Journal of Retailing 83 (2, 2007) 223–236

The effects of loyalty programs on customer lifetime duration and share of wallet
Lars Meyer-Waarden ∗
University Toulouse III Paul Sabatier (France), Department of Management and Cognition Sciences (LGC, EA 2043), France Received 4 April 2005; accepted 18 April 2006

Abstract In the retailing sector, consumers typically patronize multiple outlets, which confronts these outlets with an important issue: determining how to gain a greater part of consumer expenditures. One potential avenue is to increase consumer lifetime duration and repeat purchases through loyalty cards. This research, using BehaviorScan single-source panel data, examines the impact of loyalty programs on customer lifetime duration in grocery stores. The findings suggest that loyalty schemes have positive effects on customer lifetimes and share of consumer expenditures. However, multiple loyalty card memberships of geographically close retailers reduce lifetime duration. Furthermore, the higher the share of consumer expenditures in a store, the longer the lifetime duration will be. © 2007 New York University. Published by Elsevier Inc. All rights reserved.
Keywords: CRM; Loyalty programs; Loyalty; Customer lifetime duration; Survival analysis

Introduction Many retailers currently regard loyalty programs as fundamental. For example, the grocery retailer E. Leclerc in France devotes approximately D 18 million of its annual marketing expenditures to managing its program. Other retailers, such as Safeway, have decided to give up their loyalty schemes to save $75 million. Considering these figures, the Marketing Science Institute (2004–2006) raised the standing of customer relationship management (CRM) and its associated issues (e.g., the efficiency of loyalty programs and other CRM tools) to its capital research priority for 2004–2006. Moreover, the Journal of Retailing devoted a special issue to customer loyalty to stimulate research on topics currently prominent in the minds of retailers, such as loyalty programs, drivers of store loyalty, and so forth (Grewal et al. 2004). Despite this strong interest, scarce empirical academic work investigates the potential impacts of loyalty programs
∗ Correspondence address: 98, rue Vestrepain, F-31100 Toulouse, France. Tel.: +33 6 80 37 42 08. E-mail address: URL:

on real buyers’ behaviors, and the research that does exist provides mixed evidence (Nako 1997; Sharp and Sharp 1997; Bolton et al. 2000; Benavent et al. 2000; Leenheer et al. 2003; M¨ gi 2003; Yi and Jeon 2003; Lewis 2004; Taylor and Neslin a 2005; Kivetz et al. 2006). The ambiguity in the results of these studies likely reflects limitations in the data and methodology that hinder the proper assessment of the effects of loyalty programs. To a large degree, the effects of loyalty programs are difficult to measure because they act as dynamic incentive schemes. Existing investigations employ either aggregated panel data (Sharp and Sharp 1997; Nako 1997), which fail to take into account customer heterogeneity, or internal store data, which can make only limited use of competitive information about purchasing behavior because clients frequently buy from different companies (Reinartz 1999; Benavent et al. 2000; Bolton et al. 2000; Lewis 2004). An alternative source has been declarative survey data, whose reliability problems are well documented (M¨ gi 2003; Yi and Jeon a 2003). Finally, another contributing factor to this ambiguity might be context-dependent effects that cause differences in program success. For example, unlike most investigations, Bolton et al. (2000) conduct their research in the banking sector where exit barriers are relatively high.

0022-4359/$ – see front matter © 2007 New York University. Published by Elsevier Inc. All rights reserved. doi:10.1016/j.jretai.2007.01.002

Berger and Nasr 1998. Loyalty programs can create different types of switching barriers. and loyalty becomes an emotional choice factor and could lead to high and irreversible switching costs. limited and contradictory empirical evidence challenges the efficacy of loyalty programs. 2004). and consequently the share devoted to the focal store.g.” The points pressure mechanism is the short-term impact. 2007) 223–236 To rectify some of these methodological issues. up-selling) and use retention strategies to enhance the total lifetime of the customer base. cross-selling. and psychological. and Taylor and Neslin (2005) find that reward programs increase sales through two mechanisms: “points pressure” and “rewarded behavior. we describe our data and present the results. and lifetime duration Loyalty programs. sociological. Some researchers express doubts about their benefits and suggest that in a competitive market. whereby customers increase their purchase rate to earn rewards. an interactive. M¨ gi 1999). which represent tools for developing relationships and SOW.2 In this scenario.3 Lewis (2004) indicates a positive impact for a specific online grocery merchant loyalty program. both studies should be interpreted with caution because exit barriers in the industries they study are relatively high. 3 However. 2003. Subsequently. Gupta et al. 2000. Theoretical background Marketing theory and practice have become more and more customer centered. good programs will be imitated. including economical. and managers have increased their emphasis on long-term client relationships because the length of a customer’s tenure is assumed to be related to long-run company revenues and profitability (Bolton et al. 2002. We first provide a theoretical background and then develop our hypotheses. which strengthens the loyalty program effects beyond those of the economic aspects. and relational barriers that enhance customers’ commitment to and trust in the organization (Morgan and Hunt 1994). 2004). Successful loyalty schemes increase customer retention. M¨ gi 2003. Companies therefore search to influence customers across their lifecycles through adequate acquisition and development strategies (e. (2006) indicate that the illusion of progress toward a reward goal induces purchase acceleration and find that a strong tendency to “accelerate toward the goal” pre2 This customer identification is especially beneficial in industries in which consumers purchase frequently and the differentiation among suppliers is low (Bhattacharya and Sen 2003). delivering customized products. Customer SOW Most grocery shoppers have a primary or focal store in which they make a large share of their purchases. We conclude with a discussion and suggestions for further research. (2000) and Kivetz et al. Nako (1997) and Bolton et al. In this context. long-term relationship that leads to greater trust. a highly inefficient situation. Customer relationship management is organized according to the customer lifecycle because lifetime duration with a firm generally is not perpetual. lifetime duration. whereby clients increase their purchase rate after they have received the reward. Sharp and Sharp 1997. in which case customers lose advantages (e. and customer SOW. as well as greater SOW (Dwyer 1989. a customer SOW corresponds to the share of category expenditures spent on purchases at a certain store. Gupta et al. which is associated with lower operational costs in subsequent transactional flows and increased cross-buying. a longer lifetime should lead to higher customer lifetime value (CLV1 ). 2000. Some contend it is difficult to change established behavioral patterns with the type of reward systems that are prevalent today (Dowling and Uncles 1997.224 L. and sociological rewards. Relationship among loyalty programs. SOW. Benavent et al. whereas the rewarded behavior mechanism is the long-term impact. offer integrated systems of marketing actions and economic. Benavent et al. Meyer-Waarden / Journal of Retailing 83 (2. Consumers may be dissatisfied and find better value elsewhere (Oliver 1999) or change their lifecycle in a way that causes them to lose the need for the product. but the extent to which other stores are used routinely. (2000) report an impact on customer purchasing and resistance to counter persuasion. points) if they change product or service suppliers. If those efforts focus effectively on the retention of valid customers. . 1 We define CLV as the net present value of all current and future transactions with a customer.. their overall objective is to modify customer repeat behavior by stimulating product or service usage and retain clients by increasing switching costs.. high-quality. which integrates both choice behavior and transaction values during a specific time period into a single measure of customer share. psychological. which means that the end result will be a return to the initial situation but with increased marketing costs. varies across consumers (East et al. Meyer-Waarden a and Benavent 2006). we use marketwide scanner panel data about competitive purchasing and store location to investigate to what extent loyalty programs and the share of wallet (SOW) that a household allocates to its focal grocery store influence lifetime duration. Consumers may appreciate rewards make them feel like preferred customers and thus will identify more strongly with the company (Oliver 1999). Meyer-Waarden 2004. commitment. because they need to know how shoppers divide their purchases across competing stores and how they can increase their share of total grocery expenditures. As we show in Table 1. Leenheer et al. For retailers.g. SOW is of great significance.

