You are on page 1of 11

Australasian Marketing Journal 23 (2015) 196–206

Contents lists available at ScienceDirect

Australasian Marketing Journal

j o u r n a l h o m e p a g e : w w w. e l s e v i e r. c o m / l o c a t e / a m j

What do customers get and give in return for loyalty program

Jing Theng So, Tracey Danaher *, Samir Gupta
Monash University, Australia


Article history: A successful loyalty program (LP) represents the firms’ investment in long-term relationships with their
Received 19 September 2014 customers. However, to be effective LPs must be perceived as valuable by customers. The purpose of this
Revised 20 January 2015 study is to examine the different types of value customers derive from LP membership and examine the
Accepted 2 February 2015
relationship between program value, loyalty to the program, and loyalty to the brand (firm). Further, we
Available online 14 May 2015
examine the effect of program and brand loyalty on behavioral responses, including share of wallet, share
of purchase, word of mouth, and willingness to pay more. The moderating effect of program customization
and the duration of the customer’s LP membership on the relationship between loyalty to the program
Loyalty program value
Program loyalty and loyalty to the brand is also studied. Using a sample of 628 respondents drawn from the two largest
Brand loyalty stand-alone retail loyalty programs in Australia we find that LP value consists of six primary constructs
Behavioral consequences which drive loyalty. Specifically, we find that value in the form of reward attractiveness, knowledge benefit,
Customization and required effort impacts LP members’ perceived experiential benefits, which in turn impact program
Structural equation modeling loyalty; while value derived from group belongingness and disclosure comfort drive brand loyalty. We
also find that program loyalty influences brand loyalty; and program and brand loyalty together induce
positive customer behaviors. However, program loyalty has a negative impact on a customer’s willing-
ness to pay. Our findings highlight the impact of multiple program value elements on customer loyalty,
extending the literature by clarifying the relationships among program value, attitudinal loyalty, and be-
havioral loyalty. Practically, our findings suggest how managers can better design and implement their
LPs to build customer loyalty.
© 2015 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.


© 2015 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.

1. Introduction most involve collecting points for each dollar spent with the firm.
For example, the CVS ExtraCare Reward Program, which has a stag-
An estimated 90% of U.S. consumers are enrolled in at least one gering 50 million members, returns 2% on purchases in coupon form
loyalty program (McKee, 2007). This vast participation is driven pri- and offers $1 to spend in-store for every two prescriptions pur-
marily by the rewards offered to customers for their repeat purchases chased (Euromonitor International, 2009). Another loyalty program,
(Daryanto et al., 2010). Rewards vary across loyalty programs, but FlyBuys Australia has 10 million cardholders and offers 1 point for
every AUD$1 spent in-store. A successful loyalty program can also
generate substantial revenue. For example, Tesco’s has 13.5 million
* Corresponding author. Tel.: +61 99031927; fax: +61 99032900. members and is estimated to generate US$200 million annually in
E-mail address: (T. Danaher). added sales for the firm (Euromonitor International, 2009).
1441-3582/© 2015 Australian and New Zealand Marketing Academy. Published by Elsevier Ltd. All rights reserved.
J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206 197

The ubiquity of loyalty programs (LPs) has made them a seeming design (Kim et al., 2001; Roehm et al., 2002), reward structure (Van
“must-have” strategy for organizations. Hence, it is not alarming that Osselaer et al., 2004), or program management (Bagchi and Li, 2010;
most retailers have introduced LPs to remain competitive Liu and Yang, 2009; Palmer et al., 2000). Relatively few studies
(Euromonitor International, 2009). While promising to help build examine LP value from the customers’ perspective, even though the
customer loyalty for those organizations (Uncles et al., 2003), in- seller and the buyer both must view an exchange as beneficial for
crease customer share (Leenheer and Bijmolt, 2008; Verhoef, 2003), the relationship to succeed (Berry, 1995). Moreover, many studies
and collect customer information, not every program succeeds. use a unidimensional lens, focusing on either a general value per-
Safeway had to withdraw its ABC loyalty card to save the organi- ception (Henderson et al., 2011; Leenheer et al., 2007; Yi and Jeon,
zation US$75 million annually (Meyer-Waarden, 2007), and Coles 2003) or the monetary value of a reward (Henderson et al., 2011),
Myer (Australia) terminated its discount card to save the company such that they overlook other indicators of value. We argue that the
up to AUD$200 million a year (Wade, 2002). Shaw’s, the U.S. su- value customers derive from membership in an LP must be viewed
permarket chain, recently replaced its LP with a “card-free” saving from a multidimensional perspective that includes both economic
scheme offering low prices to all customers, because the LP failed benefits and nonmonetary, psychological benefits for those customers.
to help it gain a competitive advantage over its competitors (Tuttle, Evidence in support of existing conceptualizations of customer-
2013). These failures underscore the challenges that firms face when perceived program value also is limited (Henderson et al., 2011).
they seek to ensure that a LP has value for customers but entails a Prior studies propose several value constructs but without validat-
reward system and structure that is financially viable for the firm. ing them (Dowling and Uncles, 1997; O’Brien and Jones, 1995), and
Successful LPs represent firms’ investments in long-term rela- simplistic views persist, despite calls for more holistic analyses of
tionships with their customers (De Wulf et al., 2001) and augment LP value (Henderson et al., 2011). In conjunction with insights
the firms’ core offerings (Bolton et al., 2000; Liu, 2007). Through LPs, derived from the literature (see Table 1), we conducted several focus
firms can enhance customers’ purchase utility by providing group interviews to explore the factors that comprised LP value. This
value-added elements, such as financial incentives, a sense of process led us to posit that LP value consists of six constructs: reward
belonging (Rosenbaum et al., 2005), and anticipation of future attractiveness, knowledge benefit, experiential benefit, group
rewards (Dowling and Uncles, 1997). Understanding the custo- belongingness, disclosure comfort, and required effort. We now
mer’s perception of the value offered by a LP is imperative to its examine the influence of these value constructs on customer loyalty.
success, because for a LP to be effective, it must be perceived as val-
uable by customers (Yi and Jeon, 2003). Yet the value customers 2.2. Attitudinal and behavioral loyalty
derive from a LP, relative to what they forgo, is not well under-
stood. Nor do we know whether the value resulting from being a The impact of LP membership on behavioral loyalty measures
member of a LP drives loyalty to the program itself or loyalty to the such as share of wallet (Wirtz et al., 2007), purchase frequency
brand (firm), or how these factors affect subsequent behavioral re- (Bolton et al., 2000), and cross-buying quantity (Hughes, 2003) is
sponses, such as increased share of wallet or word of mouth. well established; less is known about the link between LP mem-
Accordingly, with this study we seek to address recent calls in bership and attitudinal loyalty (Gomez et al., 2006; Kim et al., 2009).
LP literature e.g. Henderson et al. (2011) and Dorotic et al. (2012) Scholars assert that measuring customers’ loyalty strictly on the
for better understanding of the drivers of LPs effectiveness by speci- basis of their purchase behavior is misleading (McKee, 2007), because
fying the value that customers derive from LP membership; behavioral loyalty may be driven by short-term incentives (Dick
examining the relationships among program value, loyalty to the and Basu, 1994) rather than loyalty to the brand or firm. For example,
program, and loyalty to the brand (firm); and identifying the effects customers might be dissatisfied with a store but shop there for
of program and brand loyalty on behavioral responses, including convenience, which indicates behavioral but not necessarily atti-
share of wallet, share of purchase, word of mouth, and willing- tudinal loyalty (McKee, 2007). Reichheld (2003) also notes that truly
ness to pay. We also examine the moderating effect of program loyal customers exhibit repeat purchase behavior, supported by a
customization and customer’s program membership duration on the strong internal disposition toward the brand, whereas customers
relationship between loyalty to the program and loyalty to the brand. who make repeat purchases without any emotional bond are sus-
The research framework was tested using data from a representa- ceptible to defection (Dick and Basu, 1994). Thus focusing solely
tive Australian sample in the retailing industry. Respondents were on repeat or frequent shoppers creates the risk that the firm ne-
drawn from the two largest stand-alone LPs in Australia retail market glects truly loyal customers (McKee, 2007). When customers are
(more details in section 2.6 and section 4.1). both repeat buyers and have strong positive attitudes toward the
firm, they should be less vulnerable to defection (Uncles et al., 2003).
2. Literature review In turn, research must examine the simultaneous impact of LP value
on both attitudinal and behavioral loyalty, which has been largely
2.1. Loyalty program value neglected in prior literature (Dorotic et al., 2012; McCall and
Voorhees, 2010).
Modern firms suffer from increasingly undifferentiated offer-
ings and low switching costs, such that LPs have emerged as an 2.3. Attitudinal loyalty: program or brand (firm)
important tool for customer retention and building sustainable cus-
tomer loyalty through enhanced relationships (Liu, 2007; Uncles et al., Attitudinal loyalty cultivated through LP membership might be
2003). For example, financial incentives, program rewards, and access directed toward the program or the brand (Dowling and Uncles,
to exclusive services create attractive value propositions for cus- 1997; Taylor and Neslin, 2005). Program loyalty refers to a custo-
tomers and have crucial roles in enhancing customer loyalty (Berry, mer’s favorable attitude toward the LP, driven primarily by program
1995; Liu, 2007). LPs also represent the firm’s investment in the ex- incentives (Evanschitzky et al., 2012; Yi and Jeon, 2003). Brand or
change relationship, in that they offer additional value in return for firm loyalty is a psychological commitment between the custom-
repeat purchases and loyalty (Morais et al., 2004). However, extant er and the brand (Yi and Jeon, 2003). According to behavioral learning
research into LP value remains rather ambiguous and divergent theory, program rewards provide positive reinforcement of cus-
(Henderson et al., 2011; Xie and Chen, 2013). Most studies adopt a tomers’ purchase behavior, conditioning them to continue using the
firm, rather than customer, perspective (Mimouni-Chaabane and LP (Sheth and Parvatiyar, 1995). However, such conditionally loyal
Volle, 2010), examining how LP performance depends on the program customers do not necessarily develop a favorable association with
198 J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206

