Implications of loyalty program membership and service experiences for customer retention and value

Companies that offer loyalty reward programs believe that their programs have a long-run positive effect on customer evaluations and behavior. However, if loyalty rewards programs increase relationship durations and usage levels, customers will be increasingly exposed to the complete spectrum of service experiences, including experiences that may cause customers to switch to another service provider. Using cross-sectional, time-series data from a worldwide financial services company that offers a loyalty reward program, this article investigates the conditions under which a loyalty rewards program will have a positive effect on customer evaluations, behavior, and repeat purchase intentions. The results show that members in the loyalty reward program overlook or discount negative evaluations of the company vis-à-vis competion. One possible reason could be that members of the loyalty rewards program perceive that they are getting better quality and service for their price or, in other words, “good value.” Ruth N. Bolton is Ruby K. Powell Professor of Marketing in the Michael F. Price College of Business at the University of Oklahoma. Her current research is concerned with high-technology services sold to business-to-business customers. Her most recent work in this area studies how organizations can grow the value of their customer base through customer service and support. She previously held positions at the University of Maryland, GTE Laboratories Incorporated, the University of Alberta, Carnegie-Mellon University, and the University of British Columbia. Her business experience involves a variety of consulting projects addressing services marketing, customer satisfaction, and quality management issues in the telecommunications and information services industries. Her earlier published research investigates how organizations' customer service and pricing strategies influence customer satisfaction and loyalty. She received her B.Comm. with honors from Queen's University at Kingston and her M.Sc. and Ph.D. from Carnegie-Mellon University. She currently serves on the editorial boards of theJournal of Retailing, theJournal of Marketing, Marketing Science, Marketing Letters, theJournal of Marketing Research, and theJournal of Service Research. She has published articles in these and other journals. P. K. Kannan is Safeway Fellow and Associate Professor of Marketing in the Smith School of Business at the University of Maryland. He received his Ph.D. from Purdue University. His research and teaching interests are in electronic commerce, and marketing research and modeling. His research on competitive market structures, consumers' loyalty, variety seeking, and reinforcement behaviors, and the effects of promotions on competition have appeared inMarketing Science, Management Science, Journal of Business Research, andInternational Journal of Research in Marketing. His current interests center on the marketing of information products such as market research, software, and data products using electronic channels such as the Internet covering issues of strategy, pricing, and product reliability. Articles focusing on these issues have appeared or are forthcoming inCommunications of the ACM, International Journal of Electronic Commerce, and theHandbook of Electronic Commerce. He is a member of the American Marketing Association, the Institute of Management Science, and the American Statistical Association. He has corporate experience with Tata Engineering and Ingersoll-Rand and has consulted for companies such as Frito-Lay, Pepsi Co, SAIC, and Fannie Mae. Prior to joining the University of Maryland, he was on the faculty of the University of Arizona, Tucson. Matthew D. Bramlett is a doctoral candidate in the Department of Sociology and a faculty research assistant in the Department of Marketing at the University of Maryland, College Park. His dissertation is an event history analysis of the effects of children on the stability of marriages and cohabitations. His current research focuses on high-technology services sold to business-to-business customers. His other research interests include the commodification of sports and the exploitation of the consumer in professional sports, and the fertility effects of family planning programs in developing countries over time. He is a member of the Population Association of America and a member of the Family, Sociology of Population, and Race, Gender, and Class sections of the American Sociological Association. His work on the exploitation of the consumer in the National Football League will be published as a chapter in the forthcoming bookConsumers, Commodification and Media Culture: Perspectives on the New Forms of Consumption, edited by Mark Gottdiener, University of New York at Buffalo.     

Grocery retail loyalty program effects: self-selection or purchase behavior change?

In the retail sector, consumers typically patronize multiple outlets for a variety of products, which raises the important issue of how outlets can gain a greater share of consumer expenditures. One such way is to increase repeat purchases through loyalty programs. This article examines the impact of loyalty programs, which target existing customers, on repurchase behavior in grocery stores. It finds that heavier, more frequent customers of a store enroll in the loyalty program earlier; that buying behavior changes only slightly after buyers join the program; and that small changes in loyalty appear to erode 6–9 months after buyers join.     

