Designing and effectively managing customer-centric loyalty programs

Loyalty programs are often considered an essential part of a firm's marketing strategy. The premise of loyalty programs is that they enhance customer relationships and increase customer profitability by offering customers rewards for their repeat purchases. Despite these expectations, several empirical studies and industry reports suggest that loyalty programs can have either a small or no effect on customer behavior. Thus, the goal of this chapter is twofold. First, provide a review of the literature in two substantive areas: loyalty program design and loyalty program management. Second, we want to give some guidance on discussing research opportunities to extend our understanding of customer-centric loyalty programs. Specifically, we will focus on designing and managing a customer loyalty program in a competitive market.