Loyalty program value: Give me more or treat me better?

Piotr Kwiatek; Vladimir Dženopoljac; Rauf Abdul

doi:10.5937/menhottur2102011K

Authors

Piotr Kwiatek Kozminski University, Marketing Department, Poland https://orcid.org/0000-0003-4736-6774
Vladimir Dženopoljac United Arab Emirates University, College of Business and Economics, UAE https://orcid.org/0000-0003-2974-6466
Rauf Abdul Wittenborg University of Applied Sciences, Apeldoorn, The Netherlands https://orcid.org/0000-0003-4269-7275

DOI:

https://doi.org/10.5937/menhottur2102011K%20

Keywords:

loyalty program value, economic value, social benefits, intangible benefits, tangible benefits

Abstract

Customer loyalty programs are frequently used by companies to establish and improve relationships with customers by providing them with rewards. Loyalty programs investigated in the literature focus mainly on tangible rewards and economic benefits offered to the customers. However, some research done on intangible rewards of loyalty programs suggest that they can be superior to tangible benefits in affecting customer loyalty. Previous research drew conclusions in industry-specific settings. The aim of the paper is to assess the impact of tangible and intangible benefits on customer loyalty using an on-line customer panel representing different industries. The data collected from over 300 customers is subjected to CFA/SEM analysis in R environment. The main contribution of the present study is that it represents the first attempt (to the best of authors’ knowledge) to capture loyalty programs’ tangible and intangible value in an Arab cultural context, given the fact the focus was on the participants from the United Arab Emirates. Several important dimensions of LP programs in an Arab country are revealed. Firstly, the study confirmed that social value of a loyalty program significantly impacts customer loyalty. In addition, it was confirmed that the flexibility of a loyalty program increased customer loyalty. Ultimately, it was established that customers value intangible benefits more than the tangible ones.

Downloads

Download data is not yet available.

References

Alshurideh, M., Gasaymeh, A., Ahmed, G., Alzoubi, H., & Kurd, B. (2020). Loyalty program effectiveness: Theoretical reviews and practical proofs. Uncertain Supply Chain Management, 8(3), 599–612. https://doi.org/10.5267/j.uscm.2020.2.003

Altinay, L., & Taheri, B. (2019). Emerging themes and theories in the sharing economy: A critical note for hospitality and tourism. International Journal of Contemporary Hospitality Management. 31(1), 180–193. https://doi.org/10.1108/IJCHM-02-2018-0171

Arora, P., & Narula, S. (2018). Linkages between service quality, customer satisfaction and customer loyalty: A literature review. IUP Journal of Marketing Management, 17(4), 30–53.

Baloglu, S. (2002). Dimensions of customer loyalty: Separating friends from well wishers. Cornell Hotel and Restaurant Administration Quarterly, 43(1), 47–59. https://doi.org/10.1177/0010880402431005

Blau, P. M. (1964). Justice in social exchange. Sociological Inquiry, 34(2), 193–206. https://doi.org/10.1111/j.1475-682X.1964.tb00583.x

Bolton, R. N., Lemon, K. N., & Verhoef, P. C. (2004). The theoretical underpinnings of customer asset management: A framework and propositions for future research. Journal of the Academy of Marketing Science, 32(3), 271–292. https://doi.org/10.1177/0092070304263341

Bontis, N., Janoševi?, S., & Dženopoljac, V. (2015). Intellectual capital in Serbia’s hotel industry. International Journal of Contemporary Hospitality Management, 27(6), 1365–1384. https://doi.org/10.1108/IJCHM-12-2013-0541

Brashear-Alejandro, T., Kang, J., & Groza, M. D. (2016). Leveraging loyalty programs to build customer–company identification. Journal of Business Research, 69(3), 1190–1198. https://doi.org/10.1016/j.jbusres.2015.09.014

Buhalis, D., & Volchek, K. (2021). Bridging marketing theory and big data analytics: The taxonomy of marketing attribution. International Journal of Information Management, 56, 102253. https://doi.org/10.1016/j.ijinfomgt.2020.102253

Chen, Y., Mandler, T., & Meyer-Waarden, L. (2021). Three decades of research on loyalty programs: A literature review and future research agenda. Journal of Business Research, 124, 179–197. https://doi.org/10.1016/j.jbusres.2020.11.057

Dewitte, M., Mallargé, J., & Decrop, A. (2021). Consumer perception of service quality: The case of Airbnb and Couchsurfing. In Decrop, A., Correia, A., Fyall, A., & Kozak, M. (Eds.), Sustainable and Collaborative Tourism in a Digital World, Oxford: Goodfellow Publishers.

