Airlines' frequent flyer programs and retailer loyalty schemes are both examples of efforts to:
A)Offer disguised price reductions to customers
B)Establish product differentiation by measures that reward customer loyalty
C)Establish competitive advantage that failed because they could be easily imitated by competitors
D)Promote a company's product to new customers

Question

Quizplus · Accepted Answer

Both frequent flyer programs and retailer loyalty schemes are designed to reward customer loyalty and establish product differentiation. By offering incentives such as free flights or discounts on purchases, companies can encourage customers to continue doing business with them instead of switching to a competitor. This creates a competitive advantage that can be difficult for other firms to replicate, as they would need to invest significant resources in establishing a similar loyalty program.

Option A, offering disguised price reductions, may be one benefit of loyalty programs, but it does not capture the broader goal of establishing loyalty and differentiation. Option D, promoting a company's product to new customers, is not the primary goal of loyalty programs, although they may attract new customers indirectly through positive word-of-mouth recommendations from existing loyal customers. Option C, establishing competitive advantage that failed because they could be easily imitated by competitors, does not accurately reflect the success of loyalty programs, which can be effective tools for differentiation and customer retention.

Airlines' Frequent Flyer Programs and Retailer Loyalty Schemes Are Both