loyalty program essay

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Loyalty Program: Definition, Purposes, How It Works, Example

James Chen, CMT is an expert trader, investment adviser, and global market strategist.

What Is a Loyalty Program?

Loyalty programs, sponsored by retailers and other businesses, offer rewards, discounts, and other special incentives as a way to attract and retain customers. They are designed to encourage repeat business, offering people a reward for store/ brand loyalty (hence the name). Typically, the more often a customer patronizes the merchant—and the more they spend—the greater their rewards.

Key Takeaways

• Loyalty programs are offered by retailers and other corporations as a way to attract and retain customers.
• Loyalty programs offer rewards, discounts, or other special incentives and are designed as a reward for a customer's repeat business.
• Loyalty programs benefit companies not only by developing customer loyalty but by providing crucial information on how customers are spending and what products or types of offers are most appealing.
• While companies like Starbucks make great use of loyalty programs, some retailers such as Costco and Amazon rely instead on annual memberships.

How a Loyalty Program Works

Loyalty program incentives vary. Typical incentives include:

• advance notice of/early access to new products
• early access to sales
• free merchandise or enhanced services
• special services, like free or expedited shipping
• members-only discounts

To join a loyalty program—also known as a rewards program or points program—customers typically register their personal information with the company and are given a unique identifier, such as a numerical ID or membership card. They use that identifier when making a purchase.

Purpose of a Loyalty Program

Loyalty programs provide two key functions: They reward customers for their repeated patronage, and they provide the issuing company with a wealth of consumer information and data . While companies can evaluate anonymous purchases, the use of a loyalty program offers additional details on the type of products that may be purchased together, and whether certain incentives are more effective than others.

Loyalty programs particularly apply to high-volume businesses that thrive on return customers. And since it's more expensive to acquire a new customer than to sell to an existing one, the prospect of creating a loyal following is fundamental to adding value. When appropriately executed, repeat customers will help recruit new ones at a fraction of the cost of traditional marketing methods.

When these programs are integrated into the customer's everyday routine, they can cultivate true brand loyalty. Often, customers get invested in the program—and they will stick to a hotel, store, restaurant, credit card , or airline because of points or rewards they've accrued in its loyalty program, more than anything else.

Retail loyalty programs can trace their roots to the stamp or boxtop collection and redemption programs that date back to the 1890s. But the modern model was born with airlines' frequent flyer programs. American Airlines' AAdvantage, launched in 1981, was the first; United Airlines' Mileage Plus debuted shortly afterward.

Loyalty Program Example

Loyalty programs, like everything else, have joined the Digital Age. Interestingly, they are incorporating tech not just as a means of purchase things to get rewards, but as a source of rewards themselves: urging patrons to text or Instagram photos for points, or offering a discount if you shop via the merchant's new app.

The Starbucks ( SBUX ) Rewards program remains the default case study of how a brand can retain customers through interactive offers. The app operates much like any other rewards program, in that customers earn points (called "stars") to use for future coffee purchases. It differentiates itself from other loyalty systems by providing customers a convenient way to order ahead, pay in-store and even access exclusive music playlists. For the most part, the app solidifies Starbucks as a basic necessity for every coffee drinker. If you add funds via the app onto your digital rewards card, you'll "earn Stars twice as fast," Starbucks says.

Loyalty Program Alternatives

Loyalty programs aren't the only way to win customers' allegiance. Retailers like Costco ( COST ) and Amazon ( AMZN ) have achieved great customer loyalty through membership programs. Even though they carry an out-of-pocket cost, many shoppers happily pay the annual fees to access the variety of products, free shipping (in Amazon's case), and other perks and privileges offered by the two retailers. And for those who take advantage of all the available services included in a membership, the benefits can often outweigh the costs.

Starbucks. " Starbucks Rewards ." Accessed April 29, 2021.

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The Beginner's Guide to Building a Customer Loyalty Program

Published: December 29, 2022

Loyalty. 

It's what you hope to get from your beloved house pet and your paying customers.

I'm no expert when it comes to the first, but when it comes to customer loyalty, I have some insights to share that can help you create a loyalty program that grows your business.

(For more information about animal loyalty, please refer to the 1963 classic film, The Incredible Journey .)

Before we talk about loyalty programs, let's examine how your company can attract loyal customers to your business.

Need a TLDR (Too Long Didn’t Read) directory? Here's a table of contents.

How to Build Customer Loyalty

What is a customer loyalty program.

• Benefits of a Customer Loyalty Program

How to Create a Customer Loyalty Program

• Customer Loyalty Programs for Small Businesses

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• Adopt a multi-channel customer service system.
• Provide exceptional service.
• Be consistent.
• Focus on the customer, not the competition.
• Build credibility through customer interactions.
• Deliver added value.
• Share positive customer experiences.
• Reward customer loyalty.

Customers are driven by their goals, and they’ll be loyal to the company that helps them achieve them. Even if they have a positive history with your brand, a competitor with a better offer can still win them over. Because of this, customer loyalty isn’t earned easily or even guaranteed — the steps below will help you build a following of loyal customers. 

1. Adopt a multi-channel customer service system.

Building customer loyalty begins with being in tune with your customers’ needs . A multi-channel service system is one of the best ways to connect with your customers, especially when they need help. Customers will have more access to your service team, creating more customer interactions , and the more you interact with them, the more often you can influence their experience. 

Multiple channels also allow you to offer an omnichannel experience , where customers have a consistent experience across channels, platforms, and devices. This increases customer satisfaction as your customer service is more accessible, which is exactly what you want for frustrated customers who need support.

Consider adopting help desk and live chat tools to help your customer service team cover multiple channels. For smaller teams, AI software like chatbots can relieve the workload of organizing and distributing incoming requests without having to hire more employees.

2. Provide exceptional customer service.

Going above and beyond customer expectations to provide exceptional service doesn't mean giving away free products, discounts, and perks. It's quite the opposite. Customers want solutions to their problems, not a free sample. Giveaways and discounts simply put a bandage on the problem.

Instead, challenge your team to listen to what the customer is saying and process the feedback. More often than not, your customer will be happier with the solution than they would be with a replacement or perk — although those can help sweeten the deal.

3. Focus on the customer, not the competition.

There's a time and place to scope out competitors, but it's not as beneficial as you might think, as mirroring them to win over their customers doesn’t guarantee the same results. To be the best in the eyes of your customers, you'll need to know what your competitors do, then get even more creative than they are.

Big gains in customer loyalty are the sum of several small decisions. What that means is this: Your success isn't riding on one breakthrough. Every customer interaction, product purchase, and referral by a devout customer contributes to brand loyalty every day.

So when you're tempted to see if the grass is greener on the other side, know it's probably watered with a different sprinkler.

4. Be consistent.

Franchises like McDonald's are so successful mainly because of consistency. Customers know what they can expect from these businesses when they go, no matter where they are in the world. On the surface, that doesn't seem like a contributing factor toward customer loyalty but it is — here's why.

