Faculty & Research
Frequency Strategies and Double Jeopardy in Marketing: The Pitfall of Relying on Loyalty Programs
Vol 8 No 12
By: Michael Lynn Ph.D.
Executive Summary: Domestic airlines’ reliance on frequent flier programs to improve sales is called into question by the double jeopardy effect. Data on airline travel from D.K. Shifflet indicate that small domestic airlines suffer from both weak penetration and a meager average purchase frequency, while large domestic airlines enjoy an advantage in both penetration and average purchase frequency. In addition, there is much more variance in penetration among domestic airlines than is found in average purchase frequency. Thus, differences between airlines in sales or market share are almost entirely due to differences in penetration rather than differences in purchase frequency. This “double jeopardy” pattern of data, in which small brands suffer in two ways, has been observed for many different product categories and in many different countries. The ubiquity of this effect suggests that average purchase frequency among brand users cannot be increased substantially without also increasing the brand’s penetration. Thus, hospitality marketers who focus on loyalty programs for competitive advantage will be disappointed (although such programs constitute a defensive strategy at this point). Instead of targeting current users in an attempt to increase their frequency of purchase, hospitality and other marketers should focus on increasing the popularity of their brands among the market as a whole. Ultimately, successful marketing comes not from loyalty programs, but from creating value in the form of a superior product and service offering, communicating that value to all users of the product category, and capturing that value through pricing.
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- Pricing for Revenue Enhancement in Asian and Pacific Region Hotels:A Study of Relative Pricing Strategies, by Linda Canina and Cathy A. Enz
About Michael Lynn Ph.D.
Dr. Michael Lynn is a professor of consumer behavior and marketing at the Cornell University School of Hotel Administration. He received his Ph.D. in Social Psychology from the Ohio State University in 1987, and has taught in the marketing departments of business and hospitality schools since 1988. Dr. Lynn paid his way through school by waiting tables and bartending. This experience sparked his interest in service gratuities (tipping), a topic on which he has over 35 published academic papers. His other research focuses on consumer status and uniqueness seeking. Dr. Lynn is the past editor of the Cornell Hospitality Quarterly, and is currently on the editorial board of the Journal of Academy Marketing Science, which gave him an outstanding reviewer award in 2006.
