I

What drives customer participation in loyalty programs?

Research Master’s Thesis submitted by Maïté Hörold

With the view of getting the degree in

Master 120 crédits en sciences de gestion, à finalité spécialisée

Supervisors Virginie Bruneau

Valérie Swaen

Academic Year 2016-2017

Louvain School of Management

Acknowledgments

Firstofall,Iwouldliketothankmysupervisors,Mrs.VirginieBruneauandMrs.

ValérieSwaen,fortheirencouragement,adviceandconstructivecriticismthroughoutthe

learningprocessofthismasterthesis.

Furthermore, Iwould like toexpressmygratitudetoall theparticipantsofmy

studyfortheirengagementandvaluableinput.

I would also like to showmy greatest appreciation to my family, friends and

colleagues.Withouttheircontinuousencouragementandsupport,thisthesiswouldnot

havebeenmaterialized.

Lastly, I would like to thank all the people who have, in oneway or another,

directlyorindirectly,contributedtothecompletionofthisthesis.

I

TableofContents

Introduction....................................................................................................................1

Part1:Literaturereview...............................................................................................4

1. Relationshipmarketing.................................................................................................4

1.1. Definitionandtheoreticalfoundation......................................................................4

1.2. Relationshipmarketingeffectiveness......................................................................7

2. Equitytheory.................................................................................................................12

2.1. Theoreticalfoundation..............................................................................................12

2.2. Equitytheoryandloyaltyprograms.......................................................................13

3. Customerloyalty...........................................................................................................15

3.1. Definitionandtheoreticalfoundation....................................................................15

3.2. Atwo-dimensionalapproach...................................................................................16

3.3. Loyaltytypology..........................................................................................................18

3.4. Driversofcustomerloyalty......................................................................................19

3.5. Companyloyaltyandprogramloyalty....................................................................19

4. Customerloyaltyprograms.........................................................................................21

4.1. Definitionandtheoreticalfoundation....................................................................21

4.2. Potentialobstacles.....................................................................................................22

4.3. Loyaltyprogramtypology.........................................................................................23

4.4. Loyaltyprogrammechanism....................................................................................24

4.5. Loyaltyprogrameffectiveness.................................................................................25

5. Customerfrustrationinloyaltyprograms.................................................................30

5.1. Definitionandtheoreticalfoundation....................................................................30

5.2. Modelofcustomerfrustrationinloyaltyprograms.............................................31

Part2:Practicalpart....................................................................................................34

1. Contextofthestudy......................................................................................................34

2. Researchproblem.........................................................................................................36

3. Methodology..................................................................................................................38

3.1. Methodofanalysis:qualitativeanalysis................................................................38

3.2. Datacollection:focusgroups....................................................................................39

4. Analysisapproach:thematiccontentanalysis...........................................................45

5. Resultsofthestudy.......................................................................................................47

II

5.1. Motivations..................................................................................................................48

5.2. Brakes...........................................................................................................................52

5.3. Keytakeaways.............................................................................................................55

6. Discussionandrecommendations..............................................................................58

6.1. Discussion....................................................................................................................58

6.2. Recommendations......................................................................................................61

7. Limitations....................................................................................................................64

Conclusion.....................................................................................................................66

References....................................................................................................................68

III

TableofFigures

Figure1.RelationshipCommitmentandTrust:thekeymediatingvariablesof

relationshipmarketing...................................................................................................8

Figure2.RelationalMediatorMeta-AnalyticFrameworkofRelationshipMarketing.......9Figure3.Loyaltytypologybasedonattitudeandbehaviour............................................19Figure4.Modelofcustomerfrustrationinloyaltyprograms...........................................32Figure5.Suggestionforaconceptualmodelofcustomerparticipationinloyalty

programs.......................................................................................................................61

IV

TableofTables

Table1.Overviewtableofparticipants’data.....................................................................44

Table2.Motivationsandbrakesbehindcustomerparticipationinloyaltyprograms....47

1.

Introduction

Relationshipmarketing,bothinresearchandinpractice,hasincreasinglygained

in importanceoverthe lastdecadesand loyaltyprogramshavebecomeawidelyused

customer relationshipmanagement tool (RobertW.Palmatier,Dant,Grewal,&Evans,

2006).Whereasinthepast,loyaltyprogramswerereservedtothebigretailers,theyare

nowusedacrossallsectors.Supermarkets,perfumestores,gasstations,hotels,airlines,

coffee shops, and even banks implement loyalty programs hoping to retain their

customers.

