bolton et al.s (2000) study, 43 percent of respondents did not use their loyaltybuilding credit card
during the oneyear study period and a further 36 percent used their card on fewer than six occasions the program
could not be described as particularly motivating. Similarly, Wright and Sparks (1999) found that as many as a fifth of
retail loyalty cardholders did not make any use of their card over a threemonth period. In general, enhancing the
bond between customers and their brands and expecting that this will automatically stimulate more demand for the
product category is not a sustainable outcome. Why? Because most people generally only buy what they need.
At the other extreme, it is possible that a loyalty program could be offered to people who do not buy the target brand
(but do buy from the category). If the program is sufficiently appealing, then it might entice customers to switch
brands (creating a new group of singlebrand loyals, as in Model 1) or to include the brand in their repertoire of
acceptable brands (making them polygamous loyals, as in Model 2). However, in this case the substantial appeal of
the program can actually be its weakness. First, this course of action is likely to induce a quick counterresponse from
managers whose brands start to loose share. Second, when the program is attractive, customers may come to build
a relationship with the program rather than the brand. Then a large part of the brands equity becomes dependent on
something that might have little directly to do with the brand, as well as something that is vulnerable to competitive
responses.
Most consumers buy more than one brand in the category
In between these extremes, recall that over a number of purchases, most consumers buy more than one brand in the
category. For these consumers there is some scope for bringing about a reallocation of purchasing without
demanding any fundamental shifts in attitudes or behavior towards the brands bought or the product category.
However, if consumers have good reasons for being multibrand loyal, then it is unrealistic for brand managers to
expect them suddenly to become singlebrand loyal. Empirically, consumers appear not to want to watch one
television station, eat at one restaurant, patronize one hotel chain, drink one brand of wine, get all their business
news from one magazine, go to one holiday destination, buy one brand of petrol, only attend one theatre, always
shop at the same bookstore, etc. Hence, it is a major challenge for brand managers to convince enough people to
reduce their repertoire of brands such that the propensity to buy their particular brand increases enough to cover the
full costs of the program.

