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The impact of reward personalisation on frequent flyer programmes'

perceived value and loyalty

Article  in  Journal of Services Marketing · May 2013

DOI: 10.1108/08876041311330681

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 The impact of reward personalisation on
frequent flyer programmes’ perceived value
and loyalty
Lars Meyer-Waarden
Ecole de Management, Strasbourg University, Strasbourg, France

Abstract
Purpose – The purpose of this research is to contribute to a better theoretical and empirical knowledge about the way frequent flyer programmes
influence customer behaviour. It aims to describe the relationships between purchase orientations and personalized rewards on customers’ perceived
programme value and subsequent loyalty.
Design/methodology/approach – The research uses self-determination theory (SDT) and purchase orientations to classify types of rewards in terms
of their effect on perceived programme value and loyalty. Scales are developed through exploratory and confirmatory factor analysis. To validate the
hypotheses, surveys are realized in a major international airline. Structural equation modelling confirms the research model.
Findings – Perceived value and loyalty vary according to purchase orientation, in support of the SDT. Intrinsic (extrinsic) rewards motivate customers to
act to obtain a benefit within (apart from) the target of their purchase orientation and influences loyalty positively (have low impact on loyalty).
Research limitations/implications – Further testing of reward types, in(ex)trinsic motivation, SDT, across multiple contexts is necessary for validity
enhancement.
Practical implications – Differentiation through tailored (non-)monetary rewards is possible in markets marked by strong competition to appeal to
different segments.
Originality/value – This is one of the pioneer articles in the use of SDT in marketing research. The development of scales which focus on reward types
and the moderating impact of purchase orientations on frequent flyer programmes’ perceived value and loyalty is another contribution.

Keywords Frequent flyer programme, Rewards, Perceived value, Scale development, Self-determination theory, Purchase orientations, Airlines,
Consumer behaviour

Paper type Research paper

An executive summary for managers and executive
readers can be found at the end of this article.
1. Introduction
Customer relationships have been increasingly studied in the
academic and professional marketing literature. Customer
retention rates and customer share of category purchase are
important metrics in customer relationship management
(CRM). To maximize these metrics, almost all airlines use
customer relationship management instruments, and frequent
flyer schemes have become key marketing activities for many
companies. Airlines reward travelers with free flights, free
hotel stays or other benefits after they accumulate sufficient
travel miles.
Yet despite their prominence in the marketing mix and in
passengers’ wallets, the benefits of loyalty cards remain
uncertain. Many researchers argue that in a competitive
market, good frequent flyer schemes simply get imitated,
which means that the market eventually returns to stasis, but
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/0887-6045.htm
Journal of Services Marketing
27/3 (2013) 183– 194
q Emerald Group Publishing Limited [ISSN 0887-6045]
[DOI 10.1108/08876041311330681]
with increased marketing costs – a highly inefficient situation.
Furthermore, the rewards commonly provided in association
with such programmes might not change consumers’
motivations or behavioural patterns effectively (Leenheer
et al., 2007; Liu, 2007; Meyer-Waarden, 2007; Meyer-
Waarden and Benavent, 2009; Sharp and Sharp, 1997). Yet
little research investigates customers’ value perceptions
regarding frequent flyer scheme rewards, even as
experimental studies suggest loyalty programme effectiveness
depends on the design of those very rewards (Smith and
Sparks, 2009a; Demoulin and Zidda, 2008; Kivetz and
Simonson, 2002; Kivetz, 2005; Yi and Jeon, 2003).
Understanding how various rewards enhance or undermine
loyalty is a critical question for differentiation; the various
types of rewards likely induce varying levels of perceived value
of frequent flyer schemes, which in turn have differential
influences on loyalty. This article contributes to a better
understanding theoretical, managerial, and empirical
knowledge about frequent flyer programme management
and consumer psychology. It investigates a multipart research
question: How does the interaction of reward types
(economic, social-relational, hedonic, informational, and
functional) with customer purchase orientations induce
perceived value, and affect loyalty?
The author expresses his warmest thanks to the airline for kindly
supporting this investigation.