the brand (Graham, 1994; Roehm et al., 2002). When program in- behavior (Baloglu, 2002). Purchase amounts, frequency of pur-
centives fail to reinforce the customers’ association with brands their chase, and purchase volume represent quantifiable measures of a
purchases are likely to stem from their program participation. In customer’s consistent dedication to purchasing from the firm (Dick
such cases customer loyalty focuses on the program rather than the and Basu, 1994). However, behavioral loyalty has a softer inten-
brand (Dowling and Uncles, 1997; Roehm et al., 2002). Rothschild tion, which is less quantifiable (e.g., non-purchasing behaviors),
and Gaidis (1981) and Uncles et al. (2003) argue that attractive manifested as willingness to pay premiums for products, switch-
program rewards lead customers to build relationships with the ing intentions, and willingness to cooperate (Fullerton, 2003; Morgan
program rather than the brand, but when the reward factor is and Hunt, 1994). These behaviors also signify customers’ inten-
removed the positive effects of the LP disappear. tions to repurchase from the firm in the future (Palmatier et al., 2006).
Cognitive learning theory instead suggests that a LP changes cus- Responding to recent calls on extensive investigation on impact of
tomers’ behavior by causing them to develop feelings of affection LP on customers’ attitude and their behavior, we thus examine the
toward the firm (Chisnall, 1995). Cognitive behavior refers to the impacts of program value, program loyalty, and brand loyalty on a
psychological impact that LPs exert on customers. Rewards such as range of behavior loyalty metrics, including share of wallet, share
premium gifts, member-only events, and privileged access rein- of purchase, word of mouth, and willingness to pay more.
force this cognitive behavior because customers feel grateful for
special treatment they receive (Liu, 2007). If customers attribute 2.5. Program customization and program duration effects
these provisions to the brand, instead of the program, they should
increase their attachment to and deepen their relationship with it, In a LP context, customer and program characteristics are crit-
driving their loyalty toward the brand rather than the program ical to the success of a program (McCall and Voorhees, 2010). The
(Gwinner et al., 1998). customer’s initial product usage level (Liu, 2007) and relationship
Both program and brand loyalty represent a customer’s psycholog- proneness (De Wulf et al., 2001) likely influence customer loyalty;
ical disposition, but brand loyalty is more enduring and less subject to we also include program membership duration and the level of
competitor actions. Brand loyalty may be more effective for reducing program customization as potential influences on customer loyalty.
customer defection (Tanford et al., 2010), encouraging customers to pay Frisou and Yildiz (2011) claim that as loyalty evolves over time, cus-
price premiums, spend more share of wallet, and make a greater share tomer knowledge of and experience with the LP and firm also increase.
of visits to the firm (Evanschitzky et al., 2012). In contrast, program Similarly, customizing an offering to meet customers’ needs poten-
loyalty gets generated through the incentives provided by the program tially represent an effective route to brand loyalty (Morais et al., 2004;
and thus reflects a sort of “deal loyalty” (Yi and Jeon, 2003). In this sense, Shugan, 2005). Customer information captured through a LP helps
program loyalty is weaker, because as soon as customers perceive a com- firms tailor their programs to meet customers’ needs (Shugan, 2005;
peting program as more attractive, they tend to switch. Dorotic et al. Uncles et al., 2003), which in turn should influence customer loyalty.
(2012) call for further research to examine the factors that drive loyalty As noted, loyalty can be directed toward the program, the firm, or
to not only the program but also the brand. We investigate the rela- both (Dorotic et al., 2012; Evanschitzky et al., 2012). Most firms prefer
tionship between program loyalty and brand loyalty to understand to convert program loyalty into brand loyalty, because it is associated
whether loyalty to the program might transform into the more endur- with increased price premiums, share of wallet, and share of visit
ing form of loyalty to the brand (firm). (Evanschitzky et al., 2012) and reduced defection (Tanford et al., 2010).

2.4. Behavioral loyalty: buying behavior and intention-based 2.6. Stand-alone vs multi-vendor program
LPs can generally be categorized into two different types – stand-
Behavioral loyalty can be broadly categorized into more objec- alone program (SAP) or multi-vendor program (MVP) (also known
tive, quantifiable buying behavior, as well as softer intention-based as coalition or multi-partner LPs). SAPs refer to programs that are

Table 1
Loyalty program value dimensions.

Source Purpose Context Key constructs

Bridson et al. (2008) To examine the relationships between LP, store Retail Hard attributes and soft attributes
satisfaction, and store loyalty.
Dowling and Uncles (1997) To discuss current LP marketing practices and to – Tangible incentives, psychological benefit (e.g.
offer guidelines for designing LPs to maximize belongingness to program, point
their effectiveness for cultivating customer loyalty. accumulation), timing of rewards, types of
rewards, costs
Jang and Mattila (2005) To identify customers’ preference for LP rewards. Fast food industry Monetary saving, quality, convenience, value
expression, entertainment, exploration
Leenheer et al. (2007) To investigate the effectiveness of LP on behavioral Retail Price discounts and saving points
loyalty, while controlling for endogeneity of
program membership.
Mimouni-Chaabane and Volle (2010) To develop a framework that captures the main Retail Monetary savings, exploration, entertainment,
benefit customers perceive to derive from joining a recognition, social benefit
LP and model the impact of each benefit on
various customer loyalty behaviors.
O’Brien and Jones (1995) To offer insights on the designs and – Cash value, choice, aspirational value,
implementations of LPs that drive sustainable relevance, convenience
customer loyalty. The paper emphasizes the
importance of taking a long-term perspective in
managing LPs.
Rosenbaum et al. (2005) To examine whether members of communal LP Multi-context Membership, influence, integration and
exhibit stronger customer loyalty toward the firm fulfillment of needs, shared emotional
than members of non-communal LP. connection, sense of community
J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206 199

