Articles / Recommended Reading / Relationship

Busting Six Myths About Customer Loyalty Programs

Image credit: http://hbswk.hbs.edu/

Image credit: http://hbswk.hbs.edu/

Busting Six Myths About Customer Loyalty Programs
Marcel Corstjens and Rajiv Lal

Harvard Business School
Working Knowledge
24 Feb 2014

Low-margin retailers argue they can’t afford customer loyalty programs, but is that true? Rajiv Lal and Marcel Corstjens make the case that such programs are profit-enhancing differentiators.

There are three ways to differentiate in retailing: location, location, and location. The problem is that as markets mature, location becomes less potent as a competitive advantage because the consumer has a growing abundance of convenient choices.

That’s one reason why mass retailing in mature markets is a sector notorious for its lack of differentiation between players. Once location has played out its magic, retailers tend to get squeezed in a business characterized by the infernal duo of low margin and high fixed cost. In such businesses, price wars are never far away.

Creating non-price differentiation is difficult in retail as well because development of such advantages takes time and is difficult to execute. All the while, low-price players are constantly looming to pounce.

(read more)

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s