Over the recent years, loyalty programs have become vital in relationship marketing in various industries today. Using these programs has been important in the encouragement of customer loyalty. In many retail companies, customer loyalty is a major factor in ensuring success since keeping existing customers is relatively cheaper than trying to draw new customers. These programs have invested in card technology and have introduced cards that enable the retail company to collect data and information about customers. This incentive plan has been established to offer certain services such as points for the goods bought, coupons for various prizes, and discounts on merchandise purchased by the customer. The loyalty card program offers clients who participate something that is not available to other non-participating clients, which allows the company to build some repeat business. They resemble common credit cards that are plastic and they can also be stickers. According to the research done, over sixty percent of shoppers from America are listed in at least one loyalty database, while a survey done in different states on various buyers shows that they are willing to give up some aspect of their privacy to receive the card. This card technology has helped many businesses evaluate needs of their customers to be able to plan a strategic business plan based on real-time industry information. This research paper is going to analyze frequent customer loyalty cards and the impact they have from the financial, ethical, and future perspectives.
Customer Loyalty Cards and Programs
Customer loyalty programs are marketing efforts that are structured to reward a customer who is loyal to any business establishment, thereby encouraging them to return to the firm again. This program is designed to give the client access something that is more advanced than common free products and prizes, coupons for special sales, and discounts on new products. This is done after the customer has registered his/her personal information with the business company and has been given a loyalty card to be able to access these services (Uncles, Dowling, & Hammond, 2002). These programs operate as incentives by giving out special benefits that are based on purchasing that is cumulative over time and it encourages shoppers to change from decision-making that is single-period to multiple-period decision-making.
The incentives provided for customers encourage them to buy merchandise more often usually and in larger quantities. Loyalty programs do not only increase the number of customers that are loyal to the company, but they also tend to gather enough information to evaluate habits of the client and merchandise preferences. The main purpose is to increase the happiness of consumers and improve the company’s customer retention. Customer loyalty develops the relationship between the client and the business establishment and relationship continuity is reflected upon by customer retention. The customer retention programs objective is to change a normal buyer to an occasional and then frequent one (Magatef & Tomalieh, 2015). Customer loyalty programs are effective because they are based on the organization’s capabilities and size. Both large and small businesses can set up this program depending on how they can expand and innovate.
Stakeholder value that is sustainable is created by customer loyalty, which has become an important area of focus in various markets today. According to former business analysts, building the relationship with customers and being able to keep them is the real purpose of business. There are many research reports, which indicate that customers in various businesses are not equal and those who are loyal to a business are far more profitable to the company than normal clients. Customer loyalty cards reduce defection of customers from the organization, which in turn maintains its base profits that help in the growth of the company. Loyalty cards also increase the company’s profits because loyal customers spend more money over time as they continue purchasing products. Customers with loyalty cards also cost less money to serve than other normal consumers and therefore also increase profits of the company. Over time, customers build trust with the organization to the point of buying high-margin products. This product costs a lot of money and it increases profits of the organization, thereby increasing the growth rate. As customers become loyal to the business, they refer their loved ones and other people to the business they love and advise them on the benefits of loyalty cards. This increases the number of customers in the business, thus promoting generation of profits for the company.
Customer loyalty card programs follow patterns similar to that of a particular customer by tracking his/her spending habits and giving different forms of prizes for the purchasing behavior. These programs, however, should be implemented with a lot of caution in order to try to avoid various ethical issues related to the subject. As the organization collects customers’ information before giving out loyalty cards, it should disclose to customers how it intends to use the information so that they can secure consent. This is because each customer interprets privacy in different ways and his/her need for privacy should be balanced with the needs of the company. The information could be used in the marketing of the organization’s services. As such programs seek to reward customers who are profitable, they may accidentally favor the wealthy as they are more likely to be lucrative, which may make the company look unfriendly to poor customers. Ethical issues may arise when people making decisions to reward customers are separate from people paying for such decisions.
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Benefits of a customer loyalty card program do not end at bringing in customers as to when the business has a technological advantage over other competitors, the program for rewards will be beneficial to the business. The technology will provide customer information that is detailed when other competitor businesses have to hire expensive market-research firms to gather such customer information (Lee, 2014). The technological impact on these programs has enabled many companies to adopt high-end modern tools that convert the customer information gathered into promotions that are better and thus ensure generation of high revenues. The point-of-sale system is one of the tools used in these programs. Some of these modern point-of-sale systems give functionality to customer relationship management. This system tracks histories and trends of customer purchasing behavior and establishes a profile for the customer using certain basic information such as credit card numbers, email, and phone numbers. Modern point-of-sale systems also have loyalty programs, which connect profiles of customers to rewards. Loyalty networks and email marketing are other technological tools that do all the management functions and marketing for the organization and other related businesses that are connected to the network.
Many customers have doubts before giving out their private information to various organizations without knowing how they intend to use it. People have asked the government to investigate and make sure that organizations in the industry do not manipulate customers’ private information to benefit themselves in a way that is illegal (Kumar & Shah, 2004). Political figures have set out an agenda to lobby the concerned government institutions to ensure there are more checks on the use of information gathered through loyalty cards in supermarkets and other businesses. Compulsory ID cards for people is the idea of the state and people should trust them since the government has also accepted the use of loyalty cards used by private firms. Loyalty cards could even help stop any potential terrorist threats by limiting the use of multiple identities since information on the database is broad and wide. The government should put in place a watchdog that would supervise and oversee information in the customer database in any organization by limiting access to people’s details.
For organizations to ensure their customers’ true loyalty, they have to think outside the box and improvise on common traditional loyalty card programs. Many business brands are now focusing on creating loyalty in all business aspects to fully comprehend the needs of the customer. In big corporations, loyalty is created by relationships that are long-term and build trust between each other rather than merely depending on common plastic customer loyalty cards (Magatef & Tomalieh, 2015). Many brands want to create such relationships with their customers and they have used predictive analytics to gain a better insight on the behavior of the client. With the help of modern technological ideas, big organizations have put customer programs, which use texts in their analytics to compare and equate it with other data collected, to determine patterns in the purchasers’ experience. New schemes will do away with plastic cards though there will be a place for them for some time when digital channels used in much bigger brands in the industry will overthrow loyalty cards.
According to the information gathered, it is clear that customer loyalty cards have been useful and very important in building trust and loyalty among consumers and ensuring retention of clients, which has proved to be significant for the growth of many brands in the industry. All loyalty program initiatives benefit organizations, as well as customers purchasing the merchandise. Brands have made a lot of profit from significant spending of loyal consumers and the sale of high-value merchandise. Organizations should disclose information on the use of private buyers’ information gathered to get consent from them. The government should put in place institutions to monitor the use of clients’ private information and upcoming brands should incorporate modern technological facilities and systems to improve the performance of customer loyalty cards programs.