Enhancing customer participation in loyalty programs (original) (raw)

Loyalty Programs: Generalizations on Their Adoption, Effectiveness and Design

Foundations and Trends® in Marketing, 2010

Loyalty programs (LPs) have increased in popularity, and have been studied extensively in the academic literature with mixed findings. Therefore, we offer an overview of extant research on LPs. We derive generalizations on the effectiveness and best design of LPs, discuss conditions that mediate and moderate the effects of LPs on customer behavior and attitudes, and highlight avenues for further research. Overall, we conclude that LPs are effective in increasing consumer purchase behaviors over time, but their impact differs across consumer segments and markets. Numerous practical examples illustrate the points discussed. Overall, this monograph provides insights to researchers and practitioners through a comprehensive, research-based synthesis of current knowledge. As a consequence, LP managers may better understand the implications of LP adoption, and ultimately improve the effectiveness of their LPs.

The Impact of Customer Loyalty Programs on Customer Retention in the Retail Industry

2021

As the importance of the concept of customer loyalty increases, organizations are investing more towards loyalty programs for retaining their existing customers as well as attracting new customers. This study analyzes the literature to synthesize some debatable areas such as types of customer loyalty programs and their impact on customer retention. This research is carried out as a systematic review, evaluating ten recently published research articles due to their high relevancy. Our analysis identifies four major categories of customer loyalty programs in the retail industry namely, point system, rewarding system, loyalty card system and gift card system. Further, it is found that a rewarding system is the most effective type of loyalty program in the retail industry where retailers can be provided additional rewards based on the customers' loyalty levels. Through this study, it is found that all four types of customer loyalty programs are positively correlated with customer retention while the rewarding system has the highest co-relation with customer retention.

Loyalty program effectiveness: Theoretical reviews and practical proofs

Uncertain Supply Chain Management

Loyalty programs are widely used by organizations as a structured customer relationship management (CRM) tool to build and extend customer-supplier relationship. Although a large number of benefits are offered through them to both companies and consumers, loyalty programs face a set of planning and implementation pitfalls. Scholars or practitioners rarely discuss such pitfalls. Thus, this paper intends to add further values to the current literature by exploring/investigating the main loyalty scheme pitfalls, both theoretically and practically. The study explores a set of loyalty program planning problems and some of the execution's drawbacks, including clear aim need, loyalty program design, budgeting and experienced employee involvement. In addition to loyalty programs benefits and rewards offered, loyalty programs target customer selection problems using loyalty program promotional tools. For the study, 161 managers and employees who were involved in loyalty program planning and execution were surveyed. Smart-PLS was used to test the developed model and hypotheses. The study found that all studied loyalty program elements identified affected their planning and implementation. However, some of these elements where seen important to be considered when planning loyalty schemes, such schemes' benefits and rewards offered were still not planned properly and did not meet customer needs or even expectations and, in most cases, the loyalty programs' aims were not clear to all their stakeholders. The paper also provides additional discussion about additional issues of loyalty schemes planning and execution problems and proposes a set of solutions and recommendations, which might highlight some of the future venues with this regard. .

The effects of introducing and terminating loyalty programs

European Journal of Marketing, 2015

Purpose – The goal of this paper is to empirically investigate the effects of an loyalty program (LP) introduction and termination, accounting for simultaneous effects of LP designs, cross-customer effects and competition effects. Despite firms across the globe spend billions of dollars on LPs, it is not clear: whether these programs enhance customer loyalty, what happens if a program is terminated and which LP design elements enhance effectiveness of LPs. Design/methodology/approach – The authors empirically investigate to what extent the effects of introducing and terminating a LP depend on: its monetary and non-monetary design elements, customer characteristics and competition. The empirical evidence is based on a bivariate hierarchical linear model, using a large-scale dataset involving 9,783 consumers rating 24 different LPs across eight industries. Findings – While the characteristics of LP are more important in influencing customer behavior when they join the LP, the competit...

An empirical analysis of the components of retailer customer loyalty programs

International Journal of Retail & Distribution Management, 2008

Purpose -This paper sets out to determine the benefits offered to customers and activities taken by retailers, whether or not they have formal customer loyalty programs, whether there are differences in the benefits/activities of retailers with and without formal loyalty programs and finally, whether specific benefits/activities of retailers can predict whether or not they have formal loyalty programs. Design/methodology/approach -A questionnaire was sent to a random sample of retailers in one US state. In addition, respondents reporting that they had formal loyalty programs received a telephone call lasting less than ten minutes designed to gather further information regarding their loyalty program. x 2 , Kendall's W and logistic regression analysis were used to test the purposes of this study. Findings -The most used benefits/activities of participating retailers are: demonstrating having the customers' interests at heart, providing financial incentives to selected customers, sending thank you notes to customers, and identifying customer preferences and recording them to guide future actions. In addition, a model was developed that was used to predict those retailers that had formal loyalty programs.

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.

Advancing research on loyalty programs: a future research agenda

Marketing Letters, 2014

Despite the growing literature on loyalty program (LP) research, many questions remain underexplored. Driven by advancements in information technology, marketing analytics, and consumer interface platforms (e.g., mobile devices), there have been many recent developments in LP practices around the world. They impose new challenges and create exciting opportunities for future LP research. The main objective of this paper is to identify missing links in the literature and to craft a future research agenda to advance LP research and practice. Our discussion focuses on three key areas: (1) LP designs, (2) Assessment of LP performance, and (3) Emerging trends and the impact of new technologies. We highlight several gaps in the literature and outline research opportunities in each area.

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.