Effects of Loyalty Programs on Value Perception, Program Loyalty, and Brand Loyalty (original) (raw)
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Full Atricle published in Journal of Retailing and Consumer Services, 2012
We relate motives for loyalty program participation to perceived customer value.The relationship between motives and value is moderated by loyalty program design.Targeting customer motive may lead to higher levels of perceived customer value.Despite the strong use in marketing practice, the effectiveness of loyalty programs is still heavily questioned among researchers. In our study we present an empirically tested framework that views customer loyalty programs (CLPs) with their differing designs as a moderating tool in a means-end relationship between customer motives and value. By disentangling customer value perceptions of loyalty programs we contribute to the remaining question of the efficacy of CLPs and set the road for further research. Our results support the argument that CLPs can be an effective tool and are not only something that adds to the value of a product or service, but rather creates value by itself. However, this is only the case for programs that target prevailing customer motives and hence provide a higher level of perceived value.
The Long-Term Impact of Loyalty Programs on Consumer Purchase Behavior and Loyalty
Despite the prevalent use of loyalty programs, there is limited evidence on the long-term effects of such programs, and their effectiveness is not well established. The current research examines the long-term impact of a loyalty program on consumers' usage levels and their exclusive loyalty to the firm. Using longitudinal data from a convenience store franchise, the study shows that consumers who were heavy buyers at the beginning of a loyalty program were most likely to claim their qualified rewards, but the program did not prompt them to change their purchase behavior. In contrast, consumers whose initial patronage levels were low or moderate gradually purchased more and became more loyal to the firm. For light buyers, the loyalty program broadened their relationship with the firm into other business areas. The findings suggest a need to consider consumer idiosyncrasies when studying loyalty programs and illustrate consumers' cocreation of value in the marketing process.
Implications of Loyalty Program Membership and Service Experiences for Customer Retention and Value
Companies that offer loyalty reward programs believe that their programs have a long-run positive effect on customer evaluations and behavior. However, if loyalty rewards programs increase relationship durations and usage levels, customers will be increasingly exposed to the complete spectrum of service experiences, including experiences that may cause customers to switch to another service provider. Using cross-sectional, time-series data from a worldwide financial services company that offers a loyalty reward program, this article investigates the conditions under which a loyalty rewards program will have a positive effect on customer evaluations, behavior, and repeat purchase intentions. The results show that members in the loyalty reward program overlook or discount negative evaluations of the company vis-à-vis competition. One possible reason could be that members of the loyalty rewards program perceive that they are getting better quality and service for their price or, in other words, " good value. "
LOYALTY PROGRAMS BENEFITS AND CUSTOMER LOYALTY: THE MEDIATING ROLE OF CUSTOMER SATISFACTION
The purpose of this study was to develop an original framework to explore the direct effect of customer loyalty programs benefits on customer loyalty and to discuss the mediating role of customer. This study applies two original concepts – loyalty programs benefits and customer satisfaction to develop an integral model that enhances customer loyalty. In addition, this research employs an empirical study by means of the questionnaire survey method to verify the hypotheses and to explore their managerial and theoretical implications. Hayes' (2013) PROCESS macro and the four steps mediation process (Mackinnon, 2008) has been applied to verify the research framework. The empirical results showed that loyalty programs benefits and customer satisfaction significantly affect customer loyalty. Furthermore, this study demonstrates that the indirect relationship between loyalty programs benefits and customer loyalty is mediated by customer satisfaction. The indirect path presents partial mediation; hence, the need for hotels to establish other factors that indirectly influence the relationship between loyalty program benefits and customer loyalty as well as they enhance the antecedents of customer satisfaction during the service delivery process to increase customer loyalty. This study summarizes the literature on loyalty program benefits and customer satisfaction into a new managerial
Review of the theoretical underpinnings of loyalty programs
Journal of Consumer Psychology, 2011
A review of the extant literature reveals that the theoretical underpinnings of the majority of loyalty program research rest on psychological mechanisms from three specific domains-status, habit, and relational. We propose that to understand how loyalty programs actually work, a broader, more holistic research perspective is needed to account for the simultaneous effects across these three theoretical domains as well as both cross-customer and temporal effects. The contribution of this approach is a fresh research agenda advanced in 15 research propositions.
