THEORETICAL FRAMEWORK

This study is anchored on the equity theory of David M. Messick & Karen S. Cook, 1983. This theory

emphasizes the various parts of society that work together to achieve sustainability, stability, and

functionality. Messick & Cook, 1983 defined that people develop and maintain relationship in which

rewards are distributed in proportion to costs. When share of rewards is less than what is demanded by

equity people are likely to experience dissatisfaction and exit relationship. These relationship theories

indicate the benefits of creating relationships with customers which leads to building of customer

loyalty.

The purpose of building relationships with customers is to retain customers in the existing company.

And by retaining them the loyalty is created and loyalty intern, results in superior long-term financial

performance. Loyalty is the biased behavioral response expressed over time by customers with respect

to one provider out of many providers accompanied by a favorable attitude. Any insurer should be

understandable essence of relationship in order to build customer loyalty. Relationship will dissolve if

mutual benefits can’t secure. Such theories can be used for better understanding how customers may

initiate in the creation of customer loyalty through relationship.

Despite such a significant effort, the marketing literature has overlooked the role of equity (Szmigin and

Bourne, 1998; Tax, Brown and Chandrashekaran, 1998 cited in Maria et al 2010) in developing customer

loyalty. Social exchange theory and social psychology studies (Homans, 1961; Blau, 1964; Austin, McGinn

and Susmilch, 1980 cited in Maria et al 2010) haveshown that equity perception derives from the

proportionality between the “outputs "(benefits)/inputs (costs)” ratios experienced by a part (e.g., the

customer) and a counterpart (e.g., the firm). Moreover, according to social identity theory, people tend

to classify themselves into different social categories. That leads to evaluation of objectives and values in
various groups and organizations in comparison with the customer’s own values and objectives. They

prefer partners who share similar objectives and values, (Ashforth et al. 2001).

Sussmann and Vechio (1982) offered Identity-related dispositions as an antecedent of behavioral

intentions which relate in turn to overt behavior. Such dispositions include social attachment to the

organization, such attachment being akin to organizational commitment. Insurers can draw lessons from

social identity theory to inspire customers in the realm of creating and maintaining relationships,

because relationships is seen as mediated by such and other factors.

Customer loyalty is the customer attitude and behavior to prefer one brand over all competitor ones,

whether? due to satisfaction with the product or services. It encourages consumers to shop more

consistently. (Peiguss, 2012) Customer loyalty is defined as the willingness of any given customer to

purchase the company’s goods or services over competitive ones available in the marketplace. (Singh,

Khan, 2012). Due to the fact that loyalty is the result of developing past positive experiences with the

customers and having them return to the company various times due to these experiences, customers

will return again and again to do business with the company; regardless of whether it may not have the

best product, price or service delivery (Ghavami & Olyaei, 2006) Zikmund, (2002) demonstrate that

loyalty is more than a repetition of behavior. Customers can demonstrate loyalty to price, brand,

company, and other customers. However, Customer satisfactions important to any company and it

affect clients repeatedly coming back to the company due to its service. This expects that the crucial

factors affected customer loyalty are customer satisfaction, emotional bonding, trust, choice reduction/

habit, and company history.(Ghavami & Olyaei, 2006).Therefore, customer satisfaction with a

company’s products or services could be considered the key to a company’s success and long-

term competitiveness. Customer satisfaction is viewed as a central determinant of customer retention.

(Peiguss, 2012) Singh, & Khan, 2012) pointed out that satisfaction is not enough because less than half of
the company satisfied customers will come back. The company needs to transfer satisfied customer to

loyal customer. It's so important because it costs so much to influence customers to buy and so little to

induce a repurchase. Customer loyalty is a result of a positive emotional experience, physical attribute-

based satisfaction and perceived value of an experience, which includes the product or

services.(http://beyondphilosophy.com/customer-experience/customer-loyalty) .

Here is the exhibit of the various procedures carried out by the researcher in order to gather the

relevant data needed to answer the research questions and to prove the effectiveness of using loyalty

cards to encourage sales and boost customer’s loyalty of card users.

STATEMENT OF THE PROBLEM

This study aims to determine the effectiveness of using loyalty cards to encourage sales and boost

customer’s loyalty of loyalty card users.

Specifically, this study sought to answer the following questions:

1. What is the profile of the respondents in terms of the following:

1.1. Age

1.2. Civil Status

1.3. Gender

1.4. Income

2. What is the level of effectiveness of using loyalty cards in encouraging sales and boosting customer’s

loyalty of respondents?

2.1 Loyalty of Customer

2.2 Increase Sales

2.3 Save Money

2.4 New Customer

3. Is there a significant difference in the assessment of the effectiveness of using loyalty cards in

encouraging sales and boosting customer’s loyalty of respondents when profile is considered?

4. What are the problems encountered by the respondents using loyalty cards?

5. What are the problems encountered by the companies using loyalty cards to encourage sales and

boost customer’s loyalty.

6. What are the programs being implemented by the companies to encourage sales and boost

customer’s loyalty using loyalty cards?"