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Has the loyalty card had its day in European retailing?
Keywords:
Loyalty schemes, Customer loyalty, Consumer behaviour, Market research
Loyalty cards have become an increasingly sophisticated marketing strategy in recent years. These bits of plastic that most of us have in our wallets serve three basic functions: identification, memory and reward. As technological advances have enabled increasingly sophisticated databases, retailers have gained the ability to target customers with frightening accuracy. Do you have sophisticated tastes? Your supermarket loyalty card will reward you with money-off coupons for French cheese and fine wine. Have you recently succumbed to the joys of dog ownership? Coupons for essential pet care products will soon be dropping through the letterbox. However, the important question is: do loyalty cards actually work? That is, do they encourage customers to spend more money with the shop offering this incentive and are customers thus rewarded less likely to shop elsewhere?
Do loyalty cards work?
Retailers certainly seem to believe that loyalty cards are an effective marketing strategy. In recent years the top sixteen European retailers have spent over $1 billion annually on loyalty cards and similar initiatives. However, despite the vast sums of money being spent on customer loyalty, there is little hard evidence about whether such strategies actually work. Even less information is available about how they work. However, Nordhoff et al. (2004) think they might have some insights into the question of "how" loyalty cards work. They propose that store loyalty actually exists in two different forms: attitudinal and behavioral. Behavioral loyalty probably represents more of what retailers are aiming for, as it has to do with customer habits. Customers exhibiting behavioral loyalty spend more of their shopping budget at stores whose loyalty cards they hold. Attitudinal loyalty represents a psychological disposition toward a certain retailer. It does not necessarily translate into hard cash.
Targeting Asian markets
Despite that the effectiveness of loyalty cards has not been established, they are...