Loyalty Programs in Indian Retail
Retail Loyalty Programs
Loyalty Programs in retail : An overview
What is a loyalty program ?
Loyalty programs are the schemes designed with an intention to retain existing customers and attract new customers by rewarding a customer with both hard and soft benefits for his loyalty and patronage.
Classification
Loyalty programs (either on the shop delivery ' or web based ') can be classified either based on types of rewards and recognition tools used or the mechanism by which customers earn their rewards.
Classification based on the mechanism by which customers earn their rewards :
1. Earning points towards a reward of free or discounted product.
Such kind of approach is normally used in applications where there is high transaction frequency and moderate price points .However, such a kind of loyalty program increases functional loyalty rather then emotional loyalty ,for example a frequent flier program.
2. Allowing customers to redeem third party currencies such as airline miles for retail purchases.
These kinds of loyalty programs are successful but there are certain issues such as brand fit between two companies and a risk of brand dilution due to coalition partner 's inefficiency.
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Partnerships between frequent flier programs and retail outlets is a successful example of third party based currency program
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3. Offering rewards for using store branded credit cards.
These kinds of programs are normally single brand loyalty programs i.e. they can 't be used across various retail stores thus driving away shoppers who mange their credit through multiple cards.
4. Offering discount or margin for select items.
This approach is primarily used to push across slow moving products or to introduce new products.
Classification based on the incentives and recognition tools used :
1. Providing unbiased and relevant product and service information to shopper.
This is a high involvement reward mechanism which looks
Loyalty Programs in retail : An overview
What is a loyalty program ?
Loyalty programs are the schemes designed with an intention to retain existing customers and attract new customers by rewarding a customer with both hard and soft benefits for his loyalty and patronage.
Classification
Loyalty programs (either on the shop delivery ' or web based ') can be classified either based on types of rewards and recognition tools used or the mechanism by which customers earn their rewards.
Classification based on the mechanism by which customers earn their rewards :
1. Earning points towards a reward of free or discounted product.
Such kind of approach is normally used in applications where there is high transaction frequency and moderate price points .However, such a kind of loyalty program increases functional loyalty rather then emotional loyalty ,for example a frequent flier program.
2. Allowing customers to redeem third party currencies such as airline miles for retail purchases.
These kinds of loyalty programs are successful but there are certain issues such as brand fit between two companies and a risk of brand dilution due to coalition partner 's inefficiency.
Page 5 of 21
Partnerships between frequent flier programs and retail outlets is a successful example of third party based currency program
IIFT_NCS - Paper writing contest
3. Offering rewards for using store branded credit cards.
These kinds of programs are normally single brand loyalty programs i.e. they can 't be used across various retail stores thus driving away shoppers who mange their credit through multiple cards.
4. Offering discount or margin for select items.
This approach is primarily used to push across slow moving products or to introduce new products.
Classification based on the incentives and recognition tools used :
1. Providing unbiased and relevant product and service information to shopper.
This is a high involvement reward mechanism which looks