Fromacompany’sperspective,introducingloyaltyprogramsrepresentsawayof

increasingorat leastmaintainingacustomerbase intimesofseverecompetitionand

price pressures (De Wulf, Odekerken-Schroder, de Canniere, & Claudia van, 2003;

Evanschitzkyetal.,2012).

Fromaconsumer’sperspective,consumerscontinuetoenrolinloyaltyprograms,

but only rarely become active members, an active member being one who earns or

redeemsatleastonceayear(Berry,2015).IntheU.S.,householdsholdmembershipsin

29loyaltyprograms,butareonlyactivein12ofthem.Thecorrespondingfiguresinthe

2013reportwere22and9,indicatingadeclineoftwopercentagepointsintheactive

membership rate (Berry, 2015). These figures obviously put into question the

effectivenessofloyaltyprograms.

Indeed,reviewsregardingtheeffectivenessofloyaltyprogramsaremixed.Some

researchers claim thatwell designed loyalty programsmay increase repeat-purchase

rates,willingnesstopaypricepremiums,advocacy,andshareofwallet,whereasothers

questiontheirimpactoncustomerloyaltyandcompanyprofitability(McCall&Voorhees,

2010).

Although previous research has been focused on various aspects of loyalty

programs,relativelylittleisknownaboutthefactorsthatdrivecustomerparticipationin

loyalty programs. Yet, for loyalty programs to be successful, they require active

2.

participation and thus, understanding the motivations and brakes to customer

participationinloyaltyprogramsisfundamental.Ourstudyseekstofillthegapinthis

areaofresearch.

Therefore, the aim of this master thesis is to determine the factors that lead

customers to participate or not in loyalty programs. Thus, we will study customers’

attitude and behaviour towards loyalty programs to address the following research

question:

Whatdrivescustomerparticipationinloyaltyprograms?

Morespecifically,ourresearchwillbefocusedonthetwofollowingsub-questions:

- Whatarethefactorsthatmotivatecustomerparticipationinloyaltyprograms?

- Whatarethefactorsthatimpedecustomerparticipationinloyaltyprograms?

Asregardsthestructure,thisthesiswillbedividedintotwomainparts:theliterature

reviewandthepracticalpart.

In the first part, we will study the theoretical concepts related to our research

probleminordertodevelopaconceptualframeworkandtogetabetterunderstanding

ofourresearchproblem.Loyaltyprogramsarebaseduponrelationshipmarketingand

thus, it only seems natural to start our literature review by exposing the concept of

relationshipmarketing. Next, we will focus on equity theory as this will allow us to

comprehend what motivates consumers to participate in a relationship with a firm.

Customer loyaltybeingatthecentreof loyaltyprograms,wewillexplorethisconcept

beforeturningourattentiontowardsloyaltyprograms.Wecouldnotendourliterature

reviewwithout consideringeventualnegativeoutcomesof loyaltyprograms,which is

whywewillclosethispartbydiscussingcustomerfrustrationinloyaltyprograms.

Inthesecondpart,wewillexposethequalitativestudythatwehaveconducted.We

willstartbydefiningthecontextofourstudyaswellastheresearchproblem.Then,we

will detail the methodology followed by the analysis technique used for this study.

Afterwards,wewillpresentanddiscussourstudyresultsbeforeadvancinganumberof

3.

scientific and managerial recommendations. We will close this part by exposing the

limitationsofourresearch.

Finally,wewillconcludethisthesisbysummarizingthekeyelementsofourstudy

andbyhighlightingthescientificandmanagerialimplicationsofourstudy.

4.

Part1:Literaturereview

Thefirstpartofthispaperaimstoprovideatheoreticalframeworkforourresearch

byreviewingtheexistingliteraturerelatedtocustomerparticipationinloyaltyprograms.

