MONASH UNIVERSITY
FACULTY/SCHOOL/DEPT OF BUSINESS AND ECONOMICS
ASSESSMENT COVER SHEET
Student’s name
Day
Keith
ID number
Monash 23746378 / OUI - 340785
Phone
0434 256 976
Unit name
Assessing Marketing performance
Unit code
MKF5200 / X3410
Note: If this is a group assignment, please include the names of all other group members.
Title of assignment
Lecturer/tutor
Task 1 (Week 11) Nunes and Xavier Drèze from 2006 entitled “Your loyalty
program is betraying you”.
Joanne McGregor
Is this an authorised group assignment?
Yes
No
Has any part of this assignment been previously submitted as part of another unit/course?
Tutorial/laboratory day & time
Yes
No
Semester 1 - 2014
Due date 18th May 2014
Date submitted 18th May 2014
All work must be submitted by the due date.
If an extension of work is granted this must be specified with the signature of the lecturer/tutor.
Extension granted until (date) ................................ Signature of lecturer/tutor .................................................
Please note that it is your responsibility to retain copies of your assessments.
Intentional plagiarism amounts to cheating in terms of Monash University Statute 4.1 – Discipline.
Plagiarism: Plagiarism means to take and use another person’s ideas and or manner of expressing them and to
pass these off as one’s own by failing to give appropriate acknowledgement. This includes material from any
source, staff, students or the Internet – published and unpublished works.
Collusion: Collusion is unauthorised collaboration with another person or persons.
Where there are reasonable grounds for believing that intentional plagiarism or collusion has occurred, this will be
reported to the Chief Examiner, who may disallow the work concerned by prohibiting assessment or refer the
matter to the faculty manager.
Student Statement:

I have read the university’s Plagiarism Policy and Procedures [http://www.policy.monash.edu/policybank/academic/education/conduct/plagiarism-policy.html.].

I understand the consequences of engaging in plagiarism and collusion as described in University Statute
4.1. Part III – Academic Misconduct
[http://www.monash.edu.au/pubs/calendar/Statutes/Statute04.html#Heading110].

I have taken proper care of safeguarding this work and made all reasonable effort to ensure it could not be
copied.

I acknowledge that the assessor of this assignment may for the purposes of assessment, reproduce the
assignment and:
i.
provide to another member of faculty; and/or
ii.
submit it to a plagiarism checking service; and/or
iii.
submit it to a plagiarism checking service which may then retain a copy of the assignment on
its database for the purpose of future plagiarism checking.*

