MGMT 211 Lecture Notes - Lecture 4: Frequent-Flyer Program, Walgreens, Loyalty Program
Document Summary
Cvs v walgreen price war: cvs can propose loyalty pricing: if you purchased from me in the past, you get a rebate the next time you go in. To cover your costs, you need to increase prices of all products by x: walgreens can increase its non-loyalty prices by x to be just as profitable, both cvs and walgreens continue to increase prices until sales drop. Loyalty pricing- divide your customer into loyal and non-loyal customers. You need to raise prices for non-loyal customers, which allows your rival to increase his price, which allows you to raise your price again. American v. delta v. united v. continental at phl. American raises its prices for non-loyalty customers slightly. Delta and all other companies can now increase prices, because the customers they would have lost are already loyal to american and have lots of miles with them already.