Asloyaltyprogramsarepartofrelationshipmarketingactivities,weconsideritessential

to dedicate the first chapter of this literature review to the concept of relationship

marketing. In fact, understanding the theoretical background and the objectives of

relationshipmarketingaswellasthefactorsthatinfluenceitseffectivenesswillallowus

to better comprehend the rationale behind loyalty programs. Many researches have

referredtoequitytheorytoexplaincustomers’motivationtoparticipateinarelationship

with a firm which is why the second chapter will focus on equity theory and its

implications for loyalty programs.Next,wewill turn our attention towards themain

purposeofloyaltyprograms,namelycustomerloyalty.Indeed,webelievethatitisvital

togeta clearunderstandingofwhat customer loyalty isandhow firmscanstimulate

customer loyalty to be able to analyse loyalty programs and their effectiveness.

Therefore, chapter three will focus on customer loyalty whereas chapter four will

concentrateoncustomerloyaltyprograms.Tohaveaclearcomprehensionofthesubject,

wewillalsoneedtoconsidertheeventualnegativeoutcomesofloyaltyprogramswhich

iswhythelastchapterwillanalysecustomerfrustrationinloyaltyprograms.

1. Relationshipmarketing

Wewill start this chapter by exploring the concept of relationshipmarketing and

exposing its benefits and drawbacks. Afterwards, we will analyse the factors that

influencetheeffectivenessofrelationshipmarketingbeforeendingthischapterwitha

briefconclusion.

1.1. Definitionandtheoreticalfoundation

ThenotionofrelationshipmarketingwasofficiallyintroducedbyBerry(1983,p.25)

who described relationship marketing as “attracting, maintaining, and enhancing

customer relationships”. Morgan and Hunt (1994, p. 22) argued that relationship

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marketing does not solely occur between buyers and sellers and thus, proposed a

definitionthatembodiesallformsofrelationalexchange:“Relationshipmarketingrefers

to all marketing activities directed toward establishing, developing, and maintaining

successful relational exchanges”. Later, Parvatiyar and Sheth (2000, p. 8) defined

relationship marketing as “the ongoing process of engaging in cooperative and

collaborativeactivitiesandprogramswithimmediateandend-usercustomerstocreate

orenhancemutualeconomicvalue,atreducedcost”.Despitethedivergencesintheabove

three definitions, they all illustrate that relationshipmarketing focuses on individual

relationshipsbetween the firmand its customersand/orothermarketingactors, that

theserelationshipsarelong-termorientedandthatthereexistbenefitsforbothparties

(Parvatiyar&Sheth,2000;Sin,Tse,Yau,Lee,&Chow,2002).Forreasonsofclarityand

consistency, I will refer to the seller as the party that implements the relationship

marketingwiththeaimofstrengtheningtherelationshipwiththecustomer(RobertW.

Palmatieretal.,2006).

Relationshipmarketingisoftenproposedincontrasttotransactionmarketing.While

relationshipmarketingisalong-termapproachthataimstobuildandpreservelasting

connectionswith existing customers, transactionmarketing is a short-term approach

thatattemptstomakethesaleandlookfornewcustomers(Kumar,Bohling,&Ladda,

2003;Zineldin&Philipson,2007).

Advocatesofrelationshipmarketingstatethatrelationshipmarketingleadstoloyalty

which in turn engenders companyprofitability (Kumar et al., 2003).However, recent

studieshaveshownthattherelationbetweenloyaltyandprofitabilityisnotasstrongas

commonly believed and that loyal customers do not necessarily lead to a higher

profitability. Indeed, for some customers the cost of building and maintaining

relationships exceeds the income generated. In other words, there are two types of

customers; those with a short-time horizon and those with a long-time horizon.

Nonetheless, a company needs both types of customers. Short-time customers, or

transactional customers, provide cash flows which are essential for the company to

surviveintheshortrunwhereaslong-timecustomersguaranteeprofitabilityinthelong

run. Thus, relationshipmarketing cannot always be considered themost appropriate

solutionandratherthanoptingforeithertheoneortheotherapproach,companiesneed

6.

both transaction and relationship-oriented approaches to survive. With regards to

relationshipmarketing,companiesshouldproceedtoanextensiveanalysis to identify

therightcustomersforinvestinginrelationshipbuilding(Kumaretal.,2003;Zineldin&

Philipson,2007).

Relationship marketing has proven beneficial for both parties; the seller and the

customer. On the one hand, relationship marketing activities engender stronger

customer-seller relationships and thereby, improve the seller’s financial outcomes

including sales growth, share of wallet and profitability (RobertW Palmatier, 2008).

