Sustainable Profitability As mentioned

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We believe this to be a myth because successful application of loyalty systems by retailers goes beyond tiered rewards—they offer individually tailored rewards. Tiered reward systems create some form of stratified shopper segmentation—a shopper belongs to the silver category or the platinum category. These predetermined categories are far from homogeneous and substantial variation exists between consumers in the same category.

So tailor made loyalty systems go way beyond these heterogeneous customer groupings by offering propositions at an individual customer level truly propositions . Information technology has enabled retailers to do on a mass scale of millions of customers what shopkeepers did in their villages a century ago offer a differentiated service to each shopper. Shopkeepers knew each one personally and treated them accordingly. If that customer went to another retailer who didn t know the shopper as well he or she would receive an inferior service. Then as well as now the more a shopper spends at a particular store the better that retailer can offer specific Chinese Overseas America Number Data value propositions that competitors can t match. Promiscuous shoppers will be disadvantaged by receiving the vanilla service designed for the average shopper. While retailers do not offer tiered loyalty programs they do offer tailored coupons and other offers valued at par with the total spent in the store.





The convexity in the reward structure comes from continuous improvement in making the rewards more relevant and meaningful to the shopper which is more likely with ever increasing data available on the customer s loyalty card.  earlier retailers are often thought of as being unable to afford substantive loyalty reward programs because of their low margins. Offering an unconvincing percent loyalty reward to customers already represents a reduction of percent to percent of the retailer s net profits. When margins are low the sustainability of loyalty rewards often depends on two possible sources abundant excess capacity and exogenous subsidies. Airlines casinos and hotels can offer significant rewards to their loyal customers because they often operate with substantial overcapacity.