1.

Introduction

Customer Loyalty programs are structured marketing efforts that reward, and therefore
encourage, loyal buying behavior, behavior which is potentially of benefit to the firm.
Customer loyalty Program is a marketing initiative for developing long lasting
relationships with most valuable customers

Customer loyalty describes the tendency of a customer to choose one business or product
over another for a particular need. In the packaged goods industry, customers may be
described as being "brand loyal" because they tend to choose a certain brand of soap
more often than others. Note the use of the word "choose" though; customer loyalty
becomes evident when choices are made and actions taken by customers. Customers may
express high satisfaction levels with a company in a survey, but satisfaction does not
equal loyalty. Loyalty is demonstrated by the actions of the customer; customers can be
very satisfied and still not be loyal. The commercial benefits of loyal customers are well
known by brand owners. The cost of acquiring customers is six times that of retaining
them and, therefore, ensuring loyalty is commercially important. Loyal customers are
also important because they provide the consistency of volume critical for mass
production not to mention the consistency of revenue required to run a business. These
are the customers who are strong advocates for the brand and more willing to try new
offerings; they are also more forgiving toward an occasional lapse. All of these
compelling reasons lead brands on the quest for the Holy Grail of customer loyalty.

As a result brands look toward loyalty programs to reward loyal customers and encourage
retention. However, there are a lot of strategic issues that need to be considered while
deciding on whether to employ a loyalty program or not and the nature of the program
best suited for different brands. Loyalty programs need to be examined in the context of
what they offer to the customer and to the brand’s equity, as well as what they add to the
brand both in terms of image and competitive edge.

2. Factors Influencing Loyalty

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It has been suggested that loyalty includes some degree of pre-dispositional
commitment toward a brand. Brand loyalty is viewed as multidimensional construct. It is
determined by several distinct psychological processes and it entails multivariate
measurements. Customers’ Perceived value, Brand trust, Customers' satisfaction, Repeat
purchase behavior and Commitment are found to be the key influencing factors of brand
loyalty. Commitment and Repeated purchase behavior are considered as necessary
conditions for brand loyalty followed by Perceived value, satisfaction and brand
trust, enhancing customer loyalty could have dramatic effects on profitability.
Among the benefits from brand loyalty - specifically, longer tenure or staying as
a customer for longer - was said to be lower sensitivity to price. This claim had not been
empirically tested until recently. Recent research found evidence that longer-term
customers were indeed less sensitive to price increases. The image surrounding a
company's brand is the principal source of its competitive advantage and is therefore
a valuable strategic asset. Unfortunately, many companies are not adept at disseminating
a strong, clear message that not only distinguishes their brand from the competitors', but
distinguishes it in a memorable and positive manner. The challenge for all brands is to
avoid the pitfalls of portraying a muddled or negative image, and instead, create a broad
brand vision or identity that recognizes a brand as something greater than a set of
attributes that can be imitated or surpassed. In fact, a company should view its brand to
be not just a product or service, but as an overall brand image that defines a
company’s philosophies. A brand needs more than identity; it needs a personality. Just
like a person without attention-grabbing characteristics, a brand with no personality
can easily be passed right over. A strong symbol or company logo can also help to
generate brand loyalty by making it quickly identifiable.

3. Components of Customer Loyalty Program

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In marketing generally and in retailing more specifically, a loyalty card, rewards card,
point’s card, advantage card, or club card is a plastic or paper card, visually similar to a
credit card or debit card that identifies the card holder as a member in a loyalty program.
Loyalty cards are a system of the loyalty business model. In the United Kingdom it is
typically called a loyalty card, in Canada a rewards card or a point’s card, and in the
United States either discount card, a club card or a rewards card. A retail establishment or
a retail group may issue a loyalty card to a consumer who can then use it as a form of
identification when dealing with that retailer. By presenting the card, the purchaser is
typically entitled to either a discount on the current purchase, or an allotment of points
that can be used for future purchases. Hence, the card is the visible means of
implementing a type of what economists call a two-part tariff.

The card issuer requests or requires customers seeking the issuance of a loyalty card to
provide a usually minimal amount of identifying or demographic data, such as name and
address. Application forms usually entail agreements by the store concerning customer
privacy, typically non-disclosure of non-aggregate data about customers. The store, one
might expect — uses aggregate data internally as part of its marketing research.

Lets look at some components which can be very useful in Customer loyalty program,

Communication - Whether it is an email newsletter, monthly flier, a reminder card for a

tune up, or a holiday greeting card, reach out to your steady customers. Communication
is also an important factor when it comes to deal face to face with customer. Calling
customer by his name may make the customer feel good and he feels that he is getting
consideration.