Additionally, relationshipmarketing hasmany organizational benefits such as higher

retention, reduced price sensitivity and opportunities for up-selling and cross-selling

(Jonesetal.,2015).Ontheotherhand,customersenjoynumerusadvantageslikespecial

treatment,confidence,socialandtime-savings(Jonesetal.,2015).

Nonetheless, some drawbacks have also been identified. Indeed, relationship

marketingeffortsaresometimesnegativelyperceivedbyconsumers.Sharingpersonal

informationwithcompaniesisstillanissueformanyconsumers(Ashley,Noble,Donthu,

& Lemon, 2011). Besides this, consumers are nowadays overloadedwith companies’

marketingeffortsandaresuspicioustowardscompaniesthatwishtobuildarelationship

with them (Jones et al., 2015). They feel used and manipulated as they have the

impression that companies do not reciprocate and only aspire to gather consumer

informationandincreasesales.

Inadditiontothat,somecustomerssimplydonotwishtodeveloprelationshipswith

companies (Jones et al., 2015; Kumar et al., 2003). Therefore, it is fundamental for

companiestosegmenttheircustomerbaseandconcentratetheirrelationshipmarketing

effortsonthosecustomersthataretrulyinterestedinbuildingrelationships.

AsKumaretal.(2003)pointedout,acustomermayrepeatedlybuyfromafirmfor

various reasons, includingconvenienceorhigh switchingcosts,whichnotnecessarily

imply a true intention to develop a relationship. Thus, it is crucial for companies to

identifythecustomersthathaveahighdegreeofrelationshipintentionwhichmeansthat

theyhaveahigh“willingnessofacustomertodeveloparelationshipwithafirmwhile

7.

buyingaproductoraserviceattributedtoafirm,abrand,andachannel”(Kumaretal.,

2003,p.667).Indeed,thosecustomerspresentmanyadvantagesforafirm,suchaslow

pricesensitivity, lowcosttoserve,highword-of-mouthpromotion,andhighcompany

advertisement.Asaresult,theprofitability,whichistheultimateobjectiveofthefirm,

increaseswiththedurationofthecustomer’sstay.Firmscaninfluencetherelationship

intentionoftheircustomersbyincreasingtheperceivedfirmequity,theperceivedbrand

equity,andtheperceivedchannelequity.

Besidesrelationshipintention,consumers’attitudetowardsrelationshipmarketing

alsoplaysanimportantrole.Jonesetal.(2015)arguedthatconsumers’attitudetowards

relationshipmarketinghasastrongpositiveimpactontheirlikelihoodofdevelopinga

relationshipwithacompanyandthus,badgeringconsumersthatarenotinterestedin

developingrelationshipswithrelationshipmarketingmaterialshastheoppositeeffect

and may ultimately lead them to switch companies. This underlines the need for a

company to know his customer and his preferences in order to improve his attitude

towardsrelationshipmarketingandthereby,itslikelihoodtopositivelyrespondtothe

company’srelationshipmarketingefforts.

1.2. Relationshipmarketingeffectiveness

Aconsiderableamountofresearchhasbeendedicatedtothefactorsinfluencingthe

successofrelationshipmarketing.Mostresearch isbaseduponaconceptualmodel in

whichrelationalconstructsmediatetheeffectsofrelationshipmarketingstrategies,also

called antecedents, onoutcomes. Yet, researchers fail to agree aboutwhich relational

mediatoriskeytoperformanceoutcomes.Thus,thefollowingsectionwillanalysethe

relationalmediatorsthatplayaroleintheeffectivenessofrelationshipmarketing.

1.2.1. Thecommitment-trusttheory

AccordingtoMorganandHunt(1994),relationshipcommitment,definedas“an

enduringdesire tomaintainavaluedrelationship” (Moorman,Zaltman,&Deshpande,

1992,p.316),andtrust,definedas“awillingnesstorelyonanexchangepartnerinwhom

one has confidence” (Moorman, Deshpande, & Zaltman, 1993, p. 82) are the key

8.

components of successful relationship marketing. Their findings indicate that the

presenceof relationshipcommitmentand trustengenders,amongothers, cooperative

behaviourswhichareattheessenceofrelationshipmarketing.Therefore,theyposition

relationship commitment and trust as key mediating variables in a firm’s relational

exchanges with its partners. Furthermore, commitment is positively influenced by

relationship termination costs and shared values whereas trust is affected by

communication, opportunistic behaviour and shared values (Morgan & Hunt, 1994).

