Question

Case description: Credit and charge card issuer American Express (Amex) had developed a strong reputation among consumers due in part to its Membership Rewards (MR) loyalty program, first established in 1991. Through MR, all Amex cardholders could accumulate and redeem "points" based on how much they spent, while customers with Amex's Gold and Platinum Cards received additional perks. By 2016, however, the U.S. credit card market had become increasingly competitive, with many credit card companies increasing their sign-on point bonuses for new customers. Chris Cracchiolo, Amex's vice president of U.S. loyalty, strategy, and global partnerships, had to decide how to position the MR program in the face of this competition. Should Amex begin offering more competitive sign-on bonuses and point redemption rates, or would this dilute the company's strong brand?

Discussion Question: List and discuss three factors that companies, including American Express, should take into account in designing loyalty programs aimed at attracting and retaining clients. Write at least 3-4 sentences about each factor.

Answer 1

Answer: Loayalty Programs are always good marketing strategies for customer retention and attraction. Loyality Programs can always boost up sales for companies even in highly competitive markets but then again it is the entire loyality program mechanisim that needs to be really attractive and a long-term rewarding one so that customers are not only attracted but existing customers are retained as well.

Some important factors to be kept in mind while designing customer loyalty programs especially for credit card companies are:

• Customer Value Appreciation: Each customer or client associated with you is always an independant entity with his or her own values and customs. Therefore, if loyality programs help them in their value appreciation, your loyalty program scheme can truly work out in the long-run on a wider scale. For example, giving bonus points on customer birthdays can surely leave an ever lasting impact on them.

• Reward Program Flexibility: If Credit Card companies like American Express are rewarding their customers for repititive purchases they need to be flexible with the approach. They need to change rewards redemption options and points awarding criteria depending upon what is the need of the time. Flexible and dynamic programs are more better options and are a kind of surety to engage more clients and enhance the customer base.

• Enticing and Innovative Reward Schemes: Reward Programs need to be innovative and attractive so that they catch the eyes of the customers instantly. For example, introducing cash back schemes and annual fee waiver by credit card companies can engage more people and people are likely to consider these options as a sign of truly rewarding gesture.