Strategies for increasing Customer Loyalty - Essay Example

The airline industry is a case-in-point. Customer loyalty programs, while different in their form and detail, often have the same basic features. As Brook Consulting (2006) puts it, "many companies focus on rewarding customers who have repeat purchases . . . such reward programs have their place in assuring customer loyalty . . . however, if the product or service doesn't meet customer needs, no reward program will keep them returning." (my emphasis). The basic fact is that if a company offers a product or service that consumers desire then no customer loyalty program is really needed as the customers will return to give repeat business.

This paper will analyze a number of different types of customer loyalty programs, from those that succeed to those of uncertain success to those that have not worked. There is a great variety of reward and loyalty programs currently in place. As Kim (2001) puts it, "in the marketplace we observe a diverse set of offerings, ranging from cash rewards, firm's free products or service, or free products or service of another firm in a different category". Thus, The question arises as to whether there is any method to the apparent madness of these customer loyalty programs. . Wal-Mart is the largest retail company in the world.

It provides a whole range of consumer goods from clothes to sports-ware to household items to food and automotive services. It sells virtually any consumer product that a customer could want, becoming almost ubiquitous in recent years. Recently it has also expanded its offerings to include on-site banking, hairdressing, tax advice and numerous other activities that it normally offers through outsourcing. Wal-Mart has no customer loyalty program because it does not need one. By the end of 2003, more than 100,000,000 /week visited Wal-Mart stores worldwide, and it had $256 billion in sales (Economist 2004).

The very appearance of a Wal-Mart in an area seems to create its own self-contained customer loyalty program. None that is centrally organized is needed. Wal-Mart's customer loyalty is gained by offering the best prices on a whole range of products, together with a remarkably liberal return policy that allows a no-questions asked return on most goods up to three months after purchase. Wal-Mart currently employs more than 1.7 million people worldwide, with 1.3 million of them in America alone.

This makes it the largest private employer in America, and probably the largest company that the world has ever known. Such massive size brings the obvious advantages of economies of scale. Thus Wal-Mart can offer the lowest possible prices on its products through its massive buying leverage with its suppliers. It can pick and choose its suppliers, and there is great competition to become a leader supplier to Wal-Mart.For about half of companies customer loyalty programs take on a more concrete, and risky dynamic, as they offer to