The effect of loyalty program fees on program perceptions and engagement
Journal of Business Research, 2015
Retailers may introduce loyalty program enrollment fees for several reasons, including to offset the costs of the program. The principle of commitment-consistency and sunk cost effects suggest consumers who pay a fee have a higher value to the firm and exhibit behavioral loyalty, while the zero-price effect predicts the opposite. Three studies show: consumers who pay to participate in a loyalty program have more favorable attitudes, more positive evaluations of value for the money and benefits than non-paying members (Study 1); and altering the wording of denominations of accrual can affect willingness to join fee-based programs (Studies 2 and 3). The results suggest a boundary effect to the numerosity heuristic. Presenting reward credit accumulations in higher numbers may be advantageous when program fees are high, since it shifts the focus of processing from the fee to the rewards. However, standard units may be more favorable when program fees are low.
B rand loyalty and the more modern topics of computing customer lifetime value and structuring loyalty programs remain the focal point for a remarkable number of research articles. At first, this research appears consistent with firm practices. However, close scrutiny reveals disaffirming evidence. Many current so-called loyalty programs appear unrelated to the cultivation of customer brand loyalty and the creation of customer assets. True investments are up-front expenditures that produce much greater future returns. In contrast, many socalled loyalty programs are shams because they produce liabilities (e.g., promises of future rewards or deferred rebates) rather than assets. These programs produce short-term revenue from customers while producing substantial future obligations to those customers. Rather than showing trust by committing to the customer, the firm asks the customer to trust the firm-that is, trust that future rewards are indeed forthcoming. The entire idea is antithetical to the concept of a customer asset. Many modern loyalty programs resemble old-fashioned trading stamps or deferred rebates that promise future benefits for current patronage. A true loyalty program invests in the customer (e.g., provides free up-front training, allows familiarization or customization) with the expectation of greater future revenue. Alternative motives for extant programs are discussed.
The influence of perceived benefits on the satisfaction with the loyalty program
Engineering Economics, 2017
Nowadays every loyalty program must have some value proposition, it becomes the main factor attracting customer to join the loyalty program. Value proposition, considered as a set of benefits customer receives being a member of the loyalty program relates to perceived benefits. Identifying the influence of perceived benefits becomes important to satisfy customers and can lead to greater loyalty to the program what can result greater loyalty to the store. The aim of the study was to measure the influence of perceived benefits on the satisfaction with the loyalty program in Lithuanian grocery retailing. 312 respondents took part in the research. A structural equation modelling using partial least squares path modelling methodology was applied in order to determine the impact of perceived benefits on the satisfaction with the loyalty program. The research findings indicate that the most important loyalty program benefits for the customer satisfaction with the loyalty program are monetary savings (as a part of utilitarian benefits), exploration (as a part of hedonic benefits), entertainment (as a part of hedonic benefits) and social (as a part of symbolic benefits). On the other hand, convenience (as a part of utilitarian benefits) and recognition benefit (as a part of symbolic benefits) are not important in the case of the satisfaction with the loyalty program in Lithuanian grocery retailing. The study findings imply that it is advantageous for Lithuanian grocery retailers to provide partly utilitarian, hedonic and partly symbolic benefits in their programs for gaining customer satisfaction through loyalty programs.
Rewards That Undermine Customer Loyalty? A Motivational Approach to Loyalty Programs
2017
Guided by the framework of Self-Determination Theory (SDT), this study examined the effects of external rewards on undermining customers’ intrinsic motivation to engage in a retail loyalty program. Two experiments revealed that participants who received a salient, controlling reward (i.e., a promise of reward with an explicit requirement and deadline, without options of choice) reported lower intrinsic motivation to use the loyalty program than participants who received a non-salient, autonomy-supportive reward (i.e., a promise of reward with a less explicit requirement and no deadline, with options of choice). However, the undermined intrinsic motivation of those who received the salient, controlling reward was enhanced when they were given verbal feedback acknowledging their potential negative feelings associated with using the loyalty program. These findings provide important practical implications for designing a more effective loyalty program.
Perceived benefits of loyalty programs: Scale development and implications for relational strategies
Journal of Business Research, 2010
Positive outcomes of loyalty programs are clear for firms, yet little research examines customer perceptions. To address this gap, this article investigates various perceived benefits of loyalty programs using a multi-benefit framework based on utilitarian, hedonic, and relationship literature. Two quantitative studies, involving 658 French members of loyalty programs, provide a 16-item scale that measures five types of perceived benefits: monetary savings, exploration, entertainment, recognition, and social benefits. The five dimensions have different impacts on satisfaction with the program, loyalty to the program, and perceived relationship investment of the firm. This article offers a discussion of the theoretical and managerial implications of these findings for relationship marketing strategies.