Question

Which of the following forces is commonly reduced through the use of a loyalty program?

A) Buyer power.
B) Supplier power.
C) Threat of new entrants.

Answer 1

Loyalty programs mainly aim to reduce buyer power by creating incentives for customers to remain with a company, thus fostering repeat business and enhancing customer retention. Hence, option (A) is correct.

Step-by-step explanation:

Loyalty programs are designed to incentivize repeat business, which can reduce the buyer power by encouraging customers to stay with a particular brand or company instead of shopping around. This is achieved by offering rewards for repeated purchases, special discounts, or exclusive benefits to loyal customers.

Through these programs, businesses aim to create a strong customer base that is less price-sensitive and more resilient to the competition, which in turn can reduce the threat of customers switching to competitors even if competitors offer better or cheaper products.

Therefore, a loyalty program commonly reduces buyer power by making it less likely for customers to go elsewhere, thus strengthening the business's position in the market and potentially improving its profits and stability.