|Type of paper:||Case study|
|Categories:||Branding Sales Business plan Business management|
What has Enterprise Rent-a-car done with its loyalty reward program that requires a response from Olympic?
Enterprise has had changes in its loyalty reward programs to its customers in which it had announced that all regular customers had a chance to have rental days on any car of their choice free. They also had a change in the mode of rewarding of the loyalty rewards to the amount of money spent instead of the days one rented during rewarding. This affected Olympic business tremendously that they would not allow Enterprise which was their competitor take away their customers.
What are the purposes of loyalty reward programs? How do they generally work? What is their relationship with Customer Lifetime Value (CLV)?
The purpose of the loyalty rewards is to maintain long periods of customer and business relationship with their most frequent customers. They also serve as a medium of providing significant details about their customers which is a method of maintaining "personal" or knowledgeable associations. These loyalty reward programs are awarded relative to the number of items a customer has purchased and then later are redeemed for example for more products or travel. Loyalty rewards are a way of maintaining and keeping customers into the business.
Strengths and weaknesses of Olympia loyalty program
According to the Deighton & James(1), the strength of Olympia loyalty program was the use of the Olympic Medalist Awards loyalty program which enabled the company to gain more profit and enhance its growth but was later viewed as weak. The prices and services provided by Olympia were highly competitive unlike those of Enterprise.
Characteristics of the rental car business
The car rental business is directly related to the overall economic status of the country. The fleets used in the car rental business can be reduced or maximized both of which depends on the demand. The profits gained in the car rental business is determined by the size of the fleet and demand.
Olympia's options in responding to the changes in the Enterprise Rent-a-Car loyalty rewards program.
According to the Deighton & James(9), some of the officials in the meeting at Dallas suggested a change in how they reward the loyalty programs to be more like those of Enterprise whereby you are awarded according to the amount of money spent. However, some considerations such as the revenue changes and increase in the number of the days that have free rentals should have been key determinants. However, they considered changing the mode into a better strategy which is different from that of Enterprise.
How should Olympic Rent-a-Car respond to the change in the Enterprise Rent-a-Car program? Why?
The Olympic Rent-a-car should not use the customer loyalty reward system used by Enterprise. This is because the free day's number will rise to values from 1.65% to 1.95% from 1.45% previously. This translates to a total of from 50 to 125 free days which is an increase in the costs incurred for the program. If there is low demand, the profits will decrease to around 3% to 8% which is a significant margin.
Deighton, John, and James T. Kindley. "Olympic Rent-A-Car US: Customer Loyalty Battles." (2013).
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