traffic. no impact on number of transactions even if temporarily dissatisfaction. discrete choice programming. USA Online grocery retailing. USA Grocery retailing. sole buyer. Meyer-Waarden / Journal of Retailing 83 (2. no impact purchase volume and value. Purchase data (N = 776. France Lifetime duration Turnover. on-board service. +300 percent frequency. Before/after card subscription comparison: No or weak short-term impact on purchasing behavior. dissatisfaction Share-of-wallet Purchase database (N = 9. sample. Impact of program’s perceived value on program and brand loyalty. purchase value. nb. Results Little to no impact on all Dirchlet indicators.Table 1 Comparison investigation Authors Sharp and Sharp (1997) Nako (1997) Sector. Stronger increase airline’s utility by loyalty program than by brand image. Bolton et al. Mixed support impact of loyalty cards on customer behavior. country Grocery retailing. Dirichlet model. USA Grocery retailing.5 years). Progress toward goal induces purchase acceleration. ANOVA. GfK scanner panel data combined with POS data (N = 5. 4 weeks). SEM. Sweden Perfumery and restaurant. promotion creates opposite effect. Effectiveness increases with value given but diminishes with higher price discounts. France Share-of-purchase and share-of-visits in the focal store Loyalty to program and brand Basket. (2000) Credit cards. revenues. Self-reported survey (N = 643. USA Coffee and music on Internet. purchase incidence rate. POS scanner data (150. OLS regression. 2007) 223–236 Reinartz (1999) Benavent et al.000 purchasing acts). Experimental design (N = 262). 1 year). USA Dependant variables Market share. margin. Tobit and logit models. Australia Airlines. Little impact on all Dirchlet indicators. switching behavior Basket. revenues. +4. interpurchase time Retention. Online purchase data. (N = 952).8 percent turnover and +3. interpurchase time. 3 years). 3/7 programs not effective. Europe Leenheer et al. revenues. −10 percent attrition. MNL. customer purchase incidence rate. Correlation program membership and length of flight route. basket. basket value.058.5 percent traffic. Experimental design. sensitiveness competitors’ offers Research design. Increase sales “points pressure” (short term impact) and “rewarded behavior” (long term impact). Impact loyalty program on basket.167. No impact on lifetime. Dirichlet model. +200 percent purchase value. 4/7 programs give too much value. (2003) Grocery retailing. number of orders. Tendency to accelerate toward goal induces greater retention. sole buyer.476.926 individuals. repeat purchase and frequency Market share. USA 225 . 2. Tobit-II model. 2 years). negative impact on margin if massive card distribution. number of orders Market share. GfK panel data (1. purchase frequency. Credit card usage and self-reported data (N = 405). repeat purchase rate. purchase incidence rate. OLS regression. Declarative panel (N = 650). L. (N = 1. Pareto/NBD model. Netherlands M¨ gi (2003) a Yi and Jeon (2003) Lewis (2004) Meyer-Waarden (2004) Grocery retailing. logistic and Tobit regression. method Self-reported panel survey (N = 745). purchase volume and value. orders Interpurchase time Taylor and Neslin (2005) Kivetz et al. frequent flyers less price sensitive. frequency. (2000) Charge card mail-order firm. (2006) Grocery retailing. 2 years). number destinations.