When brands provide consistency through their products and service, their customers can easily incorporate them into their lives. For instance, imagine wanting ice cream, and all you can think about is your favorite cone from McDonald’s. You can count on them to be open and deliver exactly what you had in mind. After enough visits, you'll begin to trust it because it's proven time and time again that it can consistently deliver on its promise (and ice cream!).

5. Build credibility through meaningful customer interactions.

Nearly three out of five consumers report that good customer service is key to feeling loyalty toward a brand. Additionally, 76% of customers say they would stop doing business with a company after one bad experience.

Every business makes mistakes, but the key to retaining customers is acknowledging mistakes and correcting them when they happen. 

Loyal customers expect a positive experience from your brand every time they interact with it. They want to feel like you value them as much — if not more — than they value you. If they sense their business isn't appreciated, you might lose them to competitors.

A CRM can come in handy here as it records the past experiences that a customer has with your brand. It stores messages like emails and calls, as well as customized notes that relay specific information about a customer. This creates a more personalized experience as employees can leverage important historical data regarding past interactions with a customer.

6. Deliver added value.

You're not the only one vying for your customers' attention — your competitors are too. Everyone races to show their customers that they can best fulfill their needs. So, how do you edge them out? Go above and beyond their expectations.

Research shows that one in four customers is willing to pay 10% more in almost every industry if there’s a guaranteed good experience. Other than offering a loyalty program — which we'll talk about soon — you can do this by building a relationship with your customers that extends beyond the moment of purchase to demonstrate that you’re invested in their lifestyle, not just their money. 

One way that your company can add value to the customer experience is to host events or contests that your target audience would be interested in. For example, the energy drink brand, Red Bull, has built a massive customer following by sponsoring extreme sporting events and teams.

Another way to add value is to create a customer community. This could be something simple like a knowledge base or ideas forum, or it could be complex and include a devout network of loyal advocates.

Take Harley Davidson, for example. It founded a community of brand evangelists who advocate for Harley Davidson at different dealerships throughout the U.S. These communities make customers feel like they're part of an in-crowd with a social status exclusive to the group members. 

7. Share positive customer experiences.

If you're doing a good job generating positive customer experiences, why not let people know? Gather customer feedback and share reviews to inform others about the benefits your company brings and broadcast these stories across your different channels. Customers tend to trust other customers more than your advertising, so it's important to leverage positive interactions to maximize customer value .

If you’re unsure where to find feedback, third-party review sites like Yelp give you access to a lot of customer feedback in one place. You could also consider adopting NPS® and other feedback tools to gather qualitative information about your brand or encourage customers to share testimonials that you can share on your site. 

8. Reward your customers.

Customers loyal to your brand are also the most valuable to your business. In fact, customers who have an emotional connection to your brand tend to have a lifetime value higher than your average customer . These customers spend more with your business and should be rewarded for it — this is where a loyalty program becomes essential to building customer loyalty.

A customer loyalty program is a program your business offers that rewards customers for their continuous purchases from you. 

Rewards can be free products, early and exclusive access to new products or events, point systems, awards, exclusive merch — anything you want to do to share your appreciation with them for their business. 

68% of loyal customers will join a loyalty program if offered, and the rewards and unique offers are additional incentives for them to continue their purchases. Customers who join these programs tend to spend more money because they receive benefits for their business. They already enjoy buying from your company, so why not give them another reason to do so?

An easy retort to that question would be that it costs too much to offer incentives without getting anything directly in return. This does appear to be true when you look at an individual purchase. However, loyalty programs benefit your business in ways that extend beyond just one or two transactions.

If you question whether they're cost-effective, below are some key benefits that customer loyalty programs can provide to your business. But first, let’s take a moment to give examples of platforms that make rewarding your clients easy.

Xoxoday Plum

Xoxoday Plum is a powerful customer loyalty rewards platform that helps businesses engage and retain their customers through personalized reward programs. With Xoxoday Plum, businesses can easily create and manage reward campaigns that are tailored to their specific customer base, offering rewards that are both meaningful and relevant.

Yotpo is an incentive marketing platform that helps you build a custom loyalty program, whether tier-based, a point system, or referrals, to engage your existing customers and reach new ones. 

LoyaltyLion

LoyaltyLion helps you create a loyalty program to help your customers feel valued, as opposed to being another number. You can customize a program based on points, rewards, and tiers that customers can access anywhere along their journey, whether you’re re-engaging at-risk customers or saying thank you to an extremely loyal customer. 

Now we’ll discuss why customer loyalty programs are important for businesses.

What are the benefits of a customer loyalty program?

All businesses can benefit from building a customer loyalty program and rewarding customers with additional, exclusive benefits. You might already be a member of some programs, like a frequent flier miles program or a referral bonus program. 

In an increasingly competitive and crowded market, loyalty programs can differentiate you from your competitors and keep your customers around. While loyal customers are more likely to make repeat purchases, that’s not the only reason to start a program. Below we’ll go over the benefits of a customer loyalty program for your business. 

1. Better Customer Retention

Nowadays, customers are making purchase decisions based on more than just price. They make buying decisions based on shared values, engagement, and emotional connections with a brand. Customer loyalty programs are a great way to engage customers beyond just the point of purchase, to interface on shared values, and to provide even more value to customers — making them happier and more likely to keep purchasing from you. You can also work with customers for recurring exchanges. For example, with home service companies, you could create a maintenance plan with homeowners where you come back on a weekly or monthly plan. This keeps the customer engaged and enrolled repetitively. 

And 88% of customers that feel appreciated plan to stay loyal to brands, and 83% plan to spend more . 

2. More Customer Referrals

If your customers enjoy the benefits of your customer loyalty program, they’ll tell their friends and family about it. This word-of-mouth marketing draws in new customers at no acquisition cost and can generate even more revenue for your business. In fact, word-of-mouth marketing drives $6 trillion of annual consumer spending , and people are 90% more likely to trust and buy from a brand recommended by a friend. 

3. Cost-Efficacy

It's more cost-effective for your business to retain happy customers than acquire new ones. Acquiring a new customer is 5-25X more expensive than retaining a current one.

4. User-Generated Content and Reviews

Online customer reviews are almost as trustworthy as recommendations from friends and family. Customer loyalty programs that incentivize reviews and ratings on websites and social media will result in authentic user-generated content from customers singing your praises so you don't have to.

So, now that you're on board with the value of customer loyalty programs, how do you start one? Let’s go over how to create a loyalty program.

• Choose a great name.
• Create deeper meaning.
• Reward a variety of customer actions.
• Offer a variety of rewards.
• Make your 'points' valuable.
• Structure non-monetary rewards around your customers' values.
• Provide multiple opportunities for customers to enroll.
• Explore partnerships to provide even more compelling offers.
• Make it a game.

1. Choose a great name.

The first step to a successful customer loyalty program is choosing a great name. It should incite curiosity and interest and urge customers to participate. Most importantly, you must distinguish it from the myriad of other loyalty programs they might already be part of. 

