{"id":1954,"date":"2018-03-27T19:53:20","date_gmt":"2018-03-27T19:53:20","guid":{"rendered":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/?post_type=chapter&#038;p=1954"},"modified":"2024-04-25T02:48:56","modified_gmt":"2024-04-25T02:48:56","slug":"frequent-shopper-and-rewards-programs","status":"publish","type":"chapter","link":"https:\/\/courses.lumenlearning.com\/wm-retailmanagement\/chapter\/frequent-shopper-and-rewards-programs\/","title":{"raw":"Frequent-Shopper and Rewards Programs","rendered":"Frequent-Shopper and Rewards Programs"},"content":{"raw":"<div class=\"textbox learning-objectives\">\r\n<h3>Learning Objectives<\/h3>\r\n<ul>\r\n \t<li>Analyze the various tactics of frequent-shopper or rewards programs<\/li>\r\n<\/ul>\r\n<\/div>\r\n<img class=\"alignright wp-image-2552 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2986\/2018\/03\/13185928\/Screen-Shot-2018-04-13-at-11.57.01-AM.png\" alt=\"someone holding several rewards cards\" width=\"383\" height=\"255\" \/>\r\n\r\nCustomer retention is crucial to the success of any business given the high cost of acquiring a customer in the first place. It is estimated that it costs a business 5-25X more to acquire a new customer than to sell to an existing one. Further, established customers are thought to spend 67% more than new customers.[footnote]<a href=\"https:\/\/blog.hubspot.com\/customer-success\/customer-loyalty\" target=\"_blank\" rel=\"noopener\">https:\/\/blog.hubspot.com\/customer-success\/customer-loyalty<\/a>[\/footnote]\r\n\r\nIt\u2019s no wonder that savvy businesses have brought a variety of customer retention techniques together under the umbrella of formal \u201cFrequent Shopper\u201d or \u201cCustomer Loyalty\u201d programs. As consumers, we all experience these techniques every day.\r\n\r\nSome programs are based on simple point system\u2013a purchase amount is equivalent to a number of points. Those points can then be accumulated and used as currency to make additional purchases.\r\n\r\nA variant of this tactic, a so-called tiered reward program, is designed to foster longer-term loyalty. Airlines and car rental companies offer such programs and consumers move up the food chain by becoming Bronze, Silver and Gold members over time. With each designation, the customer receives more benefits and perks.\r\n\r\nAnother tactic is charging customers an annual fee in exchange for VIP treatment. Amazon Prime would be a good example of this type of customer loyalty program. \u201cPrime\u201d customers pay an annual $99 fee to participate in the program. \u00a0As Amazon Prime members, customers receive free two-day shipping on millions of products with no minimum purchase required. \u00a0According to the Consumer Intelligence Research, Prime members spend an average of $1,500 per year on Amazon.com, compared with $625 per year spent by Amazon customers who aren't Prime members.[footnote]<a href=\"https:\/\/files.ctctcdn.com\/150f9af2201\/bf283d9e-4cbb-4306-8645-b2dc9a16d805.pdf\" target=\"_blank\" rel=\"noopener\">https:\/\/files.ctctcdn.com\/150f9af2201\/bf283d9e-4cbb-4306-8645-b2dc9a16d805.pdf<\/a>[\/footnote]\r\n<div class=\"textbox tryit\">\r\n<h3>Practice Questions<\/h3>\r\nhttps:\/\/assess.lumenlearning.com\/practice\/4e92c839-509e-4fe9-ae87-4138073678c8\r\n<\/div>","rendered":"<div class=\"textbox learning-objectives\">\n<h3>Learning Objectives<\/h3>\n<ul>\n<li>Analyze the various tactics of frequent-shopper or rewards programs<\/li>\n<\/ul>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-2552 size-full\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/2986\/2018\/03\/13185928\/Screen-Shot-2018-04-13-at-11.57.01-AM.png\" alt=\"someone holding several rewards cards\" width=\"383\" height=\"255\" \/><\/p>\n<p>Customer retention is crucial to the success of any business given the high cost of acquiring a customer in the first place. It is estimated that it costs a business 5-25X more to acquire a new customer than to sell to an existing one. Further, established customers are thought to spend 67% more than new customers.<a class=\"footnote\" title=\"https:\/\/blog.hubspot.com\/customer-success\/customer-loyalty\" id=\"return-footnote-1954-1\" href=\"#footnote-1954-1\" aria-label=\"Footnote 1\"><sup class=\"footnote\">[1]<\/sup><\/a><\/p>\n<p>It\u2019s no wonder that savvy businesses have brought a variety of customer retention techniques together under the umbrella of formal \u201cFrequent Shopper\u201d or \u201cCustomer Loyalty\u201d programs. As consumers, we all experience these techniques every day.