Cost Justification: Profitable Customer Loyalty

Interest in customer loyalty programs has never been more avid. After a number of years when such programs always seemed to be on the brink of taking off - but never quite managed to reach expectations - recent years have seen a real and dramatic increase in their uptake.

Putting aside the superficial reasons for installing a loyalty system, such as everyone else in the same sector appears to be ‘doing something’, or fear that the main competitor might steal a march by implementing a loyalty strategy, the key consideration is whether such a system can be cost justified. Will it measurably help the retailer in his bid to build long term profitable relationships with his customers? Can the investment required in a sophisticated customer loyalty system be justified on the basis of anticipated increased profits?

This paper explores the issues which need to be addressed in order to cost justify the implementation of a customer loyalty system.