Why Loyalty Isn’t Just About Discounts: 2 Articles You Should Read
Let’s face it — loyalty programs are often reduced to discounts and point collection. But there’s so much more beneath the surface. If you're wondering how pricing strategy, perceived value, and financial design shape loyalty outcomes, these reads will give you the clarity you need. These articles explore how smart loyalty design goes far beyond giveaways — and how to create value that works for both your customers and your balance sheet.
1. The Economics of Loyalty Pricing: Are Discounts Worth the Data?
Loyalty pricing can effectively drive repeat business and collect valuable consumer data, but it must be managed carefully to maintain perceptions of fairness and avoid alienating non-members. This article explores the rise of loyalty pricing in UK supermarkets, where members receive exclusive discounts. It discusses how this strategy functions as a form of price discrimination, leveraging consumer data to segment markets and maximise revenues. The piece also highlights findings from the Competition and Markets Authority (CMA), noting that while most loyalty discounts offer genuine savings, a significant portion of consumers perceive non-member prices as inflated.
2. Harnessing Behavioural Economics to Enhance Customer Loyalty
Incorporating behavioural economics into loyalty programs can lead to more engaging and effective customer retention strategies by aligning with how customers naturally make decisions. This article delves into how principles of behavioural economics can be applied to strengthen customer loyalty. It emphasises strategies such as personalising rewards to align with individual preferences, creating a sense of urgency through time-limited offers, and simplifying reward structures to reduce decision fatigue. By tapping into cognitive biases like loss aversion and the desire for instant gratification, businesses can design loyalty programs that resonate more deeply with customers.
