Why Coles stores are always filled with customers popping in and out?
Why Amazon, Qantas, Myer are frequently being mentioned by people?
Well, there’s no fairy tale grandma who weaves her wand and hypnotizes customers to shop in these stores. The answer simply lies in their marketing strategy which is their LOYALTY PROGRAMs.
- “Good marketing and good strategy are both about making choices that build and maintain a particular set of capabilities that enables the company to outperform its competitors with a particular set of customers” (Martin, 2013). Kumar et al. (cited in Beck, Chapman & Palmatier, p.3) states that strategies that build customer relationships enhance sales and profit over time, especially when sellers adopt these strategies before competitors .
Additionally, if I want my plan to succeed I must prepare a strategy different from the superpowers in my business field. Following the same strategy, I (a novice ) ,cannot expect to win the match with the already experienced players in this field . If they focus on product leadership, I should base my strategy on differentiation or being focused in one specific area.
Defining Loyalty Programs………
Bolton, Kannan and Bramlett (cited in Mattison Thompson & Chmura 2015, p. 87) defines loyalty programs as the marketing activities that support and enhance a firm’s value proposition by providing additional incentives for consumers to repeat purchase .Loyalty programs in Emerging and Developed Markets: The Impact of Cultural Values on Loyalty Program Choice
Today, some of the popular rewards programs are
- Coles Flybuys (being the largest in Australia),
- Woolworths Everyday Rewards,
- Amazon Prime, Myer One,
- Carter’s Rewarding Moments,
- Amazon Prime.
Offering loyalty points or rewards is an increasing applied and appealing tactic that is used by marketers to gain additional profits. In simple words, these help retain customers.
Starbucks coffee: recent example relating with loyalty plans.
Starbucks is a renowned coffee company which commenced its journey in 1970, with a single store at Seattle in Washington. It is well known for the ethically sourcing of the finest coffee beans, roasting them with great care, and improving the lives of the people who grow them (Starbucks Australia 2016). Starbucks has been in news for its new loyalty program.
In April 2016, Starbucks launched a new loyalty reward for its customers according to which
- instead of earning one star per visit (as per their older reward program ), members earned two stars for every dollar they spent (Vasel 2016). This made earning points much easier .
- additional perks are offered to the customers like periodic free drinks.
- the gold level members also get the benefit of Double Star Days (once a month), when they will get two stars for every dollar spent.
- the number of levels were reduced from 3 to just 2.
Since the announcement of this program , it was found that a large number of people have registered for this program. This happened as Starbucks strategy of alluring the customers was successful.
SWOT Analysis of Starbucks Position
However, this strategy (rewards) is not a cupcake. If you think you have your own rewards program and this will make your profits soar high, then, let me remind you, YOU ARE ABSOLUTELY WRONG. It has been found that Consumers belong to an average of 13.4 loyalty programs, but are active in only 6.7 programs .
A marketing strategy for a company can be successful only if ,careful situation analysis is carried out before its execution and preparation , by which I mean SWOT analysis .
Strengths: If you have just started a new business and are thinking of a loyalty program offering huge discounts, then man, you are going to repent it dearly. Know your strengths first and then devise a strategy. Starbucks has vast resources in money, men and machinery and so giving free drinks sometimes does not affect its gains much.
Weaknesses: The relatively higher prices of Starbucks’ products make them less accessible to the large population of lower-middle class and lower class consumers (Lombardo, 2015). Most Starbucks products are also based on generalized corporate standards that make the products less aligned with cultural demands in some markets(Lombardo 2015). So, here , innovation is the key in this field.
Opportunities :The coffee giant still has stores in 63 countries . But it is struggling to survive in Australia. So employing this new strategy of improved loyalty program in Australia had been a better option.
Threats: It faces threats from low cost coffee sellers and also because its products are easily imitable. So, this coffee giant must have kept this in mind while devising its new strategy.
So, one must consider all these points before devising own loyalty program.