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Some of my favorite customer loyalty program names include beauty brand Sephora's Beauty INSIDER program and vegan supplement brand Vega's Rad(ish) Rewards . These clever, unique names hint at benefits but don't give them away — making customers curious to learn more and join.

2. Create a deeper meaning.

Some customers are cynical about customer loyalty programs and think they're just a clever ploy to get them to spend more with businesses. Even if that’s one of your goals, it should be about more than just the money. 

To get customers excited, tap into the "why" behind your product or service to make your customer loyalty program as compelling as possible.

Briogeo is a customizable hair care product line. With just a few answers to a quiz, customers will have a shampoo and conditioner crafted just for their hair on their doorstep.

Its rewards program is just as customer-centric as its product. For every $1 customers spend, they earn three points toward a savings discount on their next purchase. With no frills or distractions, customers know that this loyalty program is getting them closer to even more affordable hair care products. It's a win-win.

3. Reward a variety of customer actions.

Another way to demonstrate your commitment to customer loyalty beyond just purchases? Reward non-purchasing customer actions.

Customers watching product videos, engaging in your mobile app, sharing social media content, and subscribing to your blog are still valuable signs that a customer is engaging with your brand — so reward them for it.

4. Offer a variety of rewards.

Discounts aren't the only way to provide more value to your customers.

Those who spend at a certain threshold or earn enough loyalty points could turn them in for free tickets to events and entertainment, free subscriptions to additional products and services, or even donations in their name to the charity of their choice.

Lyft does a fantastic job of this with its LyftUp program. Riders can round up the cost of their ride to the next dollar and donate the change to the charitable organization of their choice — making it easy and rewarding for them to make an impact while using the service as they normally do.

5. Make "points" valuable.

If you’re asking customers to enroll in your customer loyalty program, make it worth their while and offer something valuable in return. 

For example, if you're offering cashback rewards as part of your customer loyalty program, assign a monetary value to your points so customers can visualize what they can earn (and spend) by continuing to purchase from you.

Credit cards do an excellent job of this by illuminating dollar-for-dollar how people use points — just watch any commercial offering points in exchange for dollars, airline miles, groceries, or gas.

6. Structure non-monetary benefits around your customers' values.

Values are important to customers — in fact, two-thirds of customers are more willing to spend money with brands that take stances on social and political issues they care about.

So, make sure you tap into those values as part of your rewards program, too.

TOMS Shoes donate a pair of shoes to a child in need for every purchase its customers make. Knowing that providing resources to the developing world is important to its customers, TOMS takes it a step further by launching new products that help other important causes — like animal welfare, maternal health, clean water access, and eye care — to get customers excited about helping in other ways.

7. Provide multiple opportunities for customers to enroll.

Once you've launched your customer loyalty program, make sure you're promoting the benefits of joining.

If customers get rewards from purchasing from your online store, next to the price, share the points they could earn from spending that much.

You might have experienced this when flying on an airline that offers a loyalty rewards credit card. The flight attendants might announce that you could earn 30,000 miles toward your next flight — if you apply for the airline's credit card.

Other ways to do this include promoting the program on social media channels and adding on-site push notifications when customers complete an activity that earns them points.

8. Explore partnerships to provide even more compelling offers.

What's better than one reward? Two rewards, of course.

Co-branding rewards programs are a great way to expose your brand to new potential customers and to provide even more value to your existing, loyal ones.

Brands might offer loyal customers free access to co-branded partnerships — like T-Mobile's offer of a Netflix subscription with the purchase of two or more phone lines.

9. Make it a game.

Everyone loves games and competition — so use that winning spirit to get your customers interacting with your brand more frequently.

Lots of brands gamify their customer loyalty programs to earn valuable engagements within an app, website, or at point-of-purchase.

Points are easily translatable for gamification. Take Treehouse , which teaches coding and app development, and rewards engaged users with more and more points leading up to a badge — which users can then display on their websites and social profiles to impress colleagues and potential employers with their skills.

If you're operating with a growing business, you may not have much flexibility when it comes to your budget. However, you can still offer an attractive rewards program that fosters customer loyalty.

Customer Loyalty Programs for Small Business

While growing businesses don't have the same financial influence as bigger companies, these organizations can still create incentives that motivate customers to return to their stores. When developing their rewards program, small businesses need to be creative and develop a unique system that mutually benefits both the company and the customer.

Take a look at a few common ways that growing companies leverage rewards programs to build customer loyalty.

1. Punch Cards

Punch cards are a common reward program for B2C companies. With it, customers get a business card that gets a hole punched after every purchase. Once customers fill up the card with punches, they receive perks and rewards. The benefit of this system is that customers are guaranteed to return a certain amount of time to receive the reward, making repeat purchases and driving revenue. 

Nothing Bundt Cakes has a popular punch card loyalty program that offers customers a free personal cake when they buy 12 of them.

2. Opt-in Email

Opt-in email solicits the customer's email address for communication with your brand. Once the customer opts in, your company can email them offers or promotions.

Emails are cheap to compose and distribute and can be sent at almost any frequency. You can also use email automation tools to deliver emails efficiently.

3. Free Trials

Free trials are typically thought of as incentives used to convert potential leads, but you can also utilize them in rewards programs too. For example, say you have a new product or service that's about to launch. You can release a free trial to members of your loyalty program. This not only acts as a reward for customer loyalty but also works as a marketing tactic that primes your customers for a future sales call.

4. Partner Programs

One way to add value is to look externally at businesses to partner with. By combining your resources, you can create an offer that benefits both you, your partner, and your shared customers.

Credit card companies like Visa and MasterCard do this all the time by offering cards sponsored by a specific brand. While having a credit giant on your side is nice, start by looking for local, non-competitive businesses you can partner with to add more to your offer.

5. Referral Programs

Why track down new leads all by yourself when your customers can help do that for you?

You can incentivize loyal customers to become advocates by offering them an attractive reward for customer referrals. If your offer is good enough, customers will be happy to take the time to network your business with other potential leads.

6. Points Systems

Tracking points is a tried and true method of tracking customer loyalty. The two keys to making these programs successful are a worthwhile incentive and a reasonable timeline to earn the incentive.

Point-based loyalty programs find the sweet spot between the two so customers don’t get frustrated. For example, if you sell workout gear, people might make purchases fairly often, and there are many different businesses to choose from. 

Your incentive would need to be valuable — like a free t-shirt — and the buyer would need to be able to earn it quickly enough to keep them striving toward it, but not so quickly that the reward loses value.

Assigning a point value per dollar is a smart way to find this balance, but you’ll need to make sure it's fair. If it takes 100 points to earn a free t-shirt that usually costs $20, a $10:100 point ratio may not be feasible for your profit margin, while a $1:1 point ratio might discourage customers before they even sign up.

