Loyalty Programs may
help companies to connect with their customers however people don’t realize
that there
can be a lot of disadvantages for the companies to offer Loyalty Programs.
·
It can cost
a company fortune to offer Loyalty programs. Small discounts may seem alright
but it comes off from profit. A $100 transaction could cost them $90 in product
and $10 profit. If they offer 5% off on their transaction the company only made
$5 which is 50% decrease in profit. A 5% discount seems not so big but in this case
it decreased their profit by 50%.
·
It is
difficult for companies to get out of schemes once they offer it especially for
cell phone companies. Once they offer a deal they cannot go back on it, even if
it cost them from their own pocket.
·
When companies
offer loyalty program there is always a risk of customer information may end up
in wrong hands and also the risk of falling foul of Consumer Privacy ACT
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