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Unit 11: Customer Loyalty

advocacy as a result of a customer loyalty program, or other customer-focused efforts and Notes
initiatives, means that the customers wholeheartedly believe one or more elements of the
scheme have created desired value.
The objective here is to link beliefs, inherent in performance, and the actions and behaviours
associated with likely future purchase and recommendation.

The three metrics that are at the heart of any successful loyalty program are:
Overall performance,
Likelihood to repurchase,
Likelihood to recommend.

11.5.1 What Affects Customer Loyalty?

The degree of customer loyalty is depend on the attitudinal loyalty and behavioural loyalty.

Figure 11.7: Factors Affecting Customer Loyalty
Satisfaction
Emotional bonding ATTITUDINAL
Trust/risk reduction LOYALTY DEGREE OF
CUSTOMER
LOYALTY
Habit
Choice reduction BEHAVIOURAL
History with the LOYALTY
company

Features of a successful loyalty scheme
1. Customers must perceive added value.

2. It must be mutually beneficial.
3. It must reward increased spending, e.g. British Airways ‘Executive Club’ programme,
where more spending leads to more privileges.
4. Communication: it provides names and addresses of prime customers who can be targeted
for future schemes/offers, etc.
5. Cost: the cost should be borne by the organisation and not by the customer. However,
entry barriers like initial purchase to enter the scheme may exist.
6. Multi-site: the scheme/loyalty card must be usable at any branch/anywhere.
7. Multi-organisation: one organisation’s card usable at another organisation, e.g. British
Airport Authority’s (BAA) loyalty scheme allows a customer to collect points based on
purchase at a wide range of retail and food outlets in the airports controlled by BAA.
8. Ease of redemption: the effort required by customers to redeem their rewards for goods
should be kept to the minimum. The use of technology can aid this; for example, loyalty
cards that are computer readable.

Self Assessment

State True or False:
6. Companies like Air India and Kingfisher Airlines are more in touch with the customers
than the channel members.

LOVELY PROFESSIONAL UNIVERSITY 237