In this case. a longer lifetime should be associated with higher SOW.e. We therefore hypothesize H1. a longer lifetime should be associated with increased cross-buying and increased SOW at the expense of competitors (Bolton 1998. Ubiquitous loyalty schemes in retailing and their frequent connection to promotional devices even may have a negative effect on lifetime duration. because they offer added convenience and buying power to shoppers and target only low-income customers. for convenience. lifetime duration and SOW are not necessarily associated (Reinartz 1999). We thus hypothesize that H5. This suggestion corresponds with findings that show that loyalty program members need not exhibit a high degree of repurchase behavior (Benavent et al. SOW. and these variables also may affect store choice behavior. Finally.” In the first category. because shoppers could devote only a small portion of their purchases to a store but continue to use that outlet indefinitely. due to financial advantages. In this case. a Meyer-Waarden 2004). However. On average.226 L. However. we employ competitive information on individual customer purchases in competitors’ stores by using the single-source BehaviorScan panel based in Angers. that is. East and colleagues (1997. at least in some contexts. The simultaneous possession of competitors’ loyalty cards relates negatively to lifetime duration with the focal store. 1998). Thus. 2000) find an empirical relationship in a grocery context. 2000. Meyer-Waarden / Journal of Retailing 83 (2.. For example. Despite the contradictory empirical evidence and taking into account the limitations of these studies. or alternatively. depending on the situation. We also anticipate that shoppers who regularly use several stores will be members of loyalty schemes offered by all stores. lifetime duration. and identification). and customers typically buy from several competing companies simultaneously. Arnold et al. even if consumers’ outlet choices are based on different criteria depending on the nature of the trip. which may create cherry-picking behavior. H2. which differ somewhat from the loyalty cards French retailers use. Bell et al. a French .g. Jackson (1985) and Dwyer (1989) differentiate two types of markets in this sense: (1) “lost for good” and (2) “always a share. in that the share a household designates to a store depends on its attraction versus the attraction of competitors (Reichheld 1996. and SOW are interrelated. In addition. because they obtain a superior level of usefulness from different loyalty programs. most purchase processes belong to the “always a share” category (e. shoppers are unlikely to travel long distances for small basket. there should be a positive association between loyalty card possession. through which consumers hop from store to store. Customers’ geographic proximity to the focal store is related positively to lifetime duration. We hypothesize H3. does it follow that lifetime duration and SOW automatically are positively correlated? We treat this problem and its methodology more in detail in the methodology section. Store location and lifetime duration The location of a store and the distance the consumer must travel to shop at it represent basic criteria in store choice decisions and assessments of total shopping costs (e. The SOW in the focal store is positively related to lifetime duration. Kahn and Schmittlein 1989.g. heavy shoppers might defect frequently. they maintain a portfolio (Ehrenberg 1988). In turn. Nevertheless. the customer enters into a contractual relationship with the company (e.. countries differ in their retail structures and cultural traditions. packaged goods). We therefore hypothesize that H4. Furthermore. and lifetime duration in the focal store. and firm reputation. we consider another theoretical problem pertaining to the likely nature of the SOW–lifetime duration relationship. in support of this claim. If loyalty scheme membership is positively correlated with SOW (H1) and lifetime duration (H2). Relationship between SOW and lifetime duration Although it seems intuitive that a longer lifetime duration will be associated with a greater degree of cross-buying and higher SOW. specifically. retailing. Reinartz (1999) finds no link between loyalty program memberships and lifetime duration. insurance) and has high switching costs. customers likely have longer lifetime durations with closer stores. fill-in trips. Gupta et al. telephone services. it seems intuitive that members of the loyalty programs of their focal stores concentrate a larger share of expenditures in that outlet and are less inclined to visit competitors because the loyalty cards should provide a higher level of usefulness (i. product availability.. However. added convenience. a theoretical problem emerges regarding how program membership. 1983. M¨ gi 2003. multiple loyalty cardholders probably are less likely to stay loyal. 2004). 2007) 223–236 dicts greater retention. The possession of a loyalty card has a positive effect on SOW in the focal store. European and American consumers possess three retailing loyalty cards. Allenby et al. differences in sectors.. Methodology Data description For a proper assessment of loyalty programs’ effectiveness. 1999). so switching costs are low. The possession of a loyalty card has a positive effect on customer lifetime duration in the focal store. the author tests a proprietary credit card of a mail-order company. buying only promoted items on sale (Nielsen 2005).g.

S5. Members must spend a considerable amount to reach the minimum redemption threshold to exchange points for gifts or purchase vouchers (the return/rebate corresponds to . Fig. We thereby smooth any variations in stores’ recruitment and marketing strategies. Meyer-Waarden / Journal of Retailing 83 (2. S6 and S7. situated at the town peripheries and intersections of major highways. is quite isolated from all other competitors.L. are direct competitors due to their geographical proximity to bigger hypermarkets such as S1. the programs are free and provide price discounts on a varying set of items. The outlet locations in Angers (S1 = Store 1. with the exception of S4. Purchases made by panel participants are recorded on a daily basis for seven stores in the area (five hypermarkets. two supermarkets. etc. S1 and S2 belong to the same retailing chain (RC1) and issue loyalty cards that are valid in both outlets.476 consumers active over a 156-week period4 4 Panelists are chosen randomly and replaced every 4 years. Typically. they receive purchase vouchers and sweepstakes as rewards. S1–S5. and all use the loyalty cards for identification and registration. . which is directly across a bridge from it. S2 = Store 2. 2007) 223–236 227 Fig. . and S3.000–9.). Customers can also earn points if they buy certain promoted products or brands and if they pass through the checkout counter.000 m2 . The point-saving feature provides points and rewards that depend linearly on the amount shoppers spend. S2. which is on the other side of the Maine River. These retail outlets represent 95 percent of the fast-moving consumer goods sales in the area. From this panel.400 m2 ). S3 and S4 also belong to a single company (RC2) with a joint loyalty scheme. For their participation. we obtain loyalty card subscription dates for 266 customers of store S1. town with approximately 100. 1. All large and small retails outlets except S6 offer a loyalty program. we extracted a total of 397. we have information about four loyalty programs’ memberships. The features of all loyalty systems are similar.000 m2 and S7 on the outskirts with 1. S6 in the city center of 2. with surface areas of 5. Thus. which enables us to compare their activity before and after their subscription to the program. In addition.000 inhabitants. . 1 shows the store locations. which represent smaller supermarkets. (week 28/1998 to week 28/2001).000 purchase acts by 2.

