The loyalty business model is a strategic management approach in which a company directs its resources toward increasing the loyalty of its customers and other stakeholders, on the reasoning that superior product or service quality drives customer satisfaction, satisfaction builds loyalty, and loyalty in turn drives profitability, because retaining an existing customer costs less than acquiring a new one. The model rests on the strength of the relationship between a company and its customers, shaped by perceived quality, trust and various economic or social bonds, and it has been extended beyond customers to employee and supplier loyalty as part of a self-reinforcing cycle in which satisfied employees help deliver the quality that keeps customers loyal in turn.
Facts
Core MechanismThe loyalty business model directs a company's resources toward increasing customer and stakeholder loyalty on the premise that higher product or service quality drives customer satisfaction, which drives loyalty, which in turn drives profitability, rather than treating loyalty as a side effect of an unrelated marketing campaign. 1 Origin YearThe source dates the detailed service quality model version of the loyalty business model to a 1994 paper by Storbacka, Strandvik and Gronroos; it gives no separate origin date for the broader loyalty business model concept, which the source treats as older and less formal. Connections
Associated With
Airlines were early large-scale adopters of the loyalty business model through frequent-flyer programs (American Airlines AAdvantage launched 1981).
Source Wikipedia, Airline
The loyalty model is a customer-retention strategy central to marketing practice, reasoning that retaining an existing customer costs less than acquiring a new one.
Customer loyalty programs are a core marketing-practice tool for retention, using rewards to encourage repeat purchasing.
Sources
1. Wikipedia, Loyalty Business Model
WikipediaWikipedia: Loyalty business model, lead paragraph
The loyalty business model is a business model used in strategic management in which a company's resources are employed so as to increase the loyalty of customers and other stakeholders in the expectation that corporate objectives will be met or surpassed.
Wikipedia: Loyalty business model, Service quality model section
A model by Kaj Storbacka, Tore Strandvik, and Christian Grönroos (1994), the service quality model, is more detailed than the basic loyalty business model but arrives at the same conclusion.
View the Source Wikipedia, Airline
WikipediaAssociated With: Airline Industry, History sectionQuote, Associated With: Airline Industry, History section
Many millions who had never or rarely flown before became regular fliers, even joining frequent flyer loyalty programs and receiving free flights and other benefits from their flying.
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