Loyal Customers Make Businesses Successful

Bonus cards. The majority of people will have at least one of them in their wallets. But why do people have bonus cards? The reason is that when they shop regularly at a certain store, they can get discounts and other extra benefits and services. Consumers like discounts, because everyone wants to get as much possible at the lowest cost. Therefore bonus cards are very helpful, all you need to do is become a regular customer and you can get a discount. This sounds like friendliness from the store. But is it chiefly an act of friendliness, or is there also some gain for the firm? And if there is, do suppliers use this loyalty rewards only as a means to make consumers more dependent on suppliers? We will discuss this question from the point of view of a consumer.

All firms are profit-maximizing. Without profits they cannot have a sustainable existence. Consequently, all the decisions a firm makes are meant to increase profits (Roberts, 1986). Firms act out of self-interest, as Adam Smith pointed out more than 200 years ago (Smith, 1991). Firms don’t act out of benevolence, but out of self-interest. This also includes giving discounts and loyalty rewards. Firms give discounts, because this attracts new consumers, since they are looking for low prices (Parguel, Pechpeyrou, Sabri-Zaaraoui, & Desmet, 2007). Attracting new customers means higher revenues and higher profits. The following task for a firm is to keep customers. By giving loyalty rewards, people will come back to your store. This also creates a disincentive for consumers to shop elsewhere, because they forgo discounts or extra benefits by doing this. The firms therefore have more revenues and profits because of these loyal customers.

Research has also shown that loyal custo...

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