Case 17: Nordstrom Rewards its Customers
An effective loyalty program should be targeted at potential customers after carrying out an analysis of the customer groups of the company (Butscher, 2002). The program should be related to the business goals of raising extra income. The loyalty program should elicit more revenues from an increased consumer base because of the anticipated benefits to customers. These programs should bear high perceived values to enable customers invest in their time, faith and resources into such programs. An effective loyalty program should be communicated and well defined (Baran et al, 2008). Loyalty programs that are poorly defined results into losses to the company from the more adverts that are intended to be initiated. A sound loyalty program should be attainable for purposes of sustaining the attraction and retention of consumers. Achievability should be balanced to ensure that both the company and consumers benefits from the loyalty program.
Nordstrom’s program has been designed to mainly suit the high value consumers. However, the program is well structured and linked to the business goals since it targets potential consumers besides retaining the existing customers. The program makes sure that customers can get value from their spending in every dollar at Nordstrom stores. The loyalty program ensures that a large percentage of the consumers will benefit within a year or two and therefore, increasing the company’s revenues.
Nordstrom should be targeting potential consumers as well as the existing ones. Failure to recognize the existing customers will ensure that those who are not recognized pledge their loyalty in other stores, hence reducing the profits margins of the company. The program should attract and retain potential consumers with the aim of expanding the customer base and augmenting the profit margins.
The Nordstrom program is worthy, considering that at the minimum, customers have to accumulate 2000 points in order to get a $20 note. Goods worth 2000 points are converted into thousands of dollars in cash money. Therefore, the $20 is not a loss to the company considering the profits made from that particular client. For the high end customers, rewards are equally awarded given that the company accrues higher profit from such clients. The high end consumers buy in bulk and thus, enjoy quantity discounts and after sales services, and personalized services. Besides the loyalty programs rewards, high end consumers get several benefits through large purchases unlike the average customers. The company’s loyalty program has been able to strike a balance between the accrued benefits by the various consumer groups with the view to encouraging more purchases by different consumer factions with the aim of accumulating more points, and higher bonuses.
Luxury customers are less attracted to rewards and loyalty programs, unlike other economic groups (Baran et al, 2008). They are largely drawn by their status to have unique products. The other economic factions are focused on quantity of the products to be obtained from a single dollar in relation to the quality aspects pursued by the luxury customers. However, luxury customers may enter into various programs in order to improve their status or fit into a given circle of elites in society.
The strength of loyalty programs are that they help in attracting and retaining customers, growing traffic besides increasing sales (Butscher, 2002). A company can collect data about the purchasing trends of consumers, thus undertaking a sustainable marketing campaign. Loyalty programs further reduce the costs of advertisements while increasing returns on investment (Baran et al, 2008). The weaknesses of loyalty programs refer to the reduced profits and decreased brand values because of the impaired effectiveness in marketing campaign and consumer’s perception over the value of different products. Nordstrom can enlist the services of various experts for the purposes of designing and efficient, future oriented and optimum loyalty program that maximizes the benefits of employees and the company.
Case 18: Active Endeavors Analyze its Customer Database
Group one customers are loyal since they have been buying more than four times for the last three months. Consumers who fall under the second category are discount oriented since they purchased just once in the last three months. Loyal customers fall under the third group since they have bought goods more than once in the course of the year. Group 5 customers are loyal and discount oriented. The need-based consumers, impulse customers and wandering customers dominate group six since they have purchased once in the past one year.
Active vendors should promote their products extensively besides using discounts for the attraction and retaining customers (Hoyer & MacInnis, 2001). There are different methods of enhancing promotional objectives in an entity. The promotional campaigns that the company should use include billboards, air, print media and social media. There is a large opportunity for the company to register a high consumer base considering that most potential consumers have access to the internet. Use of Facebook and Twitter as a means of interaction between the company and the consumers is an ideal avenue for attracting and retaining such clients. Follow up of customers after making purchases will enhance customer attraction and retention. Besides, the company should set the prices of products in such a way that different customers have the ability of buying from the stores.
Baran, R. J., Galka, R. J., & Strunk, D. P. (2008). Principles of customer relationship management. Mason, Ohio: Thomson/South-Western
Butscher, S. A. (2002). Customer loyalty programs and clubs. Aldershot, England: Gower
Hoyer, W. D., & MacInnis, D. J. (2001). Consumer behavior. Boston: Houghton Mifflin