Customer value impact of sales contests

Although firms spend more than $26 billion annually on sales contests, no empirical research has investigated the effects of contests on individual customers. While some short-term firm effects of contests have been documented, the impact on long-term customer value has remained a matter of speculation. This research investigates the long-term customer impact of sales contests, by applying the customer value framework. We add to previous research that has used customer value of marketing programs by employing the acquired, retained, and add-on framework to segment customers based on their purchase history. We develop hypotheses drawing on theories in the buyer behavior, customer loyalty, and sales management domains. By disaggregating the overall customer value into initial and subsequent components, we demonstrate a greater long-term value per customer in the retained customer cohort and lower short-term and long-term value per customer among the two other cohorts (acquired and add-on customers). There is no adverse impact on other drivers of customer value such as customer churn and purchase frequency. While our study focuses on individual customer effects, we note the significantly higher volume of customers during the contest leads to a positive aggregate-level assessment. We conclude by discussing the implications of our findings for managers and researchers.     

Effects of loyalty programs on value perception,program loyalty,and brand loyalty

The authors investigate how reward schemes of a loyalty program influence perceived value of the program and how value perception of the loyalty program affects customer loyalty. The results show that involvement moderates the effects of loyalty programs on customer loyalty. In high-involvement situations, direct rewards are preferable to indirect rewards. In low-involvement situations, immediate rewards are more effective in building a program's value than delayed rewards. Under high-involvement conditions, value perception of the loyalty program influences brand loyalty both directly and indirectly through program loyalty. Under low-involvement conditions, there is no direct effect of value perception on brand loyalty. Youjae Yi (uoujae@snu.ac.kr) (Ph.D., Stanford University, 1987) is a professor of marketing in the College of Business Administration at Seoul National University. He was at the University of Michigan as an assistant professor, Sanford Robertson Assistant Professor, and tenured associate professor. His work has appeared in theJournal of Marketing Research, theJournal of Consumer Research, theJournal of Applied Psychology, theJournal of the Academy of Marketing Science, theJournal of Consumer Psychology, theJournal of Advertising, and theJournal of Econometrics. He is currently an editor of theKorean Journal of Consumer Studies and was an editor of theSeoul Journal of Business. Hoseong Jeon (jeonho1@snu.ac.kr) is a doctoral candidate in the College of Business Administration at Seoul National University. He received his M.A. in advertising from Michigan Sate University. His current research interests include customer relationship management, advertising effects on consumer attitudes, and determinants of customer loyalty.     

Do managers know what their customers think and why?

The ability of a firm’s managers to understand how its customers view the firm’s offerings and the drivers of those customer perceptions is fundamental in determining the success of marketing efforts. We investigate the extent to which managers’ perceptions of the levels and drivers of their customers’ satisfaction and loyalty align with that of their actual customers (along with customers’ expectations, quality, value, and complaints). From 70,000 American Customer Satisfaction Index (ACSI) customer surveys and 1068 firm (manager) responses from the ACSI-measured companies, our analyses suggest that managers generally fail to understand their firms’ customers in two important ways. First, managers systematically overestimate the levels of customer satisfaction and attitudinal loyalty, as well as the levels of key antecedent constructs such as expectations and perceived value. Second, managers’ understanding of the drivers of their customers’ satisfaction and loyalty are disconnected from those of their actual customers. Among the most significant “disconnects,” managers underestimate the importance of customer perceptions of quality in driving their satisfaction and of satisfaction in driving customers’ loyalty and complaint behavior. Our results indicate that firms must do more to ensure that managers understand how their customers perceive the firm’s products and services and why.     

