Loyalty Program Case Study

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When you purchase an item at a business a common question is usually asked. Would you like to sign up for our loyalty program? The practice of businesses offering loyalty programs is being used as a tool to reward consumers for their continued loyalty. The rewards can include things such as accruing reward points per dollar spent to get free items, achieving a higher customer status, or having access to special deals. These programs are a way for businesses to create win-win situations while building meaningful relationships with the consumers. A successful loyalty program can increase the amount spent on customers purchases, create a strong connection between the consumer and business, and increase the number of times a customer visits the …show more content…
This is usually done by having different tiers of membership within the program. Using BestBuy’s loyalty program as an example, the BestBuy reward zone has a premium silver, standard, and non-member tier system put in place. As you spend more money you can achieve a higher status within the program, which is why if you spend at least 2,500$ you will be eligible for the premium silver status. Because status is important to most consumers the idea of achieving a higher status than the normal shopper is motivation to spend more money. Once the highest status is achieved he or she will also receive added benefits not offered to the other members of the program. Ideally the most optimal structure is a three tier structure in which you have two elite tiers and one tier reserved for the non-participants. That structure is not a requirement as some companies opt in to a two-tier system where you have two general groups, the non-members and members. Additionally some programs require an upfront fee to opt-in to the program. Requiring an upfront cost to participate in the program can turn many potential customers away from participation in the program, but using Amazon Prime as an example it can be very …show more content…
There is an abundance of programs that are being offered to customers currently. Therefore, I assumed that it could put a company at a competitive disadvantage by asking for money for membership. However, usually companies that requires a fee for membership attempt to offset the costs by offering more lucrative rewards for its members. I will be using Amazon Prime as an example, thought by many to be the most successful fee-based program in the market. It costs $79 a year for membership with offers of a free trial and a free one year membership for college students. With Prime you have access to free two-day shipping, one-day shipping at a cost of $4, and access to Amazon instant video. Amazon offers a wide range of items and given the simplicity of the ordering process, having free shipping on all orders can create a lot of value to the consumer. This program is successful because it complements the company’s goals. Users will look for their items on Amazon first because of the simplicity of the process, attempts to maximize the value they receive from the program, and the long-term savings that can be

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