solely managed by the implementing firm while LP such as Oneworld International, 2009). Increased customer engagement then may evoke
and Flybuys are MVPs whereby a few brands form an alliance so greater motivation, heighten arousal, and positively influence cog-
that customers can accumulate points from participating brands nitive evaluations of the membership (Mano and Oliver, 1993),
(Sharp and Sharp, 1997). For the purpose of this study, only SAPs enhancing the positive experience with the program. By increasing
are considered for three reasons. First, past research has shown that the interaction of the LP and the customer, a program with greater
SAPs are more effective for retention than MVPs because MVPs fail reward attractiveness achieves better customer experiences.
to build switching barriers for participating firms (Rese et al., 2013). Knowledge benefits are the firm’s ability to enhance customers’ con-
Second, SAP and MVP are likely to have different value proposi- sumption experience through added knowledge. As LP members,
tions. Third, MVPs, which encourage customers to buy across customers receive “inside” information about special promotions, newly
multiple brands, dilute a customer’s association with any partici- launched products, and improved services (Mimouni-Chaabane and
pating brands, making it difficult to ascertain which vendor in a MVP Volle, 2010). Firms also educate customers by providing extra infor-
customers are really loyal. Given the focus of the paper, the impact mation about their program membership (Henderson et al., 2011), which
of multiple firms’ participation on a LP’s effectiveness was mini- customers use to inform their purchase decisions. When customers have
mized through the exclusion of MVPs. Thus, this research examines more information about a firm’s offerings and their membership in
the impact of only SAP value propositions on customers’ loyalty. general, they likely enjoy being a member of the program more, which
enhances their experience with the program itself.
3. Conceptual model and research hypotheses Finally, required effort should disrupt the customer’s member-
ship experience, because it reflects the effort (cost) a customer must
Our conceptual model in Fig. 1 captures various types of value that exert to participate in a LP, such as a minimum threshold of purchases
customers derive from LP membership, the effect of this value on before the reward can be redeemed, travel or time costs, the phys-
loyalty to the program and brand, and the impact of program and ical inconvenience of carrying the loyalty card, and the actual process
brand loyalty on share of wallet, share of purchase, word of mouth, of undertaking a reward redemption (Noble and Phillips, 2004;
and willingness to pay more for the firm’s produce and services. In O’Malley and Prothero, 2004). The level of effort required by many
particular, reward attractiveness, knowledge benefit, and required programs makes it less surprising to find that LP usage and reward
effort are hypothesized to influence experiential benefit which, in turn, redemption rates, especially among retail customers, are relatively
impacts program loyalty. Group belongingness, disclosure comfort, low (Smith and Sparks, 2009). If the effort (or cost) required in par-
and program loyalty are posited to influence brand loyalty. Finally, ticipating in a LP is too high, customers likely regard other alternatives
we consider how program customization and length of program mem- as more attractive (Mano and Oliver, 1993). We thus hypothesize:
bership might induce the shift of program loyalty to brand loyalty.
H1. Reward attractiveness has a positive, significant impact on the
experiential benefit customers derive from a loyalty program.
3.1. Loyalty program value and program loyalty
H2. Knowledge benefit has a positive, significant impact on the ex-
Reward attractiveness, knowledge benefit, and required effort periential benefit customers derive from a LP.
should drive customers’ experiential benefits obtained from the LP,
H3. Required effort has a negative, significant impact on the expe-
which drives loyalty to the program. These experiential benefits stem
riential benefit customers derive from a LP.
from customers’ positive experiences, obtained through interacting
with the LP. Reward attractiveness is the customer’s perception of Experiential benefits reflect the positive experiences custom-
the economic value, variety, and availability of a reward, so greater ers gain as a result of program participation, which may lead to
reward attractiveness allows the customer to benefit more from the emotional responses aroused through using the LP. These emotion-
experience of being a LP member. Program rewards are central de- al aspects include feelings of enjoyment, entertainment, excitement,
terminants of customer participation in LPs, and rewards that are more fun, enthusiasm, and gratitude (Chandon et al., 2000; Holbrook and
valuable, relevant, and worthwhile prolong customers’ interest in the Hirschman, 1982; Mathwick et al., 2001). Feelings of being re-
LP (Peterson, 1995) and encourage them to engage with it (Euromonitor warded by the program and excited to use it, as well as being

Attractiveness Share-of-
Knowledge Experiential Program
Benefit Benefit Loyalty Share-of-
Group Pay
Brand Loyalty
Disclosure Mouth

Fig. 1. Conceptual model.

200 J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206

enthusiastic or even entertained by collecting and redeeming points, 3.4. Program customization and membership duration
are aspects of experiential benefits. If positive, these benefits should
result in the customer’s favorable disposition toward the LP. Antic- Brand loyalty may be a more enduring form of loyalty than program
ipation of future rewards encourages customers to collect more loyalty (Evanschitzky et al., 2012; Yi and Jeon, 2003). However, the struc-
points, in an enjoyable process of point accumulation (Bagchi and tural design of many programs tends to induce program rather than
Li, 2010), which also encourages customers to be more involved with brand loyalty (Tanford et al., 2010), particularly in contexts such as re-
the LP and seek to repeat the experience in the future (Brakus et al., tailing, where LPs function primarily as discount programs, with little
2009). Therefore we hypothesize: differentiation in their value propositions (Kumar and Shah, 2004). If
customers are merely program loyal, firms must convert their loyalty
H4. Experiential benefit has a positive, significant impact on program into enduring brand loyalty. Thus, we examine the impact of program
loyalty. customization and program member duration on the relationship
between program loyalty and brand loyalty.
3.2. Loyalty program value and brand loyalty Program customization offers an effective way to achieve brand
loyalty (Henderson et al., 2011; Kumar and Shah, 2004; Shugan, 2005).
Brand loyalty entails affective commitment toward a firm; we hy- LPs by definition grant retailers access to detailed information about
pothesize that group belongingness and disclosure comfort both their customers, including their transaction history, purchase cat-
directly influence and build loyalty to the brand. Group belongingness egories, shopping locations, and demographics (Euromonitor
refers to feelings of belonging to the LP community. Joining a program International, 2009). Firms can use this information to customize
usually entitles customers to privileges or products and services that their LPs to meet the needs of their customers, which in turn en-
are not offered to other customers (Liu, 2007), which may cause them hances the attractiveness of the program (Shugan, 2005). For example,
to feel important and valued by the firm, such that they engage and the firm can provide offers that are more relevant to individual cus-
identify with and feel close to the firm (Muniz and O’Guinn, 2001). tomers, as well as targeted suggestions and recommendations that
Program members also can interact with other program members reflect information contained within the loyalty database (Henderson
through invitations, events, and virtual online communities et al., 2011). When customization leads to a more positive evalu-
(McAlexander et al., 2002). Such interactions allow members with ation of program membership, customers should sense stronger
similar values to relate to each other (Bhattacharya and Sen, 2003). loyalty toward the program. Because program loyalty grows with
The sense of belongingness associated with being a part of the LP repeated satisfying experiences with the program and brand, a more
also enables them to identify with and feel appreciated by the firm. enduring sense of brand loyalty should develop as well. Thus,
LP membership inherently requires customers to divulge person-
al information. Disclosure comfort denotes the feeling of ease the H8. As the level of program customization increases, the influ-
customer experiences when providing personal information to the ence of program loyalty on brand loyalty grows stronger.
firm. Providing customers with a secure and worry-free exchange of Membership duration of a LP likely influences the program’s ef-
personal information brings them closer to the firm (Noble and fectiveness for building brand loyalty. Over time, customers learn
Phillips, 2004; Spake et al., 2003). When customers feel comfort- more about the program, such as details about the point accumu-
able disclosing personal information, they likely are more willing to lation process, reward redemption, and account management (Frisou
reveal information about themselves in return for customized offer- and Yildiz, 2011). Familiarity built over a series of experiences means
ings from the firm (Spake et al., 2003). Disclosure comfort thus should that customers gain greater knowledge of their program member-
lead to constructive, ongoing dialogue with the firm, with positive ship, including both benefits and costs, which make it easier for
impacts on the relationship between the customer and firm. Thus, experienced members to compare alternative programs (Evanschitzky
H5. Group belongingness has a positive, significant impact on brand and Wunderlich, 2006; Frisou and Yildiz, 2011). Experienced members
loyalty. also may become more critical of their LP, which makes them more
susceptible to competitive offerings (Evanschitzky and Wunderlich,
H6. Disclosure comfort has a positive, significant impact on brand 2006). That is, it is harder to entice experienced, compared with
loyalty. less experienced, members with program rewards. Experienced
members then become less attentive to their program member-
3.3. Program loyalty and brand loyalty ship, which decreases the effect of program loyalty on brand loyalty.
Furthermore, the longer the membership duration of LP, the more
Program loyalty denotes a form of cognitive loyalty; brand loyalty opportunities the customer has to interact with the firm, its em-
represents a form of affective loyalty (Evanschitzky et al., 2012; Oliver, ployees, and its products and services. Experienced members likely
1999). The former is arguably weaker (Yi and Jeon, 2003), driven largely build loyalty to the brand through these interactions, over and above
by customers’ evaluations of the LP’s utilitarian performance, based program loyalty. These experiences may decrease experienced
on economic and functional value (Evanschitzky et al., 2012). Members members’ responsiveness to program loyalty, because other factors,
who are mainly program loyal tend to be more “deal prone” and thus such as customer service and the retail environment become equally
more likely to defect to alternative programs they consider more at- or more salient for determining brand loyalty. We predict that as
tractive (Oliver, 1999). Brand loyalty instead implies customers’ affective program duration increases, the influence of program loyalty on brand
commitment to the firm, whereby customers exhibit an enduring desire loyalty decreases. In turn we hypothesize:
to maintain a valued relationship with the firm (Evanschitzky et al.,
H9. As the duration of program participation increases, the influ-
2012). These customers have a strong sense of loyalty to the brand
ence of program loyalty on brand loyalty grows weaker.
or firm and are less influenced by competitive offerings. However,
program-loyal customers also could develop more enduring brand
loyalty, through repeated satisfying experiences with the program, 3.5. Program and brand loyalty and behavioral outcomes
such that program loyalty likely has a strong influence on brand loyalty
(Yi and Jeon, 2003). We hypothesize: Program and brand loyalty should affect critical behavioral out-
comes, including share of wallet, share of purchase, word of mouth, and
H7. Program loyalty has a positive, significant impact on brand willingness to pay more for the firm’s products and services. Custom-
loyalty. ers who are program loyal stay with the firm because the benefits
J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206 201