183
 The impact of reward personalisation
Lars Meyer-Waarden
We first provide a theoretical background, based on the self-
determination theory-SDT (Deci, 1971), as well as the
purchase orientation theory (Moschis, 1976). Accordingly, we
develop our research propositions about how various systems
of rewards and individual consumer purchase orientations,
affect perceived frequent flyer scheme value and loyalty. To
our knowledge, this study is the first to test the moderating
effects of purchase orientations on perceived frequent flyer
scheme reward value as well as loyalty. Subsequently, we
describe our methodology, the survey realized in a leading
International airline and present the results. We conclude with
a discussion and suggestions for further research.
2. Conceptual framework
We require a better understanding of how rewards influence
perceived value, and then affect loyalty. Therefore, we define
the loyalty concept clearly and turn to theories pertaining to
perceived value, self-determination, and purchase
orientations.
2.1. Loyalty
Loyalty consists of one behavioural dimension and one
attitudinal dimension (Jacoby and Chestnut, 1978). Trust,
commitment (i.e. motivation to maintain a valued
relationship; Morgan and Hunt, 1994), and resistance to
counter-persuasion from competitors (Lessne and Didow,
1987) are essential features of loyalty. True loyalty entails
repeat purchasing behaviour, accompanied by an underlying
positive attitude and a high degree of commitment, as well as
resistance to counter-persuasion from competitors.
2.2. Frequent flyer programmes, rewards and perceived
value
Frequent flyer programmes comprise integrated systems of
marketing actions and communications that aim to increase
loyalty and switching costs by providing economical, hedonist,
informational, functional, sociological and relational rewards
(Gwinner et al., 1998). They are thought of as activities that
offer incentives (rewards) to customers based on evidence of
loyalty (flight frequency or amounts). These rewards refer to
any abstract (e.g. virtue, pleasure, novelty, self-esteem) or
concrete (e.g. miles, points, discounts) stimuli granted by the
frequent flyer scheme that launch passengers internal
cognitive efforts and thereby help create perceived value,
improve economic decision-making and motivation
outcomes, and strengthen the intensity of approved
purchase behaviours, such as loyalty (Sutton and Barto,
1998; Tietje, 2002).
The perceived value created by frequent flyer scheme
rewards is the relationship between the consumer’s perceived
benefits in relation to the perceived costs of receiving these
benefits, and represents a positive emotional response
(e.g. such as subjective feelings of pleasure or hedonic
enjoyment) and a source of satisfaction and motivation,
because the rewards fulfill a desire or a goal (Zeithaml, 1988).
By categorizing the different types of rewards that induce
customer perceived value, we can derive specific motivations
that induce frequent flyer programme usage. For example,
utilitarian rewards tend to encompass three fields:
1 economic, which corresponds to an economic purchase
motivation (e.g. price reductions, purchase vouchers);
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Journal of Services Marketing
Volume 27 · Number 3 · 2013 · 183 –194
2 functional, in which case they satisfy commodity
motivations (e.g. facilitate purchase, reduce purchasing
time); or
3 informational (e.g. greater access to information) (Babin
et al., 1994; Chitturi et al., 2008).
In contrast, hedonistic – entertainment rewards have more
emotional value (Arnold and Reynolds, 2003; Chitturi et al.
2008) and correspond to motivations associated with giving or
receiving pleasure (e.g. games, sweepstakes, travelling).
Social – relational rewards enable people to gain status, be
identified with a privileged group, or establish a firm
relationship, which makes their interactions more
interpersonal and helps the firm satisfy their needs better
(Gwinner et al., 1998; Hennig-Thurau et al., 2002).
Finally, frequent flyer programme use is goal oriented.
Therefore, purchase behaviours depend on specific perceived
value, which must be coherent with individual and
heterogeneous customers’ motivations.
2.3. Self-determination theory and purchase
orientations
The self-determination theory (SDT) suggests that various
rewards and contexts have differential effects on motivation
(Deci, 1971; Deci and Ryan, 1985). Motivation refers to the
desire to engage in a goal-oriented behaviour such as loyalty.
Furthermore, the SDT indicates that the nature of the reward
itself determines whether motivation is intrinsic or extrinsic.
Intrinsic motivation occurs when people engage in an activity
because it provides an internal reward, that is, for its own
sake. These rewards increase the internal gratification
associated with a behaviour and thus the internal reasons
for maintaining it. In contrast, extrinsic motivation results
from the offer of external rewards in exchange for the desired
behaviour. Therefore, people engage in the desired behaviour
for a reward other than their interest in the activity and feel
pressure to obtain the offered reward. Economic benefits are
the most commonly cited external reward in psychology
research (Deci et al., 1999). (Ex)Intrinsic motivations have
varying impacts on behaviour. Both motivation and behaviour
(de)increase in the long term in response to an intrinsic
(extrinsic) reward. Empirical evidence also shows that
extrinsic rewards can undermine motivation and behaviours,
but intrinsic benefits tend to have a positive effect.
Applied to frequent flyer programmes, intrinsic rewards
motivate people to act to obtain a benefit that matches their
individual purchase goals; extrinsic incentives motivate them
to act to obtain a benefit separate from their purchase target.
Heterogeneous intrinsic or extrinsic motivations probably
depend on customers’ individual characteristics and purchase
orientations, such that purchasers are not intrinsically
motivated by the same rewards.
Purchase orientations refer to consumers’ mental
predispositions toward purchasing (Moschis, 1976; Kahn
and Schmittlein, 1989). They are based on people’s
experiences and personal value systems. Because such
orientations are goal oriented, they may explain various
motivations, preferences, and behaviours (e.g. search for
information, purchase behaviour, loyalty).
Many orientations exist in the form of purchasing goals
(Westbrook and Black, 1985), but most typologies simplify
this consideration by citing five main orientations (Childers
et al., 2001; Laaksonen, 1993). The economic, budget-
 The impact of reward personalisation
Lars Meyer-Waarden
optimizing orientation with the motivation to realize price
economies (Babin et al., 1994); a hedonist one with the aim of
having pleasure through the potential entertainment value and
enjoyment of the fun and play arising from the purchasing
experience (Arnold and Reynolds, 2003); a functional, time-
optimizing orientation implies efforts to decrease the
demands associated with purchasing and travelling; these
buyers hope to purchase and travel in an efficient, timely
manner to achieve their goals with minimal irritation (Babin
et al., 1994). A routine-loyal, uncertainty-avoiding orientation
that corresponds to purchasers’ motivations to be loyal to
their favourite brands or suppliers and to be reassured about
their choice to minimize uncertainty and risk (Dawson et al.,
1990). Finally, consumers with a social-relational orientation
desire personalised, privileged, interpersonal relationships
with a brand or a supplier (Smith and Sparks, 2009b).
According to these orientations and their goals, consumers
develop coherent shopping strategies, such as making
impulsive purchases, comparing products, brochures or web
sites, using frequent flyer cards, relying on purchase vouchers,
or searching for contacts with sales staff (Arnold and
Reynolds, 2003).
3. Hypotheses
These ideas have significant implications for frequent flyer
programmes, because they suggest that economic or
promotional rewards might undermine some consumers’
motivation and loyalty after they receive the reward (Scott and
Yalch, 1978). In line with SDT, the intrinsic motivation for
frequent flyer programme usage and subsequently loyalty
should be largely goal oriented (i.e. to receive a particular
reward) and thus depend on the desired rewards that induce
perceived value, assuming they are intrinsic and accord with
the individual customers’ purchase orientations (Figure 1).
Individual disparities in loyalty likely result from
interpersonal heterogeneity; passengers have different
purchase orientations and should be differentially
intrinsically motivated by various rewards that induce
different perceived values. Therefore, they devote unequal
effort to obtaining a given reward, according to the value they
assign to it in comparison with the associated expenses.
Figure 1 Conceptual framework: how frequent flyer programmes work
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Volume 27 · Number 3 · 2013 · 183 –194
Loyalty changes only if passengers perceive that the value
delivered by the rewards are greater than the costs (e.g. joining
expenses, switching costs) to gain them. The effect of
frequent flyer programmes’ rewards on passenger perceived
value, as well as their loyalty, should be moderated by
individual purchase orientations and thus their (intrinsic/
extrinsic) motivation for various rewards. In turn, if the
reward corresponds to a passenger’s purchase orientation,
which motivates him or her intrinsically to use the frequent
flyer programme it should relate positively to his or her
perceived value and then should have a persistent, positive
impact on loyalty. In contrast, if the reward does not
correspond with a passenger’s purchase orientation, it should
not motivate him or her extrinsically to use the frequent flyer
program, and it should not relate positively to his or her
perceived value and then should not have a persistent, positive
impact on loyalty. This general hypothesis leads us to detail
the testable sub hypotheses we summarise in Table I.
At this stage though, we cannot establish precise predictions
for these effects, because it is not easy to define the degree of
correlation between a single purchasing orientation and a
single purchase goal. These variables probably are
multidimensional, because consumers rarely pursue just one
purchase target. To our knowledge, no investigations have
considered the relationship among frequent flyer programme
rewards, purchase orientations, intrinsic motivation, customer
perceived value, and loyalty. Therefore, we explore and
evaluate the value of the general framework (Table I) that we
use to test our research hypotheses. The empirical findings
cannot provide a test of a well-established priori theory;
rather, they represent a step toward building a theory.
4. Methodology and empirical investigation
To test our hypotheses, we considered the air transportation
sector as it was pioneered to operate large scale electronic
loyalty programmes. Indeed, AAdvantage, the frequent flyer
program of American Airlines, launched in 1981, was the first
such loyalty programme in the world, and remains the largest
with more than 50 million members. The airline sector
continues to innovate and to integrate the latest innovations
 The impact of reward personalisation Journal of Services Marketing
Lars Meyer-Waarden Volume 27 · Number 3 · 2013 · 183 –194