the consumer has defected (coded as 1).6 percent in RC1.8) and D 9420 (SD 397. 2. 6 percent. the lifetime duration per store (LT1–LT7). and 46 percent a card of S7. If competing stores are located close to one another (S2.4 percent in S6. we take geographical location into account through seven proxy variables (Dist1–Dist7). the lifespan thus indicates the difference between the date of the first purchase and the end of the observation period. For RC2’s members. For these customers. portfolio behavior. where purchase frequen5 One of the anonymous reviewers suggested the term “portfolio behavior” to indicate that most households use several grocery stores concurrently. 6 percent have three. and 1 percent have four. 3. Our first indicator. Second. 37. and 7 outlets. During the 3-year observation period.2 percent in RC2.9 percent in S7 (median 20 percent. The mean and total basket amounts (S1–S7) over the 3 years were. which they derive from the mail-order industry. 4.6). 11 percent in S5. then switches to another. purchasing behavior is characterized by high buying frequency. D 60 (SD 9. The average SOW was 35.3). the households used. This value. the term “switching behavior” implies that a shopper first uses one product or service. If the censor time in a given store is less than four times the average interpurchase time. Meyer-Waarden / Journal of Retailing 83 (2. MAD 12). This breakdown implies portfolio behaviors in the households’ store choice decisions.5 and basket size variation (Kahn and Schmittlein 1989).1–1 percent of the purchase amount). discontinuing the use of the first. This value is biased in two ways because the panel has left. Peterson et al. theoretically. 1998). location should have less of an effect than for outlets that are farther apart (S1. we can determine whether program members change their SOW over the study period. respectively. In addition. insofar as all panelists reflect this left censorship. respectively. the panel does not necessarily contain the date of the first purchase. 5. and the duplication rate of program memberships is substantial: 27 percent of the households have two or more loyalty cards. The mean number of store visits during the 3-year period was 157 (SD 60. 40 percent. Moreover. the effect of location is expected to differ. Measures In grocery retailing. the shopper is regarded as active (coded as 0). is greater than four times the average interpurchase time for that same point of sale (IP1–IP7). Some consumers may have changed their behavior before the start of the data collection. on average. or member Web pages. S6. but unless they provide 100 percent SOW to the focal store.2 stores (standard deviation [SD] 0. Because SOW could vary significantly over the 3-year period. We therefore use different measures. Our second variable measures customer defection to determine the point at which a store may consider a customer to have defected. First. direct mailings. In the BehaviorScan test market. However. However. temporal variations during the 3 years were weak. 9. they still may shop there more. 2007) 223–236 Cardholder S1 and S2 (percent) Cardholder S1 and S2 Cardholder S3 and S4 Cardholder S5 Cardholder S7 100 13 6 15 Cardholder S3 and S4 (percent) 39 100 37 39 Cardholder S5 (percent) 6 12 100 11 Cardholder S7 (percent) 46 38 33 100 0. and 1 percent visited 2. 6 percent also hold a card of S5. cies are higher.and right-censored data. and. No significant differences between men and women were found.228 Table 2 Loyalty program membership duplication L. S5). In contrast. 4 percent. which could have taken place before the observation period. a household holds 1. which corresponds to the time between the last purchase in a given store and the end of the observation period. 12 percent. is fixed in an arbitrary way and does not necessarily fit grocery retailing. 1989 consider customers potentially active if their right-censored times are less than or equal to 12 months. 6. and 6. which means that households shop once a week on average. Thereby. 36 percent. S4. On average. shoppers might continue to buy after the observation period (right-censorship). 39 percent of the members of RC1’s program also hold a loyalty card of RC2 (see Table 2). as measured from the centroid of the store’s zip code to the centroid of the household’s zip code (Bell et al. no empirical studies exist for this topic. Approximately 66 percent of the panel households are members of at least one loyalty scheme. We compute the variable for distance as the number of kilometers between the household and the store. S3.93). Receipts show the number of points the customer has saved and the total discount earned. Only 1 percent of households limited their purchases to one store. we calculate the store SOW at two different times: year 1 (beginning of the observation period) and years 2/3 (middle to end of the observation period). The SOW by store is calculated as the average proportion of the household’s purchases in the outlet compared with its total category purchases. the duplication rate is highest for S7 (38 percent). We therefore calculate the defection indicator by store (Defect1–Defect7) as follows: If the right-censored time in a given store (Censor1–Censor7). corresponds to the difference between the date of the last and first purchase. S7).48 loyalty cards. this methodological problem should not represent a major concern. Finally. The schemes give also other rewards such as lotteries. The mean lifetime .

It also describes the time distribution of that event and estimates quantitatively the impact of various independent variables. (2) f(t). those who have stopped buying in an outlet before the end of the observation (and thus whose lifetime is known) and those who have not defected by the end of the observation period (whose lifetime is unknown). represents the likelihood that a customer will defect at moment t and is calculated as the product of the survivor function S(t) and the hazard function h(t). Two basic variables are introduced into the model: a positive random variable T that represents the lifetime (LT1–LT7) of a randomly selected customer and a binary variable for whether the defection event will occur (Defect1–Defect7). among others. We apply the proportional hazard model (Cox 1972) at the individual customer level. Markov models (Pfeifer and Carraway 2000). The hazard approach provides estimates of the residual lifetime duration of a customer. We briefly introduce the core of the analysis methodology here. for each of the seven stores (store-level). on this distribution. that is. the impact of loyalty cards. 2004). Negative estimated regression coefficients b of the covariate are assumed to increase the likelihood of survival. 2003). and Bolton (1998). 2004). the variable is coded as 1. individual models of discounted cash flows (Berger and Nasr 1998). [1 − F (t)] S(t) (4) The semiparametric estimation for hazard model parameters is based on a partial likelihood regression procedure (Cox 1972). seem promising alternatives to the regression. However. Helsen and Schmittlein (1993). Reinartz 1999). Finally. detailed discussion in literature of the actual applied calculations that approximate retention patterns (Berger et al. and the lifetime duration is the difference between the defection date and the date of the first purchase in the store. Several approaches exist. we use dummy variables for cards (Card1–Card4) for focal stores and for competing chains (0 = no membership. and SOW on survival probability. 2007) 223–236 229 was 609 days (SD 157. and as it approaches 0. (5) The estimated survival function S(t) is considered the survival probability. In the opposite case. if any. t]. in which explanatory covariates xi s are introduced for each unit. Modeling defection and lifetime duration Customer lifetime duration and CLV have been mainstay concepts in marketing for many years. Our target is to test. Meyer-Waarden / Journal of Retailing 83 (2. there is a certain probability for the defection event. The lifetime duration is thus the difference between the censor date and the date of the first purchase. whereas positive coefficients should reduce the likelihood. logit or multivariate probit models (Donkers et al. In f (t) = lim[Pr(t < T < t + dt)] = h(t) S(t). We thus test: b = 0 (no significant impact of the covariate on the survival probability) against . there is little.L. show that these standard modeling approaches can break down because of the peculiarities inherent in durations. purchase probabilities become less important. the defection rate is important: h(t) = Pr t ≤ T ≤ t + dt T>t = f (t) f (t) = . They suggest that event history models (also known as hazard models) handle duration and purchase timing events more effectively in noncontractual settings in terms of the stability and face validity of the estimates and predictive accuracy. The dependent variable is the lifetime (LT1–LT7) for one of the seven stores: S(t) = [S0 (t)]p . These rates correspond to those found by East and colleagues (2000) and may indicate that shoppers are “always a share” consumers with weak switching costs and purchase from several stores without being lost forever (Jackson 1985). recency–frequency–monetary value models (Colombo and Jiang 1999). and discriminant analyses that marketers typically use to analyze duration and interpurchase times. the observations are right censored and take a value of 0. We also consider the distance of the household from the stores (Dist1–Dist7) and the SOW1–SOW7 for each store as the focal store (measured at year 1 and years 2/3). called covariates. the probability density function. 1 = membership). (1) F(t) is the cumulative distribution function of the variable T and corresponds to the cumulative likelihood of defection in a given store by time t (between 0 and t): F (t) = Pr(T < t). logit. as well as information about those customers who are at risk. S(t). The model works with right-censored data. if they incorporate the proper censoring (prevalent in duration time data). mathematical models that have been developed. DuWors and Haines (1990). given that it has not occurred in the duration interval [0. If the event occurs within the observation period t.3). geographical distance. If h(t) is high. These models with greater flexibility. At every moment of a client’s lifetime. The semiparametric model examines the hazard that a defection will occur at a certain moment. and top–down financial models (Gupta et al. the defection rates after 1 year (3 years) were approximately 13 percent (27 percent) for cardholders and 27 percent (49 percent) for customers without a program membership. the survivor function. and the topic has been addressed methodologically by aggregate-level Pareto/NBD models (Schmittlein and Peterson 1994. despite the sophisticated. It also represents the ratio between f(t) and S(t). (3) h(t) is the hazard function and corresponds to the conditional likelihood that defection occurs at duration time t. where p = ebx . To take the prevalence of multiple card holders into account. is the cumulative survival probability and represents the likelihood that the customer will not to have left a given store by time t: S(t) = Pr(T = t) = 1 − F (t) = 1 − Pr(T < t).