outweigh the costs of being a member (Evanschitzky et al., 2012). When 4. Methodology
customers find their LP more worthwhile than other programs, they
increase their program participation and remain loyal to the program 4.1. Research sample
(Wirtz et al., 2007). Program incentives are rewards for achieving a
certain threshold of points, so program-loyal customers should engage Australian retail stand-alone program is the chosen research
in more transactions to the focal retailer, to accelerate their reward point context. The research sample consists of customers enrolled in the
accumulation (Verhoef, 2003). Similarly, the anticipation of free rewards two largest SAP retail LPs in Australia, from which we obtained a
should lead customers to consolidate their purchases more with one representative sample. We investigated a department store LP, with
retailer, which increases their overall purchase amounts with that firm about 3.7 million members, and a cosmetics retailer, which has ap-
(Wirtz et al., 2007). In turn we hypothesize: proximately 3.3 million members. Respondents first answered a few
screening questions, to ensure they met the qualifying criteria, then
H10. Program loyalty has a positive, significant impact on a custo-
selected (from a list of LPs) a program to which they belonged, which
mer’s share of wallet.
should help minimize choice bias toward the two selected programs.
H11. Program loyalty has a positive and significant impact on a cu- If they indicated they belonged to both of the LPs examined, we
stomer’s share of purchase. asked these respondents to answer the questions in relation to the
program with which they were most familiar. Of the 628 usable ques-
Customers who are brand loyal stay in an enduring relation- tionnaires obtained from a web-based survey, 312 came from the
ship with the firm, devote their purchases to that particular retailer, department store retail LP, and 316 reflected the cosmetics retail-
and increase their shares of wallet and purchases with that firm. er LP. The demographic profile for respondents is provided in Table 2.
A long-term relationship with the firm involving multiple transac- Given that loyalty card holders are predominantly female, it is not
tions also exposes customers to a range of opportunities to engage surprising that both samples have more females than male respon-
more with the firm, in terms of share of wallet and share of pur- dents (Lee, 2010). Moreover, the primary target market of the
chase. Therefore we hypothesize: retailers in our sample is females again implying a sample that will
H12. Brand loyalty has a positive, significant impact on a custo- be predominantly female. A comparison of the mean values of key
mer’s share of wallet. variables in research framework from the two LPs indicated no sig-
nificant differences. The analysis provided evidence that respondents
H13. Brand loyalty has a positive, significant impact on a custo- from the store retail LP and cosmetic retailer LP were similar and
mer’s share of purchase. equality of population can be assumed.
Beyond purchase-related behavior, customers engage in non-
purchase behavior in favor of the firm when they are loyal (Baloglu, 4.2. Measures
2002). Such non-purchase behaviors can be even more powerful in-
dicators of loyalty than purchase behavior (Palmatier et al., 2006). The survey instrument consisted of 68 seven-point Likert-
As noted, customers are program loyal mainly because of the rel- scaled items ranging from “strongly disagree” to “strongly agree”,
ative attractiveness of the program, compared with other LPs. The as listed in the Appendix. The items for the value constructs were
appeal of a LP often derives from the rewards it offers (Johnson, adapted from existing scales (e.g., Mimouni-Chaabane and Volle, 2010;
1999). When customers receive financial rewards for using their LP, Spake et al., 2003; Yi and Jeon, 2003). For brand and program loyalty,
they likely share their positive experiences with others, not only we used 11 items derived from Baloglu (2002) and Yi and Jeon (2003).
to share the benefits they enjoy but also to gain support from others The word of mouth measure contained 5 items from the scales of
with similar views. Therefore, program-loyal customers likely engage Zeithaml et al. (1996), and the 4 items reflecting willingness to pay
in positive word-of-mouth behavior (Wirtz and Chew, 2002). If cus- were from Choi et al. (2006) and Zeithaml et al. (1996). We mea-
tomers believe they are getting “good value” from their program sured the shares of purchase and wallet with 1 item each, namely,
membership, they are less likely to be price sensitive and more the proportion of purchase frequency a customer has committed
willing to pay a premium price for the extra value they receive. to a particular retailer (De Wulf et al., 2001) and the ratio of cus-
Therefore we hypothesize: tomers’ expenditures with a retailer to their total product category

H14. Program loyalty has a positive, significant impact on custom-

ers’ word-of-mouth behavior. Table 2
Respondent demographic profile.
H15. Program loyalty has a positive, significant impact on custom-
Characteristics Store retailer sample Cosmetic retailer sample
ers’ willingness to pay more. (n = 312) (n = 316)

Brand-loyal customers express greater confidence in their pro- Frequency Percentage Frequency Percentage
vider and are more emotionally attached to the firm (Evanschitzky (n) (%) (n) (%)
et al., 2012). With their strong identification and affiliation, brand- Age
loyal customers agree to make additional investments or personal 18–24 18 5.8 14 4.4
25–34 78 25.0 46 14.6
sacrifices to stay with this provider (Reichheld, 2003). Customers
35–44 50 16.0 65 20.6
who have a strong sense of loyalty also should be less sensitive to 45–54 66 21.2 88 27.8
price increases than other customers. Brand-loyal customers are also 55–64 68 21.8 75 23.7
more prone to spreading positive word of mouth (Baloglu, 2002). 65+ 32 10.3 28 8.9
Their faith in and strong connection with the firm prompts these
Male 104 33.3 43 13.6
customers to issue enthusiastic referrals (Reichheld, 2003). There- Female 208 66.7 273 86.4
fore, we hypothesize: Income (Annual)
Less than $20,000 35 11.2 75 23.7
H16. Brand loyalty has a positive, significant impact on customers’ $20,000–$40,000 45 14.4 88 27.8
word-of-mouth behavior. $40,001–$60,000 63 20.2 57 18.0
$60,001–$80,000 65 20.8 29 9.2
H17. Brand loyalty has a positive, significant impact on customer’s More than $80,000 74 23.7 25 7.9
N/A 30 9.6 42 13.3
willingness to pay more.
202 J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206

