LITERATURE REVIEW

Effects of Loyalty Programs:

Earlier researches have documented varied outcomes of consumer purchase

behaviour towards loyalty programs operating in market. For instance
Grahame R. Dowling and Mark Uncles (1997) came to a conclusion that in the
majority of cases all that a customer loyalty program will do is cost you money
to provide more benefits to your customers, not all of which will be relevant to
the brand’s value proposition and/or positioning. It is unlikely to significantly
increase your relative proportion of loyal customers, or your profitability. And
the study done by Blanca Garcia Gomez, Ana Gutierrez Arranz and Jesus
Gutierrez Cillan (2006) found out that loyalty programs attract most loyal
retailer customers. Out of this group, non participants are those sporadic
customers characterized by a lack of emotional bonds with the company.
Question arises why loyalty programs exhibit varied performances. Although
this phenomenon may not be surprising, a systematic understanding of the
factors contributing to varied performances of loyalty programs is important.