Are customer loyalty programs too expensive?

Low-margin retailers often argue they can’t afford customer loyalty programs, but is that true? Two business professors make the case that such programs are profit-enhancing differentiators.

When location, location, location is the only means of differentiating and all is left to low margin and high prize, what to do then? Creating a non prize differentiation in this position is hard, takes time and costs money. Maybe this is why many retailers have adopted loyalty programs as a convenient mechanism of meaningful differentiation. At the end loyalty programs should offer incentives for customers to stay put with their store by offering them better value. Also loyalty programs have the added advantage of rapid establishment and making the threat of price wars from competing retailers less credible.

According to Forbes there are a number of myths over whether loyalty programs offer a sustainable and profitable business model. Dig in to the full article on Forbes.

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