Table I Hypotheses about the impact of rewards on loyalty, according to purchase orientations
Purchase orientation
Functional,
Budget- Social- Time- Uncertainty-
Reward Optimizing Relational Optimizing Avoiding Hedonist
Relational H1a 0 H2a þ H3a 0 H4a 0 H5a þ
Economic H1b þ H2b 0 H3b 0 H4b 0 H5b 0
Hedonist H1c 0 H2c 0 H3c 0 H4c 0 H5c þ
Functional H1d 0 H2d 0 H3d þ H4d 0 H5d 0
Informational H1e þ H2e 0 H3e 0 H4e þ H5e 0
Among passengers with an economical, budget-optimizing purchase orientation who are intrinsically motivated to optimize their budget,. . .
H1a: . . .relational rewards should create a low level of perceived value and loyalty
H1b: . . . economic rewards should create a high level of perceived value and loyalty
H1c: . . . hedonist rewards should create a low level of perceived value and loyalty
H1d: . . . functional rewards should create a low level of perceived value and loyalty
H1e: . . . informational rewards should create a high level of perceived value and loyalty
Among passengers with a social-relational purchase orientation who are intrinsically motivated to establish a relationship with a specific airline
and its sales staff,. . .
H2a: . . .relational rewards should create a high level of perceived value and loyalty
H2b: . . . economic rewards should create a low level of perceived value and loyalty
H2c: . . . hedonist rewards should create a low level of perceived value and loyalty
H2d: . . . functional rewards should create a low level of perceived value and loyalty
H2e: . . . informational rewards should create a low level of perceived value and loyalty
Among passengers with a functional, time-optimizing purchase orientation who are intrinsically motivated to reduce the time and effort
associated with booking and to make traveling easier,. . .
H3a: . . .relational rewards should create a low level of perceived value and loyalty
H3b: . . . economic rewards should create a low level of perceived value and loyalty
H3c: . . . hedonist rewards should create a low level of perceived value and loyalty
H3d: . . . functional rewards should create a high level of perceived value and loyalty
H3e: . . . informational rewards should create a low level of perceived value and loyalty
Among passengers with an uncertainty-avoiding purchase orientation who are intrinsically motivated to minimize uncertainty about their
favourite airlines and gain reassurance about their airline choice,. . .
H4a: . . .relational rewards should create a low level of perceived value and loyalty
H4b: . . . economic rewards should create a low level of perceived value and loyalty
H4c: . . . hedonist rewards should create a low level of perceived value and loyalty
H4d: . . . functional rewards should create a low level of perceived value and loyalty
H4e: . . . informational rewards should create a high level of perceived value and loyalty
Among passengers with a hedonist purchase orientation who are intrinsically motivated to gain pleasure, . . .
H5a: . . .relational rewards should create a high level of perceived value and loyalty
H5b: . . . economic rewards should create a low level of perceived value and loyalty
H5c: . . . hedonist rewards should create a high level of perceived value and loyalty
H5d: . . . functional rewards should create a low level of perceived value and loyalty
H5e: . . . informational rewards should create a low level of perceived value and loyalty
Notes: + positive impact on loyalty; 0 no impact on behaviour

before all other service and retailing sectors. For our empirical
investigation we worked with a major international airline.
4.1. Measure development
The absence of directly applicable existing scales for each
construct required us to adapt or develop multi-item Likert
scales for this study. For perceived rewards’ value of the
frequent flyer programme, we adapted items from Arnold and
Reynolds (2003), and Hennig-Thurau et al. (2002); the
purchase orientation items were adapted from Laaksonen
(1993). For our scale development, we employ concept
mapping and expert reviews to ensure the scales apply to the
specific context of the frequent flyer scheme.
Our qualitative study of 30 French loyalty programme
managers from different sectors (e.g. grocery, perfumery,
other specialized retailers, airlines, car-rental companies,
hotels) provided further insights into the rewards that
customers perceive when they participate in loyalty schemes,
as well as their common purchase orientations. Together, the
literature review and qualitative study suggested 20 items for
measuring perceived rewards’ value and 25 items for purchase

