Designing loyalty programs that enhance customers' perceived value

Pietro Zidda, Nathalie Demoulin, Jérémy Prosman

Research output: Contribution in Book/Catalog/Report/Conference proceedingConference contribution

Abstract

Many companies use loyalty card programs (LP) to retain their customers and increase their loyalty. These programs ought to be inimitable and thus enable companies to differentiate themselves from their competitors (Dowling and Uncles, 1997). The design of a LP is crucial given that it drives desired customer behaviours such as increased share of wallet and share of visit, and attitudes such as enhanced attitudinal loyalty. However, very few studies looked at the LP characteristics that impact on customers’ satisfaction and store loyalty (Bridson et al., 2007; Keh & Lee, 2006; Leenheer et al., 2007; Yi & Jeon, 2003). As a result, the overall objective of this study is to identify and classify the LP characteristics that really matter in the customer satisfaction-loyalty process. More specifically, by decomposing customers’ overall evaluation of LPs into the evaluation of LP characteristics, we intend to discover how LPs should be designed so as to potentially maximize customers’ overall evaluation, their satisfaction and finally their loyalty towards the store. Our methodology is based on a conjoint experiment to derive customers’ preferences with respect to the characteristics of LP (attributes and levels of attributes). Attributes considered in this research are membership costs (free or not), methods of loyalty measurement (points accumulation according to the purchase amount or the type of product bought or box to tick according to the purchase amount), types of rewards (monetary, free product, or psychological reward), timing of rewards (immediate or delayed), link of the reward with the retailer offer (direct or indirect), number of retailers involved in the LP (a single retailer vs. multi-retailers), card functions (loyalty card only, loyalty card with debit payment function, loyalty card with debit and credit payment functions). We conducted surveys among customers of some HBC retailers. During the conjoint experiment, respondents expressed their overall preferences for the various theoretical LPs, each LP program being described by attributes and levels of attributes. For each loyalty card held, we measured the loyalty card satisfaction, the store satisfaction as well as the behavioural and attitudinal loyalty towards the retail chain. We also considered several moderating variables such as customers’ involvement in the product category, store attachment and their shopping orientation (economic, relational and apathetic). Given partial utilities, we discovered the importance of LP characteristics. In addition, we simulate customers’ overall preferences for existing LPs and link partial as well as overall preferences to customers’ LP satisfaction and store loyalty. From our model, we are able to suggest managerial recommendations to retailers to improve the design of their loyalty scheme.
Original languageEnglish
Title of host publicationProceedings of the 19th International Conference on Recent Advances in Retailing and Consumer Services Science (EIRASS), Vienna, Austria, July 9-12
Publication statusPublished - 2012

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    Zidda, P., Demoulin, N., & Prosman, J. (2012). Designing loyalty programs that enhance customers' perceived value. In Proceedings of the 19th International Conference on Recent Advances in Retailing and Consumer Services Science (EIRASS), Vienna, Austria, July 9-12