Drèze, X., & Nunes, J. C. (2011). Recurring goals and learning: The impact of successful reward attainment on purchase behavior. Journal of Marketing Research, 48(2), 268–281. https://doi.org/10.1509/jmkr.48.2.268

Evanschitzky, H., Ramaseshan, B., Woisetschläger, D. M., Richelsen, V., Blut, M., & Backhaus, C. (2012). Consequences of customer loyalty to the loyalty program and to the company. Journal of the Academy of Marketing Science, 40(5), 625–638. https://doi.org/10.1007/s11747-011-0272-3

Fornell, C., & Bookstein, F. L. (1982). Two structural equation models: LISREL and PLS applied to consumer exit-voice theory. Journal of Marketing Research, 19(4), 440–452. https://doi.org/10.1177/002224378201900406

Fornell, C., & Larcker, D. F. (1981). Evaluating structural equation models with unobservable variables and measurement error. Journal of Marketing Research, 18(1), 39–50. https://doi.org/10.1177/002224378101800104

Gunay, S., Dzenopoljac, V., & Bontis, N. (2021). Social media as a proxy for intellectual capital: Twitter posts in the cryptocurrency market. International Journal of Web Based Communities, forthcoming.

Ha, S., & Stoel, L. (2014). Designing loyalty programs that matter to customers. The Service Industries Journal, 34(6), 495–514. https://doi.org/10.1080/02642069.2014.871531

Hennig-Thurau, T., Gwinner, K. P., & Gremler, D. D. (2002). Understanding relationship marketing outcomes: An integration of relational benefits and relationship quality. Journal of Service Research, 4(3), 230–247. https://doi.org/10.1177/1094670502004003006

Hollebeek, L. D., Das, K., & Shukla, Y. (2021). Game on! How gamified loyalty programs boost customer engagement value. International Journal of Information Management, 102308. https://doi.org/10.1016/j.ijinfomgt.2021.102308

Homans, G. C. (1961). Social Behavior: Its Elementary Forms. New York, Harcourt: Brace & World.

Jevti?, J., Tomi?, S., & Lekovi?, K. (2020). Customer experience in the tourism industry–Determinants influencing complaint behaviour. Menadžment u hotelijerstvu i turizmu – Hotel and Tourism Management, 8(2), 25–33. https://doi.org/10.5937/menhottur2002025J

Kim, H.-Y., Lee, J. Y., Choi, D., Wu, J., & Johnson, K. K. (2013). Perceived benefits of retail loyalty programs: Their effects on program loyalty and customer loyalty. Journal of Relationship Marketing, 12(2), 95–113. https://doi.org/10.1080/15332667.2013.794100

Kim, J. J., Steinhoff, L., & Palmatier, R. W. (2021). An emerging theory of loyalty program dynamics. Journal of the Academy of Marketing Science, 49(1), 71–95. https://doi.org/10.1007/s11747-020-00719-1

Kopalle, P. K., Sun, Y., Neslin, S. A., Sun, B., & Swaminathan, V. (2012). The joint sales impact of frequency reward and customer tier components of loyalty programs. Marketing Science, 31(2), 216–235. https://doi.org/10.1287/mksc.1110.0687

Kuhzady, S., Olya, H., Farmaki, A., & Erta?, Ç. (2021). Sharing economy in hospitality and tourism: a review and the future pathways. Journal of Hospitality Marketing & Management, 1–22. https://doi.org/10.1080/19368623.2021.1867281

Kwiatek, P., Morgan, Z., & Baltezarevic, R. (2018). Actions speak louder than words: Understanding the meaning of loyalty program building blocks. Economics & Sociology, 11(2), 305–319. https://doi.org/10.14254/2071-789X.2018/11-2/21

Kwiatek, P., & Thanasi-Boçe, M. (2019). Loyalty program activity: Make B2B customers buy more. Marketing Intelligence & Planning, 37(5), 542–554. https://doi.org/10.1108/MIP-06-2018-0193

Lentz, M., Berezan, O., & Raab, C. (2021). Uncovering the relationship between revenue management and hotel loyalty programs. Journal of Revenue and Pricing Management, 1–15. https://doi.org/10.1057/s41272-021-00331-0

Lima, S., & de Assis Carlos Filho, F. (2019). Bibliometric analysis of scientific production on sharing economy. Revista de Gestão, 26(3), 237–255. https://doi.org/10.1108/REGE-01-2019-0018

Liu, Y. (2007). The long-term impact of loyalty programs on consumer purchase behavior and loyalty. Journal of Marketing, 71(4), 19–35. https://doi.org/10.1509/jmkg.71.4.019

Melancon, J. P., Noble, S. M., & Noble, C. H. (2011). Managing rewards to enhance relational worth. Journal of the Academy of Marketing Science, 39(3), 341–362. https://doi.org/10.1007/s11747-010-0206-5

Meyer-Waarden, L. (2013). The impact of reward personalisation on frequent flyer programmes' perceived value and loyalty. Journal of Services Marketing, 27(3), 183–194. https://doi.org/10.1108/08876041311330681

Mimouni-Chaabane, A., & Volle, P. (2010). Perceived benefits of loyalty programs: Scale development and implications for relational strategies. Journal of Business Research, 63(1), 32–37. https://doi.org/10.1016/j.jbusres.2009.01.008

Nesset, E., Bergem, O., Nervik, B., Sørlie, E. S., & Helgesen, Ø. (2021). Building chain loyalty in grocery retailing by means of loyalty programs – A study of ‘the Norwegian case’. Journal of Retailing and Consumer Services, 60, 102450. https://doi.org/10.1016/j.jretconser.2021.102450

Nunnally, J. C. (1978). Psychometric Theory (2nd ed.). McGraw-Hill.

