Customer Loyalty Programmes and Consumers

Matti Kari, Ilkka Kiema, Petri Kuoppamäki and Eero Lehto

The study by Eero Lehto, Petri Kuoppamäki, Matti Kari and Ilkka Kiema considers some widely used customer loyalty programmes in Finland and Sweden. In particular, the study analyses these arrangements in retail trade and financial markets. With easier tracking of customers, the benefits of concentration in retail trade as well as in insurance and banking operations have increased in Finland and elsewhere in Europe. Generally speaking, these customer loyalty programmes reward customers for concentrating their purchases to a company that offers benefits. The nature of the programmes differs, depending on 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.

As is the consumers’ welfare is the main concern of competition and consumer law, this study evaluates the impact of customer loyalty programmes mainly by focusing on pricing and consumer surplus. We have also studied the effects of bundling with companies and consumers by means of theoretical models.

The problem of Finnish customer loyalty programmes with regard to competition and consumers is that they have, in many places, been extended to include several industries at a time. Limiting bonus programmes to only one 2-digit level industry could have a positive impact on competition and consumers. Another problem is the long duration of some benefits. Reducing the bonus accrual period to two years at least in the banking and insurance sectors would have healthy effects on competition. It would also be in the interest of consumers.

Published: October 12, 2017
ISBN: 978-952-209-167-3 (pdf)
ISSN: 2242-6914 (pdf)
Publication (PDF)