Investigation of the effect of loyalty card membership levels on customers' perception of benefits and on their loyalty

Many companies use loyalty card programs to retain their customers and increase their loyalty. In some sectors, such as airlines firms, hotel chains, clothing retail chain, companies used non-linear programs (Hederstierna and Sällberg, 2009). Indeed, they provide their customers with loyalty cards with two, three or more levels. Customers can achieve a higher level when they have spend a given amount of money within a given time period.

The effectiveness of loyalty reward programs have been widely investigated in the literature. However, no research has looked into the effect of membership levels on the customers’ perception of loyalty programs benefits as well as on the effect of these benefits on attitudinal and behavioral loyalty. The benefits considered in this research are threefold (Mimouni-Chaabane and Volle, 2010). The utilitarian benefits include monetary savings from coupons and cash-back offers as well as convenience linked to services specially designed to loyalty card members. The hedonic benefits consist of exploration benefits obtained through magazines, direct mail that enables customers to keep informed about new offers or new trends. Hedonic benefits also include an entertainment dimension linked to points' collection and exchange. Finally, symbolic benefits comprise customers recognition related to special treatments and special status as well as social benefits for customers who feel that they belong to a group of privileged customers sharing the same value.

We conducted a survey of customers holding a loyalty card from a clothing company with a two-level loyalty program. We measured the membership level, the perceived benefits, the loyalty card satisfaction, and the store satisfaction, the behavioral and attitudinal loyalty. The data were analyzed using SmartPLS version 2.0.M3 (Ringle, Wende and Will, 2005) in two stages: the measurement model and the structural model. Our results demonstrated that the loyalty card satisfaction mainly depends on the points' collection i.e. monetary savings as well as entertainment derived from it. Being member of the higher loyalty card level increases hedonic and symbolic benefits, i.e. recognition, entertainment and social dimensions. On the one hand, behavioral loyalty is influenced directly by recognition benefits and indirectly through loyalty card satisfaction by monetary and entertainment benefits. On the other hand, attitudinal loyalty is determined directly by social benefits and indirectly by monetary benefits. Based on these results, we suggest managerial recommendations.