Effectiveness of Loyalty Programs in Customer Retention
A loyalty program is part of a marketing strategy that aims to maintain a long-term relationship with customers; to increase profitability and used by small and big organizations to help to predict future improvement activities.
The loyalty program emphasizes services and products that can be easily customized and to be effectively marketed the products according to customers’ needs and wants.
This study aims to assess the impact of loyalty programs on customer retention. It then seeks to investigate the mediating effect of brand association and customer satisfaction. This explanatory, quantitative research adopts a questionnaire as a survey instrument. Multiple mediation analysis was then conducted, and results were confirmed through bootstrapping.
The Malaysian automotive industry is the third largest in Southeast Asia, and the 25th largest in the world, with an annual production output of over 500,000 vehicles. The automotive sector contributes 40 billion to Malaysia’s GDP and employs a workforce of over 700,000 throughout a regional ecosystem.
There are many ways to formulate loyalty programs. A typical approach uses platinum, gold, and silver tiers, typically based on purchase volumes. 41% of hotel chains reward consumers for a range of engagement behaviors. Some other examples are offering discounts, resale assistance, free services, etc.
The market approach had transformed to the customer-centric approach from the product-centric approach due to the highly competitive market and varieties of services offered to customers. Hence, a marketing strategy prioritizing the growth of a sustainable business and increasing customers satisfaction.
Findings from this study confirm there is a significant positive impact of loyalty programs on customer retention, and the brand association has a full mediation effect between loyalty programs and customer retention.
Article details:
Effectiveness of Loyalty Programs in Customer Retention: A Multiple Mediation Analysis
Andy Chin Woon Fook, Omkar Dastane
First Published April 29, 2021 Research Article
DOI: 10.1177/22786821211000182
Jindal Journal of Business Research