Customer Service – Giving the best service is the key to touch the heart of customer.
Services like free home delivery, free maintenance, etc can be very effective, Customer
like being treated well.

Employee loyalty - Loyalty works from the top down. If you are loyal to your employees,
they will feel positively about their jobs and pass that loyalty along to your customers.

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Employee Training - Train employees in the manner that you want them to interact with
customers. Empower employees to make decisions that benefit the customer.

Customer Incentives - Give customers a reason to return to your business. For instance,
because children outgrow shoes quickly, the owner of a children’s shoe store might offer
a card that makes the tenth pair of shoes half price. Likewise, a dentist may give a free
cleaning to anyone who has seen him regularly for five years.

Product - Know what your steady patrons purchase and keep these items in stock. Add
other products and/or services that accompany or compliment the products that your
regular customers buy regularly. And make sure that your staff understands everything
they can about your products.

Reliability - If you say a purchase will arrive on Wednesday, deliver it on Wednesday. Be

reliable. If something goes wrong, let customers know immediately and compensate them
for their inconvenience.

4. Customer Loyalty Grid

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Zone 1: Unstated/Expected...The Zone of Indifference
Literally, this includes all those customer needs and wants that are basic to fulfilling the
contract between you and them. For example, customers expect to be treated with
courtesy and respect, and would probably be puzzled (and maybe even insulted) if you
asked them if this was a need. It of course is, and if you don't meet this need, you will
cause DISSATISFACTION. If you meet this basic and obvious need, the best you can
hope for is INDIFFERENCE.

Zone 2: Stated/Expected...The Zone of Satisfaction

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This is where your customer actually TELLS you what is important to them. Listen
carefully here, as this is a key stepping stone to customer loyalty. Meeting a customer's
needs here will cause SATISFACTION, whereas not meeting them will cause
DISSATISFACTION. For example, a customer might expect a volume discount on a
purchase, but knows that they have to specifically ask (or negotiate) for it. It is an
expectation, simply because other organizations that the customer deals with provide this
benefit.

Zone 3: Stated/Unexpected...The Zone of Delight

This is where your customer HOPES for something, ASKS for it, but really does not
expect you to provide it. This is your opportunity to provide something beyond their
expectations and by so doing will create DELIGHT. For example, a customer might ask
for something that is usually available only in a premium priced product. Not providing it
will unlikely cause dissatisfaction. Therefore this is an area for particular attention in
building a LOYAL customer base.

Zone 4: Unstated/Unexpected...The Zone of Loyalty

This is an area where your expertise in whatever product or service you provide and the
customer's lack of expertise can really pay off! Providing benefits above and beyond
what the customer is even aware of can create a LOYAL customer. This requires you to
be really proactive in suggesting to customers new innovations that they can really
benefit from. Many customers will be even willing to pay extra for this. For example,
airbags in automobiles when first introduced were an innovation that saved lives, but
customers had no way of asking for this innovation, or expecting it, before it became
known to them.

All Zones are equally important

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To get to the Zone of Loyalty, you must first conquer the other zones...there are no short-
cuts. If your organization is really good at innovations (the key factor in creating
Loyalty), but struggles at reliability (the key factor in creating Satisfaction), then it will
end up struggling in all four zones.

Loyalty creating innovations are time limited

What was once an unstated/unexpected innovation will eventually become
unstated/expected...would you now purchase a car without a CD player? Would you even
ask the salesperson if it is installed? So maintaining a rate of innovation that matches or
exceeds what the market demands is crucial to maintaining customer loyalty.

5. Conclusion

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 Thus we have seen that loyalty programs are of immense value to any organization
irrespective of geographical distribution.
1. Providing a better product an impeccable service should be the major objective
for any organization.
2. Recognizing the customer and his spending behavior can enable to make more
specific rewarding structure.
3. Loyalty programs should not be limited to Rewarding but to broaden relationship
with the customer and offering them more liberty.

6. Bibliography

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The Power of Loyalty - Roger L. Brooks

Marketing Management - Philip Kotler

http://en.wikipedia.org/wiki/Loyalty_program

http://www.businessknowhow.com/marketing/loyaltyprog.htm

http://searchcrm.techtarget.com/news/992695/Getting-loyalty-programs-right

http://www.greatbrook.com/customer_loyalty.htm

http://www.crm2day.com/content/t6_librarynews_1.php?
id=EpFkZEApZlPwkAZWaQ