7. Loyalty Discounts

Loyalty discounts come with a bonus to the traditional customer loyalty programs we've covered so far. These types of programs allow you to give back to the customer while also collecting data that can help you personalize their buying experience . Kroger's Community Rewards program is a great example of loyalty discounts in action.

To employ this type of program, you'd offer consistent, predictable discounts to customers every time they display an identification marker that associates them with the program. This might be a QR code, a card, or a phone number.

On the back end, your business captures data about what the customer purchased. Over time, you'll understand your customers' trends, patterns, and habits so you can improve their experience, making them even more brand loyal.

These types of programs are so strong because the incentive is consistent and predictable, which gives the customer a reason to come back again and again.

8. VIP Memberships

Similar to the idea of a loyalty program, there’s an added sense of luxury or exclusivity when a business introduces VIP perks.

By introducing a VIP membership program, customers can subscribe to your company’s email or SMS in exchange for better product selection or ease of use. Not only will they be more interested in your new offerings, but they’ll get notifications each time they check their email or phone messages.

9. Mission-Driven Programs

Giving back to the community is good for the world and business. A great way to foster customer loyalty is to offer added benefits for shopping with your company — like doing something for the greater good.

Baron Fig makes office materials, a broad market to sell in, but has a program dedicated to planting trees for every item sold. Conscious consumers will think highly of your small business and spread the word about these programs because of their selfless nature.

10. Community Programs

Community programs are highly effective for small businesses as they can attract customers in your area or from computer screens.

In the last year, it’s plain to see how a business can impact its audience when it positions itself as a way to connect with others. Some examples are family-owned gyms offering Zoom classes to make customers feel more included, or having bakeries pop up in local flea markets. These are all steps small businesses can take to build customer loyalty and social bonding as well.

Start Your Customer Loyalty Program Today

To get started with building your customer loyalty program, you have to prioritize the customer experience.

A loyalty program won’t magically solve all your customer's issues — it's simply a more interactive way to say, "thank you, come again." Once your customers trust you, they'll be vying for the chance to earn rewards for doing business with your brand. After all, don’t they deserve the royal treatment for being loyal customers?

Editor's note: This post was originally published in July 2019 and has been updated for comprehensiveness.

Don't forget to share this post!

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An actionable guide on building customer loyalty and retention

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Customer Loyalty Programs

632 words 3 page(s)

Nowadays, it seems that nearly every organization offers a type of loyalty program. While these programs are typically used to measure customer activity and purchase behavior, they also have a significant amount of potential for customer retention as well as developing closer loyalty bonds and the reduction of churn drivers. A comparison of several well-known loyalty programs can provide additional evidence as to the use and benefits of such programs for a variety of service providers.

One example of a well-known loyalty program is frequent flier miles that are offered by nearly all of the major airlines. One example of such a loyalty program is Delta Airline’s program, SkyMiles program which is offered in conjunction with the credit card company, American Express. This program allows member to earn “miles” to be used toward the purchase of future airplane tickets for Delta flights. Miles are earned one of two ways. The first way that miles can be earned is through using the Delta SkyMiles Credit Card and for every dollar spent, miles are earned depending on the tier at which the member is associated (“SkyMiles” n.d.). The other way that members are able to earn miles, is through the number of miles they actually fly. The program offers several perks beyond the opportunity to earn miles. For one, the program boasts that the miles earned by the customer never expire. Additionally, the customer is able to use their miles towards future flights, in place of or in addition to cash.

Need A Unique Essay on "Customer Loyalty Programs" ? Use Promo "custom20" And Get 20% Off!

The Delta Airline’s SkyMiles program illustrates just one example of loyalty programs that drive customer loyalty, satisfaction, repeat business, and a reduction of churn drivers. For one, miles can only be earned when flying with Delta. As such, customers enrolled in the program may feel more compelled to fly with Delta versus other airlines in order to add to their miles. Also, as part of the SkyMiles program, customers may feel that they belong to an elite group of fliers, developing a closer bond with the Delta brand and will be less likely to move on to other brands.

Another example of loyalty programs commonly used, are those within grocery stores such as Kroger. Grocery store loyalty programs may not be as effective in reducing churn as frequent flier miles due to the frequency of which customers visit the grocery store. These programs, however, do offer an added benefit to corporations in that these loyalty programs assist in tracking customer purchases and provide insight into the consumptions habits of a particular customer. They also allow for customized advertising and discounts tailored to the purchasing habits and desired products of a particular consumer (Choi 2013). This targeted advertising is seen as beneficial both from the consumer standpoint as well as the store’s standpoint. The consumer gets discounts and deals relevant to the actual products they regularly purchase while the store is able to target their campaigns to be more successful for that particular consumer. This sort of individualized marketing program is nearly impossible with other forms of advertising, and often very costly. Loyalty card programs within grocery stores, however, are a more cost-efficient alternative to other forms of individualized advertising.

Overall, loyalty programs, such as Delta Airline’s SkyMiles program and grocery store loyalty card programs, such as Kroger, are an effective marketing tool to help develop closer brand-customer bonds, reduce churn, and provide additional value to the brand in the eyes of the consumer. By offering discounts and deals to loyal customers, customers are more likely to continue their relationship with a particular brand and consider that brand their first choice within the market they serve. While many industries are adopting loyalty programs, there are still many that have yet to take advantage of the many benefits such programs offer.

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Effectiveness of loyalty programs

• Center Ph. D. Students
• Research Group: Marketing

Research output : Thesis › Doctoral Thesis

Access to Document

• 10.26116/center-lis-2105
• PhD thesis Nick Bombaij Final published version, 3 MB

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• Loyalty Programs Business & Economics 100%
• Retailers Business & Economics 27%
• Customer Engagement Business & Economics 12%
• Reward Business & Economics 9%
• Contingency Business & Economics 9%
• Competitive Environment Business & Economics 9%

T1 - Effectiveness of loyalty programs

AU - Bombaij, Nick

N1 - CentER Dissertation Series Volume: 646

N2 - With the steady growth of interest in loyalty programs by both retailers and consumers, creating the right program is more important than ever. However, with an increasing number of decisions and designs, adopting a loyalty program has never been more complex. This dissertation aims to provide a better understanding on loyalty programs, and consists of three essays that study the effectives of loyalty programs from three different perspectives. The first essay focuses on the effectiveness of permanent programs, and investigates whether loyalty programs with a certain design, at a certain retailer, or in a certain country perform better. The second essay looks at the effect of the increasingly popular temporary programs, in which consumers have limited time to save stamps and redeem highly discounted rewards. These programs often run alongside the retailers’ permanent loyalty programs in an attempt to increase customer engagement. The third essay studies the effect of loyalty-program promotions, where brand manufacturers try to capitalize on retailers’ temporary loyalty programs. This essay provides a contingency framework for the effects of promotion designs, brands, categories, and competitive loyaltyprogrampromotion environments.

