Within the field of retailing, most companies have developed loyalty programs build around the concept of loyalty cards. Do these programs are really efficient? Do they really increase customer loyalty ?
Few evidence come from the literature because very few empirical work has been done. The purpose of this paper is first to contribute empirically to a better knowledge of this kind of marketing program, second to contribute to a better understanding of their management.

Numerous firms currently view customer loyalty programs as crucial, especially those used by retailers. They lie within the scope of rather defensive strategies aimed at keeping customers (De Souza 1992, Reichheld 1993, Vavra 1993, Jones and Sasser 1995) and rely on a double belief that keeping a customer is less costly than gaining a new one, and that the best customers are the most profitable ones.

By customer loyalty program one means a set of actions devised so as to stimulate and keep up with some customers, and so as to minimise loss, namely the rate of lost customers, and increase the amount of purchases.
These programs often consist in issuing loyalty cards. Their use is widespread among retailers, airlines, car rental companies, film developers…, that is to say in all the sectors that deliver a good or a service in regular use and of a relatively high unit value.

Some authors are concerned about the efficiency of customer loyalty programs (Uncles 1994, Dowling and Uncles, 1997, O’Brien and Jones 1995, Sharp and Sharp 1997, Nako 1997, Benavent and Crié 1999, Bolton and al. 2000). There would be no guarantee of efficiency; it would even be rather poor.
That is all the more surprising as many shops have taken up that kind of technique over the last few years. Would the lack of rigorous studies then be due to an imitative effect?
Should the role of these cards be reconsidered in view of the facts?

How do customer loyalty programs work ?

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Analysis of the Efficiency of Loyalty Programs: a Case Study.pdf