Journal of Critical Reviews ISSN- 2394-5125 Vol 7, Issue 6, 2020 Review Article IS LOYALTY PROGRAM AS A MARKETING TOOL EFFECTIVE? Ms. Nisha Nandal1, Dr. Naveen Nandal2, Dr. Ritika Malik3 1Research scholar. Ansal University, Gurugram 2Assistant Professor, Ansal University, Gurugram 3Management Consultant and Visiting Professor Received: 15.02.2020 Revised: 14.03.2020 Accepted: 25.04.2020 Abstract Loyalty programs are an ubiquitous instrument of customer relationship management. Complexity of modern business requires managers to strive for innovative strategies to acquire and retain customers in any product market field. As acquiring new customers is getting costlier day by day, business organizations have offered loyalty programmes to retain & reward existing customers and maintain relationships. One of the best ways to keep customers coming back for more is by establishing an effective loyalty or rewards program. Loyal customers, it is said, are worth striving for. They spread positive word-of mouth, reduce defection rates, and amplify the purchase frequency, to name just a few examples. But what can be done to induce that loyalty? Can loyalty schemes help us to do so? In this paper, we try to determine whether loyalty cards issued by stores have an impact on customer loyalty. The aim of this research is to enhance our understanding of loyalty program effectiveness. Key Words: Loyalty, Complexity, program. © 2019 by Advance Scientific Research. This is an open-access article under the CC BY license (http://creativecommons.org/licenses/by/4.0/) DOI: http://dx.doi.org/10.31838/jcr.07.06.188 INTRODUCTION Benefits of Customer Loyalty Programme A loyalty program is a promoting framework initiated by a • Increase in Customer Retention. business that rewards acquiring conduct accordingly • Increase in Customer Lifetime Value expanding the client’s inclination to remain faithful to the • Improved client Relation organization. A loyalty program may offer accommodation • Improved company reputation store credit prizes or some other advantage that would allure • Great ‘Customer Win back’ strategy to bring back lost the faithfulness of a client. Customer engagement Organizations customers. all through the country are presently using loyalty programs • Great way to encourage customers to move up from their more regularly than any other time in recent memory. These current spend level to a higher spend level. associations comprehend the significance of holding existing • Allows the flexibility to decide which segment of your clients and execute a framework coordinated particularly at client base you wish to spend your marketing budget on. building client loyalty. Of course, similar to all other showcasing • Loyalty Programmes give you the opportunity to acquire endeavours an all-around created dependability program new customers. Value Rewards requires assets that may presently be assigned towards • Gives you the opportunity to create brand advocates who different attempts. Customer Loyalty programme - a very can help you expand your customer base by giving powerful strategy Which has been accepted and implemented personal recommendation. by businesses big and small. • Allows laser targeted marketing based on the valuable segmentation of a loyalty database. History of Loyalty Program Journal of critical reviews 1079 IS LOYALTY PROGRAM AS A MARKETING TOOL EFFECTIVE? Types of Customer Loyalty Programs points are not just the numbers, they are converted into some Frequency Loyalty Program Loyalty rewards programs kinds of reward for you. Customers get a chance to redeem their This loyalty rewards program encourages the customers to buy points on the future purchase more. For example: If a customer has bought 4 items then he gets the 5th one free. Therefore, by rewarding the customer on 2. Spend Program the 5th purchase this loyalty scheme helps increase sales. On the basis of how much the customer has spent on purchasing, he gets credits. It has been seen that the amount on PROS: This is the simplest type of customer loyalty programme. transaction increases by giving credit facility to customer It is easy and cost effective to set up this customer rewards program. It allows businesses to set up tiers to reward increase 3. Tiered Program in levels of purchase behaviour. One way to find the right balance between attainable and CONS: The Downside of this customer loyalty program is that desirable rewards is to implement a tiered system, which it’s too simple. Its simplicity does not allow companies to collect rewards initial loyalty and encourages more purchases. This customer information. You lose valuable data which can one is based on how much loyal the customer is. On every otherwise be used in further marketing efforts. purchase customer gets certain points. As the points increases, the level of loyalty also increases. Customer will start getting Earn Points to Get Rewards Customer rewards programs more points