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Loyalty marketing is the practice of rewarding customer loyalty in order to keep customers patronizing a company. There are many different types of loyalty marketing strategies, but many of these involve making a certain number of purchases to reach a reward of some type that is seen as appropriate for the customers in question. Using small prizes, like those found in cereal boxes and candy, is also a popular strategy for retaining customers who are already interested in the brand. It is imperative that the reward for loyalty be appealing enough to inspire additional purchases or otherwise act as an incentive, because otherwise the company is losing money on the prizes or deals.
The potential benefits of loyalty marketing are numerous and the risks are often quite low for a company, depending on the strategy used. Customer rewards that involve giving a free item or discount after a number of purchases can be sustained in a manner that strategically limits the amount of money given away, and small prizes or other rewards can be branded to be appealing but are otherwise low enough quality to save money. This strategy can be implemented by businesses both big and small, although large companies are often more able to create large rewards programs involving prize catalogs and online point redemption.
There are many different reasons that loyalty marketing is successful, but most depend on the customer's perception that he or she is getting something for free. It has been demonstrated in many different ways that customers who carry loyalty cards usually frequent a chosen brand more often than those who do not, although the causality of the issue is certainly questionable. Subjectively, customers often feel that they are patronizing a business because of the loyalty program, but these customers were often already loyal in the first place.
Among the different loyalty marketing strategies, those that reward all customers proportionately are often more effective than those that involve a single winner. When using prizes, one way to increase the number of purchases without creating a feeling of losing is to put collectibles of different rarity in products, or to create sets of items that are designed to be collected. Humans, particularly children, are often susceptible to the collecting impulse and may feel compelled to purchase more items. Children can often be used to influence the purchasing habits of parents, so getting children involved in a loyalty marketing scheme is a valuable technique.
One of the most successful types of adult loyalty programs is the frequent flyer system used by airlines. This system rewards frequent flyers with miles, and also helps fill empty seats that would otherwise go empty on planes, creating a win-win situation for the airline. Adult loyalty marketing must often be subtler than prizes and must have definite perceived value involved, but some adults still enjoy the thrill of receiving a prize in a product's packaging. The key to successful loyalty marketing is to make the system fit the consumer base for a maximum increase in sales.