expenditures (Wirtz et al., 2007), respectively. For word of mouth, 5.2. Hypothesis tests
we measured customers’ likelihood of referring other potential cus-
tomers to the firm (Palmatier et al., 2006); willingness to pay refers We tested the research framework using SEM; the fit statistics
to acceptance of a higher price for a firm’s product (Tanford et al., indicated a good fit to the data (χ2 = 1069.9, df = 296; CFI = .96;
2010). The program customization scale consisted of 4 items, derived TLI = .95; RMSEA = .06), as we detail in Table 4.
from Gwinner et al.’s (1998) special treatment benefit scale. Program We found support for the hypothesized linkages, with the ex-
duration simply asked respondents to indicate how long they had ceptions of H12 and H15. The squared multiple correlations for the
been a member of the LP. endogenous constructs ranged from .32 to .83. A closer examina-
tion indicated that knowledge benefits (β = .56; p < 0.05) had the
5. Analysis and results greatest effect on perceived experiential benefits, followed by reward
attractiveness (β = .22; p < 0.05) while required effort has a negative
We used structural equation modeling (SEM) with a maximum effect on experiential benefit (β = −.19; p < 0.05), in support of H1–H3.
likelihood estimation approach, using AMOS 20, to test the The results also indicated that LP members’ experiential benefits
hypotheses.Our two-step procedure reflected Anderson and Gerbing’s derived from program membership have strong effects on their
(1988) recommendations. The measurement model was first vali- program loyalty (β = .91; p < 0.05), as we suggested in H 4 .
dated, after which we examined the structural relationships among Furthermore, group belongingness (β = .44; p < 0.05) had a moder-
latent variables. Because of the large number of items, we applied a ately strong influence on brand loyalty; disclosure comfort (β = .05;
partial disaggregated measurement model to analyze the measure- p < 0.05) had a small positive effect. Program loyalty also drove brand
ment model and structural model, to reduce random error and loyalty (β = .51; p < 0.05). These findings offered support for H5–H7.
produce more stable estimates (Bagozzi and Heatherton, 1994). A total Together, the predictors explained about 81% of the variance in
of 27 composite indicators emerged, according to the original items. brand loyalty. Further examination of the parameter estimates in-
dicated that program loyalty had a moderately strong impact on
share of wallet (β = .44; p < 0.05) and share of purchase (β = .44;
5.1. Measurement model analysis
p < 0.05) but only a small effect on word of mouth (β = .25; p < 0.05),
which supported H10, H11, and H14, respectively. Yet the effect of
We initially examined the dimensionality of the program value
program loyalty on willingness to pay was negative (β = −.30;
constructs using exploratory factor analysis, with principal com-
p < 0.05), in contrast with H15. Brand loyalty exerted a powerful
ponents factoring and Oblimin rotation; it distinguished six primary
influence on customers’ willingness to pay (β = .94; p < 0.05) and
dimensions. Next we evaluated the psychometric properties of the
word of mouth (β = .63; p < 0.05) but a weak effect on share of pur-
measurement items using confirmatory factor analysis. All items
chase (β = .15; p < 0.05), in line with H13, H16, and H17, respectively.
were restricted to load on their assigned factors and were tested
Brand loyalty did not have a significant association with share of
simultaneously in one model. The overall measurement model fit
wallet, thus not supporting H12.
was acceptable (χ 2 = 869.63, df = 269; confirmatory fit index
As an extension, we also examined the possible moderating effects
[CFI] = .97; Tucker–Lewis index [TLI] = .96; root mean square error
of program customization and program duration on the relation-
of approximation [RMSEA] = .06). To examine the reliability of the
ship between program loyalty and brand loyalty. Accordingly,
measurement scale, we used Fornell and Larcker’s (1981) ap-
we performed a median split based on the value of the moderator
proach. All scales were reliable with R-square estimates ranging
variables, with each moderator variable divided into a high and a
between 0.60 and 0.98 and construct reliability values between 0.85
low group. The median value of customization and member dura-
and 0.97. As a test of convergent validity, we considered the average
tion is 4.25 and 3 (years) respectively. The tests for moderating effects
variance extracted, and the results indicated that all constructs
relied on multi-group analyses of variance, following the steps pre-
achieved convergent validity, in that each exceeded the recom-
scribed by Hair et al. (2010). We first computed a non-restricted
mended value of 0.50 (Garver and Mentzer, 1999). The results are
model, then, restricted the path under investigation to be equal across
shown in Table 3. Finally, we confirmed discriminant validity, using
subgroups. A moderating effect exists if the change in chi-square
Fornell and Larcker’s (1981) and Anderson and Gerbing’s (1988) rec-
value is significant (χ2 = 3.74), with one more degree of freedom for
ommended approaches.
Applying Harman’s single-factor test, exploratory factor analysis
(EFA) was performed on all measures to detect possible common Table 4
method bias (Podsakoff et al., 2003). EFA produced more than one Hypothesis testing results.
factor with Eigenvalues greater than one, and variance explained by Hypotheses and pathways Coefficients, β CR
the first factor was not greater than 50%. With this, we conclude that
H1: (+) Reward attractiveness → Experiential benefit 0.22 2.02**
common method bias is not a significant problem in this study.
H2: (+) Knowledge benefit → Experiential benefit 0.56 6.12***
H3: (−) Required effort → Experiential benefit −0.19 −4.37***
H4: (+) Experiential benefit → Program loyalty 0.91 29.19***
Table 3 H5: (+) Group belongingness → Brand loyalty 0.44 12.21***
Construct assessment. H6: (+) Disclosure comfort → Brand loyalty 0.05 2.01**
H7: (+) Program loyalty → Brand loyalty 0.51 13.54***
Construct Average extracted variance Construct reliability H10: (+) Program loyalty → Share of wallet 0.44 5.86***
H11: (+) Program loyalty → Share of purchase 0.44 5.88***
Reward attractiveness 0.68 0.91
H12: (+) Brand loyalty → Share of wallet 0.13 1.82
Knowledge benefit 0.69 0.92
H13: (+) Brand loyalty → Share of purchase 0.15 2.07**
Required effort 0.54 0.85
H14: (+) Program loyalty → Word of mouth 0.25 4.27***
Experiential benefit 0.77 0.97
H15: (+) Program loyalty → Willingness to pay −0.30 −3.87***
Group belongingness 0.73 0.96
H16: (+) Brand loyalty → Word of mouth 0.63 10.35***
Disclosure comfort 0.84 0.96
H17: (+) Brand loyalty → Willingness to pay 0.94 11.62***
Brand loyalty 0.69 0.93
Program loyalty 0.64 0.87 Squared multiple correlations (SMC) experiential benefit = .80; program loyalty = .83;
Word-of-mouth 0.72 0.93 brand loyalty = .81; share of wallet = .32; share of purchase = .33; word of mouth = .73;
Willingness-to-pay 0.80 0.94 willingness to pay = .50.
Customization 0.70 0.90 ** p < .05.
*** p < .01.
J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206 203