I certify that I have not plagiarised the work of others or participated in unauthorised collaboration when
preparing this assignment.
Signature ..Keith Day (Submitted on-line)............................................ Date 18h May 2014
* delete (iii) if not applicable
Privacy Statement
The information on this form is collected for the primary purpose of assessing your assignment. Other purposes of
collection include recording your plagiarism and collusion declaration, attending to course and administrative
matters and statistical analyses. If you choose not to complete all the questions on this form it may not be
possible for Monash University to assess your assignment. You have a right to access personal information that
Monash University holds about you, subject to any exceptions in relevant legislation. If you wish to seek access to
your personal information or inquire about the handling of your personal information, please contact the University
Privacy Officer: privacyofficer@adm.monash.edu.au
1| Page
Submission for Assignment 1 – Week 11 – Keith Day
This week’s discussion is based upon a review of the paper by Joseph Nunes and Xavier
Drèze from 2006 entitled “Your loyalty program is betraying you”.
The Nunes and Drèze paper explores the topic of loyalty programs and starts off with a
somewhat gloomy introduction of how they apparently don’t work and most of the major US
and UK companies have, as a consequence, abandoned them. It’s not all bad news though, the
authors do imply that somewhere within their research is the golden apple, and armed with
their loyalty tool kit you will be able to design your own loyalty program that bucks all the
trends and elevates your business, and you, to consumer stardom.
The body of their paper starts by taking the position “creating a successful loyalty program is
about defining what should be gained from the effort and that only with clear business goals
can one create the appropriate mechanisms and judge whether they will be effective enough”,
although to be fair, that can also be said for pretty much any business strategy. Nunes and
Drèze go on to provide a somewhat whimsical definition of loyalty as something which
means faithfulness or unswerving devotion. I would have personally liked to have seen this
defined a little clearer with the introduction of specific traits or tangible criteria for loyaltybased customers or loyalty-based programs such as “loyalty is the emotional bond between
one individual and X” (McGoldrick and Andre 1997; Bennett and Rundle-Thiele 2002) or
that loyalty is an extension of trust between the consumer and the retailer (Macintosh and
Lockshin (1997) or even at a minimum to acknowledge a link between customer satisfaction
and loyalty (Gummesson 1993; Heskett et al. 1994; Anderson and Fornell 1994; Hallowell
2| Page
1996) and the authors never really do expand in their paper about what they feel loyalty is or
to even define it further.
The authors do sort of save themselves from their flippancy though by proffering up a
framework for loyalty programs by asking what can loyalty programs reasonably do? They
then go on to provide some good examples of five goals that loyalty programs can serve, such
as the ability to retain customers, winning a greater share of the customer’s wallet, prompt
customers to make additional purchases, yield insight into customer behaviour and preference
(My favourite) and finally, turn a profit.
Nunes and Drèze provide some great examples of the five goals framework which were well
worth reading although I must admit I had a bit of difficulty with some of the “one basket”
examples, notably when discussing multi-tiered loyalty programs, where they offered an
example of when “a friend of theirs …” I couldn’t help feeling, that as exhaustive as some of
the example were, there was a distinct lake of data to substantiate much of what they were
saying.
Thankfully, they moved on. The section which talked to the levers of loyalty was interesting.
They start the discussion by noting that designing a loyalty program is a straightforward
exercise of creating something that is attractive to customers but not too expensive and then
cunningly spend the next 4 pages explaining why that’s not so easy to achieve. It quickly
becomes apparent that setting up a loyalty program can be very complex indeed, which of
course is nothing new and there have been plenty of academic studies focussing on the
complexities of loyalty already written (Cunningham 1956; Jacoby 1971, Lipstein 1959; and
so on), and as example after example are wheeled out covering everything from how do
divide rewards, the nature of rewards, combined currency flexibility, don’t promise what you
3| Page
can’t deliver and not giving away the store you almost fall in to a sense of doom and lob the
whole loyalty program idea you had in your head in to the bin and you that’s when they hit
you with the final section “Keep the faith” and remind you why you should be doing it after
all.
As papers on loyalty programs go, it was a good read. Personally I thought there were way
too many assumptions being made, a total lack of data to support their research/arguments, no
real academic basis for their findings and in many cases I found a lot of what they were
putting forward rather subjective. Although saying that, the examples they gave made me
think and there were plenty of them. I would have really liked to have seen some link between
consumer behaviour and goal/objective setting and I personally feel the line “designing a
loyalty program is a straightforward exercise of creating something that is attractive to
customers but not too expensive” as trivialising the whole article. For me though the biggest
disappointment was that I still didn’t feel at the end of it that I had my tool kit and I was
rather looking forward to that.
References
Anderson, E.W. and Fornell, C. (1994) “A customer satisfaction research prospectus”, in
Rust, R.T. and Oliver, R. (Eds.), Service Quality: New directions in theory and practice, Sage
Publications, Thousand Oaks, CA, pp. 241-68.
Bennett, R. and Rundle-Thiele, S. (2002) “A comparison of attitudinal loyalty measurement
approaches”, Journal of brand management, Vol. 9, No. 3, pp. 193-209.
Cunningham, R.M. (1956) “Brand Loyalty – What, where, how much: Journal of marketing,
Vol. 21.
4| Page
Gummesson, E. (1993) Quality management in service organisations: An interpretation of the
service quality phenomenon and a synthesis of international research, International Service
Quality Association, Karlstad, Sweden.
Hallowell, R. (1996) The relationships of customer satisfaction, customer loyalty, and
profitability: an empirical study, International journal of service industry management, Vol.
7, No. 4, pp. 27-42.
Heskett, J.L., Jones, T.O., Loveman, G.W., Sasser, W.E. Jr and Schlesinger, L.A. (1994)
“Putting the service profit chain to work” Harvard Business Review, March-April, pp. 105-11.
Jacoby, J. (1971) “A model pf multi-brand loyalty” Journal of advertising research, Vol. 11.
Lipstein, B. (1959) “The dynamics of brand loyalty and brand switching” Fifth annual
conference of the advertising research foundation.
Macintosh, L. and Lockshin, G. (1977) “Retail relationships and store loyalty a multi-level
perspective” International journal of research in marketing, Vol. 14, No. 5. Pp. 487-97.
McGoldrick, P. and Andre, E. (1997) “Consumer misbehaviour: promiscuity or loyalty in
grocery shopping” Journal of retailing and consumer services, Vol.4, No. 2, pp. 73-81.
5| Page