Customer Loyalty Programmes and Consumers

Petri Kuoppamäki, Matti Kari, Ilkka Kiema, Eero Lehto

Research output: Book/ReportBookScientificpeer-review

Abstract

The benefits of concentrating retail trade, insurance and banking operations have increased in Finland and elsewhere in Europe, as customer tracking has become easier. Generally speaking, these customer loyalty programmes reward customers for concentrating their purchases to a company that offers benefits. The nature of the programmes differ in terms of whether the bonus is given in cash or as a discount on the company's products. From the viewpoint of consumers and competition, even more important is whether a potential discount is given for the same type of products or other types of goods entirely.
This study investigates Finnish customer loyalty programmes. Chapter 2 illustrates various forms of tying and bundling. At the same time, the main features of the programmes prevalent in Finland and Sweden are discussed. The most significant programmes in Finland are focused on the retail trade, aviation, insurance and banking. When looking at the different programmes we see how much consumers spend on these programmes and how large the bonuses are. We also highlight the extent to which a single customer loyalty programme can cover a wide range of products in a variety of industries.
In the economic literature, product bundling and tying is generally analyzed in a
framework where a key part of the market is assumed to be monopolistic. Apparently, this assumption merely reflects the reality in which these schemes are applied. In this respect, the situation has remained the same for decades. Of course, in advanced market economies, many service industries are characterized by concentrated structures where large companies have significant market power. In fact, even the areas of economics and law focussing on bundling and tying do not address the question of whether the marketsare competitive or not, or whether they become competitive by themselves. The different views are mainly related to the effects of bundling and tying.
Original languageEnglish
Place of PublicationHelsinki
PublisherPalkansaajien tutkimuslaitos
ISBN (Electronic)978-952-209-167-3
Publication statusPublished - 1 Oct 2017
MoE publication typeC1 Separate scientific books

Keywords

  • Customer loyalty programs, bundling, tying, economic effects, consumer welfare, competition law

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