A study of loyalty programs and their impact on purchasing behaviour of customers

Abstract

There is a need for innovative loyalty programs in cutthroat competition of present day world to retain customers and increase sales. Firms abroad have been introducing new loyalty programs after extensive market research; on the contrary, most of the loyalty programs offered in India do not rely on any scientific basis and base their programs on hit and miss method. This report is an attempt to conduct a scientific study on various loyalty programs and understand the critical factors in designing an effective loyalty program. This report includes literature review on various loyalty programs employed in different domains such as Credit card and Consumer Packaged Goods. Effective design of cost effective loyalty programs in consumer packaged goods industry was also examined. The various parameters involved in design of loyalty programs were also covered in the literature review. From the literature review conducted, guidelines to design an effective loyalty program were proposed. To analyze a live situation where a loyalty program can be designed, we have selected Executive Education Program at IIMB as case in point. Loyalty programs have been designed targeted towards subscribers of short term customized programs. Segmentation of these users has been done and accordingly loyalty programs are suggested for these segments. Financial implications of loyalty programs were examined for IIMB.