Do customer loyalty programs really help sellers make money?
New study finds that yes, they do, but not in the ways you may think
2021-06-07
(Press-News.org) Key Takeaways:
Study finds non-tiered customer loyalty programs create a more sustainable customer base.
Non-tiered customer loyalty programs are not as likely to generate increases in spending per transaction or accelerate transactions.
CATONSVILLE, MD, June 7, 2021 - Customer loyalty programs have been around for decades and are used to help businesses, marketers and sellers build a sustainable relationship with their customers. But do they work? A recent study sought to find out and researchers learned that while yes, customer loyalty programs do work, perhaps not in ways most may assume.
There are two basic types of customer loyalty programs, tiered and non-tiered. Airlines and hotels often use tiered customer loyalty programs that increase rewards as program members reach higher thresholds of spending over time. Retailers and service industry businesses are more likely to offer non-tiered customer loyalty programs, in which members are rewarded with frequent, but not increasing rewards, such as "buy 10 get one free."
This research investigated if those non-tiered customer loyalty programs actually do what they are designed to do.
The study to be published in the June issue of the INFORMS journal Marketing Science, "Can Non-tiered Customer Loyalty Programs Be Profitable?", is authored by Arun Gopalakrishnan of Rice University, Zhenling Jiang of the Wharton School of Business at the University of Pennsylvania, and Yulia Nevskaya and Raphael Thomadsen of the Olin Business School at Washington University in St. Louis.
The authors found that non-tiered customer loyalty programs increase customer value by almost 30% over a five-year time period. They discovered that the program's effectiveness is not so much through increased spending per transaction or frequency of purchasing but rather through the reduction of attrition. In other words, the chief benefit is that the customer loyalty program reduces customer fall-off and turnover.
"We found that a non-tiered customer loyalty program's reduction in attrition accounts for more than 80% of the program's total lift or success," said Thomadsen. "On the other hand, increased frequency accounts for less than 20% of the program's lift or effectiveness."
Jiang added, "One of the more interesting findings was that the impact of the loyalty program does not necessarily contribute to increased spending per transaction or increased frequency of transactions. Rather, the benefit to the business is creating more sustainable and lasting relationships with customers."
To conduct their research, the authors worked with a company to collect data of more than 5,500 new customers who first started purchasing from that company in the same three-month period. This helped to ensure that the customers were comparable in terms of the amount of time they had to become acquainted with the selling firm. For the next 30 months, the researchers collected all subsequent transaction data from those consumers. During that period, a non-tiered customer loyalty program was introduced.
In the process, some of these new customers were automatically enrolled into the loyalty program. This helped researchers better gauge pre-program visit frequency and spending and then compare it to post-enrollment visit frequency and spending. "We were able to analyze the behaviors of consumers absent a customer loyalty program, and then after the rollout of the program," said Nevskaya. "We evaluated frequency and actual spending amounts, and whether customers come back for repeat transactions."
Gopalakrishnan summarized, "In the end, the primary value of a non-tiered customer loyalty program is not a means to increase frequency or spending. It's a way to nurture a long-term and lasting relationship with the customer to reduce the defection of loyal customers over time. Non-tiered loyalty programs may provide psychological benefits that help cultivate such loyalty."
INFORMATION:
About INFORMS and Marketing Science
Marketing Science is a premier peer-reviewed scholarly marketing journal focused on research using quantitative approaches to study all aspects of the interface between consumers and firms. It is published by INFORMS, the leading international association for operations research and analytics professionals. More information is available at http://www.informs.org or @informs.
ELSE PRESS RELEASES FROM THIS DATE:
2021-06-07
LA JOLLA--(June 7, 2021) Type 1 diabetes, which arises when the pancreas doesn't create enough insulin to control levels of glucose in the blood, is a disease that currently has no cure and is difficult for most patients to manage. Scientists at the Salk Institute are developing a promising approach for treating it: using stem cells to create insulin-producing cells (called beta cells) that could replace nonfunctional pancreatic cells.
In a study published on June 7, 2021, in the journal Nature Communications, the investigators reported that they have developed a new way to create beta cells that is much more efficient than previous methods. Additionally, when these beta cells were tested in a mouse model of type 1 diabetes, ...
2021-06-07
WHAT:
New findings published in JAMA Neurology suggest there is no difference in cognitive outcomes at age 2 among children of healthy women and children of women with epilepsy who took antiseizure medication during pregnancy. The findings are part of the large research project Maternal Outcomes and Neurodevelopmental Effects of Antiepileptic Drugs (MONEAD), which is a prospective, long-term study looking at outcomes in pregnant women with epilepsy and their children. The study was funded by the National Institute of Neurological Disorders and Stroke (NINDS), part of the National Institutes of Health. ...
