Pattern description

Customers are retained and loyalty assured by providing value beyond the actual product or service itself, i.e., through incentive-based programs. The goal is to increase loyalty by creating an emotional connection or simply rewarding it with special offers. Customers are voluntarily bound to the company, which protects future revenue.

Inventive problems

Application examples

American Airlines, a company operated by AMR Corporation based in Fort Worth, Texas, was one of the first to introduce a loyalty programme within the commercial flight sector, AAdvantage. The flight booking system, Sabre, provided information permitting American Airlines to determine which customers flew with them on a regular basis. These ‘frequent flyers’ as they became known were offered participation in the AAdvantage programme whereby they would gather air miles with each booking. The points earned were redeemed against upgrades, future bookings, special offers and other benefits. The airline benefited from the repeated business by the loyal clients. The costs of offering the service and the special offers were offset by the consistent (or increasing) revenue from the programme.

Payback is a German loyalty card concept initiated by the company Metro A.G. It currently boasts over 26 million users. Payback also took over India’s i-mint rewards programme in 2011, rebranded Payback India. For every cent spent, customers are credited with points on their Payback card account which can be redeemed against cash, exchanged for rewards on Payback’s website or from the company’s partners, or donated to charity.

References

The Business Model Navigator: 55 Models That Will Revolutionise Your Business