pp. the original correlation is spurious. 7 We perform all analyses for the outlets at the store level.05). S1 and S2 and S3 and S4 do not have the same zip codes). −2. For a detailed description of the methodology of survival analysis. For large models. SOW1–SOW7 are the dependant variables that we explain by loyalty card memberships. where h(t) is the hazard function of an individual (instantaneous risk that the event will occur at time t. in most cases. The values are mostly significant (p < 0. The models supported by SPSS belong to the following class of univariate proportional hazards models with a single response time: h(t. it would be dangerous to consider only covariates that are fixed over time and include just one variable. even though S1 and S2/S3 and S4 belong to RC1 and RC2. update behavior at each quarter.05). and their interaction. 38–44)8 .05) for S1. are significant (p < 0. Kalbfleisch and Prentice (2002). In this case. at each point in time. which signifies that program memberships are even more positively linked to stores’ SOW when the distance is less. S3. The distance variables have the expected negative signs and. because the control variable is either a common antecedent or an intervening variable. Modeling customer shares To test whether SOW in the focal store is positively related to loyalty card possession and store distance. we find that loyalty schemes moderate the negative distance effect on SOW. 8 Partial correlation is common when there is only one control variable but is sometimes used with two or three. With regard to the interaction of the loyalty programs and store distances. and there is no direct causal link between lifetime and SOW. Thus. To test the SOW–lifetime relationship. the geographically isolated location. given it has not already occurred).230 L.. SOW values probably differ at different time points). the proportional hazard assumption of the Cox regression model may not hold because hazard ratios change across time (i. +1. and compare it with the chosen time frame using a variable T that relates to the process time and the covariate in question. we show the results of the GLM. the loyalty program influences to include the location effect (i. In Table 9. For t0 to t + 3. 2007) 223–236 b < 0 (significant impact of the covariate on the survival probability.01 or p < 0.3) between the controlled and the original correlation. We formulate a linear model (ANOVA with repeated measures) for the sample with S1’s 266 loyalty scheme members to indicate their SOW developments on the basis of observed indicators three quarters prior to loyalty program membership and four quarters after. (6) To analyze whether S1 loyalty cards affect SOW after subscription. H01 argues that variations in purchase behavior are not systematic over time and are observed for cardholders. Davis 1985. p < 0.3 for lifetime durations and SOW. Because we want to test whether cardholders stay longer. a vector of (possibly) time-dependent covariates x(t) with corresponding parameter vector b. These values are −3. but they are mostly insignificant for S5 and S7 (p > 0. we find no difference between the partial and original correlations (r12 = r12. S2. and the SOW–lifetime relationship is not automatic. and +3 quarters after card adoption. the dummy variable for card possession takes the value 0. The farther a household is from the focal store. Thus. actual process time is added to the time value at the beginning. For S5. possibly driven by loyalty scheme membership. which enables us to specify time-dependent covariates whose values are subject to change with time. and if the result lies between t − 3 and t − 1 quarters. the households’ store distance. that is. the control variable “loyalty card of the focal store” has no effect. the respective loyalty program memberships are positively linked to the focal stores’ SOW (p < 0. x(t). and Klein and Moeschberger (1997). respectively. and the lifetime duration–SOW relationship is not automatic. p < 0. We thus create a variable that gives us the time until and after S1’s6 loyalty program adoption at every moment t from the beginning to the end of the process (Anderson and Gill 1982). and S4. Thus. Therefore. researchers use path analysis or structural equation modeling when data are near or at the interval level or use log-linear modeling for lower-level data. We then measure SOW and lifetime during the seven quarters. we apply a general linear model (GLM).3). z(t)) = h0j (t) exp(x(t )b + z(t) u). are created and included in the Cox regression model. see Cox (1972). while controlling for possession of a loyalty card from the focal store simultaneously (Blalock 1961. which would mean variations are linked to systematic evolutions rather than loyalty cards. Moreover. For all stores. Meyer-Waarden / Journal of Retailing 83 (2. the loyalty card of the focal store has no effect. the variable has a value of 1.e. H0 posits that the card has no effect and variations in purchase behavior are systematic. If the partial correlation approaches 0 (r12. whether people subscribe to the loyalty program. as indicated by the change of sign.e. Results The impact of loyalty programs on SOW In Table 3. different time-dependent covariates. we analyze variations in repeated data measurements. and a vector of (possibly) time-dependent random covariates z(t) with corresponding parameter vector u. because we obtained individual information about the 266 customers’ loyalty card subscription dates only from S1. as well as to model the effects of subjects transferring from one group to another..3 = 0). and −1 and 0. T COV . but this impact is strongest when the distance is small (<1 km).1). we compute the Pearson r12 and the partial correlation r12. depending on time t. we use an extended Cox regression model. the more its SOW decreases. loyalty program membership is not systematically related to time. because we need .7 6 We do this only for S1. In contrast. Newer versions of structural equation modeling software allow variables of any type on either side of the equation.01. If there is no difference (r12 = r12.01. so we must define a segmented time-dependent covariate. +2. In this situation.