Comparative evaluation and the relationship between quality,satisfaction, and repurchase loyalty

This study evaluates alternative measurement approaches to examining the relationship between perceived quality performance, customer satisfaction, and repurchase loyalty. The authors define and measure the constructs within a relative attitudinal framework and compare these results to a noncomparative or individual evaluation of products. In addition, loyalty is measured and defined as self-reported repurchase behavior instead of purchase intention. The proposed model, with satisfaction as a mediator between quality and repurchase loyalty, was found to be an acceptable representation of the data across four products and for both comparative and noncomparative evaluations. The use of relative attitudes, however, indicated a much stronger relationship between quality, satisfaction, and loyalty than the attitudes toward a product when they are performed as an individual evaluation. With respect to predictive ability, the study findings suggest that quality, satisfaction, and loyalty should be defined and measured within a relative attitudinal framework.     

When does salespeople’s customer orientation lead to customer loyalty? The differential effects of relational and functional customer orientation

Is a customer orientation universally effective for salespeople? Or does its effectiveness depend on the selling situation? While previous research has largely neglected this question, this study investigates contextual influences on the link between customer-oriented behaviors and customer loyalty. To do so, it takes a role theory perspective on salesperson customer orientation by distinguishing functional customer orientation and relational customer orientation. It then investigates which type of customer orientation is more effective with regard to establishing and maintaining customer loyalty, given the specific situation. Here, the authors analyze the moderating impact of a customer’s communication style (task orientation and interaction orientation) and specific characteristics of a supplier’s products (product individuality, importance, complexity, and brand strength). Multilevel analysis of triadic data from a cross-industry survey of 56 sales managers, 195 sales representatives, and 538 customers provides empirical support for positive, non significant, and even adverse effects of salespeople’s customer-oriented behaviors on customer loyalty, depending on contextual variables.     

A customer perspective on product eliminations: how the removal of products affects customers and business relationships

Regardless of the apparent need for product eliminations, many managers hesitate to act as they fear deleterious effects on customer satisfaction and loyalty. Other managers do carry out product eliminations, but often fail to consider the consequences for customers and business relationships. Given the relevance and problems of product eliminations, research on this topic in general and on the consequences for customers and business relationships in particular is surprisingly scarce. Therefore, this empirical study explores how and to what extent the elimination of a product negatively affects customers and business relationships. Results indicate that eliminating a product may result in severe economic and psychological costs to customers, thereby seriously decreasing customer satisfaction and loyalty. This paper also shows that these costs are not exogenous in nature. Instead, depending on the characteristics of the eliminated product these costs are found to be more or less strongly driven by a company’s behavior when implementing the elimination at the customer interface.     

An investigation of the cross-national determinants of customer satisfaction

Many multinational corporations have implemented cross-national satisfaction measurement programs for tracking and benchmarking the satisfaction of their customers across their various markets. These companies measure satisfaction with the goal of maximizing customer loyalty and the financial benefits associated with loyalty. However, existing research comparing consumer satisfaction across nations is limited, with the few existing studies examining only a small number of countries or predictors of satisfaction, or a small group of consumers within a particular economic sector. To expand our knowledge of the determinants of cross-national variation in customer satisfaction, we study three sets of factors: cultural, socioeconomic and political-economic. We utilize a unique sample of cross-industry satisfaction data from 19 nations, including nearly 257,000 interviews of consumers. Consistent with our hypotheses, we find that consumers in traditional societies have higher levels of satisfaction than those in secular-rational societies. Likewise, consumers in self-expressive societies have higher levels of customer satisfaction than those in societies with survival values. We also find that literacy rate, trade freedom, and business freedom have a positive effect on customer satisfaction while per capita gross domestic product has a negative effect on customer satisfaction. We discuss the implications of these findings for policymakers, multinational corporations, and researchers.     

Understanding the co-creation effect: when does collaborating with customers provide a lift to service recovery?

Because co-creation allows customers to help shape or personalize the content of their experience, it can affect customer satisfaction with recovery efforts, as well as offer a more cost-effective alternative to compensation. This article identifies specific situations in which co-creation is and is not useful. Study 1 tests the impact of co-creation in comparison with compensation for enhancing satisfaction with the recovery process and demonstrates that co-creation offers a cost-efficient strategy for companies when customers must deal with severe delays. Study 2 extends these results by showing that the impact extends to repurchase intentions. Study 3 details conditions in which co-creation harms evaluations. Finally, Study 4 explores whether it is necessary for the company to meet the customer??s requests when co-creating a recovery, as well as what happens when the company exceeds a customer??s requests. The article concludes with a discussion of the theoretical and managerial implications, limitations, and research directions that emerge from the studies.     

