IDEAS home Printed from https://ideas.repec.org/a/spr/joamsc/v49y2021i1d10.1007_s11747-020-00719-1.html
   My bibliography  Save this article

An emerging theory of loyalty program dynamics

Author

Listed:
  • Jisu J. Kim

    (University of Washington)

  • Lena Steinhoff

    (University of Rostock)

  • Robert W. Palmatier

    (University of Washington)

Abstract

As exemplary instruments of relationship marketing, loyalty programs are being implemented and studied at an unprecedented rate. Yet real-world efforts often fail—or at least do not live up to expectations—and despite the growing richness of loyalty program literature, the field remains fragmented. Thus, a comprehensive perspective is required. To guide further research and suggest ways that managers might improve loyalty program effectiveness, this article synthesizes insights on loyalty programs from empirical research and underlying psychological theories. The proposed conceptual model of loyalty program effectiveness consists of psychological, design, and operational elements; in turn, it suggests a set of 12 propositions that account for differential effects across customer acquisition, onboarding, expansion, and retention stages. With an evolving theory of loyalty programs across relationship dynamics, this propositional inventory parsimoniously delineates the trade-offs associated with relationship stage–based management of these programs. The proposed comprehensive foundation can guide loyalty program practice and research.

Suggested Citation

  • Jisu J. Kim & Lena Steinhoff & Robert W. Palmatier, 2021. "An emerging theory of loyalty program dynamics," Journal of the Academy of Marketing Science, Springer, vol. 49(1), pages 71-95, January.
    • Handle: RePEc:spr:joamsc:v:49:y:2021:i:1:d:10.1007_s11747-020-00719-1
    DOI: 10.1007/s11747-020-00719-1
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11747-020-00719-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11747-020-00719-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Wesley Hartmann & V. Viard, 2008. "Do frequency reward programs create switching costs? A dynamic structural analysis of demand in a reward program," Quantitative Marketing and Economics (QME), Springer, vol. 6(2), pages 109-137, June.
    2. Byung-Do Kim & Mengze Shi & Kannan Srinivasan, 2001. "Reward Programs and Tacit Collusion," Marketing Science, INFORMS, vol. 20(2), pages 99-120, June.
    3. Hsee, Christopher K, et al, 2003. "Medium Maximization," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 30(1), pages 1-14, June.
    4. Demoulin, Nathalie T.M. & Zidda, Pietro, 2009. "Drivers of Customers’ Adoption and Adoption Timing of a New Loyalty Card in the Grocery Retail Market," Journal of Retailing, Elsevier, vol. 85(3), pages 391-405.
    5. Rebecca Walker Reczek & Kelly L. Haws & Christopher A. Summers, 2014. "Lucky Loyalty: The Effect of Consumer Effort on Predictions of Randomly Determined Marketing Outcomes," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 41(4), pages 1065-1077.
    6. Paul Klemperer, 1995. "Competition when Consumers have Switching Costs: An Overview with Applications to Industrial Organization, Macroeconomics, and International Trade," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 62(4), pages 515-539.
    7. Bridson, Kerrie & Evans, Jody & Hickman, Melissa, 2008. "Assessing the relationship between loyalty program attributes, store satisfaction and store loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 15(5), pages 364-374.
    8. Xavier Drèze & Joseph C. Nunes, 2009. "Feeling Superior: The Impact of Loyalty Program Structure on Consumers' Perceptions of Status," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 35(6), pages 890-905, April.
    9. Joseph C. Nunes & Xavier Drze, 2006. "The Endowed Progress Effect: How Artificial Advancement Increases Effort," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 32(4), pages 504-512, March.
    10. Lan Jiang & JoAndrea Hoegg & Darren W. Dahl, 2013. "Consumer Reaction to Unearned Preferential Treatment," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 40(3), pages 412-427.