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Lars Meyer-Waarden Volume 27 · Number 3 · 2013 · 183 –194

orientations. We also employ a five-item scale (Bruner et al.,
2005) to measure purchase intensity (PI) and resistance to
counter-persuasion (RCP).
In Table II, we summarise the principal reward types
offered by the airline to members, which we classify according
to loyalty programme managers’ categorisations of benefits
according the five dimensions of perceived value. Miles
accumulated in the programme allow members to redeem
tickets, upgrade service class, obtain free or discounted car
rentals, hotel stays, merchandise, or other products and
services.
Hedonist rewards pertain to all benefits that give pleasure,
such as games or sweepstakes, exchange of the points against
spas, hotels, entrees to Disneyland. Social-relational rewards
include personalisation, privileges, status, or special events;
the economic benefits offer free tickets or price reductions.
Functional rewards attempt to decrease purchase time, such
as by offering priority check-in, and informational rewards
entail personalised mailings that provide information about
the most taken flight destinations. We cannot necessarily
classify rewards precisely into single perceived value categories
though, because in practice, they may be multidimensional
and satisfy several purchase targets (e.g. priority check-in
could deliver relational and functional benefits).
To test the research instrument and purify the measurement
instrument to optimize the data collection procedure for a
much larger sample, we pretested each scale with a random
sample of frequent flyer programme members from the major
international airline (N ¼ 237) (these respondents were not
included in the final study). All items used five-point Likert
scales (1 ¼ “strongly disagree” to 5 ¼ “strongly agree”), such
that respondents indicated their degree of agreement with a
series of statements about the stimulus object. We built our
measurement model using exploratory (EFA) and
confirmatory factor analysis (CFA) with three scales.
4.2. Measurement model analysis
The purification of the pool of items pertaining to the three
multi-indicator constructs (purchase orientations, perceived
reward value, and loyalty) relied on using item-to-total
correlations and EFA (principal axis factor analysis with
oblique rotation) in an iterative process. Values with loadings
close to or greater than 0.60 and factors with eigenvalues
greater than 1 are acceptable (Sharma, 1996). On the basis of
the EFA results, we performed three CFA with a new sample
of frequent flyer programme members, recruited from the
major international airline (N ¼ 221). We employed AMOS
5.0 for the three multi-indicator constructs and confirm the
EFA factor structures. Finally, our measure purification
results in 20 items for purchase orientations, 15 items for
perceived reward value, and five items for loyalty, as we show
in Tables III-V, respectively.
Regarding purchase orientations, we identify five factors
(explaining 81 per cent of the variance), consistent with prior
literature (Laaksonen, 1993):
1 economic, budget-optimizing;
2 routine-loyal, uncertainty-avoiding;
3 hedonist;
4 social-relational; and
5 functional, time-optimizing.
Regarding perceived rewards value, we again identify five
dimensions (economy, hedonist, functional, information,
relation; Arnold and Reynolds, 2003). The extracted
variance is 73 per cent.
Finally, for the loyalty scale, we uncover two factors,
purchase intensity (PI) and resistance against counter-
persuasion (RCP). The extracted variance is 71 per cent.
To assess the overall fit of the model, we investigated several
fit indices, as recommended (Fornell and Larcker, 1981). The
goodness-of-fit indexes (GFI) are greater than 0.9 for the multi-
indicator constructs (1– ½x2 for the default model/x2 for the null
model]); the GFI measures adjusted for degrees of freedom
(AGFI), which uses mean squares instead of total sums of
squares in the numerator and a denominator of (1 – GFI), are
greater than 0.8. Furthermore, the root mean square error of
approximation (RMSEA), or the mean of the squared residuals
comparing the observed and predicted covariance matrices, is
less than 0.05. Finally, the model x2 (CMIN) is not significant,
whereas a significant x2 would indicate a lack of satisfactory
model fit. These indicators provide evidence of good model fit
for the three multi-indicator constructs.
To assess the adequacy of the measures, we also evaluate the
reliability of the individual items and the discriminant validity
of all constructs (Fornell and Larcker, 1981). Our measure of
item reliability uses Cronbach’s alpha; the values are all greater
than 0.7 for the purified scales, and all loadings approach or
exceed 0.7 with regard to the latent variable, which indicates
that more than 50 per cent of the variance in the observed
variable can be explained by the corresponding construct.
Thus, we have evidence of good reliability and internal
consistency. Each item loaded significantly on its intended
latent variable, which suggests all items are adequate. We
confirm the convergent validity of all scales and sectors.
To assess the discriminant validity of the constructs, we first
examine the cross-loadings and find that the latent variables
share more variance with their respective items than with
other latent variables. All values representing the square root
of the average variance extracted (AVE) from each construct
also are substantially greater than all other correlations of the
factor with other constructs. The AVE for all constructs is
greater than the generally accepted value of 0.50. Thus, we
confirm discriminant validity for all constructs and
unidimensionality for all purified measurement scales (see
Table VI-VIII).

Table II Typology of rewards offered by frequent flyer scheme to members

Hedonist
Games, sweepstakes,
exchange points against
airline tickets, hotels,
spa, entry Disneyland
Social-relational
Personalization and
privileges on board, mailing
birthday and special events
Economic
Tickets (ratio value reward/
spent amount: 4.5 per cent)
Functional
Priority check-in, security
controls, business class
upgrades, access lounges,
tickets available at the last
moment
Informational
Newsletter, personalized
mailings according to most
taken flight destinations

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Table III CFA: purchase orientations (loadings)

Budget- Uncertainty- Social- Functional, time-
“When purchasing airline tickets or when traveling . . .” optimizing avoiding Hedonist relational optimizing
I often purchase flights on promotion 0.802
I do not pay attention to airline reputation 0.626
I try to minimize amounts 0.763
I always research good deals 0.790
I have my preferred airline 0.672
I always use my frequent flyer card 0.568
I always choose the same airline 0.566
On-board quality is important 0.563
Purchase coupons give me pleasure 0.881
I like to try new destinations 0.847
It is a pleasure to discover new destinations 0.771
I look at magazines to get informed 0.706
I appreciate the contact with sales board/staff 0.799
I appreciate to be close to the airline and have a good relationship 0.798
I appreciate to be recognized as a privileged passenger 0.795
I appreciate the airline is paying more attention to me than others 0.762
It is a chore 0.866
I book in an impulsive way 0.621
I know in advance what book 0.545
I look to ads before booking 0.434
Variance extracted by the factor (%) 22 20 18 11 10
Cronbach’s alpha 0.88 0.85 0.75 0.71 0.83
Fit indices x2 /sig RMSEA GFI AGFI CFI
3.88/0.00 0.049 0.99 0.95 0.96

