Loyalty Program - Apparel and Footwear Retailer - Essay Example

Loyalty Program – Apparel and Footwear Retailer The primary focus of this paper is to discuss the issue of Loyalty programs, how do they operated, what are their benefits to the customer as well as the retailer and what are the risks and drawbacks. The retailer selected for this analysis is The Gap Inc of the USA. The first Gap store was opened in the year 1969 with a humorous reason i.e. Donald Fisher, the owner of Gap Inc, was unable to find a pair of jeans that fitted him. The company currently operates within the apparel and footwear industry with five different brands under the names of – “Gap”, “Banana Republic”, “Old Navy”, “Piperlime” and “Athleta”.

“Gap”, “Banana Republic” and “Old Navy” are the divisions whose focus is towards the clothing and apparel industry whilst “Piperlime” and “Athleta” divisions are a part of the footwear industry (. Loyalty programs are considered to be techniques used by the marketing team of any organization in order grab and retain new and old customers respectively. The basic phenomenon of a loyalty program is to reward a customer in such way that he gets encouraged and enhances his/her buying ability.

Loyalty programs are designed in such a way that customers are issued a particular loyalty, points or club card. This card is similar to credit card and it usually holds barcode or a magstripe on its back. Every time a customer makes a purchase, his/her loyalty card is scanned via machines such as the bar code readers. This process entitles the customer to either receive a discount on his/her purchases or the customer, in some instances, is given the option to gather reward points which he/she can claim at any future date of purchase.

Loyalty cards like these are issued upon the request of a customer but prior to the issuance of such cards; certain information regarding the customer has to be filled up by him/her on some sort of an application form. Loyalty cards like these are commonly found in the USA. Several retail stores around the USA require cards like these to be shown to the retailer in order to avail reduced loyalty prices. Many stores in the USA allow for fuel discounts as well. This loyalty card program also became famous within the airline industry in 1979, where customers were awarded with points which could be availed at later dates for free air travel (Crandall, 2010).

Gap Inc also uses its own unique loyalty cards to increase their customer’s buying power and increasing its brand loyalty. Loyalty cards earn benefits for both the customers as well as the retailer/seller. Customers earn benefit by availing numerous discounts being offered by the retailers, except these discounts, the customers are also able to save those discounts monetarily in the form of reward points and those reward points can later be converted in the form of future free or discounted purchases.

At Gap Inc, these loyalty programs also help in aiding many different participating schools and other non-profit organization by diverting a percentage of the amount spent by the customers within their retail outlets. The customer’s information is kept confidential in accordance with the terms stated by the customers (GAP, 2009). The advantage that the retailer gains from such loyalty programs is the fact that customer’s buying habit may be enhanced which would result in higher revenues and hence higher profits for the retailer.

Such loyalty programs also help in improving the brand image of a particular retailer in the eyes of the customer and this consequently results in better goodwill of the retailer. Loyalty programs are also a step that helps in customer retention, the trick in loyalty programs is to create such a program that may be beneficial to both the customer (in terms of better discounts) and the retailer (in terms of increased revenue and profits from products which might not get sold off quickly). Each and every customer is rewarded incrementally based upon their purchase activities.

Each and every coin has two sides, likewise is the case with such loyalty programs. Such loyalty programs are judged to have certain drawbacks and risks as well. The major criticism of loyalty programs is that such programs are not of the greater use to the retailer/seller and that the costs of carrying out such loyalty programs are higher than its benefits. Commentators argue that such loyalty cards are only availed on those products which would get sold in any case either the discount is attached to them or not.

Loyalty cards are considered to carry privacy risks. Important information of any customer may get violated and he/she may get affected by it immensely. Works Cited “About Us ‘Key Facts’.” Gap Inc. 2011 11 July 2011< http://www.gapinc.com/content/gapinc/html/aboutus/keyfacts.html> Crandall, Robert. "A History of US Airline Deregulation." The Travel Insider.13 August 2010 11 July 2011 “Privacy Policy ‘Our Commitment to Privacy’.” GAP. 8 May 2009 11 July 2011