Figure1providesanoverviewofthefactorsinfluencingthemediatingvariablesandof

theoutcomesgeneratedbythemediatingvariables(Morgan&Hunt,1994).

Figure1.RelationshipCommitmentandTrust:thekeymediatingvariablesofrelationshipmarketing.

Reprintedfrom“TheCommitment-trusttheoryofrelationshipmarketing,”byR.M.Morgan,&S.D.Hunt,

1994,JournalofMarketing,58(3),p.22.Copyright1994byAmericanMarketingAssociation.

1.2.2. Ameta-analyticframework

However, Palmatier et al. (2006) demonstrated that the linkage between

antecedents,relationalmediatorsandexchangeoutcomesismorecomplexthanthat.In

theirmeta-analysis, they identified four relationalmediators (i.e., commitment, trust,

relationship satisfaction, and relationship quality) that connect the antecedents and

outcomes,whicharebothclassifiedas“customer-focused”,“seller-focused”or“dyadic”

9.

dependingontheperspective.Figure2allowsabetterunderstandingoftheiranalysisby

depictingthedifferentlinksthatexistbetweentheantecedents,therelationalmediators,

andtheoutcomes(RobertW.Palmatieretal.,2006).Theirstudysupportsthegeneral

idea that relationship marketing and strong relationships positively influence

performance.

Nevertheless, they also reveal that relationship marketing strategies have

distinctiveeffectsacrossthedifferentrelationalmediatorswhichinturnaffectoutcomes

differently.Forexample,customerrelationshipbenefitshavethestrongestinfluenceon

commitment whereas relationship investments, which comprise the time, effort and

resourcesinvestedinbuildingrelationshipsfromtheseller’sperspective,havetheleast

effect on commitment. Likewise, commitment has the greatest impact on customer

loyaltywhereasrelationshipquality,describedasan“overallassessmentofthestrength

ofarelationship”(RobertW.Palmatieretal.,2006,p.138),hasthegreatestimpacton

sellerobjectiveperformance.Thesefindingsindicatethatthereisnosuchthingasthe

most effective relationshipmarketing strategy or the key relationalmediator.Rather,

marketsshouldfocusonbuildingrelationshipsthatarestrongonallitskeyaspectsand

ontargetingstrategiestoaddressspecificrelationalaspects.

Figure2.RelationalMediatorMeta-AnalyticFrameworkofRelationshipMarketing.

Reprintedfrom“FactorsInfluencingtheEffectivenessofRelationshipMarketing:AMeta-Analysis,”byR.

W.Palmatier,R.P.Dant,D.Grewal,&K.R.Evans,2006,JournalofMarketing,70(4),p.137.Copyright2006

byAmericanMarketingAssociation.

10.

1.2.3. Theroleofcustomergratitude

Additionally,Palmatieretal.(2006)noticethattheexistingrelational-mediated

framework is lacking one or more mediators in order to be comprehensive. Thus,

Palmatier,Jarvis,Bechkoff,andKardes(2009)analysetheeffectofgratitudefollowedby

a desire to reciprocate on performance. Gratitude typically occurs after receiving a

benefit and has two components: affective and behavioural. The affective component

refers to feelings of gratefulness for receiving a benefit whereas the behavioural

componentrelatestoactionsundertakentorespondtothebenefitsreceived.Regarding

its role in relationship marketing, gratitude not only mediates a stronger effect on

performanceoutcomesthancommitmentbutalsoenhancescustomer’strustintheseller

resultinginanimprovedrelationalperformance.Duetothefeelingsofgratitudeinduced

byrelationshipmarketing,customersfeeltheneedtoreciprocateandengageinpositive

gratitude-basedbehaviours.Thisobviouslyleadstohighersalesbutalsoinitiatesacycle

ofreciprocationandthereby,reinforcestheoverallrelationship.

Thesefindingsareofgreatimportanceastheyprovideabasisfornewstrategies

that managers can implement to improve the effectiveness of their relationship

marketing(RobertW.Palmatieretal.,2009).Firstofall,sellersshoulddesignprograms

inawaythattheyincreasethecustomers’perceptionoftheseller’s freewill.Offering

flexibleandcustomizableprogramspositively influences thecustomer’sperceptionof

freewillandthus,hasagreatimpactonhisfeelingsofgratitudeorhisneedtoreciprocate.