4.3. Data collection
For the final survey, we gathered a sample of the airline’s
frequent flyer members (N ¼ 659). Respondents were
randomly invited (in 2007) to complete the questionnaire
while waiting for boarding, surveyed Monday-Saturday to
achieve greater representativeness. After agreeing to
participate, respondents indicated their purchase
orientations on the 20-item scale, then their perceived
reward value from the airline’s frequent flyer programme on
the 15-item scale. Finally, they revealed the impact of the
airline’s frequent flyer programme perceived reward value on
their loyalty, according to the five-item scale.
As the final sample characteristics in Table IX show, Table
IXmore passengers were men (70 per cent). More than half of
the sample was between the ages of 35 and 59 years. The most
represented profession is the one of the executives (41 per cent)
followed by the employees (40 per cent). Most passengers fly
one to six times per year (50 per cent). A total of 32 per cent
are very heavy travellers and fly at least once per month. More
than 95 per cent had been programme members for more than
two years, which implies they should be highly familiar with the
functioning and rewards of the related loyalty schemes.
5. Results
To explore the relationship between individual purchase
orientations and programs’ rewards perceived value on
purchase intensity (PI) as well as resistance to counter-
persuasion (RCP), we develop a general linear model (GLM)
which estimates the differences among parameters for the
different purchase orientation clusters. In this case, PI and
RCP are the dependant variables that we explain by purchase
orientations segments, perceived rewards values, and their
interactions. The conditions of normality are respected as the
Kolmogorov-Smirnov tests are not significant (p . 0:05).
There is no autocorrelation of the residuals as the values of
the Durbin-Watson tests and the VIF (variance inflation
factor) are lower than two.
We first estimate a base model (without any interaction
effects), and then extend it by introducing an interaction
effect between the five purchase orientations and the five
factors of the rewards’ perceived values. The R2 is better for
the extended model (R2 ¼ 0:76) than for the base model,
without interactions (R2 ¼ 0:54). In the base model the single
undifferentiated effects of perceived reward values and
purchase orientations on both PI and RCP are not
significant (p . 0:1). The impact of the interaction effect
“perceived reward values x purchase orientations” on both PI
and RCP is highly significant (p , 0:01).
After selecting the extended model that best fits the data,
we interpret the parameter estimates for the interaction terms.
The perceived reward values and their impact on PI and RCP
vary according to purchase orientations (economic, relational,
functional, hedonist, uncertainty-avoiding) (see Table X).
Budget-optimizing passengers are mostly motivated –
intrinsically – by economic rewards in terms of both PI and
RCP (b ¼ 0:64, b ¼ 0:62; p , 0:01). The primary purchasing
target being economic, frequent flyer programmes based on
promotions create greater perceived benefits for these
passengers, because these rewards increase the level of
budget gratification. Informational rewards that give input
about sales promotions also increase their PI and RCP and

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Table IV CFA: perceived reward value from the frequent flyer programme
The loyalty program of airline X . . .
Hedonism gives me pleasure me as I participate in sweepstakes 0.974
gives me pleasure when I exchange points (miles) 0.963
creates pleasant distractions and surprises 0.929
Variance extracted by the factor (%) 19
Cronbach’s alpha 0.96
Relation makes the airline paying more attention to me than others 0.889
makes me adhere to a group of privileged customers 0.771
makes the airline treating me as a privileged customer 0.768
Variance extracted by the factor (%) 16
Cronbach’s alpha 0.88
Economy is the best mean to reduce the purchase amount 0.844
gives monetary advantages 0.702
allows to make substantial economies 0.605
Variance extracted by the factor (%) 13
Cronbach’s alpha 0.82
Functional allows to find more easily usual bought destinations 0.871
grants additional services 0.784
Makes reservations easier and more practical 0.611
Variance extracted by the factor (%) 12
Cronbach’s alpha 0.85
Information makes me choose new destinations 0.785
makes me discover good bargains’ new ideas 0.660
allows me to be well informed about news 0.615
Variance extracted by the factor (%) 11
Cronbach’s alpha 0.77
x2/sig 2.39/0.1
RMSEA , 0.05 0.04
GFI $ 0.90 0.98
AGFI $ 0.90 0.97
CFI $ 0.90 0.95

Table V CFA: loyalty

Thanks to the loyalty program of airline X . . . ..
Purchase intensity (PI) I increase me flight frequency with this airline 0.93
I choose a larger variety of destinations in this airline 0.71
Variance extracted by the factor (%) 40
Cronbach’s alpha 0.84
Resistance to counter persuasion (RCP) I return to the same airline 0.90
I book less often in competitors’ airlines 0.84
I recommend this airline to my family and friends 0.71
Variance extracted by the factor (%) 35
Cronbach’s alpha 0.74
x2/sig 3.87/0.02
RMSEA , 0.05 0.04
GFI/AGFI/$ 0.90 0.94/0.93

are significant (b ¼ 0:32, b ¼ 0:39; p , 0:05). We thus
confirm H1b and H1e. However, relational, hedonist, and
functional rewards are extrinsic (p . 0:1), as expected and in
support of H1a, H1c, and H1d, respectively. Relational,
hedonist, and functional rewards might be perceived as
disturbing from the primary purchase target.
For social-relational passengers, relational rewards
influence PI and RCP strongly, as expected in H2a
(b ¼ 0:54, b ¼ 0:66; p , 0:01). Their intrinsic motivations
are to establish an interpersonal relationship with a specific
airline and its staff, as well as to be recognised as privileged
customers or in a special social group (e.g. status). This

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Lars Meyer-Waarden Volume 27 · Number 3 · 2013 · 183 –194

Table VI Discriminant and convergent validity: purchase orientations

Budget-optimizing Uncertainty-avoiding Hedonist Social-relational Functional, time-optimizing
Budget-optimizing 0.93
0.86
Uncertainty avoiding .04 * 0.89
0.002 0.79
Hedonist 0.31 * 0.1 * 0.81
0.096 0.010 0.65
Social-relational 0.05 * 0.04 * 0.39 * 0.80
0.0025 0.00016 0.015 0.64
Functional, time-optimizing. 0.15 * 0.92
0.03 0.86
Notes: * p ¼ 0:01; Diagonal elements are the square roots of the AVE of the concerned constructs or factor

