I found this Shin and Sudhir study on “When to Reward Your Customers” very thought provoking. Please note particularly”
“The award-winning paper helps to reconcile a contradiction between marketing theory and practice. Marketing scholars have generally held that in order to maximize profits, firms should attract new customers with low prices, rather than giving discounts to current customers to reward them for their loyalty. But such rewards for existing customers are common in practice.
Shin and Sudhir found that rewarding your own customers can be justified in industries where two conditions apply. First, heterogeneity in customer value is high; that is, a small group of customers provide a large percentage of profits. And second, stability of customer preferences is low: customers can easily switch to competitors.”
Should you reward your own customers or your competitors’ customers? [or is this a false choice?]