LOYALTY PROGRAMS: DO COMPANIES REALLY MAKE CONSUMERS LOYAL?
Savica Dimitrieska
Tanja Efremova
Abstract
In the markets of different products and services, the interests of both, companies and consumers collide. Companies that offer products and services expect a return on investment and higher profits. They can achieve these goals only if they have regular consumers, preferably loyal who will buy products and services more often or in larger quantities. The companies are interested in achieving long-term and sustainable relationships with the consumers and they want to minimize the churn and their switching to competitors. Consumers, on the other hand, have more sophisticated demands and expect more value for less money. They are interested not only in the quality of the product, but also in packaging, discounts, cashback, rewards, additional customer services, free shipping, maintenance, special treatments, reputation, etc. To meet these consumer expectations, companies offer many promotional activities, including loyalty programs. Loyalty programs, as part of the CRM (customer relationship management), are marketing programs that reward consumers for their repeated purchases over a longer period of time. Unlike other promotional tools, loyalty programs need to build a long-term relationship between companies and their consumers. But despite the offer of such programs, many studies show that consumers are not loyal and do not fully enjoy the benefits of the programs. Do companies give “something for nothing” and spend their money in vain? What are the reasons for the downfall of loyalty programs? This paper aims to investigate the reasons for consumer disloyalty despite the offered companies' loyalty programs. The paper will also provide guidance for companies to design loyalty programs that will attract more consumers.
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Keywords: loyalty program, consumer loyalty, customer retention, promotion, customer relationship marketing (CRM), rewards
JEL Codes: M31, M37, M39
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To cite this article: DIMITRIESKA S., T. EFREMOVA (2021). Loyalty programs: Do companies really make consumers loyal? Entrepreneurship, 9 (2), 23-32 DOI: 10.37708/ep.swu.v9i2.2