<\/p>\n<p>Some programs are based on simple point system\u2013a purchase amount is equivalent to a number of points. Those points can then be accumulated and used as currency to make additional purchases.<\/p>\n<p>A variant of this tactic, a so-called tiered reward program, is designed to foster longer-term loyalty. Airlines and car rental companies offer such programs and consumers move up the food chain by becoming Bronze, Silver and Gold members over time. With each designation, the customer receives more benefits and perks.<\/p>\n<p>Another tactic is charging customers an annual fee in exchange for VIP treatment. Amazon Prime would be a good example of this type of customer loyalty program. \u201cPrime\u201d customers pay an annual $99 fee to participate in the program. \u00a0As Amazon Prime members, customers receive free two-day shipping on millions of products with no minimum purchase required. \u00a0According to the Consumer Intelligence Research, Prime members spend an average of $1,500 per year on Amazon.com, compared with $625 per year spent by Amazon customers who aren&#8217;t Prime members.<a class=\"footnote\" title=\"https:\/\/files.ctctcdn.com\/150f9af2201\/bf283d9e-4cbb-4306-8645-b2dc9a16d805.pdf\" id=\"return-footnote-1954-2\" href=\"#footnote-1954-2\" aria-label=\"Footnote 2\"><sup class=\"footnote\">[2]<\/sup><\/a><\/p>\n<div class=\"textbox tryit\">\n<h3>Practice Questions<\/h3>\n<p>\t<iframe id=\"assessment_practice_4e92c839-509e-4fe9-ae87-4138073678c8\" class=\"resizable\" src=\"https:\/\/assess.lumenlearning.com\/practice\/4e92c839-509e-4fe9-ae87-4138073678c8?iframe_resize_id=assessment_practice_id_4e92c839-509e-4fe9-ae87-4138073678c8\" frameborder=\"0\" style=\"border:none;width:100%;height:100%;min-height:300px;\"><br \/>\n\t<\/iframe>\n<\/div>\n\n\t\t\t <section class=\"citations-section\" role=\"contentinfo\">\n\t\t\t <h3>Candela Citations<\/h3>\n\t\t\t\t\t <div>\n\t\t\t\t\t\t <div id=\"citation-list-1954\">\n\t\t\t\t\t\t\t <div class=\"licensing\"><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Original<\/div><ul class=\"citation-list\"><li>Frequent-Shopper and Rewards Programs. <strong>Authored by<\/strong>: Bob Danielson. <strong>Provided by<\/strong>: Lumen Learning. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><div class=\"license-attribution-dropdown-subheading\">CC licensed content, Shared previously<\/div><ul class=\"citation-list\"><li>So many coffee loyalty cards. <strong>Authored by<\/strong>: Nick Webb. <strong>Provided by<\/strong>: Flickr. <strong>Located at<\/strong>: <a target=\"_blank\" href=\"https:\/\/flic.kr\/p\/5xBEEV\">https:\/\/flic.kr\/p\/5xBEEV<\/a>. <strong>License<\/strong>: <em><a target=\"_blank\" rel=\"license\" href=\"https:\/\/creativecommons.org\/licenses\/by\/4.0\/\">CC BY: Attribution<\/a><\/em><\/li><\/ul><\/div>\n\t\t\t\t\t\t <\/div>\n\t\t\t\t\t <\/div>\n\t\t\t <\/section><hr class=\"before-footnotes clear\" \/><div class=\"footnotes\"><ol><li id=\"footnote-1954-1\"><a href=\"https:\/\/blog.hubspot.com\/customer-success\/customer-loyalty\" target=\"_blank\" rel=\"noopener\">https:\/\/blog.hubspot.com\/customer-success\/customer-loyalty<\/a> <a href=\"#return-footnote-1954-1\" class=\"return-footnote\" aria-label=\"Return to footnote 1\">&crarr;<\/a><\/li><li id=\"footnote-1954-2\"><a href=\"https:\/\/files.ctctcdn.com\/150f9af2201\/bf283d9e-4cbb-4306-8645-b2dc9a16d805.pdf\" target=\"_blank\" rel=\"noopener\">https:\/\/files.ctctcdn.com\/150f9af2201\/bf283d9e-4cbb-4306-8645-b2dc9a16d805.pdf<\/a> <a href=\"#return-footnote-1954-2\" class=\"return-footnote\" aria-label=\"Return to footnote 2\">&crarr;<\/a><\/li><\/ol><\/div>","protected":false},"author":62559,"menu_order":20,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Frequent-Shopper and Rewards Programs\",\"author\":\"Bob Danielson\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"So many coffee loyalty cards\",\"author\":\"Nick Webb\",\"organization\":\"Flickr\",\"url\":\"https:\/\/flic.kr\/p\/5xBEEV\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"}]","CANDELA_OUTCOMES_GUID":"81bff414-5390-4d05-9997-f04991448088, 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