Table 5 of purchase, and positive word of mouth but has a reverse impact on
Multi-group analysis of invariance results. willingness to pay premium prices. Customers who are program loyal
Attitudinal loyalty Customization χ2 △χ2 (df = 1) instead tend to be highly sensitive to price increases. In terms of brand
High Low loyalty, customers’ devotion to a firm has a positive effect on their share
of purchases. Furthermore, customers who are brand loyal are enthu-
H8: Program loyalty → brand loyalty 0.61 0.49 6448.5 8.3**
siastic advocates for the firm, willing to dedicate additional resources
Program duration to obtaining the firm’s offerings. Such findings make important con-
Established Newer tributions to theory, in that they extend current knowledge of program
H9: Program loyalty → brand loyalty 0.46 0.58 6720.9 3.7* value–loyalty relationships. By providing empirical evidence about the
impact of program loyalty and brand loyalty on customer behaviors,
* p < .05.
** p < .01.
we offer new insights into the attitudinal–behavioral loyalty relation-
ship in an LP context.
Third, we extend current knowledge about factors that might
the restricted model. The results for moderating effects in Table 5 moderate the association between program and brand loyalty. Several
indicate that the effect of program loyalty on brand loyalty is sig- studies call for research to address this issue (e.g., Liu, 2007; Mägi,
nificantly stronger for the high customization group compared with 2003); however, few researchers have responded to these calls. We
the low customization group, in support of H8. Similarly, the brand offer one of the first empirical examinations of the moderating
loyalty of participants who belonged to the newer group was sig- impact of program customization and membership duration on the
nificantly more affected by program loyalty than was that of relationship between program and brand loyalty. Program
participants who belonged to the established group, in line with H9. customization might heighten the effect of program loyalty on brand
loyalty; program duration weakens this influence. These moderat-
6. Discussion and implications ing effects have not been considered previously, so these findings
make important contributions by providing new insights into con-
This study contributes to marketing theory in three ways. First, we tingency factors that are crucial to LP effectiveness.
summarize a comprehensive examination of different types of value
that customers derive from LPs. The study represents one of the first 6.1. Managerial implications
efforts to identify different program value constructs that might influ-
ence the effectiveness of a LP. The findings suggest that reward The findings of this study can assist practitioners in understand-
attractiveness, knowledge benefit, experiential benefit, disclosure ing the different types of value that customers derive from being
comfort, group belongingness, and required effort are all salient aspects members of a LP. We assert that LP value is diverse and related to
of the value that customers derive from joining a LP. Reward attrac- multiple consumption motivations. Firms that hope to enhance the
tiveness represents the overall utility of program rewards, encompassing effectiveness of their LPs by delivering greater value should offer
the economic value of program rewards, reward options, and reward program rewards that are attractive in terms of not only financial
availability for customers. Knowledge benefit reflects the ability of the benefits to the firm but also the variety available, along with in-
LP to enrich members’ experiences with additional knowledge. Expe- formation about the program, rewards, products, and services. To
riential benefits are positive experiences members have when ensure enjoyable customer experiences with the LP, the rewards
interacting with the LP. Disclosure comfort denotes a customer’s feeling should be achievable but require some effort, leading to a more en-
of being at ease when disclosing personal information. Group tertaining process of point accumulation and reward redemption.
belongingness represents the customer’s feeling of belonging to a com- Related services and events should create excitement and engage
munity, through program participation and membership. Required effort customers with their program membership. In addition, firms need
entails the costs incurred to use and interact with the LP. These find- to find ways to enhance customers’ feelings of belonging to a com-
ings thus extend current conceptualizations of LP value, beyond a munity of people who share the same values, such as by providing
unidimensional perspective (Henderson et al., 2011), to capture both special benefits to members and encouraging interactions. Finally,
economic and psychological aspects. This multi-construct approach they need to ensure both, confidentiality and information privacy,
means that we can better capture the “full” impact of a LP for evalu- as well as a hassle-free, easy system.
ating the effectiveness of program membership. Different aspects of value do not contribute equally to driving
Second, the proposed model extends previous research by incor- program or brand loyalty. This finding can help firms make resource
porating both attitudinal and behavioral dimensions of loyalty into allocation decisions; in particular, it provides some guidance regard-
investigations of LP effectiveness. Truly loyal customers exhibit repeat ing which aspects of value have the greatest impact on loyalty, whether
purchase behaviors, backed by a positive attitude toward the firm, yet to the program or the brand. Program loyalty is greatly influenced by
little empirical evidence reveals the impact of LPs on both attitudinal a member’s overall experience with the LP. As such, marketers wanting
and behavioral aspects of customer loyalty (Gomez et al., 2006). The to increase a customer’s dedication to a LP should focus on cultivat-
value that customers derive from LP membership also can encourage ing experiential benefits. To achieve stronger brand loyalty, firms could
them to be program loyal, firm loyal, or both. Yet distinctions among also promote a member’s sense of belongingness to a LP.
these different types of loyalty rarely are considered (Evanschitzky et al., By extension, this study offers managers a valid and reliable in-
2012; Yi and Jeon, 2003). Attitude loyalty drives behavior (Oliver, 1999), strument to measure LP value. The scales we used in this study were
so understanding the way loyalty to the program and loyalty to the brand both valid and reliable; firms can use them to monitor and evaluate
develop is important. This study investigates, for the first time, the effect the perceptions of value the customers derive from program mem-
of different types of LP value on program loyalty and brand loyalty, to- bership. The scales also provide diagnostic tools for identifying areas in
gether with the effect of these outcomes on behavioral loyalty. The which customers believe the LP falls short of or exceeds expectations.
results show in turn that three antecedents – reward attractiveness, Brand loyalty can be cultivated through program loyalty, so
knowledge benefit, and required effort – influence LP members’ per- program loyalty should be encouraged. In contrast with previous re-
ceptions of experiential benefits, which affect their program loyalty (with search (Kumar and Shah, 2004; Uncles et al., 2003), we argue that
required effort negatively impact experiential benefit). Group managers should not be overly concerned about discouraging program
belongingness, disclosure comfort, and program loyalty drive brand loyalty; instead, they should attempt to convert program loyalty into
loyalty. Program loyalty also enhances customers’ share of wallet, share brand loyalty through increased program customization. The more
204 J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206

customized a program, the stronger the link between program loyalty loyal to the program, customers expect to be offered greater finan-
and brand loyalty. Moreover, the newer the customer is to the LP, the cial savings and other financial privileges.
stronger this association is. Thus, program loyalty drives brand loyalty
especially among new customers and when customization is greater. 7. Limitations and further research
Many existing LPs appear problematic because they induce custom-
ers’ loyalty only to the program, and the economic foundation of this Despite its contributions, this study has several limitations. First,
type of loyalty could encourage program members to seek out deals the findings may be relevant only for stand-alone LPs. In multi-vendor
instead of showing true loyalty. Yet our results also indicate that firms programs, customers’ expectations and value derived from the
should try to foster program loyalty, because it can translate into a program might vary, such that our findings might not apply. Second,
deeper, more enduring sense of brand loyalty. additional research should test our proposed framework in differ-
Customer loyalty in turn relates to profitability (Reinartz and ent contexts. In particular, future studies should examine the
Kumar, 2003). Our study shows that program and brand loyalty dif- relationship between program loyalty, brand loyalty, and behav-
ferentially drive customers’ behaviors. Whereas program loyalty ioral loyalty in less price competitive contexts (e.g. luxury goods)
drives share of wallet and share of purchases, brand loyalty is more to fully understand the dynamics between these variables. Third,
effective in shaping word of mouth and willingness to pay a premium the data came from LPs operating in one country, though they appear
price. Firms striving to achieve these outcomes should ensure the similar to the multitude of programs operating in the United States,
value offered by their program fosters loyalty to it and to the firm, Europe, and Asia. Fourth, we relied on self-reported measures of pat-
to achieve the varying behavioral outcomes. Furthermore, they ronage behavior, in line with existing support for this usage in business
should recognize that program loyalty exerts negative effects on will- literature (Dagger et al., 2009). Finally, we note the potential that
ingness to pay more for the firm’s products and services. Program- other consumer-related motivators might influence the value–
loyal customers emphasize monetary benefits, leaving them more loyalty relationship. Thus, further research should consider variables
likely to pay attention to retail price movements and less willing such as shopping orientation, customers’ purchase levels, or variety
to pay a higher price for the firm’s products and services. By being seeking as potential constructs of interest.


Research instrument

Construct Adapted scale Scale reference

Loyalty program value

Reward attractiveness • Program is very economical. Fullerton (2003)
• Program provides good value for money. Gwinner et al. (1998)
• Program offers attractive financial benefits. Holbrook and Hirschman
• Variety of rewards offered by program is excellent. (1982)
• Program provides good variety of redemption options. Johnson (1999)
Mathwick et al. (2001)
Knowledge benefit • Discovered new products
Mimouni-Chaabane and
• Discovered products I wouldn’t have found
Volle (2010)
• Tried new products
Noble and Phillips (2004)
• Learned more about the products
O’Brien and Jones (1995)
• Get to know more about the company
Qualitative inquiry (i.e.,
Experiential benefit • Excited about the rewards focus group discussions)
• Excited to use the program Rosenbaum et al. (2005)
• Enthusiastic about collecting points Spake et al. (2003)
• The program is appealing to me Dowling and Uncles (1997)
• Collecting points from program is entertaining
• Redeeming points is enjoyable
• Feel good when I redeem points for rewards
• Enjoy using the program
• Feel rewarded by the program
• Delighted by the rewards
• Happy receiving rewards for my purchases
Group belongingness • Share the same values as the brand
• Feel close to the brand
• Strong sense of identification with the brand
• Like a regular customer of the brand
• Part of a community who likes the brand
• Like part of a family as a member
• Belong to a community of people who share the same values
• Feel like an important customer to the brand
• Feel appreciated as a member
• More privileged than other customers
Disclosure comfort • Comfortable
disclosing information
• Very much at ease
• Worry-free when disclosing information
• Secure disclosing information
Required effort • Process of redeeming rewards is troublesome
• Required points is too difficult to achieve
• Need to make additional purchases to redeem rewards
• Go out of my way to use the program
• Too troublesome to use the program
J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206 205