Program to address the underlying reasons for polygamy


In these circumstances, the best way for customers to reallocate some of their category purchasing to a particular
brand is for a program to address the underlying reasons for polygamy. Thus, program members might be given
greater access to the brand, offered more variety, or helped to consolidate their purchases with fewer business
providers/brands. The launch of the One World Alliance in international airlines can be seen as an example of this
strategy, although the existence of competing alliances notably the Star Alliance shows the difficulty of devising a
unique and welldifferentiated program in highly competitive, repeatpurchase markets. It also shows how difficult it is
to separate purely functional and economic benefits (more routes and flexible schedules in the case of airlines) from
membership benefits (Driver, 1999; Goh and Uncles, 2003).
The loyalty program is seen as a brand extension aid
An important component of many loyalty programs is the scope for crossselling, in an attempt to increase shareof
wallet, rather than market share (Peppers and Rogers 1997). Loyaltyprogram members are encouraged to buy
products they would not normally have bought from that provider. In essence, the loyalty program is seen as a brand
extension aid. For example, through their respective programs, United tries to interest customers in car hire and
hotels, while Tesco attempts to expose its Clubcard members to highmargin wines, financial services and electrical
goods, as well as lowermargin groceries. One issue is that many of the crossselling opportunities are themselves in
highly competitive markets hotels, car hire, restaurants, financial services, etc. and often these markets support
other loyalty programs.
The implication here is that only a truly exceptional program will change the purchasing behavior of customers to
increase sales revenues significantly.
Loyalty programs from a market perspective
Most brands exhibit a double jeopardy (DJ) effect
At an aggregate level, repeatpurchase markets typically have a welldefined structure namely, most brands exhibit
a double jeopardy effect whereby small brands have fewer buyers who buy them less often than big brands
(Ehrenberg et al., 1990). Whatever their market shares, it is to be expected that, for all brands, there will be some
CBB and CBC buyers, and a majority of CBA buyers. This market structure gives rise to three strategies for
enhancing the observed level of repeatpurchase or loyalty of a brand. A possible fourth strategy is considered too.
The first strategy is to try to grow the size of the brand. This can be achieved by making the brand acceptable to a
larger number of potential customers in keeping with Figure 3 and the focus on CBA. Tactically, this means
exposure at the point of purchase, offering greater perceived value, gaining wider distribution, suggesting more usage
occasions, etc.
Niche brands
The second strategy is to create a niche brand by aiming to keep the numbers of buyers relatively low but at the
same time increasing the average amount bought by these buyers. This could be achieved by reducing the
distribution coverage of the brand and using the money saved to better support/promote the brand to current
customers. This strategy implies a higher proportion of behaviorallyloyal and committed buyers (CBCs) for the level
of market share than predicted by the DJ effect. In its early years, the Body Shop was a successful niche brand.
The third strategy is for a big brand to become a superloyalty brand. These are brands that exhibit signs of strong
commitment and that have higher than expected (using the DJ model) repeatpurchase (Fader and Schmittlein, 1993)
(i.e. an aboveaverage number of CBCs at a high level of market share). During the early 1990s, iconstatus Nike
appeared to be such a super loyalty brand.
Desire for changeofpace
A fourth strategy implied by the DJ effect is to exploit the desire of customers for changeofpace. Here the
penetration is higher and the repeatpurchase rate lower, than predicted by the DJ effect (Kahn et al., 1988). Some
imported and premium beer brands fall into this category, though the typical beer brand of this type is simply small.
This is primarily a penetration effect and cannot be seen as loyalty building unless an organization offers a portfolio of
these brands (in which case the portfolio can again be expected to conform to the DJ pattern).

Successful instances of strategies two and three are uncommon (by definition, they are deviations from the norm).
They already have aboveaverage shares of loyal (CBC) customers, and therefore a loyalty program would have to
be unusually effective to raise loyalty levels further (although it may help to maintain the deviation). The first strategy
is more common it implies offering better value than competitors and growing the size of the brand. The easiest,
and most costeffective role for a loyalty program here is to improve the accessibility, availability and
conspicuousness of a brand (e.g. its topofmind awareness or salience). This can be achieved initially by advertising
and publicizing the program; this provides something newsworthy to say about the brand. Thereafter, periodic
communication with members can take place. If this is successful the program will help the brand to grow and repeat
purchase will be a natural outcome although subject to the DJ constraint. The consumer may even reevaluate the
brand, moving from some weaklyheld attitudes to more strongly held ones. However, to expect that the program will
be sufficiently powerful to create singlebrand commitment from initial divided loyalty for enough people to cover its
full costs is a considerable challenge.
FlyBuys loyalty program
An example illustrates the point. Sharp and Sharp (1997) used consumer panel data and stochastic modeling to
establish normal patterns of consumer repeatpurchasing as a benchmark and then looked for departures from these
predictions as evidence of the impact of the Australasian FlyBuys loyalty program on creating excess loyalty. Two
conclusions from this study are noteworthy. First, Sharp and Sharp (1997, p. 479) state that they do not observe the
consistent finding of FlyBuys brands showing higher levels of average purchase frequency given their individual
levels of penetration. Second, they find that: Of the six loyalty program brands, only two showed substantial repeat
purchase loyalty deviations and both of these showed this deviation for nonmembers of the loyalty program as well
as members (Sharp and Sharp, 1997, p. 485). Given that FlyBuys was a particularly largescale and bold attempt to
use a loyalty program to reengineer patterns of repeat purchase, these results are not encouraging.
Tesco Clubcard scheme regarded as a financial success
From a market perspective, a major implication is to see whether loyalty programs have the potential to help grow the
size (and thus sales revenue) of a typical brand when used in combination with other marketing programs. This is
precisely the approach adopted by the UK retailer Tesco. The Tesco Clubcard scheme is regarded as a financial
success, especially in terms of crossselling and upselling, although this success is also closely linked to highprofile
advertising, product range extension, and strategic developments in the management of Tesco (Broadbent, 2000;
East and Hogg, 1997).
Loyalty programs and profitability
Firms employing loyalty programs should expect them to be profitable. On the cost side of the profit equation,
accurate estimates are difficult to obtain even within corporations. One reason for this is that marketing programs in
general, and loyalty programs in particular, seldom are fully costed. There are establishment costs (often including
new advertising and promotional activity), enrollment costs, IT hardware, database creation and maintenance costs,
servicing costs, management costs, editorial and production costs of loyalty magazines, the direct costs of rewards,
and the opportunity costs of spending money on a loyalty program instead of on other marketing initiatives (e.g. new
product development). A formula for factoringin some of these costs is provided by Niraj et al. (2001).
Interpreting information is difficult
Many different types of information are available about the sales effects of loyalty programs. But interpreting this
information is difficult: often there is too much of some types of sales information and too little of other types; the
evidence from sales is contradictory; and much of the data are gathered from poorly designed studies.
Turning to the first of these problems, a purported benefit of loyalty programs is that they provide vast amounts of
data that allow both a better insight into customer behavior and greater efficiency in targeted marketing. This
information provides the analytical basis for Model 1 and CBC outcomes. Typically, information is obtained on
demographics and lifestyle at the time of joining the program; subsequently, product purchasing and responses to
targeted marketing initiatives are documented for each purchase occasion. In practice the danger is that rather too
much of this information is acquired. A scheme with millions of active members (such as those run by national grocery
chains, multinational automobile companies, banks and airlines) gathers more EPOS data than it can usefully
analyze or use for targeting purposes.
Problems collecting right kind of data