Secondly,sellersshouldcarefullychoosethemomentandthevalueoftherelationship

marketing benefit. Indeed, the customer’s gratitude increases with the need for the

benefitandtheperceivedvalueofthebenefit.Thirdly,sellersshouldenablecustomers

toreciprocatesoonafterreceivingarelationshipmarketingbenefitastheirfeelingsof

gratitudetendtodeclineintime.

11.

Toconclude,whencorrectlyimplementedanddirectedtowardstherightcustomers,

relationship marketing has many potential benefits. Regarding the effectiveness of

relationshipmarketing,variousrelationalconstructsmediatetheeffectsofrelationship

marketingstrategiesonoutcomesbutthereisnotonestrategyoronemediatorcentral

to the success of a company’s relationship marketing. Marketers should start by

determiningtherelationalaspectstheywishtotargetaswellastheoutcomestheydesire

toobtainthroughtheirrelationshipmarketing.Thiswillguidetheirdecisionwithregards

to which strategy and relational mediator to focus on. Among the most common

mediators are trust, relationship commitment, relationship satisfaction, relationship

quality,andgratitude.Ultimately,marketersshouldmakesure tobuildstrongoverall

relationships.Nowthatwehaveabetterunderstandingof theconceptofrelationship

marketing, it remains to be determined what drives consumers to participate in a

relationshipwithafirm,whichwillbethefocusofthenextchapter.

12.

2. Equitytheory

Manyresearchershavebuiltuponequitytheorytoexplainconsumers’motivationto

participateinarelationshipwithafirm,whichiswhywewilldiscussequitytheoryin

thischapter.Westillstartbydescribingtheprinciplesofequitytheory. Next,wewill

applytheconceptofequitytheoryonrelationshipmarketing,andparticularly,onloyalty

programs,beforeendingthischapterwithabriefconclusion.

2.1. Theoreticalfoundation

Establishingandmaintainingbuyer-sellerrelationshipsisatthebasisofrelationship

marketing. However, managing an effective relationship in a consumer context

characterizedbyintensecompetitionandpricepressuresremainsachallenge(DeWulf

et al., 2003). Therefore, it is fundamental to understand what drives consumer

participationinanexchangerelationshipwithafirm.

Equitytheorystatesthat“peoplecomparetheratiosoftheirperceivedoutcomesto

theirinputswiththecorrespondingratiosofothers”(Samaha,Palmatier,&Dant,2011,

p.102).Equitytheoryiscloselylinkedtotheconceptoffairness.Indeed,exchangestend

to be considered as fair when the ratio of input and outcomes is the same for all

participants(Darke&Dahl,2003).Morespecifically,peoplecomparetheratiosoftheir

perceivedoutcomesrelativetoinputswiththecorrespondingratiosofotherstomake

assessments about two distinctive categories of unfairness or injustice, namely

distributivejusticeandproceduraljustice.Theformerrelatestowhoreceivedwhat,or

unfairnessoftheoutcome,whereasthelaterreferstohowitwasreceived,orunfairness

oftheprocess(Henderson,Beck,&Palmatier,2011).

Therefore,inequityappearswhentheperceivedinputsand/oroutcomesarenotin

balancewiththeperceivedinputsand/oroutcomesofthereferent(DeWulfetal.,2003).

In other words, inequities emerge when the ratios of input and outcomes are not

perceivedasfair.Theperceptionofinequities,ortheperceptionoffairness,willinfluence

thelevelofsatisfactionaswellasthebehaviourofthepartiesinvolved.Morespecifically,

the party with the lower ratio will display feelings of dissatisfaction, anger, or

13.

resentment,whereas thepartywith thehigher ratiowill exhibitpositive feelingsand

increasedsatisfaction(Darke&Dahl,2003;DeWulfetal.,2003).

Generally,peoplerespondtoperceivedinequitiesbyadaptingtheirowninputsorby

initiatingapunitivebehaviourthatpenalizestheotherpartywiththeaimofrestoringa

moreequitablestate(Samahaetal.,2011).Inthecontextofbuyer-sellerrelationships,

perceivedunfairnessmayleadcustomerstopunishthesellerandthereby,deepenthe

negativeeffectsofexistingconflict.Asaconsequence,perceivedunfairnesshasastrong

negative impact on the quality of a relationship and damages relationshipmarketing

activities,andsubsequently,firmperformance.

