W6: How Loyal Are You Really?

Frequency marketing is “technique that reinforces regular purchasers by giving them prizes with values that increase along with the amount purchased” Solomon et al (2019). This technique, also referred to as loyalty programs which are defined as “popular marketing strategies intended to attract, maintain, and enhance customer relationships”(Yoo, Bai and Singh, 2018).

It has helped coin such terms as “frequent flyers” (used across various industries now although having roots within the airline industry) and has led to the introduction of ‘Flybys’ (Coles), ‘Woolies Rewards’ (Woolworths).

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It is also a form of instrumental conditioning- this particular type works based on the rewards and positive reinforcements and experiences consumers have.

These loyalty programs, such as rewards cards, “are a marketing strategy based on offering an incentive with the aim of securing customer loyalty to a
retailer” (Gomez, Arranz & Cillan, 2006). The ultimate end goal for the business is the retention of loyal customers, and it also hopes to encourage word-of-mouth through consumers talking about their rewards to others.

It is a known fact that an existing customer yields more income for a company than a potential customers, this is further by research conducted by Shoemaker & Lewis (1999) who found that the costs of retaining a customers decline over time but the sales from them increase.

 

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Sharp & Sharp (1997) discuss the components of loyalty programs and how there has been an increase of these programs as many businesses felt they neglected customer retention strategies and in response introduced the loyalty programs to regain the customers they lost, whilst also trying to capture more of the market in doing so. Sharp & Sharp (1997) continue to analyse how loyalty programs could work similar to an ongoing promotion in the minds of a consumer, who believes they are constantly able to receive a special or sale for simply buying from that brand once more.

Yoo, Bai and Singh (2018) conclude that “program members’ behavioural loyalty
evolves positively over time that produces profitability”.

 

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Forever 21 has utilised this form of learning and conditioning through implementing a Forever 21 credit card

  • With points rewards systems such as: earn $5 for every 300 points, (3 points, per $1 spent in store or online at Forever 21, 2 points $1 spent on qualifying restaurants 1 point $1 spent anywhere Visa is accepted)
  • They also have first purchase discount of 20%, 5% back in reward program, welcome ket off 15% future purchase, birthday discounts $10 on $25 purchase, anniversary 21% off for reward anniversary and store’s birthday, free shipping.

This is a different way utilising reward program by introducing a credit card rather than simply a purely in-store card. This has helped differentiate Forever 21 and promote their store, to others even outside the store.

They have cleverly utilised this card to remind consumers of their brand continuously through the use of the card and the emails they receive once they have signed up for it. It helps cement Forever 21 in the minds on consumers on a regular basis, this helps shape consumer behaviour towards positively framing Forever 21 and encouraging more frequent purchases as they are constantly seeing the brand name and helping shape their purchase behaviour. They are also offering consumers a different way to accumulate enough points to seek the rewards they desire, which takes some pressure of them and makes them feel more rewarded in the long run.

The president of Forever 21, Alex Ok, has previously discussed the loyalty program saying they believe it will be a great success and “key driver of incremental and top-line sales” as well as a strong way to build relationships with consumers.

 

REFERENCES: 

García Gómez, B., Gutiérrez Arranz, A. and Gutiérrez Cillán, J. (2006). The role of loyalty programs in behavioral and affective loyalty. Journal of Consumer Marketing, 23(7), pp.387-396.

Sharp, B. and Sharp, A. (1997). Loyalty programs and their impact on repeat-purchase loyalty patterns. International Journal of Research in Marketing, 14(5), pp.473-486.

Shoemaker, S. and Lewis, R. (1999). Customer loyalty: the future of hospitality marketing. International Journal of Hospitality Management, 18(4), pp.345-370.

Solomon, Michael., Russell-Bennett, R. and Previte, J. (2019) Consumer Behaviour, Australian Edition, 4th Ed., Pearson

Yoo, Bai & Singh (2018), 8th Advances in Hospitality and Tourism Marketing and Management Conference: Loyalty Programs EffectivenessUniversity of the Thai Cambers of Commerce,

 

 

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