Second, few of these programs collect data about the complete customer experience or the portfolio of brands bought
(i.e. little information on either decisionmaking or total category expenditure). Nor do they have much to say about
the total market and competitor marketing activity (e.g. noncustomers are ignored). Yet, our discussion in the first
part of the paper shows that this information is essential for anything other than a superficial and possibly inaccurate
understanding of customer loyalty. Specifically, a thorough and accurate understanding of Models 2 and 3 requires
data that are rarely available from loyaltyprogram databases. Here, the problem is that too little of the right kind of
data are collected.
Successful schemes quickly copied by competitors
A third area of concern is that data come from two sources these often provide contradictory evidence. One source
is the companies that have introduced these schemes. Not surprisingly, many suggest that their schemes are
successful (publicly at least). The effects are reported as one or more of the following: increased sales of the target
brand, higher levels of crossselling, fewer customer defections, and more satisfied customers (e.g. Rayner (1998)
reports on a number of UK schemes). However, researchers are beginning to question the accuracy of these effects
(e.g. Reinartz and Kumar 2000, 2002). Notwithstanding the various initiatives that have been tried over the years, the
empirical regularities of purchase incidence noted earlier (namely, DJ effects) have been robust to attempts by loyalty
schemes to change them. One reason for this is that if a scheme looks as though it might be successful in increasing
levels of accessibility, availability and conspicuousness, or in adding to the perceived value of the brand, it is quickly
copied by competitors. The classic example of such imitation is the airline frequentflier programs there are now no
major airlines without such a scheme. When widespread copying happens, any benefit gained is likely to be
ephemeral.
A fourth area of concern is that evaluations on the sales effectiveness of loyalty programs are often based on a poor
quasiexperimental design. When quantitative measures of effectiveness are developed they typically compare post
program levels of sales, customer retention, customer satisfaction, etc. with preprogram measures. Thus, there is
often no control group (that is, no group subjected to the same new service regime, but without the benefit of a
loyalty program). Hence, program effects are confounded with the effects of other marketing initiatives. In Rayners
(1998) review she reports that all the programs she describes were introduced as part of more wideranging
marketing initiatives. For example, the oftcited success of Tescos loyalty scheme is difficult to determine because it
was introduced as part of a much broader program of new business development and store acquisition (East and
Hogg, 1997). This is not to criticize what was done; indeed, the paradox is that good business practice is based on an
integrated approach to marketing that will most likely give rise to confounded measures of success. Unfortunately,
echoing Cook and Campbells (1979) warning, we should be wary of making causal inferences from studies with
weak experimental designs.
Choice of benchmark critical
A final potential problem is the choice of benchmark. The typical benchmark consists of conditions prevailing before
the program was introduced. A much tougher test of the effectiveness of the loyalty program would be to compare the
postprogram results with what may have been achieved had the full costs of the program been used in another way
such as establishing a policy of everyday low prices, a new product introduction, more direct forms of brand
extension, an increase in advertising spend, or improvements in the channels of distribution. The literature on good
decisionmaking suggests that this type of comparison is likely to produce better management outcomes than
evaluations based on one alternative versus the status quo (Hammond et al., 1999).
Costeffectiveness of these schemes should be treated with caution
The major managerial implication from looking at the potential profitability of loyalty programs is that, in most cases,
the jury is still out but the early signs are not encouraging. The jury is still out because much of the evidence relied
on to support customer loyalty programs is not scientifically valid. The early signs are not encouraging because two of
the better scientific studies, namely those of Sharp and Sharp (1997) and Reinartz and Kumar (2000) do not support
the widespread use of customer loyalty programs. In fact, the Reinartz and Kumar study suggests a very weak
association between customer profitability and longlife (loyal) customers. Thus managers should be cautious of
claims extolling the costeffectiveness of these schemes.
6. Whither loyalty programs?
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We have discussed how loyalty programs might have an impact on customer loyalty in established repeatpurchase
markets where there are directly competing branded products and services. In these markets CBA is believed to
describe the loyalty of most customers to most of the brands they buy. CBC and CBB by some customers in some
categories exists, but these are not necessarily widespread. The notion of brand acceptance draws heavily on
behavioral definitions of loyalty, while allowing for weak attitude formation and the influence of major contingencies. It
is within this context that most firms should assess their loyalty programs. Taking account of all considerations in this
paper, the checklist, below, is designed to help managers when considering the strategic and operational implications
of starting or evaluating a loyalty program:

