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Analysis of Reward Strategies in the Context of Customer Loyalty in Direct Selling

  • Companies operating in the grocery industry are facing low customer loyalty, resulting in strong customer switching behaviour. Additionally, the high similarity of the products predominantly prevents them from deriving benefits from switching barriers. As these issues represent decisive interfering factors for a sustainable and successful business, we intend to examine possible customer retention strategies, which target an increase in customer loyalty. We aim to identify the most appropriate reward strategy in the context of customer loyalty for direct sellers in the grocery industry. In order to compare and evaluate different possibilities, we conducted an empirical study. Our study focuses on the concrete case of bofrost*, a representative of direct sellers. A total of about 430 bofrost* customer panel members participated in an online survey. With four different survey versions, four customer groups were influenced by different specific customer retention strategies. After being confronted with unfavourable situations, participants had to state how likely they would recommend the company, intend to stay loyal to the company and abstain from competitive offers. The survey data reveals no significant differences among the four groups. Therewith, based on the study results, we cannot diagnose the best strategy. Nevertheless, based on the theory of cognitive dissonance, we highly recommend bofrost* and other direct sellers to surprise the customer with a present, namely with a T-shirt, discreetly embroidered with the company logo. Furthermore, this research highlights the specific potential of direct sellers - especially in the grocery industry - to reinforce relational switching costs by implementing this suggested customer retention strategy. Thereby, companies can strengthen customer loyalty in the long-term and are able to prevent customers from churning. Moreover, company-specific recommendations of action are provided to bofrost*. This research creates value to direct sellers, specifically of the grocery industry, by offering a foundation for decisionmaking regarding the design of a sustainably effective customer retention strategy. This takes companies a step closer to the increase of customer loyalty, which is essential in the light of a highly competitive market in which own customers are likely to get attracted from competitors.

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Author:Sarah Danner
Advisor:Kai-Markus Müller
Document Type:Bachelor Thesis
Year of Completion:2019
Granting Institution:Hochschule Furtwangen
Date of final exam:2019/09/06
Release Date:2019/09/11
Tag:Cognitive dissonance; Customer churn; Customer loyalty; Reward schedule; Switching barrier
Degree Program:IBW - Internationale Betriebswirtschaft
Functional area:Marketing
Licence (German):License LogoEs gilt das UrhG