Callie Crystal owns and operates one of the most successful local coffee shops in Denver, called The Edgewater Café. Each time a
customer purchases their 100th cup of coffee at The Edgewater Café they receive a free pound of coffee of their choice. What is Callie attempting to create with her unique "Free Pound of Coffee" marketing program?A. Reducing buyer power with a loyalty program.B. Increasing buyer power with a loyalty program.C. Decreasing supplier power with a differentiated product.D. Creating a substitute product.
A customer loyalty program is a rewards program offered by a company to customers who frequently make purchases. A loyalty program may give a customer free merchandise, rewards, coupons, or even advance released products.
Loyalty programs reduce buyer power. Loyalty programs reward customers based on the amount of business they do with a particular organisation. Information Technology allows companies to track the activities and accounts of millions of customers, thereby reducing buying power. That is, customers who receive "perks" from loyalty programs are less likely to do business with competitors.
The idea behind buyer power is that buyers can affect the competitive environment for the seller and influence the sellers level of profit. A strong buyer power will pressure sellers to lower price, improve quality and generally offer better services. Buyer power is high when they have any choices and low when they don't have many choices.
One of the ways in which sellers reduces buyer power is through loyalty programs. Loyalty programs are marketing strategies designed in such a way that merchants encourages buyers to continue shopping with them or use product and services associated with them.
What Callie Crystal is doing with her buy 100th cup and recieve a pound of cup of coffee of their choice is her way of reducing buyer power through loyalty programs.
Another method of reducing buyer power is by switching cost.
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