    11. Lena Steinhoff & Denni Arli & Scott Weaven & Irina V. Kozlenkova, 2019. "Online relationship marketing," Journal of the Academy of Marketing Science, Springer, vol. 47(3), pages 369-393, May.
    12. Aîda Mimouni-Chaabane & Pierre Volle, 2010. "Perceived Benefits of Loyalty Programs: Scale Development and Implications for Relational Strategies," Post-Print halshs-00638594, HAL.
    13. Butori, Raphaëlle & De Bruyn, Arnaud, 2013. "So you want to delight your customers: The perils of ignoring heterogeneity in customer evaluations of discretionary preferential treatments," International Journal of Research in Marketing, Elsevier, vol. 30(4), pages 358-367.
    14. Schumann, Jan H. & Wünderlich, Nancy V. & Evanschitzky, Heiner, 2014. "Spillover Effects of Service Failures in Coalition Loyalty Programs: The Buffering Effect of Special Treatment Benefits," Journal of Retailing, Elsevier, vol. 90(1), pages 111-118.
    15. Steven M. Shugan, 2005. "Brand Loyalty Programs: Are They Shams?," Marketing Science, INFORMS, vol. 24(2), pages 185-193.
    16. repec:dau:papers:123456789/1603 is not listed on IDEAS
    17. Mimouni-Chaabane, Aîda & Volle, Pierre, 2010. "Perceived benefits of loyalty programs: Scale development and implications for relational strategies," Journal of Business Research, Elsevier, vol. 63(1), pages 32-37, January.
    18. Rebecca Walker Reczek & Kelly L. Haws & Christopher A. Summers, 2014. "Lucky Loyalty: The Effect of Consumer Effort on Predictions of Randomly Determined Marketing Outcomes," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 41(4), pages 1065-1077.
    19. Klein, Howard J., 1991. "Further evidence on the relationship between goal setting and expectancy theories," Organizational Behavior and Human Decision Processes, Elsevier, vol. 49(2), pages 230-257, August.
    20. Yanwen Wang & Michael Lewis & Cynthia Cryder & Jim Sprigg, 2016. "Enduring Effects of Goal Achievement and Failure Within Customer Loyalty Programs: A Large-Scale Field Experiment," Marketing Science, INFORMS, vol. 35(4), pages 565-575, July.
    21. Lena Steinhoff & Robert W. Palmatier, 2016. "Understanding loyalty program effectiveness: managing target and bystander effects," Journal of the Academy of Marketing Science, Springer, vol. 44(1), pages 88-107, January.
    22. Ying Zhang & Szu-Chi Huang, 2010. "How Endowed versus Earned Progress Affects Consumer Goal Commitment and Motivation," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 37(4), pages 641-654, December.
    23. Malika Chaudhuri & Clay M. Voorhees & Jonathan M. Beck, 2019. "The effects of loyalty program introduction and design on short- and long-term sales and gross profits," Journal of the Academy of Marketing Science, Springer, vol. 47(4), pages 640-658, July.
    24. Neil A. Morgan & Lopo L. Rego, 2008. "—Can Behavioral WOM Measures Provide Insight into the Net Promoter © Concept of Customer Loyalty?," Marketing Science, INFORMS, vol. 27(3), pages 533-534, 05-06.
    25. Luxi Shen & Ayelet Fishbach & Christopher K. Hsee, 2015. "The Motivating-Uncertainty Effect: Uncertainty Increases Resource Investment in the Process of Reward Pursuit," Journal of Consumer Research, Journal of Consumer Research Inc., vol. 41(5), pages 1301-1315.
    26. Voorhees, Clay M. & Fombelle, Paul W. & Gregoire, Yany & Bone, Sterling & Gustafsson, Anders & Sousa, Rui & Walkowiak, Travis, 2017. "Service encounters, experiences and the customer journey: Defining the field and a call to expand our lens," Journal of Business Research, Elsevier, vol. 79(C), pages 269-280.
    27. Kivetz, Ran & Simonson, Itamar, 2003. "The Role of Effort Advantage in Consumer Response to Loyalty Programs: The Idiosyncratic Fit Heuristic," Research Papers 1738r, Stanford University, Graduate School of Business.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Paula Rodríguez–Torrico & Sonia San-Martín & Rebeca San José Cabezudo, 2022. "¿Conectamos? El marketing relacional en la era del mix de canales," DOCFRADIS Working Papers 2204, Catedra Fundación Ramón Areces de Distribución Comercial, revised Jul 2022.
    2. Junzhou Zhang & Yuping Liu-Thompkins, 2024. "Personalized email marketing in loyalty programs: The role of multidimensional construal levels," Journal of the Academy of Marketing Science, Springer, vol. 52(1), pages 196-216, January.