33 −0. 2007) 223–236 Table 3 Regression coefficients b GLM b (SOW1) Constant Loyalty card focal store Distance <1 km Distance focal store 1–2 km Distance focal store 2–4 km Distance focal store >4 km Loyalty card × distance <1 km Loyalty card × distance 1–2 km Loyalty card × distance 2–4 km Loyalty card × distance >4 km R2 (adj. S2.02 −0.33 −0. S7). These results clearly support H2: Loyalty cardholders display longer lifetimes.39) * ** ns ns ns ** * * * 0. SOW is stable over time. S5. From t + 1 to t + 3. However.05).02 −0.002 0. The impact seems relatively short-term. ** p < 0. t − 2.19 −0.16 −0.14 −0. though the values are not significant (p > 0.41 (0. t + 3) the card subscription. holding the RC1 loyalty card reduces the relative risk of defection in focal store S1 by 27 percent (p < 0. R2) ns: non-significant.45 (0.24 0.29 0.18 0.31) = . Over all quarters.01) reduces focal store S1’s relative risk of defection by 59 percent.20 0. The impact of loyalty programs on lifetime duration The event history analyses provide significant results. the focal store cards reduce the relative risk of defection (p < 0. A stepwise. if focal store S6 shoppers.68 0.44) ns ** ** ** * ** ** 0.48) ns ns ns ns ** * ns ns 0. For S5. so 1 − exp(b) represents the survival probability. S5.9 9 Negative b coefficients increase whereas positive coefficients reduce the likelihood of survival. Finally.29 0. and 19 percent.02 −0.27. if focal store S1 shoppers are simultaneously members of RC2’s.29 0.05.38 −0. respectively.01) and in focal store S2 by 21 percent (p < 0. the simultaneous possession of competitive loyalty cards of geographically close retailers decreases lifetime duration and makes customers more vulnerable. the covariates improve the −2log likelihood in comparison with the base model (p < 0. ** p < 0.05.02 0. 46 percent. For all other outlets (S3. filler-trip supermarket.21 −0.6 ns t−1 36 11.03 −0. respectively.10 −0. S5’s.1).2 ns SOW5 only when a store is near S5 (<2 km). and a loyalty card cannot create an attraction effect for households that are situated farther away. The relative risk of defection can be calculated as the value of the exponential of b (exp b).7 ns t+3 45 1. or the moment of card subscription. All b coefficients for the respective loyalty programs in the six analyses are negative for the six stores (S1. For example. . exp(−.44 −0.17 (0. Between t − 2 and t − 1. because S7 is a smaller.45 0. after which point the loyalty program’s impact on SOW increases by 8 percent and is highly significant from t − 1 to t0 (p < 0. Meyer-Waarden / Journal of Retailing 83 (2. more or less one-time adjustment in behavior occurs rather than a continuous increase. the values for the other loyalty programs are not significant (p > 0. In addition.03 −0.01).05). From quarter t0 to t + 3 (Table 8). S4.01 or p < 0. Tables 7 and 8 show the regression coefficients b of the extended Cox regression model with segmented time-dependent covariates three quarters before and four quarters after card subscription. We thus find support for H1.10 −0.43 −0. Globally. its close geographical location plays a major role.16) Sig b (SOW2) Sig b (SOW3) ** ** * ** ** ** ** * * ** 231 Sig b (SOW4) ** ** * Sig b (SOW5) ** ** Sig b (SOW7) ns ** Sig ns ** 0. and appears to protect S1 from losing customer share.01.05).29 −0.28 0. Conversely.50 0.41 0.05).14 −0. We thus find support for H3.19 0.01.05 −0. or filler-trip S7’s competing loyalty programs. conversely.12 −0.16 −0.17 0.05). the risk of defection is not affected (p > 0. if shoppers are simultaneously members of RC2’s program.31 0. S7).10 −0.15 −0. S4.07 −0. 32 t−2 41 5.09 0. according to the ANOVA with repeated measures.73 decreases the relative risk of defection by (1 − . the risk rises by 6 percent.36 (0.49 (0.06 −0. 8 percent.18 −0. * p < 0. 63 percent.5 −0.04 −0.31 1. t − 1) and four quarters after (t0. for example.03 −0.5* After card subscription t0 44 17.01).44 0.02 −0. With Table 4. we provide S1’s SOW three quarters before (t − 3.11 −0. * p < 0. As Table 5 shows.4 (0.73) = . t + 2. the only outlet without a loyalty program.20 −0.39) ns ns ns ns ns ns ns ns Table 4 SOW before (t − 3 to t − 1)/after (t0 to t + 3) loyalty card subscription S1 Quarter Before card subscription t−3 SOW card holder (percent) F ns: non-significant. the defection risk for loyalty programs of close competing stores rise in most cases (p < 0. S3. SOW decreases significantly (p < 0. though its impact seems to decrease with time (t + 2.22 0.35) ns ns ** ** ** ** * * 0.14 −0. the RC1 loyalty scheme significantly (p < 0. the defection risk rises (p < 0. loyalty program memberships are positively linked to the focal stores’ SOW.4** t+1 46 2.L.1). S1’s loyalty program influences customer behavior.14 0.47 −0. t + 3). possibly because the outlet is geographically isolated from all competitors.23 −0.13 −0. hold one of the four loyalty cards.1). which appear in Tables 5–8.3 ns t+2 45 2. at least in the short term. t + 1. and 27 percent.49 0. 0.01 or p < 0.06 −0.23 0.

