Designing competitive loyalty programs : How types of program affect customer profitability
Loyalty programs are one of the most popular strategies developed by firms in various industries in their attempts to identify, reward, and retain its profitable customers. Despite prevalent use of the programs, there are limited researches which focus on the stage prior to implementation of the programs. With significant amount of investment and high costs of administering a loyalty program, it is of paramount importance for firms to carefully design their loyalty program before launching it. The main purpose of the current research is to formulate a theory of designing ex ante (prior to implementation) competitive loyalty program, and subsequently to provide empirical evidences for the theory. The author argues that various types of loyalty programs could be classified into two types. The first consists of monetary based rewards and the second types are special treatment based rewards. Conceptually, this research models that customer perceptions on the utility of loyalty programs, differ between the two types of rewards, and is contingent upon the relationship modes (contractual or non contractual relationship) between customer and the firm. Programs which are perceived favorably by customers will in turn create stronger attitudinal loyalty and higher customer profitability, expressed in customer lifetime value (CLV) and customer equity (CE). The latter is a precursor for firm value. Using research settings of airline passengers and bank customers, results of the research provide evidences that monetary rewards are perceived to provide higher utility perception of customers in contractual relationships as compared to those in non contractual relationships. However, this research failed to provide empirical support that special treatment rewards are perceived to provide higher utility perception of customers in non contractual relationship compared to contractual relationship. The research also reveals that higher program utility perception is associated with higher attitudinal loyalty, thereby increasing CE for two firms in non contractual relationships and two firms in contractual relationships. Firms are encouraged to measure the expected ROI of their loyalty programs against the CE enhancements. Implications for research and theory in marketing, strategy making, marketing management practice, and strategic management are provided..30 Maret 2009
Ketersediaan
Call Number | Location | Available |
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DMA 0076 | PSB lt.dasar - Pascasarjana | 1 |
Penerbit |
Depok
Graduate School of Management Faculty of Economics University of Indonesia.,
2009
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Marketing
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