O'Brien, L., & Jones, C. (1995). Do rewards really create loyalty? Long Range Planning, 28(4), 130–130.

O’Connor, P. (2021). Loyalty programs and direct website performance: An empirical analysis of global hotel brands. Information and Communication Technologies in Tourism 2021 (pp. 150–161). Springer. https://doi.org/10.1007/978-3-030-65785-7_13

Omar, N. A., Wel, C. A. C., Musa, R., & Nazri, M. A. (2010). Program benefits, satisfaction and loyalty in retail loyalty program: Exploring the roles of program trust and program commitment. IUP Journal of Marketing Management, 9(4), 6–28.

Pascual, M. E., & Cain, L. N. (2021). Loyalty programs: The vital safety feature for airlines to survive COVID-19. International Hospitality Review. https://doi.org/10.1108/IHR-03-2021-0017

Premayani, W., Ayu, I., Giantari, K., & Kerti, N. (2018). The effect of self image congruity and functional congruity to attitudes and repurchase intention. IOSR Journal of Business and Management, 20, 8–11. https://doi.org/10.9790/487X-2002070811

Raab, C., Berezan, O., Krishen, A. S., & Tanford, S. (2016). What’s in a word? Building program loyalty through social media communication. Cornell Hospitality Quarterly, 57(2), 138–149. https://doi.org/10.1177/1938965515619488

Revelle, W. (2018). Psych: procedures for personality and psychological research. Evanston: Northwestern University.

Rosseel, Y. (2012). Lavaan: An R package for structural equation modeling and more. Version 0.5–12 (BETA). Journal of Statistical Software, 48(2), 1–36.

Satti, Z. W., Babar, S. F., Parveen, S., Abrar, K., & Shabbir, A. (2020). Innovations for potential entrepreneurs in service quality and customer loyalty in the hospitality industry. Asia Pacific Journal of Innovation and Entrepreneurship, 14(3), 317–328. https://doi.org/10.1108/APJIE-08-2019-0063

Sigala, M. (2017). Collaborative commerce in tourism: Implications for research and industry. Current Issues in Tourism, 20(4), 346–355. https://doi.org/10.1080/13683500.2014.982522

So, J. T., Danaher, T., & Gupta, S. (2015). What do customers get and give in return for loyalty program membership? Australasian Marketing Journal (AMJ), 23(3), 196–206. https://doi.org/10.1016/j.ausmj.2015.02.002

Steinhoff, L., & Palmatier, R. W. (2016). Understanding loyalty program effectiveness: managing target and bystander effects. Journal of the Academy of Marketing Science, 44(1), 88–107. https://doi.org/10.1007/s11747-014-0405-6

Tanford, S. (2013). The impact of tier level on attitudinal and behavioral loyalty of hotel reward program members. International Journal of Hospitality Management, 34, 285–294. https://doi.org/10.1016/j.ijhm.2013.04.006

Umashankar, N., Bhagwat, Y., & Kumar, V. (2017). Do loyal customers really pay more for services? Journal of the Academy of Marketing Science, 45(6), 807–826. https://doi.org/10.1007/s11747-016-0491-8

Uncles, M. D., Dowling, G. R., & Hammond, K. (2003). Customer loyalty and customer loyalty programs. Journal of Consumer Marketing, 20(4), 294–316. https://doi.org/10.1108/07363760310483676

Vuji?, M., ?or?evi?, S., & Laki?evi?, M. (2019). Service quality and customer satisfaction in the hotel industry in Serbia. Menadžment u hotelijerstvu i turizmu – Hotel and Tourism Management, 7(1), 61–70. https://doi.org/10.5937/menhottur1901061V

Xiong, L., King, C., & Hu, C. (2014). Where is the love? Investigating multiple membership and hotel customer loyalty. International Journal of Contemporary Hospitality Management, 26(4), 572–592. https://doi.org/10.1108/IJCHM-03-2013-0141

Yi, Y., & Jeon, H. (2003). Effects of loyalty programs on value perception, program loyalty, and brand loyalty. Journal of the Academy of Marketing Science, 31(3), 229–240. https://doi.org/10.1177/0092070303031003002

Zakaria, I., Rahman, B. A., Othman, A. K., Yunus, N. A. M., Dzulkipli, M. R., & Osman, M. A. F. (2014). The relationship between loyalty program, customer satisfaction and customer loyalty in retail industry: A case study. Procedia-Social and Behavioral Sciences, 129, 23–30. https://doi.org/10.1016/j.sbspro.2014.03.643