Table VII Discriminant and convergent validity: perceived reward value loyalty program
Hedonism Relation Economy Functionality Information
Hedonism 0.65
0.42
Relation 0.59 * 0.64
0.35 0.42
Economy 0.1 * 0.2 * 0.61
0.01 0.04 0.37
Functionality 0.13 * 0.2 * 0.16 * 0.71
0.02 0.04 0.03 0.50
Information 0.09 * 0.11 * 0.15 * 0.13 * 0.84
0.01 0.01 0.02 0.02 0.08
Notes: *p ¼ 0:01; Diagonal elements are the square roots of the AVE of the concerned constructs or factors

Table VIII Discriminant and convergent validity: loyalty is to establish social relationships. Economic and hedonist
benefits also might be perceived as disturbing from this target.
Resistance to For functional, time-optimizing passengers the intrinsic
Purchase counter- motivation is to make booking effective, quick and to reduce
intensity persuasion the time and effort associated. Functional rewards that make
(PI) (RCP) booking easier, increase their PI and RCP (b ¼ 0:97, b ¼ 0:89;
Purchase intensity 0.74 p , 0:01), in support of H3d. Customers in this segment
0.54 dislike consumption and hope to book in an efficient, timely
manner to achieve their goals with minimal irritation. They
Resistance to counter-persuasion 0.68 * 0.68 often are heavy and frequent business flyers (e.g. platinum card
0.02 0.03 members) who have become accustomed to benefiting from a
Notes: * p ¼ 0:01; Diagonal elements are the square roots of the AVE of large variety of functional rewards that makes their frequent
the concerned constructs or factors travelling easier (e.g. access to luxury lounges, priority check-
in). Economic, hedonist, relational and informational benefits
are extrinsic and have no impact (p . 0:5). The tickets for
means that so relational benefits have a significant impact these business passengers are not paid by themselves but by
because they increase the level of social-relational their company which makes them insensitive to economical
rewards. They travel for business and not for leisure and
gratification. On the other hand, extrinsic economic,
therefore do not search hedonic and relational rewards. We
hedonist, functional, and informational rewards have no
thus find support for H3a-H3c and H3e.
impact though (p . 0:1), as expected and in support of H2b- Uncertainty-avoiding routine-loyal passengers hope to
H2e. These passengers might dislike functional and minimize uncertainty about their favourite airline, to gain
informational devices as they shorten the booking procedure reassurance about their choice and to minimize the risks, so
which is incompatible with their primary purchase target, that their intrinsic motivation is to gather information about their

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Lars Meyer-Waarden Volume 27 · Number 3 · 2013 · 183 –194

Table IX Adjustment base and extended model (tests of between-subject effects)

Base model without Extended model with
interactions interactions
Intensity RCP Intensity RCP
F/Sig F/Sig
Perceived reward value 2.1 ns 1.2 ns – –
Purch. orientation 1.8 ns 1.1 ns – –
Perceived reward value x Purch. orientation – – 88.45 * 90.89 *
R2 0.54 0.76
Notes: * p , 0:01 , ns: not significant

Table X Interaction perceived reward value x purchase orientations and impact on loyalty (regression coefficients)
Orientation Budget-Optimizing Social-Relational Functional Uncertainty-Avoiding Hedonist
Reward Intensity RCP Intensity RCP Intensity RCP Intensity RCP Intensity RCP
Relational 0.02ns 0.02ns 0.54 * * 0.66 * * 20.18ns 20.17ns 0.31 * 0.32 * 0.33 * 0.36 *
Economical 0.64 * * 0.62 * * 0.13ns 0.18ns 0.025ns 0.026ns 0.17ns 0.31ns 0.10ns 0.19ns
Hedonist 0.14ns 0.19ns 0.14ns 0.16ns 20/024ns 20.023ns 0.46ns 0.56ns 0.58 * * 0.59 * *
Functional 0.17ns 0.15ns 0.23ns 0.24ns 0.97 * * 0.89 * * 2 0.03ns 20.01ns 2 0.41ns 20.32ns
Informational 0.32 * 0.39 * .15ns 0.17ns 0.091ns 0.021ns 0.59 * * 0.56 * * 0.32 * 0.37 *
Notes: * p , 0:05; * * p , 0:01; ns: not significant

preferred company. Informational rewards therefore have a
strong influence on their behaviour (b ¼ 0:59, b ¼ 0:56;
p , 0:01) increasing the level of routine gratification, in
support of H4e. This orientation implies a significant impact of
habit and inertia. In conflict with H4a though, relational
rewards also have a positive impact (b ¼ 0:31, b ¼ 0:32
p , 0:01), perhaps because among these buyers, a stronger
relationship with the company leads to a higher degree of trust
and commitment, which may be perceived as means to reduce
risk (Morgan and Hunt, 1994). Finally, in support of the
remaining hypotheses, economic, hedonist, and functional
benefits are not significant (p . 0:1); that is, they are extrinsic.
For hedonist passengers, who are intrinsically motivated by
pleasure, the hedonist (b ¼ 0:58, b ¼ 0:59; p , 0:01) and
relational (b ¼ 0:33, b ¼ 0:32; p , 0:05) rewards have strong
influences on PI and RCP. They aim at finding pleasure
through the potential entertainment value and enjoyment of
the fun and play arising from the consumption experience,
rather than the achievement of any prespecified goal. These
results clearly support H5a and H5c. Informational benefits
(b ¼ 0:32, b ¼ 0:37; p , 0:05) contrary to our expectations,
have a positive influence as well, perhaps because they offer a
means to gain information about hedonist devices or events.
Regardless of the explanation, we must reject H5e. Functional
and economic rewards are insignificant (p . 0:1), as opposed
to hedonic purchasing targets, and extrinsic, in support of
H5b and H5d.
A final important question is related to whether the sought
rewards vary according to the different types of passengers
(heavy/medium/light). From to the airline point-of-view,
heavy passengers or platinum card members fly at least two
times or more per month (18 per cent of our sample).
Medium or silver passengers fly at least once a month or more
(32 per cent of our sample). Finally, light or ivory passengers
fly one to six times a year (50 per cent of our sample). A Chi2
test confirms that heavy and medium flyers belong principally
to the functional, social-relational as well as uncertainty-
avoiding routine-loyal segments searching for functional and
relational rewards. They are mainly business travellers. Light
passengers principally belong to the budget-optimizing and
hedonist segments as they are mostly leisure travellers (see
Table XI).
6. Discussion, academic and managerial
implications
To improve knowledge about the effectiveness of frequent
flyer programmes, we have investigated how purchase
orientations moderate perceived value from rewards,
motivation, and loyalty. Accordingly, we note the following:
Customers’ different intrinsic or extrinsic purchasing
motivations or orientations determine the perceived value
from the frequent flyer programme’s rewards and reinforce
unique motivations and behaviours (Deci, 1971). Customers
reportedly develop different, coherent purchase behaviours
(including frequent flyer programme usage), because they are
not intrinsically motivated by the same targets. Intrinsic
rewards motivate them to act to obtain a benefit that falls
within the target of their purchase orientation and thus creates
interest or pleasure in the task. They also correspond
positively to intrinsic reinforcements and have a positive,
long-term impact on purchase behaviour and loyalty. In
contrast, extrinsic rewards motivate customers to act to obtain
a benefit that is separate from the target of their purchase
orientation and do not influence their loyalty (Deci et al.,
1999).
Our results might challenge the widespread behaviourist
belief about conditioned behaviour (Skinner, 1976), applied
in the development of most loyalty programs that rely on
money and sales promotions to motivate people. Extrinsic