AB - With the steady growth of interest in loyalty programs by both retailers and consumers, creating the right program is more important than ever. However, with an increasing number of decisions and designs, adopting a loyalty program has never been more complex. This dissertation aims to provide a better understanding on loyalty programs, and consists of three essays that study the effectives of loyalty programs from three different perspectives. The first essay focuses on the effectiveness of permanent programs, and investigates whether loyalty programs with a certain design, at a certain retailer, or in a certain country perform better. The second essay looks at the effect of the increasingly popular temporary programs, in which consumers have limited time to save stamps and redeem highly discounted rewards. These programs often run alongside the retailers’ permanent loyalty programs in an attempt to increase customer engagement. The third essay studies the effect of loyalty-program promotions, where brand manufacturers try to capitalize on retailers’ temporary loyalty programs. This essay provides a contingency framework for the effects of promotion designs, brands, categories, and competitive loyaltyprogrampromotion environments.

U2 - 10.26116/center-lis-2105

DO - 10.26116/center-lis-2105

M3 - Doctoral Thesis

SN - 978 90 5668 647 5

T3 - CentER Dissertation Series

PB - CentER, Center for Economic Research

CY - Tilburg

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Writing help, paraphrasing tool, loyalty programs: benefits, challenges, and the case of samsung.

• Customer , Loyalty , Market , Retail

How it works

Introduction

Loyalty programs as an instrument of marketing cover a very broad area of description. So, I would like to start the introduction of this topic by explaining each key concepts step by step. To begin with, let’s first understand what loyalty actually means.

Loyalty Concept

Loyalty programs.

Since our focus is on a loyalty program, we will look at this concept in detail. Loyalty programs have been around for decades, if not for a century. The meaning and scope of loyalty program has evolved tremendously over the years. It is no longer restricted to traditional punching or buying cards that offer a point per dollar that only gives clients the chance to redeem for a discount later. Rewarding for purchase can be perceived as gimmicky – even if you’re a retailer. So when you’re working outside of retail, there really has to be something else to make the program worth engaging with. Hence, this calls for a change in the traditional loyalty program practices. What should an ideal loyalty program look like? A loyalty program should reward all things that add value to your business, as well as to customers.

An ideal loyalty program can make a huge difference in any business. All sorts of industries, from large airlines to small nail salons, use loyalty programs to give customers that little extra incentive to bring them back for more. Loyalty programs establish an emotional connection between the company and the customer, thus ensuring continuous engagement to create brand loyalty. Building and retaining customer loyalty is an important issue in this age of fast-moving information and access to diverse choices in such a competitive market. A good loyalty program typically ensures that a customer identifies herself/himself with the value the brand stands for and also makes sure that being a part of the program is a source of pride for the customer. Loyalty programs can be seen as long-term events in which consumers think of some type of investment that can later be redeemed for free merchandise, services, or discounts applied to a future purchase. To be precise, a loyalty program is a cost-effective way to retain existing customers, and this is very important for any business because keeping one customer costs 3-10 times less than acquiring a new one, depending on the industry you’re in.

Benefits and Problems with The Loyalty Programs

Loyalty programs come with various benefits to any business. But as we all know, everything that has benefits comes with some cost. There are also many problems associated with the smooth functioning of loyalty programs. Let’s first look at the benefits.

Benefits of Loyalty Programs

• Encourage repeat purchases

The main benefit that a loyalty program can create is to retain customers by rewarding them for their repeat purchase behavior. In fact, the customer loyalty program is a tool to retain customers by giving them a solid motive to buy again from the company and feel pride in being associated with the company’s product. Customer retention strategy has a direct impact on a company’s profit as well as status, which is a well-established fact. A business with a 60% customer retention rate is losing 3-4 times as many customers as a business with an 80% retention rate. Keeping the old customer is always a better option than spending resources on acquiring new customers.

• Separating profitable and unprofitable customers

Loyalty programs allow us to collect data on each customer who signs up, which can be further analyzed by giving information about what products they prefer, their spending habits, and other invaluable information that, in turn, provides various upselling and cross-selling opportunities. A well-designed loyalty program allows companies to segment customers and discover profitable and unprofitable customers based on this data giving insight to the company on what to focus more on depending upon the activities of profitable customers. It helps them in dropping off the customers who only buy the discounted lines and avoid the premium range almost on a regular basis. Loyalty programs are undoubtedly the most efficient way to retain the customers from whom the company generates the most profit.

• Getting valuable insight and building better relationships with customers

A loyalty program offers a direct line to customers, making communication much easier. When the customers know how to reach you and feel comfortable doing so, this means there is an opening for the business to receive valuable feedback that can help the company improve. Companies can actually learn the most from negative feedback and look upon the changes to make so that customer satisfaction is retained. When a customer signs up for your loyalty program, the customer’s information is saved in the company’s database. This data enables us to determine customers’ behavior, buying practices, and preferences. A good loyalty program will allow us to improve our relationship with customers. Loyalty programs allow us to capture customers’ data which we can use to communicate with them in the future. This could be to notify them of special offers, exclusive sales, new product releases, send surveys, or wish them a happy birthday!

Problems with the Loyalty Programs:

No doubt, a loyalty program has enough benefits to cherish, but we should not forget to look at the other side of the page. A loyalty program does benefit the company and customers, but it has some major drawbacks. Let’s have a look at some of them.

• Managing data can be time-consuming and costly 

In order to actually gain insight from customer data, you’ll likely need to spend a great deal of time analyzing the numbers. Not everyone can make sense of the data acquired; we need some experts to analyze the data to come up with the best solution needed. Keeping your customers engaged can be very challenging, especially in an overcrowded market where every day new products are launching. As with anything worth doing, an effective loyalty program requires a certain level of attention and regular maintenance.

• Potential damage to your business’ finances

The biggest cost that the loyalty program comes with is in its monetary terms. Perhaps companies fall into the trap of implementing such a customer loyalty program of making offers so good that they aren’t turning a profit even with repeated purchases. If you give away rewards or discounts that are too large and are not increasing repeat purchases and customer spending, you are going to do some serious damage to your business’s bottom line.

• Difficulty in finding loyal customers 

Many times, it is difficult to differentiate brand-loyal customers from repeat buyers. When consumers make frequent purchases with your business, it simply does not mean they are loyal to a product or service. They might be buying it because of the perks that you are offering. It’s very important to recognize loyal customers; otherwise, the company may be just wasting its resources with no gains in return.

Objective and Purpose of the Report

For this research, we consider brand loyalty with cell phones. In India, its generally noted that in the huge market of cell phones, the consumers of cell phones are looking for more than the product. They try to develop a relationship with cell phones, and no doubt there is a presence of a large number of brands in the cell phone. All things create an interest in studying brand loyalty with the consideration of cell phone brands. The objective of this research is to find some new brand loyalty measures and to analyze the major factors responsible for brand loyalty. The main purpose of this report is to understand what actually do we mean by ideal loyalty measures and how loyalty programs can be used effectively by the cell phone market in INDIA. We know that loyalty programs come with a cost. It alone cannot guarantee repeated customers. The program needs to be strategically planned and implemented to reap its best effect in the cell phone industry. This report will provide various insights as to how the ideal loyalty program should look like and what mistakes companies usually make while building loyalty programs. The research will also help us understand how loyalty programs can actually boost promotion and help in creating market strategy. It covers all the problems as well as benefits associated with the loyalty program.