1.

(1) Context:

Established repeatpurchase markets.


Where there is direct competition between branded products and services.
Demandside success is assumed to be of crucial importance.
1.

(2) Assessing customer loyalty:

What underlying model of customer loyalty is being assumed model 1, 2, or 3? (Section


2, Figure 1.)
How is this assumption influencing thinking about loyaltybuilding initiatives explicitly
and implicitly? (Section 3.)
Know your customers what are the relative sizes and distinguishing features of the
CBCs, CBAs and CBBs? (Section 4.)
What steps have been taken to address the sampling problem? (Section 4, Figure 2.)
1.

(3) Assessing loyalty programs:

What demandside goals are there for the loyalty program maintaining customer loyalty
or enhancing it? How will these goals be set and assessed? (Section 1.)
In general, will the program focus on the most profitable customers? What time frame is
to be used to assess their profitability? (Section 4.)
What is the appeal of the program for these customers? (Section 5 (a).)
How will the program be used in combination with other marketing activities? (Section 5
(a).)
Will these initiatives grow share and sales revenues? (Section 5 (b).)
Can the customer data be analyzed in useful ways? (Section 5 (c).)
Are the sales and cost data reliable? Is the evidence contradictory? Are you relying on

studies with weak experimental designs? (Section 5 (c).)


What benchmarks have been chosen to assess the loyalty program and are these
appropriate? (Section 5 (c).)
How will the overall profitability of the program be calculated? (Section 5 (c).)
1.

