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The effects of personalized email communication within loyalty programs for businesses without possibilities for e-commerce

Written by A. Tubulekas

Paper category

Master Thesis

Subject

Business Administration>Marketing & Sales

Year

2017

Abstract

Thesis: Today, in large B2C companies with loyalty programs, it is common to spread data-driven personalized marketing content. E-mail has become the standard digital channel for this type of communication because it provides cost-effectiveness between digital channels and offers great possibilities for creating attractive content tailored to customers. The purpose of this paper is to determine what impact personalized communication via email will have on loyalty programs, and whether companies should invest in personalized email communication. The method includes two quantitative case studies, analyzing 11 personalized newsletters and an activation email for companies in the fuel and convenience industries in the form of data analysis. A series of qualitative interviews were also conducted with individuals working in the field of personalized communications. The results show that loyal members have accepted the communication to a large extent and are exposed to personalized content. Emails in the form of monthly newsletters did not show any consistent positive impact on increased sales, store visits, or upsells. Activation email is part of the activation phase in the customer's life cycle, and it shows greater prospects because it increases the number of visits and leads to a positive overall upsell. It also determined the conversion costs and other effects of the form of brand awareness, as long as the content reaches the customer’s personalization is considered relevant. Otherwise, it may alienate them, because today's customers want digital marketing to be personalized. In short, the effectiveness of personalized e-mail proves that it is reasonable to invest in it, but people should understand the expected effect. In most industries, it is critical to turn infrequent customers into loyal customers. Nowadays, most companies no longer see customers as consumable resources, but instead develop strategies to retain existing customers and make them loyal to the company. This is especially important in industries where the differences between competitors are small, because customers are more likely to be disloyal and turn to competitors in such industries. Rosenberg and Czepiel (1984) demonstrated why companies should prioritize customer loyalty and invest in strategies that promote customer loyalty Loyalty program 2.1.2.1 Definition and purpose of loyalty program The customer loyalty program is defined by Lars Meyer-Waarden (2008) as "an integrated system of marketing activities designed to increase customer loyalty by establishing personalized relationships with customers." The customer loyalty program is a reward program for loyal customers and customers who are loyal to the brand. According to Uncles, Dowling & Hammond (2003), the main reason why a company establishes a customer loyalty program is; "Increase sales revenue, and establish and maintain a strong connection between existing customers and the brand." The customer loyalty program aims to provide customers with additional value, hoping to treat them as regular buying customers for a long time, which can bring competitive advantages, a strong brand, and so on. "Most loyalty programs are designed to provide customers with benefits and reward their loyalty through products and allowances. In exchange, the customer must conduct some of his or her business with the relevant company to receive these offers." (Blomqvist, Dahl & Haeger 1993). Loyalty programs are also an important method of recruiting customers. If customers register and join the loyalty program, they usually provide limited special offers (Cao, 2014). This is some form of generous short-term incentives that are expected to attract new customers. Loyalty programs in different industries Various companies in different industries can use loyalty programs, and the rewards are usually internal discounts or reward points. Airlines provide bonus points for flight miles, hotels can provide customers with an extra night, and grocery stores provide members with points for each purchase. (Lars Meyer-Waarden, 2008). Loyalty programs also cooperate with each other and provide the possibility to transfer reward points between loyalty programs. 2.1.2.3 Switching costs within the loyalty program According to Lars Meyer-Waarden (2008), modern loyalty programs have the potential to attract price-sensitive customers while retaining non-price-sensitive customers; “In general, loyalty programs are for those who need some kind of discount or bonus points. Provide incentives while avoiding extra costs for those who would buy even without discounts.” The loyalty program incurs switching costs for those loyalty members who have accumulated reward points over time because they are locked in that particular company and cannot be transferred to competitors. These conversion costs can be monetary or non-monetary. Companies that successfully create switching costs and try to reward long-term and active members are more likely to strengthen their relationships with loyalty program members. Read Less