Loyalty Marketing and The Loyalty Business Model
The loyalty business model relies on training of employees to achieve a specific paradigm: quality of product or service leads to customer satisfaction, which leads to customer loyalty, which leads to profitability. Loyalty marketing is an extension of that effort, relying upon word-of-mouth and advertising to draw upon the positive experiences of those exposed to loyalty business model inspired ventures to attract new customers. Fred Reichheld makes the point in his books that one can leverage the "power of extension" to draw new customers.
The rapid expansion of frequent-flyer programs is due to the fact that loyalty marketing relies on the earned loyalty of current customers to attract new loyalty from future customers. Incentive programs that are exclusive must strike a balance between increasing benefits for new customers over any existing loyalty plan they are currently in and keeping existing customers from moving to new plans. Hallmark did this through devising a program that directly rewarded customers not only for buying merchandise and utilizing Hallmark.com, but gaining additional benefits through referring their friends.
The most recent loyalty marketing programs rely on viral marketing techniques to spread word of incentive and inducement programs through word of mouth.
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