07 −0. Tables 5 and 6 also demonstrate that the negative impact of SOW on the relative risk of defection in the focal store increases with time (from year 1 to year 2/3).25 0.25 −0.29 −0.08 Wald 4. ** p < 0.05 −0. In the Cox regression model with segmented time- dependent covariates (Tables 7 and 8).58 0.13 −0. In Tables 5–8.08] in the second/third year (p < 0.05.07 −0. Table 9 shows no difference between the Pearson and the partial correlations (in italics and brackets) for all stores (r12 = r12.12 −0.1 −0.06 −0.23 0.1 −0.47 5.04 0.00 0.01 or p < 0.661 3.1 −0.09 −0. 10 Noticing the positive .085) = 1 − 0.20 2.11 −0.32 8.06 −0.572 6.01). p < 0.77 0.25 0.68 0.01.3 973.22 154.041 0.55 0.1 256.1 −0.00 −0.24 177.752 0. * p < 0.04 0. which is significant for the relationship between S2/SOW1 but not between S1/SOW2.00 −0.13 −0.59 5.08 −0.0 −0.03 −0.3 934.76 11.228 0.07] in the first year and by 8 percent [(1 – exp(−0.972 0.166 0.003 0.03 230.0 −0.00 2.16 −0.0 −0.68 154.10 We thus confirm H4 regarding the SOW–lifetime relationship.02 0.1 Wald 0.00 0.269 0.13 0.48 1.007 2.62 0.128 0.09 −0.1 18327 17427 b −0.18 0.05 −0.39 0.46 2. there is a direct causal link between lifetime and SOW.068 1.78 7.34 729.16 −0.06 −0.949 1.085 L.0 0.9 13903 13173 b −0.25 0.01).10 0.48 4.169 3.37 4.221 10.56 0.08 0.24 −0.04 −0.45 1.115 0. 2007) 223–236 Focal store S2 Sig ** Focal store S3 Sig * Focal store S4 Sig ns ** Wald 14. For example.17 −0.49 4.355 108. * p < 0.06 −0.8 25377 24442 Sig ns ns * Focal store S6 b 0.68 394.072 9.34 0.087 0.05).1 −0.06 232.065 0.51 0.1 0. Table 6 Regression coefficients b Cox model S5–S7 −0.06 0.05). the negative impact of SOW on the risk of defection in the focal store rises with time (t − 3 to t0).16 −0.30 0. 0. but the relationships are mostly negative between SOW of competing stores and lifetime durations (p < 0.76 11.07) = 1 − 0.083.36 0.0 −0.78 7. Thus.008 0.837 6.232 Table 5 Regression coefficients b Cox model S1–S4 Focal store S1 b Card S1 and S2 (RC1) Card S3 and S4 (RC2) Card S5 Card S7 Distance S1 Distance S2 Distance S3 Distance S4 Distance S5 Distance S6 Distance S7 SOW focal store year 1 SOW focal store year 2 + 3 Change χ2 −2 initial log likelihood −2 final log likelihood ns: non-significant. the competition between S1 .1 181.01.00 2.34 0. As we discussed previously.07 −0.07 1.05.3 17158 16275 b 0.37 900.2 584 31820 31236 Sig ns ns ns * * ns ns ns ns ns ns ns ns ** ** ns ns ns ns ns ** ** ** ns ** ** The impact of SOW on lifetime duration Our different event history models indicate a SOW–lifetime relationship.0 −0.71 0. Meyer-Waarden / Journal of Retailing 83 (2.3).40 −0.45 −0.05 −0.04 0.02 0. S1’s SOW reduces the risk of defection by 7 percent [(1 − exp(−0.07 Wald 4.07 −0.06 −0.48 −0.23 0.92 = 0.70 −0.77 0.1 −0.02 0.0 −0.08 −0.51 8.7 26752 25779 Sig ns ns ns ns ns ns ns ns ns * Focal store S7 b 0.12 3.08 −0.23 1073 15977 14904 Sig ns ** ** * ns ns ns * ns ns ** ns * ns * ns ns ns ns * * ** ** ns ** ns ns * ** ** ns ns ns ns ns ns ns * * ns ns ns ns ns ns ns ** ** Focal store S5 b Card S1 and S2 Card S3 and S4 Card S5 Card S7 Distance S1 Distance S2 Distance S3 Distance S4 Distance S5 Distance S6 Distance S7 SOW focal store year 1 SOW focal store year 2 + 3 Change χ2 −2 initial log likelihood −2 final log likelihood ns: non-significant.23 289.18 −0.00 1.93 = 0.51 1.01.41 −0.31 0.157 0.17 0.06 −0.18 −0. SOW in all focal stores has the expected negative sign and is significant (p < 0.423 166.45 5. the lower its defection risk becomes. Correlations between SOW and lifetime durations in focal stores are strongly positive (p < 0.03 0.12 Wald 0.9 139.06 0.002 1.07 0.24 181.512 0.2 −0.1 −0.68 0.1 −0. ** p < 0.07 352.15 −0.11 Wald 0.24 −0.137 0.12 −0.47 1.18 −0.52 0.56 883.69 9.3 −0.469 5. which means that the more a household spends in the outlet proportionally.07 Wald 0.40 −0.034 0.00 3.

01.9 0.232** −0. S5).33 4. ** p < 0.154** −0.1 0.016 3. .L. Therefore.248** −0.062 0.036 ns 0. the geographical proximity to a given store is related positively to its lifetime duration.99 35. within the same retailing chain. we find support for H5.860** −0. * p < 0.01. the distance variables to focal stores have the expected positive signs and.0 −0.022 ns −0.835** (0.079 0. p < 0.133** 0.204** SOP5 −0.08 42. In contrast.829** (0.66 0.01.186** 0.06 4.806** (0.45 0.8 −0.86) Wald Sig ** * t+1 b Wald Sig ** * t+2 b Wald Sig ** * t+3 b Wald Sig ** * −0.3 56 999 13164 12165 Sig * ns ns * ** ns ns * ** ns ns * ** Table 8 Regression coefficients b extended Cox model after (t0 to t + 3) program subscription S1 Quarter t0 b Card RC1 1 − exp(b) Card RC2 Card S5 Card S7 Distance focal store S1 SOW focal store S1 Change χ2 −2 initial log likelihood −2 final log likelihood ns: non-significant.11 0.14 0.299** −0.4 63 percent 0.009 ns −0.081 0.45 −0.252** −0.093* −0.236** −0.094** 0.141** −0.05 3.226** −0. – 0.10 0.13 0.62 0.78) −0.175** SOP4 0. longer lifetime in the smaller store S2 influences SOW in the bigger outlet S1 positively.2 741 13264 12523 ns ns * ** −0. the more its defection risk increases. whereas the opposite is not the case.83) −0.2 Sig * 233 t−2 b – 0.56 0.82) −0.70 0.01.81) 0.71 0.038 0.86 0.05).02 0. 2007) 223–236 Table 7 Regression coefficients b extended Cox model before (t − 3 to t − 1) program subscription S1 Quarter t−3 b Card RC1 Card RC2 Card S5 Card S7 Distance focal store S1 SOW focal store S1 Change χ2 −2 initial log likelihood −2 final log likelihood ns: non-significant. S1 appears to be used by S2 shoppers for major shopping trips. * p < 0.041 ns −0.4 663 13652 12989 ns ns * ns: non-significant.42 4.221** −0.185** SOP6 −0.34 4.787** (0.156** SOP2 −0.40 −0.42 0.090** SOP7 −0. in most cases (with the exception of S4 and and S2 seems asymmetric. in most cases.08 38.2 −0.43 0. according to the results of the survival analyses in Tables 5–8.863** (0.8 0.45 0.155** −0.88 22.086** −0. the more its defection risk decreases.043 −0.61 18.07 757 13802 13045 Wald 4.48 0.41 0.75 0. The distance regression scores for the focal store S1 are stable over time (Tables 7 and 8).076** SOP3 −0.40 4. Table 9 Pearson and partial correlations (in brackets) SOW/lifetime SOP1 Lifetime S1 Lifetime S2 Lifetime S3 Lifetime S4 Lifetime S5 Lifetime S6 Lifetime S7 0.31 14.08 Wald 4.237** −0.237** −0. * p < 0.128** −0.68 0.104** −0.021 ns −0.7 0.1 Wald 3. The impact of store distance on lifetime duration Finally.871** (0.39 3.057* −0. ** p < 0.075 0.05.06 32.4 46 percent 0.01.09 49 439 13118 12679 ns ns * ** −0.167** −0.01 0.239** −0.34 4.69 0.085 4.29 0.36 4.228** −0.021 ns 0.04 0.72 0.42 −0. which means that the farther a household is from the focal store. the distance variables to (geographically close) competitive outlets have expected negative signs and.087 0. are significant (p < 0.178** 0.225** −0.12 0. are significant (p < 0.181** −0.7 59 percent 0. That is.05).062* 0.071 0.048* −0. Meyer-Waarden / Journal of Retailing 83 (2. p < 0.2 32. indicating that the farther a household is from the competitive stores.083** −0. ** p < 0.05.87) −0.0 24 873 12038 11165 Sig * t−1 b – 0.2 669 14222 13553 ns ns * ** −0.76 27 percent 0.05.

