Can loyalty schemes really build loyalty?

Customer loyalty schemes have blossomed in the era of customer retention, and have been willingly embraced by both retailers and consumers alike. Today's loyalty schemes are modelled on the AAdvantage Programme; a frequent flier programme initiated by American Airlines in 1981, and lessons from the air-line industry are briefly introduced. The primary purpose of this paper is to evaluate the extent to which loyalty schemes really can build loyalty. In order to do this, four categories of loyalty as identified in the literature are considered. Given existing criticisms of loyalty schemes it is concluded that such schemes have an important role to play in situations where no loyalty or spurious loyalty is evident. However, where sustainable loyalty is the ultimate goal, customer loyalty schemes are of importance only as part of a coherent value proposition.