(4) Assessing major traps:

Are there, in fact, too few customers who will actually use it? Does the scheme have little
appeal for customers? (Section 5 (a).)
Or, has the scheme been too indiscriminant perhaps all three types of customers have
joined because they see it as a (relatively) free option and/or a reward for their current
purchase behavior? (Section 5 (a).)
Are customers more loyal to the scheme than the brand? Is this a problem and, if so, what
can be done to rectify the problem? (Section 5 (a).)
What are the chances of a competitor retaliating to nullify the impact of the program?
Have competitors already launched a counterinitiative (Section 5 (b)?)
Do you simply want to maintain the status quo (at a higher cost to all competitors)?
(Section 5 (c).)
Is the need to service large numbers of members driving up running costs? (Section 5 (c).)
Our review suggests that the demandside success of many of these programs has been overclaimed by their
advocates. This conclusion is based on two main observations:

1. (1) established patterns of repeatpurchase behavior appear to be robust to the attempts of


even large, wellfinanced programs to change them (e.g. major retail schemes or the
airline frequentflier programs); and
2. (2) many highprofile programs are either quickly copied or induce a direct counter
response from competitors, thus nullifying much of their potential impact (which, of
course, is often the case with marketing and communications initiatives in established
markets).
More loyalty programs are being introduced
Notwithstanding our cautious assessment, the fact remains that many loyalty programs are in operation and more are
being introduced. We conclude by briefly considering why is there so much momentum behind these programs.
First, it is possible to see loyalty programs as vehicles for maintaining customer loyalty (i.e. for keeping the brand in
the customers repertoire) or for maintaining brand share (where the program works in combination with other valued
enhancements, including product and service improvements). Here, rather than trying to induce singlebrand loyalty
from customers who previously have exhibited dividedbrand loyalty, a more realistic aim is to build on existing levels
of CBA. If customers feel the need for affinity, or desire an explicit reward for their loyalty, they will join the programs
of the brands they buy. The critical issue then is for the program to reinforce the value proposition of the parent brand

enhancing brand equity, not just building loyaltyprogram equity. The critical task for the program manager is to
design a costeffective scheme to achieve this aim.
Brand accessibility and market conspicuousness
Second, another role for loyalty programs can be to improve levels of accessibility and market conspicuousness for a
brand. This can manifest itself as a more credible proposition to retailers in order to secure more shelfspace and
benefit from retail push. In other cases it may provide more opportunities to talk with customers and, perhaps, more
opportunity to sell brand extensions to customers. In either case, the aim of the program is to get the brand into the
customers set of acceptable brands. This, however, is not a substitute for the inherent functional, psychological and
economic value designed into the brand, but rather it simply makes the brand easier to consider. If for some people
the program provides additional emotional value, then this is a bonus.
Metoo pressure
A third major factor is the metoo pressure to follow others who have embarked on this path. Moreover, once these
programs have been introduced, managers seem very reluctant to cancel them even if their claimed benefits are
not being realized. For example, there are persistent rumors that many airlines would like to end their frequentflier
programs if they could find an acceptable way to do this. So far, that goal has proved elusive, although the need to
respond to deep discounting by companies such as Southwest and Virgin may force the hand of some operators.
Just as there may have been firstmover advantages in creating a loyalty program, there also might be firstmover
drawbacks from snatching away much heralded customer benefits. However, there are instances of cardbased
loyalty programs having been dropped (e.g. schemes operated by the DIY group DoitAll and the grocery store
Safeway in the UK, also Ford USA withdrew its credit card reward program).
Despite all the problems surrounding loyalty programs, they are likely to be in the marketers toolkit for a long time
yet, which is a powerful reason for carefully thinking through the issues discussed here.
Executive summary and implications for managers and executives
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Loyalty or cupboard love?