191
 The impact of reward personalisation
Lars Meyer-Waarden
Table XI Chi 2 test type of passenger and segment membership
Budget-Optimizing (%) Social-Relational (%)
Heavy flyer ($ 2 times/month) 0 25
Medium flyer (once/month) 2 18
Light flyer (1-6 times/year) 69 2 1
Note: Chi2 ¼ 1556:66, Sig : 0:000
rewards that “buy” customers’ intrinsic motivations to
repurchase might probably encourage them to focus
narrowly on the reward and attempt to obtain it as quickly
as possible. Therefore, it eventually might erode intrinsic
interests and undermine feelings of control, which can
interfere with consumers’ motivations (Deci and Ryan, 1985).
From an academic point-of-view, this study contributes to
existing knowledge about psychological aspects of relationship
marketing. We provide a simple multi-benefit framework that
identifies the different rewards values customers may perceive
when participating in frequent flyer programmes. In addition
to monetary aspects, members experience a range of
nonmonetary benefits, related to exploring the firm’s
products, entertainment, or relational aspects. The ability to
measure these perceived rewards’ values offers researchers
and managers a better capacity to study the behavioural
impacts of loyalty programs.
The intrinsic nature of rewards appears contingent on
individual purchase motivations. For one customer, a reward
can be intrinsically motivating, depending on the purchasing
situation. Yet the same reward could be extrinsically
motivating for another customer or in another situation.
In turn, our findings have implications for frequent flyer
programme managers. In particular, they should promote
diverse rewards, segment their customer portfolios, and
achieve differentiation through nonmonetary benefits. The
perceived value associated with frequent flyer programmes are
diverse and relate to multiple consumer motivations and
purchase orientations. The absence of segmentation in
existing loyalty schemes therefore causes inefficiency,
because strong customer heterogeneity can result in
programme failure. The principal role of frequent flyer
programmes should be to identify and segment customers as a
means to improve resource allocations. For example,
managers might segment the target market according to
consumers’ purchase orientations and associated reward
preferences. A more thorough analysis of frequent flyer
schemes’ effects and detriments at the individual level thus is
necessary, because passenger characteristics influence the
strength and direction of the impacts on loyalty. With such
information, airlines can adopt tailored strategies, using both
monetary and nonmonetary incentives and integrating
functional and hedonistic features into frequent flyer
programmes to appeal to different segments and enhance
their use.
Differentiation through intangible, nonmonetary benefits
also is possible in markets marked by strong competition and
imitation. The differences among airlines’ offers are few,
programmes are easily exchangeable, and switching costs are
minimal (Meyer-Waarden, 2007). Therefore, airlines, that
invest in rewards such as personalised services or functional
value-added information can attain a difficult-to-imitate
advantage.
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Volume 27 · Number 3 · 2013 · 183 –194
Functional (%) Uncertainty-Avoiding (%) Hedonist (%)
50 20 5
47 21 12
4 24
7. Limitations and future research directions
Our research suffers several limitations that further research
should consider. First, the external validity is limited as our
results come only from one investigation in one sector
(airline). The transferability of the results to other sectors
(e.g. FMCG) might be difficult and one should be beware of
overestimating the findings. Although previous experimental
investigations indicate that loyalty scheme effectiveness
depends on the programme’s design (Kivetz and Simonson,
2002; Kivetz, 2005; Yi and Jeon, 2003), few supporting field
data are available. More research and replications are
therefore necessary to determine the psychological aspects
of frequent flyer programmes and individualized reward
systems. Another critical concern involves the applicability of
self-determination theory (Deci, 1971) in marketing. The
SDT emerged from research in domains such as school
education for children or motivation of athletes; does it also
hold in consumption contexts such as airlines? More
experimental approaches and replications in the same and
other sectors with less or more involvement that analyse how
rewards influence purchase behaviour are recommended,
because different theoretical points-of-view could help clarify
this question.
Second, we find that for some purchase orientations,
certain rewards are intrinsic and affect behaviour, in contrast
with our a priori expectations. Exact hypotheses about the
intrinsic or extrinsic nature of a reward for any given customer
are difficult to formulate; it remains challenging to define the
degree of the relationship among an intrinsic purchase
orientation, perceived value, and rewards. Because purchase
orientations are multidimensional, segment overlaps likely
exist (e.g. hedonist-relational).
Third, our results confirm just how difficult it is to classify
rewards exactly and uniquely to one category, because they
can satisfy several purchase targets at the same time. Our
research shows that intrinsic or an extrinsic motivation
depend on the individual but it is probable that is also varies
within an individual, depending circumstances (Smith and
Sparks, 2009b). Additional research should try to categorise
purchase orientations and rewards more precisely and to test
motivation according to circumstances.
Fourth, our analysis does not include the dynamics of
accumulating miles. For example, at the beginning when
enrolling in a frequent flyer scheme, immediate monetary
rewards (e.g. price reductions) might be preferred. The more
a passenger accumulates miles, the more (s)he might prefer
hedonic, functional or relational devices. The customer life
cycle and status (ivory, gold, platinum) may also influence the
rewards’ preferences. Therefore a longitudinal study could
offer more insights about these dynamics.
 The impact of reward personalisation
Lars Meyer-Waarden
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About the author
Lars Meyer-Waarden is a Professor at the EM Strasbourg
Business School. His main research interests are customer
relationship management and retailing management. He is the
author of a book about the efficiency of loyalty programs, and
has published lots of articles about these issues in
international journals such as the New York Wall Street
Journal, Journal of Retailing, Journal of the Academy of
