![]() ![]() It can keep customers from defecting, induce them to consolidate certain purchases with one seller (in other words, win a greater share of wallet), prompt customers to make additional purchases, yield insight into their behavior and preferences, and turn a profit. ![]() To begin with, it’s important to know exactly what a loyalty program can do. Together, their findings constitute a tool kit for designing something rare indeed: a program that won’t do you wrong. In their research, the authors have discovered patterns in what the successful loyalty programs get right and in how the others fail. Additionally, companies have to sort out the puzzles of consumer psychology, which can result, for example, in two rewards of equal economic value inspiring very different levels of purchasing. The biggest challenges include clarifying business goals, engineering the reward structure, and creating incentives powerful enough to change buying behavior but not so generous that they erode margins. What is so hard about making a simple loyalty program work? How can that be? These days, everyone knows that an old customer retained is worth more than a new customer won. ![]() Even as loyalty programs are launched left and right, many are being scuttled. ![]()
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