Like many people I have my doubts about whether its possible to be loyal to a particular brand of tomato soup.
Indeed there are times when the idea of customer loyalty seems more suited to the purposes of consultants than
the objectives of marketing management. There are a number of problems and issues with the concept of loyalty and,
in this article, Uncles, Dowling and Hammond provide a very helpful and thoughtful review.
The first problem, it seems to me, lies in the definition of loyalty in that it sometimes means unquestioning repeat
purchase and sometimes relates to a more nebulous relationship with the particular brand or organization. As
everybody recognizes, some types of brand (in the widest sense) are more likely to attract loyalty than others.
Can a chocolate bar be like a football team?
The classic examples of superloyalty are seen with sports teams. The dedicated Manchester United fan refers to
the team as we and the performance of the team affects mood, behaviour and attitude. At times the loyalty seems
almost pathological with the performance of the team seemingly the most important thing in the fans life. I think it is
safe to say that, outside the area of mental illness, such dedication is unlikely to be directed towards a chocolate bar
or department store.
The question for marketers is whether some of the characteristics we see in this superloyalty might be applied to
these more prosaic brands or whether loyalty as an idea detracts from the primary function of brand marketing.
Certainly, Uncles et al. seem to question the effectiveness that many of the loyalty marketing schemes run by
businesses such as airlines and supermarkets. Indeed the authors suggest that some airlines would like to drop
frequent flyer promotions and that the jury remains out on the success or otherwise of loyalty schemes such as the
Tesco Clubcard (we should note that the company still insists this is a success and as the UKs most successful
supermarket in recent years it is difficult to argue with their strategy). As the authors succinctly put it; loyalty is a
function of people rather than something inherent in brands.
Consumers have divided loyalties

Uncles et al. also refer to the issue of double jeopardy and the concept that consumers select from a portfolio of
brands rather than being loyal to just one brand. Indeed the most promising customers (those that buy more, more
regularly) are portfolio buyers with many singlebrand loyal buyers being light users. As the authors describe:
consumers appear not to want to watch one television station, eat at one restaurant, patronize one hotel,
drink one brand of wine, get all their business news from one magazine, go to one holiday destination, only
attend one theatre, always shop at the same bookstore, etc.

1. Loyalty programs are schemes offering delayed, accumulating economic benefits to


consumers who buy the brand. Usually this takes the form of points that can be
exchanged for gifts, free products, or aspirational rewards such as air miles. Airline
frequentflier programs have been a prototype for many of the schemes. Affinity
programs are a specific type of loyalty program. They are designed to enhance the
emotional bond between customer and brand. Mechanisms are set up to enhance two
way communication in order for the customer to get to know the brand (or company that
stands behind it) better, and for the company to learn more about the customer. No direct
economic benefit is offered to the customer. Examples include telephone help lines, club
memberships, alumni associations, newsletters, Web site chat groups, etc. Hybrids also
exist. For instance, where the focus is on enhancing the emotional bond between
customer and brand, and a thirdparty (e.g. a charity) receives a financial benefit. Or the
establishment of a club where consumers pay for membership, in return for access to
special events and offers. This latter format is prevalent in countries like Germany where
privacy and trading laws prohibit incentivebased schemes, e.g. Volkswagen Club,
Swatch the Club, Mercedes Mastercard (Butscher, 2002).
2. See, for example, Reichheld (1996). While this generalization is often made by
consultants, it takes no account of the companys specific circumstances, particularly its
target market, marketing strategy and cost structures (Niraj et al., 2001; Shaw, 1998).
Indeed, there is some evidence to suggest declining profitability from longterm
customers in the context of catalogue buying in the US (Reinartz and Kumar, 2000,
2002).
3. In this context, use of the word loyalty is debatable. Some prefer to use the term
spurious loyalty, in that any pattern of buying here is likely to result from the
recurrence of contingent factors (e.g. Mellens et al., 1996). It is pointed out that if the
contingent factors are removed, buying may change. Nevertheless, we argue that Model
3 is the basis of brand acceptance and weak loyalty, neither of which should be regarded
as spurious.
4. The main exception where exclusive buying is observed is among consumers who are
light buyers of the product category and therefore of any brand in the category. Among
these buyers, monogamous loyalty may merely reflect a very limited number of
purchase occasions (e.g. the infrequent holiday traveler versus the international business
executive). Exclusive loyalty is also a function of the length of the observation period
in a short period most people will appear to be exclusively loyal because they have had
so few opportunities to buy.
5. The bias is towards a consideration of customer issues, reflecting the customerfocus
logic of marketing. Therefore, our comments about the contribution of loyalty schemes to
profits focus largely on consumerrelated demandside issues. It would be useful for
others to consider other perspectives. For example, some of these programs could be
viewed as a form of indirect price cut that is desired by one segment of customers but is
ultimately paid for by all customers. Programs that offer air miles as their reward could
be viewed as the outcome of airlines wanting to sell excess capacity at a price greater
than marginal cost. There are also broader issues of business policy and marketing
strategy that need to be addressed. For instance, from the perspective of one business
partner in a loyalty program, the success of the endeavor may depend on an ability to
negotiate a particularly attractive deal with the other business partners irrespective of
whether the program has much impact on customer loyalty. We regard this as a very
important, but separate, issue.

