Building customer relationships: do discount cards work?

TLDR

Customer loyalty is linked to satisfaction, profitability, and retention, yet building retention is challenging and discount card schemes have uncertain effectiveness. The study aims to identify how loyalty programs can cultivate “loyalists”—customers with high satisfaction, loyalty, and ongoing support. A New Zealand hotel case study examined customer responses to a discount card promotion. Card purchasers displayed high satisfaction yet low commitment, fitting Morgan’s “mercenaries” profile.

Abstract

The relationship between customer loyalty and satisfaction, profitability and customer retention is described within the framework of relationship marketing. The importance of loyal customers and their impact on business profitability is undisputed, but it is more difficult to build customer retention than it may appear. Various strategies including loyalty schemes and discount cards are sometimes used in an effort to retain customers, but their success is questionable. A New Zealand hotel case study is presented which describes customer reactions to a discount card promotion. It was found that customers who purchased the card exhibited the characteristics of Morgan’s “mercenaries”. Although they had high satisfaction, their commitment to the company was low. However, in order to succeed, loyalty programmes need to develop “loyalists”, customers who have high satisfaction, high loyalty and who will stay and be supportive of the company.