Talking about the smartphone market in India.The usage of mobile services in India has entered nearly all economic and social sectors. India is one of the major contributors to the mobile phone market. The unbounded use of the mobile phone for its features has increased its market potential. Now, it’s not just about making or receiving a call but much more than that. In this digitalized world, mobile phones are gaining importance in every task. Like most other countries, India too is leading a growing mobile phone market.

However, the Samsung brand name was put at stake when it released the NOTE 7 in August 2016, which had a manufacturing defect that caused the battery to overheat and, in some cases, explode. With the incidents regarding the explosion of the Samsung Note7, the brand faced a number of challenges regarding its brand reputation and consumer preferences and satisfaction. The company’s production was halted as the battery malfunction caused bodily harm and serious damage. The company issued a recall and offered $25 in bill credit to owners who exchanged their Galaxy Note 7 but also promised to fix the issues and relaunch the device. Samsung Note7 explosions have caused brand loyalty to have deteriorated because consumers have started to prefer other brands over Samsung.

According to the empirical analyses drawn by Gu (2017), public relations are affected by a number of upheavals in the brand. Consumers often have a number of expectations from a brand, and in the high-tech world, the high efficiency of the product is necessary. If it’s not being provided by the product, public relations get affected. With high tech comes high risks, and Samsung could not overlook the fact that its products have been regarded as exploding devices and harming people around the world. Moreover, the banning of the products by the airlines has caused the brand to its name, reputation, and prestige. In essence, it can be said that the explosions had Samsung a great deal of negative impact, due to which the market share has fallen and consumer buying behavior has been altered.

References:

• Stone, M., & Woodcock, N. (2007). Customer loyalty: towards an integrated conceptual framework. Journal of marketing management, 23(7-8), 591-611.
• Sheth, J. N., Newman, B. I., & Gross, B. L. (1991). Why we buy what we buy: A theory of consumption values. Journal of Business Research, 22(2), 159-170.
• Oliver, R. L. (1999). Whence consumer loyalty? Journal of marketing, 63(Special Issue), 33-44.
• Reichheld, F. F. (2003). The one number you need to grow. Harvard business review, 81(12), 46-55.
• Gupta, S., & Kim, H. (2010). Value from customer-focused relationship management: The role of social network ties. Journal of marketing, 74(3), 82-96.
• Reinartz, W., & Kumar, V. (2000). On the profitability of long-life customers in a noncontractual setting: An empirical investigation and implications for marketing. Journal of marketing, 64(4), 17-35.
• Reichheld, F. F., & Sasser Jr, W. E. (1990). Zero defections: Quality comes to services. Harvard business review, 68(5), 105-111.
• Kumar, V., & Reinartz, W. (2016). Creating enduring customer value. Journal of Marketing, 80(6), 36-68.
• Gu, B. (2017). The impacts of product recalls on brand loyalty: Evidence from the automotive industry. International Journal of Research in Marketing, 34(1), 224-243.

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Loyalty Programs Encouraging Buying Behaviors Essay

Loyalty programs are structured marketing efforts that rewards thus encourage loyal buying behaviors. Retail chains issues a card similar to a credit card referred to as loyalty card, rewards card, points card, advantage card, or club card. A holder of the card identifies him/herself as a member of in a loyalty program. This essay will give an overall conclusion after reading the case as well it will comment on the statement “CVS believes that segmentation enables merchandising, marketing, operations, and other teams to have a common language when talking about their customers.” The essay will explain why collaborations between retailers and information specialists are valuable. The essay will give views on how Kroger should tailor its retailing strategy to take into account the seven main segments it had identified. The Seven-Eleven Japan’s nanaco program will be explained in the essay. Included in the essay will be ideas how Tesco should adapt its customer loyalties for the different countries it operates. Views on why Wal-Mart chooses not to use customer loyalty programs.

After reading this case, it is clear that loyalty programs are important marketing tools. Nevertheless, service provided is a superior marketing strategy. According to the various segments from the case, even without the programs the segments would still exist. This argument is based on the fact that the largest retail chain in the US is Wal-Mart but it doesn’t have loyalty programs (Nigam par.1).

“CVS believes that segmentation enables merchandising, marketing, operations, and other terms to have a common language when talking about their customers.” CVS started their loyalty program in 2001. Members of the program benefits from 2% of purchases which they receive as ExtraBucks and $1 to be spent on front end products for every two prescriptions purchased. CVS is willing to experiment with new consumer services including touch points, payment systems, technologies and third party partnerships. CVS have managed to segment its consumers by lifestyle and life stage through the information collected using its loyalty program. With most of their customers being women, there are three groups of women included in the segmentations. These segmentations are Caroline, Vanessa, and Sophie. Caroline is a young single or just married working woman aged 18 to 34. She shops for affordable beauty products. Vanessa is that CVS customer having little free time juggles a bit and works as well. She has kids and likes the drive through pharmacy. Sophie is a 55+ empty nester regularly shopping for discounts. Mostly she buys over the counter and a major customer of prescription drugs. To accommodate its main customer with an average height of 5 feet 4 inches, there was need to lower its gondola and shelf height to 60 inches. Due to its customers having limited time, CVS decided to make the forma easy to shop by using color codes. In is store in Manhattan, it incorporated elements gleamed from shopper insights. For convenience (Nigam par. 4).

The successful collaboration between Carrefour France and Emnos business intelligence firm made Carrefour to extend the relationship to Spain in an aim to becoming more customer-focused by segmenting customers, developing better assortments, and improving pricing and promotion policies. This led to Emnos opening a branch office in Madrid to better serve Carrefour Spain. A relationship with Retalix helped Carrefour to implement loyalty software for the retailer’s French hypermarkets. The software integrates and manages loyalty and promotion functionality. The system tracks customer data online and real-time transmission of store transactions to a centered data base. Carrefour uses Retalix in other markets, including its convenience stores in Italy (Nigam par. 5).

Kroger should ask for more information from Kroger card holders. According to their current loyalty program, customers have to visit the stores for a few times before being grouped to a particular segment. They should ask for customer’s salaries so as to determine who is to be grouped as budget shoppers. Kroger should request for customers occupations to be clear who they segment as convenience shoppers. Family information would help in determining the family-focused segment. Quality shoppers segment can be set by information from the shoppers. Grab and go shoppers can be shown by the time spent in the stores by a customer. Information on the traditional shoppers can be fetched on the sales of fresh foods. Low-fat products are purchased by the watching-the-waist-line segment in their pursuit for healthy lifestyle. The sales of this products are indicative of the segment belonged (Berman 23).

