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Abstract This paper reviews the approach to evaluating retail customer loyalty schemes. Traditionally, these schemes are evaluated by their financial and marketing effects on acquisition, retention and development (up-sell, cross-sell) of customers and related efficiencies. This paper argues that the evaluation should also be through how far having a customer loyalty scheme can and/or should, at a minimum, transform the way the various partners carry out their marketing and, more widely, their business.
INTRODUCTION
Store loyalty cards were widely developed during the mid-1990s. This is thought by many to show that retailers have embraced keenly the idea of developing closer relationships in their fight for the customer.' Other studies, however, focus on the difficulties of implementing a relationship marketing strategy in retailing. Pressey and Mathews2 emphasise that despite the use of loyalty cards and database marketing techniques by UK retailers, most transactions are 'discrete, short-term, one-off acts'. Given the closeness of the retail industry to the customer it is surprising that more sophisticated relational and loyalty strategies are not considered. The retail market is maturing and becoming more competitive, so retailers have sought different ways of improving sales and profits. They are adopting more transformational relationship marketing and loyalty schemes that aim to build greater customer loyalty and retention, and develop methods of creating longer-term relationships, with the aim of improving profits.3
Loyalty schemes are just one of many competitive initiatives used by retailers to supplement the traditional weapons of brand, customer service, price, merchandise range, product promotions and location. There is a strong focus on the end-to-end shopping experience, on winning and keeping customers and improving share of selected customers' business. IBM research4 shows that:
- increasingly discerning customers are demanding more services and information;
- heightened competition in mature, saturated markets is making it more difficult for retailers to sustain differentiated brands and value propositions;
- rapid evolution and adoption of new technologies present both opportunities and risks for companies seeking to innovate.
The IBM research shows that retailers are using a wider range of technologies, inside and outside the store, to improve and differentiate the shopping experience. Retailers are investing in employee empowerment and improved marketing effectiveness. To improve productivity, retailers are giving their employees online access to a wide...