Consumer behaviour
Customer loyalty

Loyalty marketing programs are built on the insight that it costs 5-20 times more to acquire a new customer than to retain an existing customer. Marketers use a variety of loyalty programs to strengthen customer attitudes towards the brand (or service provider/retailer) in order to retain customers, minimise customer defections, and strengthen loyalty bonds with existing customers. Broadly there are two types of program: reward and recognition programs. In a Reward Program, the customer accumulates points for each purchase, and the points can subsequently be exchanged for goods or services. Recognition Programs operate on a quasi-membership basis where the consumer is issued with a card that upon presentation leads to various entitlements such as free upgrades, special privileges, or access to products/services that are not normally available to non- members, and that acknowledge the loyal customer's "VIP" status. For example, a hotel might recognise loyal patrons by providing a complimentary fruit bowl and bottle of champagne in the room on arrival. Whereas reward programs are motivated by the consumer's desire for material possessions, recognition programs are motivated by the consumer's need for esteem, recognition, and status. Many commercial loyalty programs are hybrid schemes, combining elements of both reward and recognition. In addition, not all reward programs are designed to encourage loyalty. Certain reward programs are designed to encourage other types of positive customer behaviour such as the provision of referrals or providing positive word-of-mouth (WOM) recommendations.
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