Customer Loyalty Schemes in the Retail Sector
Customer loyalty schemes (or programs) are explicit efforts by retailers to gain long-term patronage from customers. Loyalty schemes are developed for a variety of reasons including to reward loyal customers, to generate more robust information about customer behavior, to influence consumer behavior, and as a defensive measure to combat a competing scheme. The purpose of this note is to describe the objectives of these schemes, their origin and evolution, to highlight key aspects of their implementation, and to suggest approaches to maximize their impact. While this note focuses on the U.S. and U.K. retail sectors, most of its content is applicable to other economies.