Due to Japanese people being reluctant in using credit, Japan is a cash-based economy. The money nanaco avoids paying interchange fees. The nanaco is tied on a loyalty scheme in which the user earns 1 yen for every 100 yen used in purchases. It is available either in smart card or a mobile phone format. It is waved over a point-of-sale reader to complete a purchase. The program targets frequent shoppers, speeds up register transactions, and provides a convenient payment method. Nanaco cards or mobiles can be recharged with money at group stores and ATMs (Berman 26).

Tesco should adapt its customer loyalties for the different countries where it operates by standardizing customer loyalty every where. Tesco should make the deal to be as in Britain throughout. In the other countries it should be such that one point is collected for an amount equivalent to £ 1 used by shoppers. For example for every 10.21 China Yuan Renminbi spent, 1 point is earned. Shoppers must collect 150 cludcard points to qualify for a redeemable clubcard voucher. The voucher should be redeemed either at stores or online. As in Britain, the voucher should be redeemable as discounts for magazines, travel, entertainment, and restaurants. The segments should be set differently for each country depending on the diverse lifestyles and shopping baskets.

Wal-Mart has not pursued a loyalty program because it has a localized approach to merchandising and marketing its stores. The approach is working for them. Wal-Mart collects shoppers’ insights through high-level consumer segment research, transaction analysis, and category management. Wal-Mart opts to tailor its assortment to local needs without sacrificing on prices rather than issuing out mails and giving exclusive discounts. Wal-Mart has segmented its shoppers by ethnicity, income and geography. Initially it had six segments: African Americans, affluent, empty nesters, Hispanics, rural and suburban. Due to its focusing on ethnic differences, it continues to roll out store of the community initiatives that provide food and merchandise to match local tastes. With this strategy, Wal-Mart can personalize its offer to be more like a local neighborhood store than a big corporate entity. For example, in May 2008, Wal-Mart opened its first store that was designed from the start to target the Hispanic community in the Dallas suburb of Garland, Texas. I agree with Wal-Mart’s approach for as far as the consumers are comfortable with what they get there is no need for large discounts. Getting what one needs with no extra struggle is all a consumer needs. In a place where many of the residents are the African Americans, needs a market in which most of the goods offered are what they need.

Works Cited

Berman, Barry and Evans, Joel. Retail Management: A Strategic Approach. New York. Prentice Hall, 2006. Print.

Nigam, Shashank. Five lessons from the most innovative loyalty programs in the world-inspired from loyal 2010. Web.

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• Analysis of Walmart and Carrefour
• Carrefour Business Failure in the Japanese Market
• Carrefour Company Problems and Solutions
• Informational Privacy Issues at the Kroger Co.
• Customer Satisfaction: The Importance for the Company
• Social and Cultural Environment
• Bossy Hair: A Marketing Plan in an International Country
• Nutrogena Company Profile in Comparison to L’Oreal
• Red Bull in Saudi Arabia

Essay: Customer Loyalty Programs

Business / Samples May 10, 2011

Sample Essay

Recently many companies are using customer-loyalty programs to keep their customers loyal to them. This approach is even more popular in hospitality business, but researchers point that using such programs, sellers should pay attention to attitudinal loyalty and frequency of actions (Baloglu 2002).  Frequent-user program allows customers to have various benefits when they return (Victorino, Verma, Plaschka and Dev 2005). Here we can talk about guest cards, with saving bonuses, cutting cost and sales for the guest and his family, special occasions and actions. In a coffee bar these can be stamp-cards with free drink and tasting days, with new coffee arrivals and recipes. In addition, some innovations can take place, for example, cash-cards, that allow experiencing coffee break without cash.

Another action that can take place – gifts for returning customers and after guest registration, birthday presents. However, these tactics are believed by various researchers can be ineffective as they can be used by other service providers and competitors.    The solution that is found in this scenario is actually building the trust and commitment between consumer and service provider (Bowen and Shoemaker 1998). Commitment is the fundamental part of relationship and it is defined as “commitment as the belief that an ongoing relationship is so important that the partners are willing to work at maintaining the relationship and are willing to make short-term sacrifices to realize long-term benefits” (Bowen and Shoemaker 1998 p. 22). Trust on the other hand is readiness to depend and rely on associate with faith and respect.

Voluntary partnership is an approach that can lead to loyalty as well. Here we are talking about customer voluntary activities that can take place in order to increase future satisfaction. For instance, questionnaires and filling forms can be designed to find out customers’ opinion and preferences as well as customer references. Very important loyalty creating factor is positive word-of-mouth, which can be even more effective than other marketing tools.

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What Is Loyalty? Essay Example

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Loyalty can be a difficult term to define. The New Oxford American Dictionary defines loyalty as “the quality of being loyal to someone or something,” and loyal as “giving or showing firm and constant support or allegiance to a person or institution.” There are three main types of loyalty, institutional loyalty (loyalty to a county, monarch or government), personal loyalty (loyalty to a friend, family member or colleague), and idealistic loyalty (loyalty to a type of idea or a cause). Loyalty is crucial to the success in any person’s personal life, as well as their business life as well.

Why is corporate loyalty so important? A corporation can not survive if they can not trust the employees within their workforce. Corporate loyalty is crucial to the success of any company, small or large. There is a strong relationship between productivity, loyalty, employee satisfaction, customer loyalty, and profitability. Sometimes however, loyalty to a company can be detrimental to the customers and the community as a whole. If a corporation is corrupt, loyalty to that company is unethical and can be causing more harm than good.

In the criminal justice system, criminal justice agencies do not want to hire people with questionable morals, ethics and a lack of loyalty. This is why thorough background checks are conducted in order to determine whether or not a candidate is a good fit for a position within the criminal justice system. Paradoxes involving personal loyalty of criminal justice superiors involves bribery within the court system, “shakedowns” and accepting large gratuities from others within the judicial system, as well as politicians.

Peak, K. J. (2010). Justice administration: Police, courts, and corrections management (6th ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

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Home — Essay Samples — Life — Emotions & Feelings — Loyalty

Loyalty Essays

Hook examples for loyalty essays, anecdotal hook.

"Imagine a friend who has stood by your side through thick and thin, never wavering in their support. Such unwavering loyalty is a rare and precious gift in today's world."

Rhetorical Question Hook

"What does it mean to be loyal? Is loyalty an unbreakable bond, or does it depend on circumstances? Exploring the complexities of loyalty can reveal its true nature."

Startling Statistic Hook

"According to a recent survey, 91% of people believe that loyalty is an essential quality in personal relationships. Loyalty clearly plays a central role in our lives."

"'Loyalty is not just a word; it's a lifestyle.' These words by Anthony Liccione remind us that loyalty is not a passive trait but an active choice we make in our interactions."

Historical Hook

"Throughout history, tales of loyalty have inspired nations and cultures. Examining the stories of loyalty in the past offers timeless lessons for today."

Narrative Hook

"Walk alongside a character in a story of unwavering loyalty—a loyalty that defies adversity and tests the boundaries of trust. This narrative explores the power of loyalty in action."