. 2000). Furthermore. Our study gives an answer to this question. 1996). shopping orientations. airlines. Limitations and directions for further research Studies of loyalty programs remain rare and incomplete. the results of this study provide support for the positive effects of loyalty programs on lifetime duration and customer SOW at the store level.. Increased SOW also occurs when people ignore deals and simplify their shopping by consistently using the same stores (East et al. customer data indicate customer-level differences. Such segmentation would enable a better measurement of consumers’ sensitivity to loyalty-developing actions and an assessment of customers’ potential value. First. a more thorough analysis of loyalty cards’ effects at the individual level and of its determinants is required. they suggest great possibilities for the extent to which customer share and lifetime duration can be created or fostered through loyalty schemes. the longer they will remain with that retailer. because the majority of cases have not been empirically measured. many questions remain that provide options for developing this work further. as occurs with sales promotions (Mela et al. These results are in line with those of East and colleagues (1997. consumer segments likely react differently to loyalty programs. Consequently. price sensitivities.. applying our approach to other sectors (e.g. many existing grocery loyalty programs therefore may fail because they lack precise customer segmentation and targeting. people try to simplify their shopping problems by limiting the range of stores they use and continuing to use the same store for long periods of time. Thus. Thus. so the retailer can determine whether a particular customer qualifies for additional rewards. taking into consideration the large number of multiple-card holders. This insight is important when retailers design and evaluate the outcomes of programs aimed at changing customer behavior. measurable factors can predict retention. Our study also does not integrate financial data. who already use several chains on a regular basis. Dowling and Uncles (1997) doubt if loyalty programs modify purchase behavior or if “heavier” customers are simply more loyal. After the program subscription. Retailers can gather shoppers’ information. Consumer characteristics (e.234 L. join all available programs to take advantage of their benefits (Ehrenberg 1988). such as shopping more at competitors’ stores. Second. customer loyalty should be managed at the first level by treating all shoppers equally and rewarding them in proportion to their total expenses to encourage more spending. At the second level. companies can selectively build loyalty for their most valuable customers (measured as the CLV metric) with more qualitative second-level rewards (e. though the suc- . Overall. privileged services). personalized relationships. An important issue for loyalty schemes is the causal direction of effects. in these circumstances. retailers can undertake tailored strategies and incentives to appeal to different segments and restore their patronage. and loyalty card portfolios. We find a positive relationship between SOW and lifetime duration. Kumar and Shah (2004) similarly suggest that companies can build and sustain behavioral and attitudinal loyalty simultaneous with profitability. deal proneness. or creates a purchase concentration effect for the focal outlet. One restriction of our investigation is the difficulty of getting the mixed data on which our analysis is based (store intern scanner data and single-source panel data). such as SOW. Our results indicate that the loyalty programs tend to change the shopping behavior of some consumer segments after they join the program. variety-seeking behavior. which indicates that the more customers purchase proportionally in a store. Our findings have important implications for managing customer portfolios and lifetime value. 1997). Through the careful selection of appropriate customers. Loyalty schemes seem be fully profitable only when applied to a small number of customers (Benavent et al. or lifetime values. This suggestion might offer an explanation for why many multiloyal shoppers. defection risks. Our investigation also suggests loyalty programs should go beyond just rewarding usage and reward customers according to future-oriented measures such as estimated CLV. Meyer-Waarden / Journal of Retailing 83 (2. 2000) but contrast with those of Reinartz (1999). More replications in other sectors are needed to enhance the generalizibility of our findings from the retail sector to other domains. In contrast. According to their two-tiered system. as well as store distance. lifetime duration. Different explanations are possible due to consumer heterogeneity. the impact of SOW on lifetime duration increases with time (from year 1 to year 2/3). Loyalty schemes thus may become strategic tools to manage customer heterogeneity by selecting. restaurants) is difficult. the effects of competing loyalty schemes by geographically close retailers may cancel one another out as a greater degree of imitation than innovation emerges.g. given that store defections in the grocery industry are inevitable. identifying and segmenting consumers. then use these data to segment according to customer vulnerabilities. sensitivity to sales promotions) influence the strength and direction of the impact of loyalty programs on repurchase behavior. even if some already loyal buyers were being rewarded for their established shopping patterns. SOW and lifetime may not be related when shoppers lack interest in stores and have a lifestyle that emphasizes activities unrelated to shopping.g. 2007) 223–236 Discussion In line with our expectations. With this information. as well as M¨ gi (2003) a and Dowling and Uncles (1997) work. The loyalty scheme probably prevents loyalty card holders from changing their behavioral patterns. because single-source panel data usually exist only for fast-moving consumer goods. which improves and personalizes the focus of marketing resources. For example. the loyalty card reduces significantly the relative risk of defection and increases SOW in the focal store.

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