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Frequency Strategies and Double Jeopardy in Marketing: The Pitfall of Relying on Loyalty Programs

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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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2008-07-01

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hospitality; loyalty programs; double jeopardy effect; frequent flyer program

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Government Document

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Required Publisher Statement: © Cornell University. This report may not be reproduced or distributed without the express permission of the publisher

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