Overcoming the “recency trap” in customer relationship management

Purchase likelihood typically declines as the length of time since the customer’s previous purchase (“recency”) increases. As a result, firms face a “recency trap,” whereby recency increases for customers who do not purchase in a given period, making it even less likely they will purchase in the next period. Eventually the customer is effectively lost to the firm. We develop and illustrate a modeling approach to target a firm’s marketing efforts, keeping in mind the customer’s recency state. This requires an empirical model that predicts purchase likelihood as a function of recency and marketing, and a dynamic optimization that prescribes the most profitable way to target customers. In our application we find that customers’ purchase likelihoods as well as response to marketing depend on recency. These results are used to show that the targeting of email and direct mail should depend on the customer’s recency and that the optimal decision policy enables the average high recency customer, who currently is virtually worthless to the firm, to become profitable.     

Proactive customer orientation and its role for creating customer value in global markets

Today??s business customers expect sellers not only to respond effectively to their expressed needs but also to understand their business sufficiently well to proactively address their latent and future needs. Yet, research shows that many firms underestimate, misunderstand, or overlook these customer expectations. To draw clarity to this discrepancy, this study explores the notion of proactive customer orientation and examines the degree to which this capability offers an opportunity for competitive advantage. While research in recent years has explored the role of proactive customer orientation in new product performance, empirical investigation in this stream of market orientation literature is significantly underdeveloped. We assess the impact of the proactive customer orientation construct on value creation by taking a novel approach that examines the proactive customer orientation ?? value ?? satisfaction ?? loyalty chain using data from 800 business customers in India, Singapore, Sweden, the United Kingdom, and the United States. We find that, relative to other firm capabilities, proactive customer orientation is the most consistent driver of customer value across our multinational data set. Results also show robust effects for the interaction of proactive and responsive customer orientation to create superior value. Several moderating conditions further frame the impact of this capability: intense levels of customer value change, a global relationship scope, and a transnational relationship structure. Overall, findings significantly advance the understanding of the proactive dimension within market orientation and provide marketers with insights for voice of the customer processes.     

信任式服务的顾客忠诚形成机制及实践启示

信任式服务因其专业性和（或）“纯服务”等鲜明特征而使之显著区别于其他类型的服务,其顾客忠诚形成机制也因此具有独特性。针对医疗服务的实证分析表明：在信任式服务中,顾客信任在顾客忠诚形成机制体中起着关键性的作用,形成“服务质量→顾客信任→感知价值→顾客满意→顾客忠诚”的逻辑链;服务互动质量和结果质量通过顾客信任对顾客感知价值和顾客满意产生影响,进而影响顾客忠诚,但服务环境质量对顾客信任和顾客忠诚没有显著影响。因此,对顾客形成机制的研究需要区分产品和服务的类型以及服务质量的类型。提供信任式服务的组织应该重视并加强对服务人员与顾客互动能力的培养,提升服务人员与顾客的服务互动质量,并切实保障和提高服务结果质量,从而增强顾客信任,提升顾客忠诚。     

Service firms and customer loyalty programs: a regulatory fit perspective of reward preferences in a health club setting

In this paper, we examine the impact of various configurations of regulatory fit on the attitudes, exercise intentions and actual behavior of members of a health club loyalty program. Regulatory fit is conceptualized as both the match between types of program rewards and how they are communicated, as well as the congruence between reward types and regulatory focus as a stable, individual disposition. In two experimental designs, non-point reward programs offering a short-term cash bonus were used. The results of Study 1 suggest that regulatory fit has a positive impact on perceived value, exercise intentions and exercise intensity, but not on visit frequency. Analysis of repeated behavioral measures further reveals that regulatory fit has a stronger impact on exercise intensity over time relative to nonfit. Study 2 also confirms the predictive power of regulatory fit over nonfit when conceptualized as the match between reward type and trait regulatory focus.     