    3. Minguez, Ana & Javier Sese, F., 2022. "Why do you want a relationship, anyway? Consent to receive marketing communications and donors’ willingness to engage with nonprofits," Journal of Business Research, Elsevier, vol. 148(C), pages 356-367.
    4. Hu, Xin & He, Liuyi & Liu, Junjun, 2022. "Status reinforcing: Unintended rating bias on online shopping platforms," Journal of Retailing and Consumer Services, Elsevier, vol. 67(C).
    5. Panzone, Luca A. & Tocco, Barbara & Brečić, Ružica & Gorton, Matthew, 2024. "Healthy foods, healthy sales? Cross-category effects of a loyalty program promoting sales of fruit and vegetables," Journal of Retailing, Elsevier, vol. 100(1), pages 85-103.
    6. Stadler Blank, Ashley & Loveland, Katherine E. & Houghton, David M., 2021. "Game changing innovation or bad beat? How sports betting can reduce fan engagement," Journal of Business Research, Elsevier, vol. 134(C), pages 365-374.
    7. Alex Belli & Anne-Maree O’Rourke & François A. Carrillat & Ljubomir Pupovac & Valentyna Melnyk & Ekaterina Napolova, 2022. "40 years of loyalty programs: how effective are they? Generalizations from a meta-analysis," Journal of the Academy of Marketing Science, Springer, vol. 50(1), pages 147-173, January.
    8. Afonso Vieira, Valter & Agnihotri, Raj & de Almeida, Marcos Inácio Severo & Lopes, Evandro Luiz, 2022. "How cashback strategies yield financial benefits for retailers: The mediating role of consumers’ program loyalty," Journal of Business Research, Elsevier, vol. 141(C), pages 200-212.
    9. Meyer-Waarden, Lars & Bruwer, Johan & Galan, Jean-Philippe, 2023. "Loyalty programs, loyalty engagement and customer engagement with the company brand: Consumer-centric behavioral psychology insights from three industries," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    10. Abolghasem Ebrahimi & Kazem Askarifar & Amin Nikbakht, 2024. "Designing and evaluating insurance customer loyalty programs for different customer groups based on their lifetime value," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 29(3), pages 808-825, September.
    11. Eunice Minjoo Kang & Seul Ki Lee, 2022. "The Impact of Monetary Benefits in a Pandemic Situation—Navigating Changes in Customer Loyalty through Negative Switching Barriers in the Hotel Industry," Sustainability, MDPI, vol. 14(13), pages 1-19, July.
    12. Marcus, Hagström & Rosengren, Sara & Hagberg, Johan, 2022. "The Role of Bonuses in Loyalty Programs – A literature review," SSE Working Paper Series in Business Administration 2022:1, Stockholm School of Economics.
    13. Katarína Gubíniová & Thorsten Robert Moller & Silvia Treľová & Malgorzata Agnieszka Jarossová, 2023. "Loyalty Programmes and Their Specifics in the Chinese Hospitality Industry—Qualitative Study," Administrative Sciences, MDPI, vol. 13(6), pages 1-12, June.
    14. Lim, Weng Marc & Rasul, Tareq & Kumar, Satish & Ala, Mamun, 2022. "Past, present, and future of customer engagement," Journal of Business Research, Elsevier, vol. 140(C), pages 439-458.
    15. Bies, Suzanne, 2022. "Examining the effectiveness of activation techniques on consumer behavior in temporary loyalty programs," Other publications TiSEM ade86df3-4846-4318-938f-a, Tilburg University, School of Economics and Management.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Chen, Yanyan & Mandler, Timo & Meyer-Waarden, Lars, 2021. "Three decades of research on loyalty programs: A literature review and future research agenda," Journal of Business Research, Elsevier, vol. 124(C), pages 179-197.
    2. Alex Belli & Anne-Maree O’Rourke & François A. Carrillat & Ljubomir Pupovac & Valentyna Melnyk & Ekaterina Napolova, 2022. "40 years of loyalty programs: how effective are they? Generalizations from a meta-analysis," Journal of the Academy of Marketing Science, Springer, vol. 50(1), pages 147-173, January.
    3. Malika Chaudhuri & Clay M. Voorhees & Jonathan M. Beck, 2019. "The effects of loyalty program introduction and design on short- and long-term sales and gross profits," Journal of the Academy of Marketing Science, Springer, vol. 47(4), pages 640-658, July.