Construct Adapted scale Scale reference

Attitudinal loyalty
Program loyalty • Recommend program to others Yi and Jeon (2003)
• Strong preference for this program Wirtz et al. (2007)
• Like program more than others’ programs
• Likely to use program in the next 12 months
Brand loyalty • Loyal toward brand Morgan and Hunt (1994)
• Very committed to brand Baloglu (2002)
• Deserves my maximum effort to maintain business with De Wulf et al. (2001)
• Brand is very important to me Hennig-Thurau et al. (2002)
• Brand is something I really care about
• I would still buy from the brand even if another store has sales
Behavioral loyalty
Word of mouth (WOM) • Say positive things about the company Zeithaml et al. (1996)
• Recommend to someone who seeks my advice
• Encourage friends and relatives to do business with company
• Often recommend company to others
• Try to convince friends, family or co-workers to switch to this retailer
Willingness to pay (WTP) • Would continue to do business even if prices increase Choi et al. (2006)
• Willing to pay higher prices Zeithaml et al. (1996)
• Willing to pay more to shop
• If prices rise, I would accept the higher prices
Share of purchase (SOP) • Of the past 10 times you bought items at a retail store, how many times do De Wulf et al. (2001)
you select this?
Share of wallet (SOW) • What percentage of your total expenditures for retail items do you spend Wirtz et al. (2007)
in this store?
Program customization • Get discounts or special deals other customers don’t get Gwinner et al. (1998)
• Get better prices than other customers
• Company performs services for me they don’t normally do for other customers
• Get customized offers because I am a member

References Dowling, G.R., Uncles, M., 1997. Do customer loyalty programs really work? Sloan
Manage. Rev. 38 (4), 71–82.
Euromonitor International, 2009. Loyalty marketing: attracting and retaining
Anderson, J.C., Gerbing, D.W., 1988. Structural equation modeling in practice: a review customers in difficult times, from Global Market Information Database.
and recommended two-step approach. Psychol. Bull. 103 (3), 411–423. <
Bagchi, R., Li, X.B., 2010. Illusionary progress in loyalty programs: magnitudes, reward -customers-in-difficult-times/report> (accessed 01.11.10).
distances, and step-size ambiguity. J. Consum. Res. 37 (3), 888–901. Evanschitzky, H., Wunderlich, M., 2006. An examination of moderator effects in the
Bagozzi, R.P., Heatherton, T.F., 1994. A general approach to representing multifaceted four-stage loyalty model. J. Serv. Res. 8 (4), 330–345.
personality constructs: application to state self-esteem. Struct. Equation Model. Evanschitzky, H., Ramaseshan, B., Woisetschläger, D., Richelsen, V., Blut, M., Backhaus,
1 (1), 35–67. C., 2012. Consequences of customer loyalty to the loyalty program and to the
Baloglu, S., 2002. Dimensions of customer loyalty: separating friends from well company. J. Acad. Mark. Sci. 40 (5), 625–638.
wishers. Cornell Hotel Restaur. Adm. Q. 43 (1), 47–59. Fornell, C., Larcker, D.F., 1981. Evaluating structural equation models
Berry, L.L., 1995. Relationship marketing of services – growing interest, emerging with unobservable variables and measurement error. J. Mark. Res. 18 (1),
perspectives. J. Acad. Mark. Sci. 23 (4), 236–245. 39–50.
Bhattacharya, C.B., Sen, S., 2003. Consumer – company identification: a framework Frisou, J., Yildiz, H., 2011. Consumer learning as a determinant of a multi-partner
for understanding consumers’ relationships with companies. J. Mark. 67 (2), loyalty program’s effectiveness: a behaviourist and long-term perspective. J. Retail.
76–88. Consum. Ser. 18 (1), 81–91.
Bolton, R., Kannan, P., Bramlett, M., 2000. Implications of loyalty program membership Fullerton, G., 2003. When does commitment lead to loyalty? J. Serv. Res. 5 (4),
and service experiences for customer retention and value. J. Acad. Mark. Sci. 28 333–344.
(1), 95–108. Garver, M.S., Mentzer, J.T., 1999. Logistics research methods: employing structural
Brakus, J.J., Schmitt, B.H., Zarantonello, L., 2009. Brand experience: what is it? How modeling to test for construct validity. J. Bus. Logist. 20 (1), 33–57.
is it measured? Does it affect loyalty? J. Mark. 73 (May), 52–68. Gomez, B.G., Arranz, A.G., Cillan, J.G., 2006. The role of loyalty programs in behavioural
Bridson, K., Evans, J., Hickman, M., 2008. Assessing the relationship between loyalty and affective loyalty. J. Consum. Mark. 23 (7), 387–396.
program attributes, store satisfaction and store loyalty. J. Retail. Consum. Ser. Graham, J.F., 1994. Increasing repurchase rates: a reappraisal of coupon effects.
15 (5), 364–374. Psychol. Mark. 11 (6), 533–547.
Chandon, P., Wansink, B., Laurent, G., 2000. A benefit congruency framework of sales Gwinner, K.P., Gremler, D.D., Bitner, M.J., 1998. Relational benefits in services
promotion effectiveness. J. Mark. 64 (4), 65–81. industries: the customer’s perspective. J. Acad. Mark. Sci. 26 (2), 101–114.
Chisnall, P.M., 1995. Consumer Behaviour, third ed. McGraw-Hill Book Company, Hair, J.F., Black, W.C., Babin, B.J., Anderson, R.E., 2010. Multivariate Data Analysis: A
London. Global Perspective, seventh ed. Pearson Education Inc, New Jersey.
Choi, D.H., Kim, C.M., Kim, S.-I., Kim, S.H., 2006. Customer loyalty and disloyalty in Henderson, C.M., Beck, J.T., Palmatier, R.W., 2011. Review of the theoretical
internet retail stores: its antecedents and its effect on customer price sensitivity. underpinnings of loyalty programs. J. Consum. Psychol. 21 (3), 256–276.
Int. J. Manag. 23 (4), 925–941. Hennig-Thurau, T., Gwinner, K.P., Gremler, D.D., 2002. Understanding relationship
Dagger, T., Danaher, P., Gibbs, B., 2009. How often versus how long? The interplay marketing outcomes: an integration of relational benefits and relationship quality.
of contact frequency and relationship duration in customer perceptions of service J. Serv. Res. 4 (3), 230–247.
relationship strength. J. Serv. Res. 11 (4), 371–388. Holbrook, M.B., Hirschman, E.C., 1982. The experiential aspects of consumption:
Daryanto, A., de Ruyter, K., Wetzels, M., Patterson, P., 2010. Service firms and customer consumer fantasies, feelings, and fun. J. Consum. Res. 9 (2), 132–140.
loyalty programs: a regulatory fit perspective of reward preferences in a health Hughes, A.M., 2003. The Consumer Loyalty Solution: What Works (and What Doesn’t)
club setting. J. Acad. Mark. Sci. 38 (5), 604–616. in Customer Loyalty Programs. McGraw-Hill, New York.
De Wulf, K., Odekerken-Schroder, G., Iacobucci, D., 2001. Investments in consumer Jang, D., Mattila, A.S., 2005. An examination of restaurant loyalty programs: what
relationships: a cross-country and cross-industry exploration. J. Mark. 65 (4), kinds of rewards do customers prefer? International Journal of Contemporary
33–50. Hospitality Management. 17 (5), 402–408.
Dick, A.S., Basu, K., 1994. Customer loyalty: toward an integrated conceptual Johnson, K., 1999. Making loyalty program more rewarding. Dir. Mark. 61 (11), 24–
framework. J. Acad. Mark. Sci. 22 (2), 99–113. 27.
Dorotic, M., Bijmolt, T.H.A., Verhoef, P.C., 2012. Loyalty programmes: current Kim, B.D., Shi, M., Srinivasan, K., 2001. Reward programs and tacit collusion. Mark.
knowledge and research directions. Int. J. Manag. Rev. 14 (3), 217–237. Sci. 20 (2), 99.
206 J.T. So et al./Australasian Marketing Journal 23 (2015) 196–206