The duality of decisions and the case for impulsiveness metrics

Customer metrics help firms manage their performance and predict financial outcomes. While many firms focus on customer satisfaction metrics for this purpose, dual-process theories in psychology and neuroscience show that customer decisions are based on two processes. This suggests that metrics which measure the impulsiveness of purchase decisions might effectively complement customer satisfaction metrics. In a series of experiments we demonstrate that satisfaction and impulsiveness metrics make distinct but strong predictions of consumer choices. Satisfaction and impulsiveness influence choice in different ways. While impulsiveness relates to choice directly, the satisfaction-choice path is mediated by loyalty intention. Moreover this relationship is moderated by product involvement such that impulsiveness metrics provide a better prediction for low-involvement than for high-involvement situations. Finally, a field study of 750 customers of 101 firms demonstrates these relationships at a firm level, indicating that satisfaction and impulsiveness metrics have equally strong but distinct relationships with shareholder value. Therefore firms may be able to benefit from complementing customer satisfaction metrics with customer impulsiveness metrics.     

The motivation for grocery store loyal behavior with marketing implications

Two different grocery shoppers can be equally loyal to the same supermarket but for entirely different reasons. For example, customer A may be loyal to a store because of convenience reasons while customer B may be loyal to the same store because he or she perceives that the store overall has very low prices. Because of these differences any attempt to segment the market based on store loyalty alone will be only partially effective. A more useful approach is to incorporate a motivation for patronage as well as a loyalty level in a market segmentation classification scheme. On data collected in Bangor, Maine, four types of grocery customers were identified and named price shoppers, convenience shoppers, involved shoppers, and apathetic shoppers. The particular advantage of the four group typology is that customers are defined in terms of response to marketing mix variables. Therefore, the implementation of or changes in marketing strategy is facilitated by the use of the typology.     

网络购物与消费忠诚之研究

网络购物产业已越来越兴盛。对于业者而言,除了能够提高顾客满意外,其最终目的以顾客能否推荐他人购买或自身能再度购买为主要目标。本研究以价值、满意、态度忠诚、与行为忠诚等四构面,探讨彼此间的关性;并试图验证价值的认知与其满意,是否是影响顾客态度忠诚与行为忠诚的重要要素。研究结果显示,价值会对于满意、态度忠诚与行为忠诚等,分别产生正向且显著影响。而满意亦会正向且显著影响态度忠诚,态度忠诚亦会正向影响行为忠诚。但满意对于行为忠诚则无达正向显著影响。     

转换成本在顾客满意度与忠诚度之间关系中的作用——兼宽带客户转换成本的归纳性分析

转换成本是近年来顾客满意和顾客忠诚研究的焦点问题,是解释顾客忠诚形成机理的重要因素,是帮助人们更深入理解满意度与忠诚度之间关系的重要工具.文章回顾了转换成本的内涵及其分类,论证了转换成本在顾客满意与顾客忠诚关系中的作用,以宽带服务为背景对客户感知的转换成本进行了归纳性分析,指出了基于转换成本建立顾客忠诚的对策建议.     

基于顾客感知价值的企业绩效模型及应用

顾客感知价值作用机制能够很好地解释企业内部资源对企业绩效的作用途径,从而为企业经营者以资源基础观为基础的战略经营思路向以顾客为中心的市场导向经营思路转变提供了理论依据。企业应该明确合理的产品定位和价值主张,努力提高为顾客提供的功能收益、情感收益和社会收益,同时考虑到从顾客角度所能感知的收益与成本,提高顾客满意度和忠诚度,进而提高企业绩效、创建自己独特的竞争收益。     

基于顾客参与的用户网络涉入程度对顾客忠诚的影响研究

本文在已有研究形成的基于顾客参与和关系质量的网络顾客忠诚形成机制模型基础之上,研究网络涉入程度这一消费者个人特征变量的影响。通过对网络消费者进行聚类分析,采用估计并比较变量间路径系数的方法,得出网络涉入程度不同的顾客,其参与行为都显著影响着关系质量和忠诚行为,但各路径回归系数却有显著差异,说明高网络涉入顾客组参与行为对忠诚的预测能力高于低网络涉入组。