Questions and Answers
What is the primary goal of determining the LP's goals during the design and implementation process?
Which of the following is a factor that determines the effectiveness of loyalty programs?
What is a key consideration when managing the costs of loyalty programs?
Which of the following is a consideration when designing the reward mechanism of a loyalty program?
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What is a key aspect of the participation requirements of a loyalty program?
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Which of the following is a characteristic of a firm that can affect the effectiveness of a loyalty program?
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What is a key consideration when designing the reward structure of a loyalty program?
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Which of the following is a dimension of loyalty programs?
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What is a key aspect of aligning the design of a loyalty program with the characteristics of the market and customer base?
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Which of the following is a characteristic of a successful loyalty card design and implementation?
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Study Notes
Creating Value and Loyalty Programs
- CRM (Customer Relationship Management) is a core business strategy that integrates internal processes and functions with external networks to create and deliver value to targeted customers at a profit.
- Value is the customer's perception of the balance between benefits received from a product or service and the sacrifices made to experience those benefits.
Key Components of Value
- Benefits (product/service features, quality, and performance)
- Sacrifices (money, search cost, psychic cost, functional-unsatisfactory performance outcomes, financial, temporal, physical, psychological, social, and sensory)
Total Cost of Ownership (TCO)
- TCO looks beyond the costs of acquiring products to the full costs of using, servicing, and disposing of the product throughout its life.
- Economic Value to the Customer (EVC) is a pricing strategy that responds to TCO by proving to customers that the value proposition improves their profitability.
Developing Customer Value Propositions
- A value proposition is a company's promise to deliver a particular bundle of value-creating benefits.
- Three key value delivery strategies:
- Product leadership (providing the best products/services/solutions)
- Customer intimacy (adapting offers to meet individual customer needs)
- Operational excellence (efficiently providing products/services at low cost)
Designing Loyalty Programs
- A loyalty program (LP) is a marketing process that generates rewards for customers based on their repeat purchases or engagement with the brand.
- Key objectives of introducing LPs:
- Building true (attitudinal and behavioral) loyalty
- Efficiency profits (changing customer buying behavior)
- Effectiveness profits (developing better knowledge of customer preferences)
- Value alignment
Attitudinal vs. Behavioral Loyalty
- Behavioral loyalty refers to observed customer actions towards a product/service.
- Attitudinal loyalty refers to a customer's perceptions and attitudes towards a product/service.
Designing Loyalty Programs
- LP design involves discretion in composition, choice of dimensions, and weights assigned to each dimension.
- Dimensions of LPs:
- Reward mechanism (transaction-based vs. engagement-based)
- Reward structure (hard vs. soft rewards, product proposition support, aspirational value, rate of rewards, tiering, timing, and rewards based on specific criteria)
- Participation requirements (voluntary or automatic enrollment, automatic or manual point accumulation)
- Payment function
- Sponsorship (existence of partner network, network externalities)
Factors that Determine LP Effectiveness
- LP design characteristics
- Customer characteristics
- Firm characteristics (perishability of product, breadth and depth of firm offering)
Successful Loyalty Card Design and Implementation
- Clearly determine LP goals compatible with marketing strategy and organization positioning.
- Align LP design with market, customer base, and firm characteristics.
- Manage LP costs.
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Description
This quiz covers creating value and loyalty programs in customer relationship management, focusing on identifying key components of value and designing effective loyalty programs.
