Do Loyalty Programs Enhance Behavioral Loyalty: An Empirical Analysis Accounting for Program Design and Competitive Effects

This paper studies the effects of loyalty programs on share-of-wallet using market-wide household panel data on supermarket purchases.We find that loyalty programs relate positively to share-of-wallet, but the programs differ in effectiveness and some are ineffective.Both a saving component and a multi-vendor structure enhance the effectiveness of a loyalty program, but high discounts do not lead to higher share-of-wallets.Further, if households have multiple loyalty cards, the effectiveness of a specific loyalty program is much smaller.The positive loyalty program effects on share-of-wallet entail substantial additional customer revenues.However, given the high number of loyalty programs already available in the market, our model predicts that a new loyalty program introduction will only lead to small effects on share-of-wallet.loyalty;marketing;retailing

The effects of experience in loyalty card adoption on the importance of the attributes of loyalty schemes

The popularity of loyalty programs worldwide shows that this is one of the most efficient marketing tools in highly competitive markets to retain customers. The saturation of loyalty schemes themselves can lead to a fierce competition between firms to gain wider penetration for their cards. The experience of the customers regarding adoption of loyalty programs can affect their attitude towards the different attributes of the programs. We found that more experienced customers evaluate the importance of the soft attributes of the loyalty schemes higher

Do Loyalty Programs Really Enhance Behavioral Loyalty? An Empirical Analysis Accounting for Self-Selecting Members

One of the pressing issues in marketing is whether loyalty programs really enhance behavioral loyalty. Loyalty program members may have a much higher share-of-wallet at the firm with the loyalty program than non-members have, but this does not necessarily imply that loyalty programs are effective. Loyal customers may select themselves to become members in order to benefit from the program. Since this implies that program membership is endogenous, we estimate models for both the membership decision (using instrumental variables) and for the effect of membership on share-of-wallet, our measure of behavioral loyalty. We use panel data from a representative sample of Dutch households who report their loyalty program memberships for all seven loyalty programs in grocery retailing as well as their expenditures at each of the 20 major supermarket chains. We find a small positive yet significant effect of loyalty program membership on share-of-wallet. This effect is seven times smaller than is suggested by a naïve model that ignores the endogeneity of program membership. The predictive validity of the proposed model is much better than for the naïve model. Our results show that creating loyalty program membership is a crucial step to enhance share-of-wallet, and we provide guidelines how to achieve this.Attraction models;Endogeneity;Grocery retailing;Loyalty programs;Tobit-II model

Negative effects of loyalty programs : An empirical investigation on the French Mobile Phone sector.

Loyalty programs have been the object of a growing interest in the area of marketing. However, it is quite surprising that there is no generally accepted theoretical or empirical research that study how these programs could elicit negative effects on consumer behavior. Using a two-step method, qualitative and quantitative, conducted in the mobile phone sector in 2007, the research explores the potential negative effects of loyalty programs. Results indicate that loyalty programs can generate negative emotions, resulting in extreme behaviors, such as shunning the operator a direct competitor. This demonstrated that loyalty programs are apt to encourage behaviors that oppose the ones they actually should.Loyalty programs; negative emotions; churn; mobile communications;

Total Rewards Compensation: A Viable Solution

Total rewards customer loyalty programs represent a viable solution for domestic gaming operators in today’s current economic environment. Total rewards customer loyalty programs provide domestic gaming operators with an unparalleled tool in understanding, identifying, and realizing their customer’s desires. The design of total rewards customer loyalty programs provides domestic gaming operators with the ability to remain fluid and allows quick adaptation to ever changing market conditions. Research suggests that total rewards customer loyalty programs provide domestic gaming operators with a viable financial solution that provides equitable value to customers alike. This paper will analyze the structure of customer loyalty programs by defining and examining its components. This paper will also identify and establish parameters necessary for domestic gaming operators to achieve a successful total rewards customer loyalty program. Finally, this paper will recommend that under current economic conditions that domestic gaming operators invest in the development of total rewards customer loyalty programs in order to drive customer retention and add to financial bottom line

Loyalty Programs in the Sharing Economy: Optimality and Competition

Loyalty programs are important tools for sharing platforms seeking to grow supply. Online sharing platforms use loyalty programs to heavily subsidize resource providers, encouraging participation and boosting supply. As the sharing economy has evolved and competition has increased, the design of loyalty programs has begun to play a crucial role in the pursuit of maximal revenue. In this paper, we first characterize the optimal loyalty program for a platform with homogeneous users. We then show that optimal revenue in a heterogeneous market can be achieved by a class of multi-threshold loyalty program (MTLP) which admits a simple implementation-friendly structure. We also study the performance of loyalty programs in a setting with two competing sharing platforms, showing that the degree of heterogeneity is a crucial factor for both loyalty programs and pricing strategies. Our results show that sophisticated loyalty programs that reward suppliers via stepwise linear functions outperform simple sign-up bonuses, which give them a one time reward for participating

InShopnito: an advanced yet privacy-friendly mobile shopping application

Mobile Shopping Applications (MSAs) are rapidly gaining popularity. They enhance the shopping experience, by offering customized recommendations or incorporating customer loyalty programs. Although MSAs are quite effective at attracting new customers and binding existing ones to a retailer's services, existing MSAs have several shortcomings. The data collection practices involved in MSAs and the lack of transparency thereof are important concerns for many customers. This paper presents inShopnito, a privacy-preserving mobile shopping application. All transactions made in inShopnito are unlinkable and anonymous. However, the system still offers the expected features from a modern MSA. Customers can take part in loyalty programs and earn or spend loyalty points and electronic vouchers. Furthermore, the MSA can suggest personalized recommendations even though the retailer cannot construct rich customer profiles. These profiles are managed on the smartphone and can be partially disclosed in order to get better, customized recommendations. Finally, we present an implementation called inShopnito, of which the security and performance is analyzed. In doing so, we show that it is possible to have a privacy-preserving MSA without having to sacrifice practicality

How to Design International Loyalty Programs

Despite the growing importance of customer loyalty programs in marketing practice, research about international loyalty programs is few and far between. Especially the issue of whether loyalty programs can be standardized across countries has not been addressed so far. Hence, this paper investigates whether it is feasible to standardize loyalty program design in countries with different cultural dimensions. We conducted an online experiment with customers in four countries (Australia, Germany, South Korea, U.S.) to examine how benefits that are provided by loyalty programs are perceived by different customer groups in these cultural environments. Particularly social and confidence benefits were perceived differently suggesting the need to adapt loyalty program designs. We also found that if a country is characterized by individualism, customers are more strongly attracted by program loyalty. However, this does not necessarily translate into brand loyalty