The relational value of loyalty programs in luxury retailing

Abstract

In the last decade loyalty programs have gained popularity across various industries. However and until recently, it was debatable if loyalty programs can be effective and appropriate in luxury retailing. If loyalty programs were to succeed in the luxury sector they had to deliver the kind of recognition and rewards that make luxury shoppers feel remarkable. Thus, this study examines how the utilitarian, hedonic and symbolic perceived benefits from loyalty programs can influence the satisfaction and trust with the program and consequently store loyalty. These relationships are compared between luxury and low-end retailers through data collected form a sample of 984 consumers from an online panel in US, using a structured questionnaire. Findings support that the effectiveness of loyalty programs is important to both settings but the strength of this effectiveness varies across the two settings. Specifically, hedonic and symbolic benefits found to be more important in the luxury context and utilitarian benefits in the low-end retailing setting. The results of this research address an important research gap and help to better understand customers' perceptions of loyalty program benefits. Finally, findings provide clear guidelines for managers in luxury retailing on how to design effectively their loyalty program rewards