BUSI 4004 Week 9 Loyalty Offer Proposal Example

Free Minor Repairs on Every Order or a Tenth Shirt Free? A Loyalty Proposal for a Neighborhood Dry Cleaner That Costs Both Options, Finds the Punch Card Three Times as Expensive and Argues the Repairs Can Be Offered Indefinitely

Student Name

Walden University

BUSI 4004: Customer Relationship Management for Small Business

Instructor Name

Month Day, Year

Free Minor Repairs on Every Order or a Tenth Shirt Free? A Loyalty Proposal for a Neighborhood Dry Cleaner That Costs Both Options, Finds the Punch Card Three Times as Expensive and Argues the Repairs Can Be Offered Indefinitely

The Proposal

Grand River Cleaners, the composite Lansing cleaner studied in earlier weeks, should give its regulars one standing reason to come back: free minor repairs on every order. A loose button replaced, a dropped hem of up to four inches resewn, a small seam closed, all without asking and without charge, on any order from a registered customer. The repair is noted on the ticket and mentioned on the tag, so the customer sees what was done.

Most people's first idea for a loyalty program is a punch card: every tenth shirt free. This proposal compares the two, costs both at round illustrative figures, and argues that the repairs are both cheaper and better suited to what keeps this shop's customers.

What Each Option Costs

Table 1

Annual Cost of Two Loyalty Options for About 600 Regulars

Grand River Cleaners and its figures are composite; volumes come from the shop's ticket history, rounded.

The punch card looks cheaper because nothing is paid until a customer redeems it, and a free shirt seems small. But regulars bring in about 72,000 shirts a year, so a tenth of them is a large number, and every free shirt is revenue the shop would otherwise have collected. The repairs cost the shop only time and materials, about a third as much, and much of that time comes from slack hours when pressers are waiting for the next load.

Why Repairs Fit This Shop's Customers

The opening discussion in this course described a customer who stayed for three years partly because a cracked button was replaced without being asked. The feedback read found staff friendliness and care to be the most praised features of the shop. A free repair is that care made routine: it shows up in the customer's hands every time something needed fixing.

A punch card rewards volume, not care. Regulars who bring in shirts every week already come back; a tenth shirt free mostly thanks them for what they would have done anyway. Dowling and Uncles (1997) argued that loyalty programs often reward customers who were already loyal and that competitors can copy them easily, so their advantage tends to disappear. Kivetz et al. (2006) found that customers speed up their purchases as they near a reward, but a weekly dry cleaning customer cannot dirty shirts faster, so that effect would be small here.

Repairs are also hard for competitors to copy cheaply. Most dry cleaners in the area charge for repairs or send them to a seamstress. Offering them free requires someone in the plant who can sew, which this shop has and the chain cleaners nearby do not.

Why the Shop Can Keep Offering It

The test of a loyalty offer is whether the shop could keep it forever without regret. The repairs pass for three reasons. Their cost grows only with orders that need them, about one in six, not with every order. The work fits slack time in the plant. And the benefit can be limited clearly: minor repairs only, with anything over four inches of hem or a replaced zipper quoted as usual. Because customers who stay longest are not always the ones who earn the most (Reinartz & Kumar, 2000), there is a reason to choose a loyalty benefit whose cost scales with real need rather than with how much a customer buys.

How It Will Be Introduced

The offer will start with the new customer system in January. Each repaired garment will carry a small tag: "We replaced a button on this, no charge." Clerks will mention the offer when a customer registers, and it will be listed on the counter sign and in the receipt email. The ticket system will record every repair, so the owner can see the true cost each month.

The test of the offer is how many regulars remain active a year later, compared with the 79 percent found in the retention analysis for the 2025 group, and by the monthly repair cost. If the cost runs above $9,000 a year, the four-inch limit on hems will be reviewed.

The Alternative's Remaining Appeal

The punch card has one advantage: customers understand it instantly. The repairs need to be seen to be valued, which is why the tags and the clerks' mention matter. If, after six months, customers do not seem to notice the repairs, the shop could add a simple note to receipts showing how many repairs it has made for that customer this year.

References

Dowling, G. R., & Uncles, M. (1997). Do customer loyalty programs really work? Sloan Management Review, 38(4), 71-82.

Kivetz, R., Urminsky, O., & Zheng, Y. (2006). The goal-gradient hypothesis resurrected: Purchase acceleration, illusionary goal progress, and customer retention. Journal of Marketing Research, 43(1), 39-58. https://doi.org/10.1509/jmkr.43.1.39

Reinartz, W. J., & Kumar, V. (2000). On the profitability of long-life customers in a noncontractual setting: An empirical investigation and implications for marketing. Journal of Marketing, 64(4), 17-35. https://doi.org/10.1509/jmkg.64.4.17.18077