 The impact of reward personalisation
Lars Meyer-Waarden
Marketing Science, Journal of Marketing Management, European
Journal of Marketing and Recherches et Applications en
Marketing. Lars Meyer-Waarden can be contacted at:
meyerwaarden@em-strasbourg.eu
Executive summary and implications for
managers and executives
This summary has been provided to allow managers and executives
a rapid appreciation of the content of this article. Those with a
particular interest in the topic covered may then read the article in
toto to take advantage of the more comprehensive description of the
research undertaken and its results to get the full benefits of the
material present.
Rewards for frequent users of an airline are possibly one of the
best-known customer loyalty schemes. Who – even among
those who seldom fly – has not heard of “air miles”? But what
do customers want for their “air miles”? Free or discounted
future flights, complementary hotel reservations, priority check-
ins, access to VIP lounges, business-class upgrades, last-minute
tickets – or maybe free entry to Disneyland or a hotel spa?
People are different and consequently expect or want
different things. As frequent-flyer schemes have become key
marketing activities for many companies, the benefits seen
through the eyes of customers need to be better understood.
In fact, in “The impact of reward personalisation on
frequent flyer programmes’ perceived value and loyalty” Lars
Meyer-Waarden says the principal role should be to identify
and segment customers as a means to improve resource
allocations. His study asks: “How does the interaction of
reward types (economic, social-relational, hedonic,
informational, and functional) with customer purchase
orientations induce perceived value, and affect loyalty?” It
uses the self-determination theory which indicates that the
nature of the reward itself determines whether motivation is
intrinsic or extrinsic.
Intrinsic motivation occurs when people engage in an
activity because it provides an internal reward, that is, for its
own sake. These rewards increase the internal gratification
associated with a behaviour and thus the internal reasons for
maintaining it. In contrast, extrinsic motivation results from
the offer of external rewards in exchange for the desired
behaviour. Therefore, people engage in the desired behaviour
for a reward other than their interest in the activity and feel
pressure to obtain the offered reward. Economic benefits are
the most commonly cited external reward.
Managers could consider segmenting the target market
according to consumers’ purchase orientations and associated
reward preferences. A more thorough analysis of frequent-
flyer schemes’ effects and detriments at the individual level is
therefore necessary, because passenger characteristics
influence the strength and direction of the impacts on
loyalty. With such information, airlines can adopt tailored
strategies, using both monetary and non-monetary incentives
and integrating functional and hedonistic features into
frequent-flyer programmes to appeal to different segments
and enhance their use.
Differentiation through intangible, non-monetary benefits
is also possible in markets marked by strong competition and
To purchase reprints of this article please e-mail: reprints@emeraldinsight.com
Or visit our web site for further details: www.emeraldinsight.com/reprints
194
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Journal of Services Marketing
Volume 27 · Number 3 · 2013 · 183 –194
imitation. The differences among airlines’ offers are few,
programmes are easily exchangeable, and switching costs are
minimal. Therefore, airlines that invest in rewards such as
personalised services or functional value-added information
can attain a difficult-to-imitate advantage.
So what are these customer preferences? How can they be
categorised? Coming in the “hedonist” category can be found
games, sweepstakes, exchange points against airline tickets,
hotels (and those spa and Disneyland visits). Personalisation
and privileges on board, mailing birthday and special events
are “social-relational” rewards. “Economics” include
discounted tickets, while “functional” rewards include
priority check-in, security controls, business class upgrades,
access to lounges, lat-minute tickets, while “informational”
rewards include a newsletter and personalised mailings
according to most taken flight destinations.
Customers reportedly develop different, coherent purchase
behaviours (including frequent-flyer programme usage),
because they are not intrinsically motivated by the same
targets. Intrinsic rewards motivate them to act to obtain a
benefit that falls within the target of their purchase orientation
and thus creates interest or pleasure in the task. They also
correspond positively to intrinsic reinforcements and have a
positive, long-term impact on purchase behaviour and loyalty.
In contrast, extrinsic rewards motivate customers to act to
obtain a benefit that is separate from the target of their
purchase orientation and do not influence their loyalty.
Managers should promote diverse rewards, segment their
customer portfolios, and achieve differentiation through non-
monetary benefits. The perceived value associated with
frequent-flyer programmes are diverse and relate to multiple
consumer motivations and purchase orientations. The
absence of segmentation in existing loyalty schemes is
inefficient because strong customer heterogeneity can result
in programme failure. The principal role of frequent-flyer
programmes should be to identify and segment customers as a
means to improve resource allocations.
These results might challenge the widespread behaviourist
belief about conditioned behaviour applied in the
development of most loyalty programmes that rely on
money and sales promotions to motivate people. Extrinsic
rewards that “buy” customers’ intrinsic motivations to
repurchase might probably encourage them to focus
narrowly on the reward and attempt to obtain it as quickly
as possible. Therefore, it might eventually erode intrinsic
interests and undermine feelings of control, which can
interfere with consumers’ motivations.
This analysis does not include the dynamics of
accumulating miles. For example, at the beginning when
enrolling in a frequent-flyer scheme, immediate monetary
rewards (e.g. price reductions) might be preferred. The more
a passenger accumulates miles, the more he or she might
prefer hedonic, functional or relational devices. The customer
life cycle and status (ivory, gold, platinum) may also influence
the rewards’ preferences.
(A précis of the article “The impact of reward personalisation on
frequent flyer programmes’ perceived value and loyalty”. Supplied
by Marketing Consultants for Emerald.)