Contrast Hook

"In a world of fleeting connections and changing loyalties, what does it mean to stay loyal? Contrasting the concept of loyalty with its opposite challenges us to reflect on our values."

Emotional Appeal Hook

"The warmth of a loyal friend's embrace, the trust in a loyal partner's eyes, and the comfort of knowing someone has your back—loyalty is the glue that binds us in a fragmented world."

Shocking Scenario Hook

"Imagine a world without loyalty—a world where trust is an endangered concept. Exploring this scenario makes us appreciate the role of loyalty in maintaining our social fabric."

Curiosity Hook

"What motivates people to remain loyal, even in the face of temptation or adversity? Delving into the psychology of loyalty unravels the intricacies of this human trait."

Loyalty to Family and Marital Relationship in Anglo Saxon Literature

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Loyalty, in general use, is a devotion and faithfulness to a nation, cause, philosophy, country, group, or person. The definition of loyalty in law and political science is the fidelity of an individual to a nation, either one's nation of birth, or one's declared home nation by oath (naturalization).

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Rental Cars: Know the Pitfalls

By Elaine Glusac

Elaine Glusac is the Frugal Traveler columnist, focusing on budget-friendly tips and journeys.

From getting a good deal to figuring out insurance requirements, renting a car can be a complicated, pitfall-prone experience. Here are some best practices to follow, from reservations through returns.

Compare prices and convenience of airport vs. nonairport locations

Prices vary widely based on the vehicle model and the location of the agency. Airport rentals, subject to extra taxes and fees, are generally more expensive.

Some cities are now charging similar fees if an agency is within 20 miles of the airport, according to Jonathan Weinberg, the founder of AutoSlash , a car rental platform. “Always check both,” he said.

If you’re flying and choosing an off-airport rental location at your destination, factor in the cost and convenience of transportation to the agency. Most have more limited hours than airport-based outlets, which could be important if your flight is delayed.

Don’t prepay

Many agencies offer discounts for prepayment. But prepaid contracts often incur fees if you cancel.

Most unpaid reservations are flexible, allowing you to cancel anytime with no penalty. Experts advise reserving early and then using the time before your trip to check prices. If they go down, you can cancel and rebook at the lower rate. Many agencies, including Budget and Dollar , offer best rate guarantees, meaning if you find a better rate on their cars elsewhere and they can verify the claim, they will rent you the car for 10 percent below that price.

The website AutoSlash will track your reservation at no cost and alert you to any price drop.

Maximize your memberships

Use memberships at the retailer Costco or the organizations AAA or AARP to get a discount at specific companies. Payoffs vary. If you’re strictly joining Costco to rent cars, it may take a few rentals a year to recoup the $60 membership fee.

If you join loyalty programs at Avis, Hertz or other major rental companies, which are usually free, you are entitled to express pickups, which means you can skip the line at the counter and go directly to your vehicle.

Consider alternative companies

Turo and Getaround act like Airbnbs for rental cars: Owners offer their vehicles to rent through company websites or apps. Turo, available in 11,000 cities in the United States, Britain, Canada, France and Australia, requires renters to work out where and when to pick up cars from their renters, though some owners will bring the car to you.

Available in more than a dozen cities in the United States, the app- and internet-based rental company Kyte , which has no brick-and-mortar locations, will drop off and pick up its cars, which are competitively priced, wherever you specify, at no extra charge. The contactless and app-based UFO Drive rents E.V.s in more than 20 cities in the United States and Europe.

At the counter, understand upgrade policies …

At traditional agencies, when the car you’ve reserved is not available when you arrive, it’s a common practice to give you the next-best available car at no extra charge. This may not always be made clear, and agencies have been known to ask if you want to upgrade for a fee. Before accepting, request your original class of car. If it is not available, you are entitled to a free upgrade.

Watch out for “manager’s specials,” which tend to be bargain leftovers. As agencies transition to electric cars, renters have ended up with surprise E.V.s that they didn’t necessarily want, according to Mike Taylor, the managing director of travel, hospitality and retail at the market research company J.D. Power.

… and know your insurance coverage

If you already have auto insurance, in most cases that coverage extends to a rental. Many credit cards also provide coverage against theft and damage as long as you use that card for payment. Check on both before buying additional coverage at the agency.

“Credit card insurance is only collision, not liability,” Mr. Weinberg said, noting liability insurance will add roughly $20 a day.

If you do not have insurance and are relying on a credit card’s coverage, pay attention to exclusions of certain kinds of car and peer-to-peer rental agencies like Turo.

“You want to avoid duplication of coverage, but you don’t want to go in thinking you’re fully covered when you’re not,” said Chuck Nardozza, the managing director of sales at AAA Northeast.

Most personal auto insurance will not apply to driving abroad, with some exceptions for Canada and Mexico.

Before driving off, document the vehicle’s condition

Look for damage, including dings and scrapes and upholstery tears. Take photos or a video to establish the vehicle’s condition at pickup. If there is damage, ask the company to document it in your paperwork.

Take photos again when you drop off the vehicle. Even if an employee reviews the car and gives you a receipt, you’ll have a record of its condition should a deeper review find any damage.

Before returning the car, buy gas

Fuel options include returning the car with a full tank or having the company refill it at what may look like attractive per-gallon rates. However, in the second scenario, you must buy a full tank.

“If you use three-quarters of a tank, you’re giving the rental car company a quarter tank of free gas,” Mr. Weinberg said.

When you return the vehicle, take a picture of the gauge showing a full tank. Companies have been known to tack on extra gas charges, and photographic proof usually wipes those charges away.

Return the car on time

A rental car day is usually 24 hours from the time you leave the lot. Anything later might incur another full day’s charge.

Even if you reserved a car from noon on pickup day to noon on drop-off day, if you arrive early and take the car at 11:30 a.m., you’ll be expected to return it by 11:30 a.m. on the due date. “They might give you a little leeway, but that window tends to be short, like 60 minutes or less,” Mr. Nardozza said.

Follow New York Times Travel on Instagram and sign up for our weekly Travel Dispatch newsletter to get expert tips on traveling smarter and inspiration for your next vacation. Dreaming up a future getaway or just armchair traveling? Check out our 52 Places to Go in 2023 .

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Considering a trip, or just some armchair traveling here are some ideas..

52 Places:  Why do we travel? For food, culture, adventure, natural beauty? Our 2023 list has all those elements, and more .

Spain : Does a culture-centric family trip have to be boring for the kids ?

Barbados : Venture beyond the resorts to find rum shops, farmers’ markets and surf breaks.

Malaysia :   Be dazzled on the island of Penang  by winding alleys, pastel-painted storefronts and aromatic food.

India:  A writer is guided by the age-old epic story of “Rajula Malushahi,” which led him to a series of unexpected places .

Serbia:  Belgrade is quietly developing into one of the best bar destinations in Europe .

Kenya:  Fifty years after her own first safari, a grandmother takes her adult granddaughter on a wildlife adventure .