    4. Bombaij, Nick, 2021. "Effectiveness of loyalty programs," Other publications TiSEM 095c506d-5b5c-4ea3-9b41-a, Tilburg University, School of Economics and Management.
    5. Steinhoff, Lena & Zondag, Marcellis M., 2021. "Loyalty programs as travel companions: Complementary service features across customer journey stages," Journal of Business Research, Elsevier, vol. 129(C), pages 70-82.
    6. Bombaij, Nick J.F. & Dekimpe, Marnik G., 2020. "When do loyalty programs work? The moderating role of design, retailer-strategy, and country characteristics," International Journal of Research in Marketing, Elsevier, vol. 37(1), pages 175-195.
    7. Bazargan, Amirhossein & Karray, Salma & Zolfaghari, Saeed, 2017. "Modeling reward expiry for loyalty programs in a competitive market," International Journal of Production Economics, Elsevier, vol. 193(C), pages 352-364.
    8. Kang, Jun & Alejandro, Thomas Brashear & Groza, Mark D., 2015. "Customer–company identification and the effectiveness of loyalty programs," Journal of Business Research, Elsevier, vol. 68(2), pages 464-471.
    9. Li, Yi & Fumagalli, Elena, 2022. "Spoiled Rotten: How and When Discontinuation of Repetitive and Regular Delight Offers Increases Customer Desire for Revenge," Journal of Retailing, Elsevier, vol. 98(3), pages 412-431.
    10. Sonja Fourie & Michael Goldman & Michael McCall, 2023. "Designing for loyalty programme effectiveness in the financial services industry," Journal of Financial Services Marketing, Palgrave Macmillan, vol. 28(3), pages 502-525, September.
    11. A. Yeşim Orhun & Tong Guo & Andreas Hagemann, 2022. "Reaching for Gold: Frequent-Flyer Status Incentives and Moral Hazard," Marketing Science, INFORMS, vol. 41(3), pages 548-574, May.
    12. Meyer-Waarden, Lars & Bruwer, Johan & Galan, Jean-Philippe, 2023. "Loyalty programs, loyalty engagement and customer engagement with the company brand: Consumer-centric behavioral psychology insights from three industries," Journal of Retailing and Consumer Services, Elsevier, vol. 71(C).
    13. Lena Steinhoff & Robert W. Palmatier, 2016. "Understanding loyalty program effectiveness: managing target and bystander effects," Journal of the Academy of Marketing Science, Springer, vol. 44(1), pages 88-107, January.
    14. Septianto, Felix & An, Jake & Chiew, Tung Moi & Paramita, Widya & Tanudharma, Istiharini, 2019. "The similar versus divergent effects of pride and happiness on the effectiveness of loyalty programs," Journal of Business Research, Elsevier, vol. 99(C), pages 12-22.
    15. Dorotic, Matilda & Verhoef, Peter C. & Fok, Dennis & Bijmolt, Tammo H.A., 2014. "Reward redemption effects in a loyalty program when customers choose how much and when to redeem," International Journal of Research in Marketing, Elsevier, vol. 31(4), pages 339-355.
    16. Bruneau, Virginie & Swaen, Valérie & Zidda, Pietro, 2018. "Are loyalty program members really engaged? Measuring customer engagement with loyalty programs," Journal of Business Research, Elsevier, vol. 91(C), pages 144-158.
    17. Matti J. Haverila & Kai Haverila & Caitlin McLaughlin & Hailey Tran, 2022. "The impact of tangible and intangible rewards on online loyalty program, brand engagement, and attitudinal loyalty," Journal of Marketing Analytics, Palgrave Macmillan, vol. 10(1), pages 64-81, March.
    18. Hu, Xin & He, Liuyi & Liu, Junjun, 2022. "Status reinforcing: Unintended rating bias on online shopping platforms," Journal of Retailing and Consumer Services, Elsevier, vol. 67(C).
    19. Amir Gandomi & Amirhossein Bazargan & Saeed Zolfaghari, 2019. "Designing competitive loyalty programs: a stochastic game-theoretic model to guide the choice of reward structure," Annals of Operations Research, Springer, vol. 280(1), pages 267-298, September.
    20. Butori, Raphaëlle & De Bruyn, Arnaud, 2013. "So you want to delight your customers: The perils of ignoring heterogeneity in customer evaluations of discretionary preferential treatments," International Journal of Research in Marketing, Elsevier, vol. 30(4), pages 358-367.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joamsc:v:49:y:2021:i:1:d:10.1007_s11747-020-00719-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.