Review of “Loyalty Myths” (by Keiningham et al.)

Keiningham, Vavra, Aksoy and Wallard (2005)

Loyalty Myths:  Hyped Strategies That Will Put You Out of Business and Proven Tactics That Really Work

(Keiningham, Timothy L., Terry G. Vavra, Lerzan Aksoy and Henri Wallard.   New Jersey:  John Wiley & Sons, 2005).

Loyalty Myths is a great 2005 book that challenges 53 assumptions about customer loyalty, including those put forward by Reichheld (1996).  The authors are from Bain & Company consulting competitor, Ipsos Loyalty.

It can be easy challenging a small number of assumptions, but 53 is a lot.  Continue reading

Reasons for Loyalty Programs

12 Things Reward Programs can do for Businesses

There are many reasons why businesses embrace reward programs and invest so heavily in their implementation and maintenance.  The following is a compilation of the major functions of loyalty programs (with academic and business expert references).  Continue reading

Review of “Effects of Loyalty Programs” (by Yi & Jeon, 2003)

Yi and Jeon (2003)

“Effects of Loyalty Programs on Value Perception, Program Loyalty, and Brand Loyalty”

(Yi, Youjae and Hoseong Jeon.  Journal of the Academy of Marketing Science, Vol. 31, 2003 (3), pp.229–240).

Yi and Jeon (2003) examine how reward program characteristics affect the perceived value of programs and how this affects customer loyalty overall.  Their work examines reward programs with respect to timing and type of reward, Continue reading

Pareto’s 80-20 Rule & Profitability

80% of Profits may come from 20% of Customers, but sometimes 80% of Losses come from a Different 20%.

(Copyright PR Loyalty Solutions, 2011)

Vilfredo Pareto was an Italian economist who observed that 20% of the Italian population in the early 1900’s owned 80% of the land.  From this developed what today is called the Pareto Principle or the “80-20 Rule”, where frequently about 80% of a result is accounted for by 20% of some factor.

Today, it is a commonly accepted belief that about 80% of sales for a typical business come from 20% of its customers.  Continue reading

Review of “Do Rewards Really Create Loyalty?” (O’Brien & Jones)

O’Brien & Jones (1995)

“Do Rewards Really Create Loyalty?”

(Harvard Business Review, May 1995)

O’Brien and Jones argue that despite the critics, reward programs can indeed enhance loyalty, when designed and implemented correctly.  It is critical, however, that program value be in proportion to the economic value of customers’ loyalty to the organization.  With references to such companies as General Motors, Neiman Marcus, AIR MILES and American Express, O’Brien and Jones’ most noted contribution to loyalty program literature is their outline of five key elements critical to a program’s success.  “Customers prefer rewards programs with cash value, relevance, choice, aspirational value, and convenience” (p.80). Continue reading

Coupons and Discounting

Coupons and direct discounting are not always effective tools for enhancing customer loyalty and improving profits.

There is a lot written about coupons and discounting in academic literature, and most experts agree that tactics like these don’t generally enhance customer loyalty.  Here’s what some loyalty experts have had to say: Continue reading

Review of “The Loyalty Effect” (by Frederick Reichheld)

Reichheld (1996)

The Loyalty Effect:  The Hidden Force Behind Growth, Profits, and Lasting Value

(Reichheld, Frederick F., Boston:  Bain & Company, Inc., 1996).

2001 Revision

A highly respected authority on the topic of customer loyalty, Reichheld (1996) notes that, “on average, U.S. corporations now lose half their customers in five years, half their employees in four, and half their investors in less than one.  We seem to face a future in which the only business relationships will be opportunistic transactions between virtual strangers” (p.1).  Also, “in a typical company today, customers are defecting at the rate of 10 to 30 percent per year; Continue reading

Origin of Reward Programs in North America

Did you know …

Trading Stamps & Carlson Marketing

Reward programs in North America date back at least as far as trading stamps, when people collected stamps from stores, stuck the stamps on cards and then redeemed the completed cards for rewards.  The first large scale program was S&H Green Stamps, a program created in 1896 as a business that sold stamps and stamp books to businesses.  By the late 1950’s approximately two out of every three American families collected some form of trading stamp.

Carlson Marketing, Continue reading

Review of Article by Nunes and Dréze (2006)

Nunes and Dréze (2006)

“Your Loyalty Program Is Betraying You” 

(Harvard Business Review; April 2006, Vol. 84 Issue 4, pp.124-131.)

This is a very valuable article and can be purchased from the Harvard Business Review (and no, we aren’t paid to say this).

In this excellent article (one of our favorites), Nunes and Dréze (2006) identify five main objectives, five critical components and five common mistakes of loyalty programs.  The authors present, in their opinion, what an effective loyalty program should look like and they give a broad overview of loyalty programs. Continue reading