2021-06-07
Youth brain activation data from the largest longitudinal neuroimaging study to date provides valuable new information on the cognitive processes and brain systems that underlie adolescent development and might contribute to mental and physical health challenges in adulthood. The study published today online in END ...
2021-06-07
Artificial intelligence natural language computer applications are becoming increasingly sophisticated, raising the possibility that they could assume a greater role in health care, including interacting with patients. But before these applications enter the clinic, their potential and pitfalls need thoughtful exploration, states a new article in NPJ Digital Medicine.
The authors are Diane M. Korngiebel, a Hastings Center research scholar, and Sean D. Mooney, chief research information officer at University of Washington Medicine.
"There is compelling promise and serious hype in AI applications that generate natural language" Korngiebel and Mooney write, referring to OpenAI's Generative Pre-trained Transformer 3 (GPT-3) ...
2021-06-07
LEBANON, NH - Previous work by a team of researchers led by Steven N. Fiering, PhD, Immunology and Cancer Immunotherapy researcher at Dartmouth's and Dartmouth-Hitchcock's Norris Cotton Cancer Center and Nicole Steinmetz, PhD, Jacobs School of Engineering and Moores Cancer Center, University of California San Diego, showed that a plant virus that does not infect mammals, cowpea mosaic plant virus (CPMV), when injected into cancerous tumors, strongly stimulated the immune system to attack and often eliminate the tumor. However, very little was understood about immune recognition of plant viruses and how and why CPMV is exceptionally immuno-stimulating. In a new study, the team identifies ...
2021-06-07
Extreme risk protection orders (ERPOs), also known as gun violence restraining orders, are civil court orders that grant temporary restrictions on purchasing and possessing firearms for individuals determined by a civil court judge to be at extreme risk of committing violence against themselves or others. A new study examined ERPO use in Oregon in the first 15 months after it was adopted. The study found that while ERPOs are commonly considered as a tool to remove guns from dangerous individuals, they should also be considered as a tool to prevent gun purchases by dangerous individuals.
The study was conducted by researchers at Michigan State University (MSU), Columbia University, the University of Michigan, and Johns Hopkins University. It appears in ...
2021-06-07
The threat of antibiotic resistance rises as bacteria continue to evolve to foil even the most powerful modern drug treatments. By 2050, antibiotic resistant-bacteria threaten to claim more than 10 million lives as existing therapies prove ineffective.
Bacteriophage, or "phage," have become a new source of hope against growing antibiotic resistance. Ignored for decades by western science, phages have become the subject of increasing research attention due to their capability to infect and kill bacterial threats.
A new project led by University of California San Diego Biological Sciences graduate ...
2021-06-07
To investigate factors that can jeopardize pregnancy success in cattle, researchers at the University of São Paulo (USP) in Brazil used a kind of chip to mimic the environment of the endometrium, the tissue that lines the inside of the uterus.
The study was conducted by biologist Tiago Henrique Camara de Bem, a postdoctoral fellow at the University of São Paulo's School of Animal Science and Food Engineering (FZEA-USP), in collaboration with four researchers at the University of Leeds in the UK. Their findings are reported in an article in the journal Endocrinology.
The researchers focused on analyzing alterations in levels of insulin and glucose in maternal ...
2021-06-07
CAMBRIDGE, MA -- About 60 percent of drugs on the market have hydrophobic molecules as their active ingredients. These drugs, which are not soluble in water, can be difficult to formulate into tablets because they need to be broken down into very small crystals in order to be absorbed by the human body.
A team of MIT chemical engineers has now devised a simpler process for incorporating hydrophobic drugs into tablets or other drug formulations such as capsules and thin films. Their technique, which involves creating an emulsion of the drug and then crystallizing it, allows for a more powerful dose to be loaded per tablet.
"This is very important because if we can achieve high drug loading, it means that we can ...
2021-06-07
ITHACA, N.Y. - As soon as an ear of corn is taken off its stalk or a potato is pulled from the ground, it travels anywhere from a few miles to across continents and sometimes undergoes processes that transform it into the food we consume.
These miles and processes contribute to what's known as the food value chain (FVC), along which, as one might expect, the value of the product increases. However, most of the research and attention thus far paid to FVCs occurs at the ends of the chain - inside the farm gate and at the consumer's plate.
Less is understood about all of the other links in the FVC, in part due to a lack of ...
LAST 30 PRESS RELEASES:
[Press-News.org] Do customer loyalty programs really help sellers make money?
New study finds that yes, they do, but not in the ways you may think
