Jove
Visualize
Contact Us
JoVE
x logofacebook logolinkedin logoyoutube logo
ABOUT JoVE
OverviewLeadershipBlogJoVE Help Center
AUTHORS
Publishing ProcessEditorial BoardScope & PoliciesPeer ReviewFAQSubmit
LIBRARIANS
TestimonialsSubscriptionsAccessResourcesLibrary Advisory BoardFAQ
RESEARCH
JoVE JournalMethods CollectionsJoVE Encyclopedia of ExperimentsArchive
EDUCATION
JoVE CoreJoVE BusinessJoVE Science EducationJoVE Lab ManualFaculty Resource CenterFaculty Site
Terms & Conditions of Use
Privacy Policy
Policies

Related Experiment Videos

Your loyalty program is betraying you.

Joseph C Nunes1, Xavier Drèze

  • 1University of Southern California's Marshall School of Business, Los Angeles, USA. jnunes@marshall.usc.edu

Harvard Business Review
|April 4, 2006
PubMed
Summary

Designing effective customer loyalty programs requires clear business goals and strategic reward structures. Successful programs incentivize behavior without eroding profit margins, avoiding common pitfalls like price wars and rewarding unprofitable purchases.

Related Concept Videos

You might also read

Related Articles

Articles linked to this work by shared authors, journal, and citation graph.

Sort by
Same author

License to Sin: The Liberating Role of Reporting Expectations.

The Journal of consumer research·2013
Same author

Status, race, and money: the impact of racial hierarchy on willingness to pay.

Psychological science·2011
See all related articles

Area of Science:

  • Business Strategy
  • Consumer Psychology
  • Marketing Analytics

Background:

  • Customer retention is more valuable than customer acquisition.
  • Many launched loyalty programs fail due to design and execution flaws.
  • Understanding consumer behavior is key to loyalty program success.

Purpose of the Study:

  • To identify patterns in successful and failed customer loyalty programs.
  • To provide a toolkit for designing effective loyalty programs.
  • To clarify the objectives and capabilities of loyalty initiatives.

Main Methods:

  • Analysis of loyalty program successes and failures.
  • Identification of common mistakes in loyalty program design.
  • Research into consumer psychology and reward perception.

Main Results:

  • Successful programs clarify business goals, engineer reward structures, and balance incentives with profitability.
  • Key objectives include customer retention, increased share of wallet, and behavioral insights.
  • Rewards must be divisible for redemption but sufficient to foster loyalty.

Conclusions:

  • Avoid creating commodity-like programs prone to price wars.
  • Do not reward disloyal behavior or prioritize purchasing volume over profitability.
  • Ensure programs are sustainable and deliver on promises to build genuine customer loyalty.

Related Experiment Videos