Kim, D.H., Lee, S.Y., Bu, K.H., Lee, S., 2009. Do VIP programs always work well? The Peterson, R.A., 1995. Relationship marketing and the consumer. J. Acad. Mark. Sci.
moderating role of loyalty. Psycho. Mark. 26 (7), 590–609. 23 (4), 278–281.
Kumar, V., Shah, D., 2004. Building and sustaining profitable customer loyalty for Podsakoff, P.M., MacKenzie, S.B., Lee, J.Y., Podsakoff, N.P., 2003. Common method biases
the 21st century. J. Retail. 80 (4), 317–329. in behavioural research: a critical review of the literature and recommended
Lee, J., 2010. Loyalty card key to Priceline’s advance. < remedies. J. Appl. Psychol. 88 (5), 879–930.
business/media-and-marketing/loyalty-card-key-to-priceline-advance- Reichheld, F.F., 2003. The one number you need to grow. Harv. Bus. Rev. 81 (12),
20100429-twoi.html> (accessed 29.06). 46–54.
Leenheer, J., Bijmolt, T.H.A., 2008. Which retailers adopt a loyalty program? An Reinartz, W.J., Kumar, V., 2003. The impact of customer relationship characteristics
empirical study. J. Retail. Consum. Ser. 15 (6), 429–442. on profitable lifetime duration. J. Mark. 67 (1), 77–99.
Leenheer, J., Van Heerde, H.J., Bijmolt, T.H.A., Smidts, A., 2007. Do loyalty programs Rese, M., Hundertmark, A., Schimmelpfennig, H., Schons, L.M., 2013. Loyalty program
really enhance behavioral loyalty? An empirical analysis accounting for self- types as drivers of customer retention: a comparison of stand-alone programs
selecting members. Int. J. Res. Mark. 24 (1), 31–47. and multi-vendor loyalty programs through the lens of transaction costs
Liu, Y.P., 2007. The long-term impact of loyalty programs on consumer purchase economics. Int. Rev. Retail Distrib. Consum. Res. 23 (3), 305–323.
behavior and loyalty. J. Mark. 71 (4), 19–35. Roehm, M.L., Pullins, E.B., Roehm, H.A.J., 2002. Designing loyalty-building programs
Liu, Y.P., Yang, R., 2009. Competing loyalty programs: impact of market saturation, for packaged goods brands. J. Mark. Res. 39 (2), 202–213.
market share, and category expandability. J. Mark. 73 (1), 93–108. Rosenbaum, M.S., Ostrom, A.L., Kuntze, R., 2005. Loyalty programs and a sense of
Mano, H., Oliver, R.L., 1993. Assessing the dimensionality and structure of the community. J. Serv. Res. 19 (4), 222–233.
consumption experience: evaluation, feeling, and satisfaction. J. Consum. Res. Rothschild, M.L., Gaidis, W.C., 1981. Behavioural learning theory: its relevance to
20 (3), 451–466. marketing and promotion. J. Mark. 45 (2), 70–78.
Mathwick, C., Malhotra, N., Rigdon, E., 2001. Experiential value: conceptualization, Sharp, B., Sharp, A., 1997. Loyalty programs and their impact on repeat-purchase
measurement and application in the catalog and Internet shopping environment. loyalty patterns. Int. J. Res. Mark. 14 (5), 473–486.
J. Retail. 77 (1), 39–56. Sheth, J.N., Parvatiyar, A., 1995. Relationship marketing in consumer markets:
Mägi, A.W., 2003. Share of wallet in retailing: the effects of customer satisfaction, antecedents and consequences. J. Acad. Mark. Sci. 23 (4), 255–271.
loyalty cards and shopper characteristics. J. Retail. 79 (2), 97–106. Shugan, S.M., 2005. Brand loyalty programs: are they shams? Mark. Sci. 24 (2),
McAlexander, J.A., Schouten, J.W., Koenig, H.F., 2002. Building brand community. J. 185–193.
Mark. 66 (1), 38–54. Smith, A., Sparks, L., 2009. Reward redemption behaviour in retail loyalty schemes.
McCall, M., Voorhees, C., 2010. The drivers of loyalty program success. Cornell Hosp. Br. J. Manag. 20 (2), 204–218.
Q. 51 (1), 35–52. Spake, D.F., Beatty, S.E., Brockman, B.K., Crutchfield, T.N., 2003. Consumer comfort
McKee, S., 2007. The problem with loyalty programs, from BusinessWeek Online. in service relationships: measurement and importance. J. Serv. Res. 5 (4), 316–332.
< Tanford, S., Raab, C., Kim, Y.S., 2010. The influence of reward program membership
_406822.htm> (accessed 10.06). and commitment on hotel loyalty. J. Hosp. Tour. Res. 35 (3), 279–307.
Meyer-Waarden, L., 2007. The effects of loyalty programs on customer lifetime Taylor, G.A., Neslin, S.A., 2005. The current and future sales impact of a retail frequency
duration and share of wallet. J. Retail. 83 (2), 223–236. reward program. J. Retail. 81 (4), 293–305.
Mimouni-Chaabane, A., Volle, P., 2010. Perceived benefits of loyalty programs: scale Tuttle, B., 2013. A disloyalty movement? Supermarkets and customers drop loyalty
development and implications for relational strategies. J. Bus. Res. 63 (1), 32–37. card programs. Time. <
Morais, D.B., Dorsch, M.J., Backman, S.J., 2004. Can tourism providers buy their -movement-supermarkets-and-customers-drop-loyalty-card-programs/>.
customers’ loyalty? Examining the influence of customer-provider investments Uncles, M.D., Dowling, G.R., Hammond, K., 2003. Customer loyalty and customer
on loyalty. J. Travel Res. 42 (3), 235–243. loyalty programs. J. Consum. Mark. 20 (4), 294–316.
Morgan, R.M., Hunt, S.D., 1994. The commitment-trust theory of relationship Van Osselaer, S.M.J., Alba, J.W., Manchanda, P., 2004. Irrelevant information and
marketing. J. Mark. 58 (3), 20–38. mediated intertemporal choice. J. Consum. Psychol. 14 (3), 257–270.
Muniz, A.M., O’Guinn, T.C., 2001. Brand community. J. Consum. Res. 27 (4), 412–432. Verhoef, P.C., 2003. Understanding the effect of customer relationship management
Noble, S.M., Phillips, J., 2004. Relationship hindrance: why would consumers not want efforts on customer retention and customer share development. J. Mark. 67 (4),
a relationship with a retailer? J. Retail. 80 (4), 289–303. 30–45.
O’Brien, L., Jones, C., 1995. Do rewards really create loyalty? Harv. Bus. Rev. 73 (3), Wade, M., 2002. Doubts dog reward schemes. The Age. <>.
75–82. Wirtz, J., Chew, P., 2002. The effects of incentives, deal proneness, satisfaction and
Oliver, R.L., 1999. Whence consumer loyalty? J. Mark. 63 (4), 33–44. tie strength on word-of-mouth behavior. Int. J. Serv. Ind. Manag. 13 (2), 141–162.
O’Malley, L., Prothero, A., 2004. Beyond the frills of relationship marketing. J. Bus. Wirtz, J., Mattila, A.S., Lwin, M.O., 2007. How effective are loyalty reward programs
Res. 57 (11), 1286–1294. in driving share of wallet? J. Serv. Res. 9 (4), 327–334.
Palmatier, R.W., Dant, R.P., Grewal, D., Evans, K.R., 2006. Factors influencing the Xie, M.K.L., Chen, C.C., 2013. Progress in loyalty program research: facts, debates, and
effectiveness of relationship marketing: a meta-analysis. J. Mark. 70 (4), 136– future research. J. Hosp. Mark. Manag. 22 (5), 463–489.
153. Yi, Y., Jeon, H., 2003. Effects of loyalty programs on value perception, program loyalty,
Palmer, A., McMahon-Beattie, U., Beggs, R., 2000. Influences on loyalty programme and brand loyalty. J. Acad. Mark. Sci. 31 (3), 229–240.
effectiveness: a conceptual framework and case study investigation. J. Strateg. Zeithaml, V.A., Berry, L.L., Parasuraman, A., 1996. The behavioral consequences of
Mark. 8 (1), 47–66. service quality. J. Mark. 60 (2), 31–46.