as the level increases In this type of customer rewards program customers earn points on each purchase. These points can then be exchanged 4. Paid Program – VIP member club for rewards. Rewards can be weekend getaways, movie tickets, This one does not come free of cost. One has to pay monthly or spa etc. annual fee for its subscription to enjoy special benefits & discounts. There are certain benefits which can only be PROS: It’s a simple process for customer to understand, set up accessible by their members, they are made exclusive for them and follow. Once rewarded customers remember their rewards for a long time which encourages them to stay loyal to your 5. Value – based Program products and services. This one is based on the customers value. First, it is very important to define your values. Let’s imagine that you run an CONS: This customer loyalty program needs a careful system to online pet store and you know that your audience values animal track points correctly. Since there is no instant gratification for welfare. One thing you may do it, is to start a loyalty program, customers, they could lose interest in the programme and similar to the point system, where customers’ purchases abandon it. Customers constantly need to be reminded of the translate into currency. Then, every time a customer makes a points they have earned. 50€ purchase, you would donate 5€ to an animal rescue organization.The reward when choosing the value-based Cash Back Loyalty Program best reward programme program is to connect with customers on a deeper level by In this type of Rewards Programme, your customers will earn creating a strong and ethical relationship with them. money after crossing a certain spend limit. They can then spend this earned cash on their future purchases. 6. Partnered Program PROS: It is a simple system to set up and follow. Customers love Can be super effective regarding customer retention, as you the idea of earning money by spending money which offer them more opportunities. At the same time, it can help encourages them to come to you more frequently. the growth of your business by building new business relationships (partnerships).While providing your customers CONS: You may not be able to attract customers in low spending with value that is relevant to them and goes beyond what your category using this type of Loyalty Program. It may not be company can exclusively offer them, you are showing them that suitable for businesses where the customers have no need to you truly understand and care about their needs. frequent your store. 7. Game Program Some other types of Loyalty programs Loyalty programs sometimes sound boring for the customers. 1. Point Program To make it interesting, a unique idea is to convert loyalty It is the simple & common program used widely by the firms. program into a game application to encourage repeat According to this, if you Spend more, you will get more points purchases, increase customer loyalty, entertain customers and in return. In this method, what happens is when a customer visit help strengthen your brand’s image in a more entertainment website or store to make a purchase, on the basis of amount of way. purchase certain points are added in their loyalty card. These Journal of critical reviews 1080 IS LOYALTY PROGRAM AS A MARKETING TOOL EFFECTIVE? 8. Hybrid Loyalty Programs (FA & RF, 2019)Concluded that Social bonding strategies should Is a combination or merger of 2 different loyalty systems. In this be used by companies to have loyal customers and must program, 2 different systems are merged such as tier and game provide value to everyone involved in exchange process. program, whenever customers reach a certain level of loyalty, Customer loyalty will come along with many benefits but for means that they have completed a new level in your game. that company should understand first, how customer loyalty is The most commonly used combination is point-based system built. This study revealed that Loyalty programs found to have with tier program because in this calculation of points is easy positive effect on Customer loyalty. Although Loyalty programs for the customers and motivates them to so for next loyalty level give benefits to customers, yet they compare the price with by making more purchases. competitors. Objective of the study (Shugan, 2005)Concluded that loyal customer should serve as • To study impact of Loyalty program on Customer an asset for the company rather than liability. True loyalty loyalty programs don’t demand trust, they built trust and believes in investing now for the future. There are some loyalty programs • To enhance the understanding about Loyalty which generate short term revenue to customers, but in long Programs term they become obligations for the customers. A real loyalty • To know how effectively Loyalty programs are used program is the one that becomes asset rather than liabilities for as a tool of marketing? the customers.