An Empirical Analysis of the Effect of a Retailers Loyalty Programme on Their Customers’ Loyalty

Abstract

Traditionally, marketing has focused on acquiring customers and gaining market share rather than on retaining existing customers. With increasing competition, there is a need for developing more sophisticated activities in order to retain the existing customers. Consequently, loyalty programmes (LPs) are being employed as a strategic business goal in order to gain customers’ loyalty. In this research, the main aim is to find whether these LPs affect customers’ loyalty towards the retailer by closely analyzing the loyalty card members of a leading Indian departmental store in Delhi. Quantitative research (regression and correlation) was conducted in the form of a questionnaire to test a model whereby the effect of value perception of the LP is tested on programme loyalty and the effect of programme loyalty is then tested on brand and store loyalty that together make the consumer a loyal customer. A total of 120 questionnaires were collected and the findings reveal that LPs do affect customers’ loyalty towards the retailer but they are not the sole factor in a customer’s loyalty development. The study is unique as it confirms the customers’ loyalty towards a retailer taking into account both attitudinal and behavioural aspects of loyalty. Apart from testing the model, other elements such as habit, convenience, offers, incentives and reputation are tested as well. Results of the study ascertain that customers focus heavily on the variety of offers, incentives and habit as other reasons for developing customer loyalty. Thus, LPs work for companies but they have to take the whole package into consideration.