These divided loyalties make it more difficult for marketers to take actions aimed a promoting loyalty. It would seem
the case that the focus on loyalty to the exclusion of other elements in consumer behaviour could result in misplaced
marketing strategies. Moreover the loyalty strategies employed by different brands are very similar. I suspect that
many consumers do not distinguish between loyalty campaigns and other forms of sales promotions. We know that
the point of frequent flyer programmes, for example, is to encourage us to use one particular airline and we make the
choice to do so because we receive some reward (discounts, incentives or other benefits). The consumer acts out of
selfinterest rather than pure loyalty.
This selfish motivation does not mean that the loyalty programme is ineffective since offering incentives to existing
customers can represent a better sales promotion strategy than the use of general or new customer targeted
promotions. Identifying good customers can be a way to maintaining market share and reflects that decades old
argument from direct marketers that making a further sale to an existing customer is far easier than recruiting a new
customer. But it remains the case that marketers have to recognise that their customer might be equally loyal to
another competing brand.
For loyalty read customer retention
For most brands (exceptions can be made for brands such as Harley Davidson) the object of the loyalty strategy is to
secure a greater share of choice from within a limited portfolio of brands. Assuming that those who buy from us have
our brand in their choice set, the loyalty programme provides an incentive for these buyers to repeat their purchase
with us rather than switch (possibly temporarily) to another brand.
As ever we need to make a clear distinction between different types of market. Chocolate bars differ from
supermarkets which, in turn, differ from hotel chains or holiday destinations. A loyalty strategy for a brand that has
genuinely loyal customers will be very different from a strategy aimed at getting our product greater attention from
actual and potential buyers (i.e. those who have our brand in their portfolio of possible brands to purchase). For some
investing time and money in securing a closer bond with customers makes sense whereas for others the focus
should be on the aggregate effect of our promotions loyalty is a lovely idea but in many cases it can result in the
wrong promotional strategy.
Uncles et al. provide marketers with food for thought about loyalty and raise questions and doubts about the use of
loyalty programmes in a range of settings. Indeed the authors conclusion that the demand side success of many
loyalty programmes has been overclaimed is a clear indication that marketing must move on to a more informed
approach to repeat purchase promotions and loyalty programmes.
(A prcis of the article Customer loyalty and customer loyalty programs. Supplied by Marketing Consultants for
Emerald.)
Notes
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Figure 1. Conceptualizations of customer loyalty

Figure 2. Summary of the different approaches to customer loyalty

Figure 3. Customer brand acceptance