Loyalty Programmes Assignment Example | Topics and Well Written Essays - 3000 words

Loyalty Programmes - Assignment Example This dissertation aims to understand how loyalty programmes are designed and if they have been of value to the hotel and restaurant business. It is also acknowledged that the idea of "gift coupons" and "rewards" is losing its meaning in the mind of consumers because it has become such a common offering. Therefore, whether a loyalty programmes continues to really help business in driving its profits remains to be examined and will be the focus of this dissertation. The aim of this dissertation is to find out whether the implementation of loyalty programmes succeed or fail in the hotel and restaurant business and identify ways to design loyalty programmes that will succeed. It is said that 80% of sales is derived through 20% of customers (Lake, 2006). This has led to a plethora of customer-focused programmes created with the help of customer relationship management tools, to increase company profitability (Brown, 2000; Kalakota and Robinson, 1999; Peppers and Rogers, 1997). Such initiatives, aim to achieve customer retention through the use of loyalty programmes. The motive behind loyalty programmes is to establish customer loyalty by rewarding a certain frequency of repeat purchase by customers. As pointed by Uncles et al (2002): "Loyalty programs are schemes offering delayed, accumulating economic benefits to consumers who buy the brand. Usually this takes the form of points that can be exchanged for gifts, free product, or aspirational rewards such as air miles. Airline frequent-flier programs have been a prototype for many of the schemes" (p.28).However, there is no consensus on the definition of loyalty exhibited by consumers (Jacoby and Chestnut, 1978; Dick and Basu, 1994; Oliver, 1999). While some claim that satisfaction is an indicator of loyalty, others debate this point. Reichheld (1994) points out that despite being "satisfied" or "very satisfied" many customers still defect. In the UK, Oglivy Loyalty Centre found out that 85 % of its automotive customers claimed to be satisfied but only 40 % made a repeat purchase, and 66 % of packaged goods customers who identified a favourite brand actually ended up buying "another brand" in the recent past (McKenzie, 1995). Gremler and Brown (1999) point out that Federal Express, Pizza Hut franchises, and Cadillac dealerships have been able to forecast the sales from loyal customers with more certainty. Research on loyalty programmes in the hospitality industry is limited. Oh's (2000), work in this field, highlights that the concept of customer value is crucial for the hospitality industry. His study explains how perception of value by customers impacts pre and post dining decisions. According to National