2.2. Equitytheoryandloyaltyprograms

Based upon the principles of equity theory, customers should receive benefits or

rewards inaccordancewith theirownrelativeeffortsor inputs(Samahaetal.,2011).

Indeed, if consumers consider the costs associated with their participation in a

relationshipmarketingprogramsuchasaloyaltyprogramastooelevated,theywillavoid

engagingintheprogram(Ashleyetal.,2011).

Therefore, De Wulf et al. (2003) argue that equity theory plays a role in the

consumer’s decision process regarding his participation in a loyalty program. More

specifically,boththeparticipantandtheprovideroftheprogramwillhavetorenounce

to something and they expect the cost of renouncing to be offset by the advantages

received.Ontheonehand,theparticipanttradessomefreedomofchoiceregardingthe

providerselectionfortherewardsofferedbytheloyaltyprogram.Ontheotherhand,the

provideriswillingtoaddextravaluefortheparticipantthroughcustomerrewardsashe

expects thenetpresentvalueof the long-termrelationshipwith theparticipant tobe

positive.

14.

Asaconclusion,equitytheorystatesthatpeopleshouldreceivebenefitsorrewards

proportional to the relative efforts or inputs they provide. Perception of equity or

inequity directly leads to fairness judgements, which has a significant impact on the

buyer-seller relationship. Applied to relationship marketing programs, perceived

unfairnesshasastrongnegativeeffectonthesuccessoftheprogram.

15.

3. Customerloyalty

Asdiscussedinthefirstchapter, increasingcustomerloyaltyrepresentsoneofthe

mainobjectivesof relationshipmarketingwhich iswhy this chapterwill focuson the

notion of customer loyalty. First of all, we will expose the theoretical foundation of

customerloyaltyandpresentcustomerloyaltyasatwo-dimensionalconstructcomposed

ofattitudinalandbehaviouralloyalty.Then,wewillbrieflydiscussthedifferenttypesof

loyaltiesbeforefocusingonthemaindriversofcustomerloyalty.Finally,wewillanalyse

thedifferencebetweencustomer loyaltyandcustomerprogram loyalty followedbya

shortconclusion.

3.1. Definitionandtheoreticalfoundation

Achievingcustomerloyaltyconstitutesanelementarymarketinggoalwhichiswhy

customer loyalty ismore thanoftenat the centreofmarketingefforts (Watson,Beck,

Henderson, & Palmatier, 2015). Through their loyalty programs, companies hope to

developcustomerloyaltytoultimatelyincreaseprofitability.Yet,thereisnouniversally

agreeddefinitionofcustomerloyalty.

AccordingtoJacobyandChestnut(1978),loyaltyisdeterminedbythreeconditions.

Firstly, on a cognitive level, the consumer is able to prove that the chosen brand is

superiortoitscompetitors.Secondly,onanemotionallevel,theconsumermustevidently

preferthebrandtoothers.Thirdly,theconsumermusthavetheintentiontopurchase

thebrandagain.

Watsonetal.(2015)arguedthatfromaconceptualstandpointcustomerloyaltycan

bedefinedas“acollectionofattitudesalignedwithaseriesofpurchasebehavioursthat

systematicallyfavouroneentityovercompetingentities”(Watsonetal.,2015,p.803),

but suggested that empirical definitions should adda temporal aspect.Therefore, the

definitionbyOliver(2014)seemsappropriateasheincludesthenotionofstabilityover

timebydescribingloyaltyas“adeeplyheldpsychologicalcommitmenttorepurchasea

product or repatronize a service in the future despite obstacles or disincentives to

achievetheconsumptiongoal”(Oliver,2014,p.23).

16.

ForLichtléandPlichon(2008),loyaltyisdeterminedby“thepersistence,consistency,

coherence and tendency of the relationship over time, as well as the capacity of the

consumertoresistbrandsthatdonotbelongtohisloyaltyset”(Lichtlé&Plichon,2008,

p.127).Indeed,theyarguethattheexclusiveaspectofloyaltyisnotmandatoryandthat

havingmultipleloyaltiesshouldbeunderstoodasbeingloyaltoseveralbrandswithina

setratherthanbeingdisloyal.

Historically, two main approaches have emerged, namely the attitudinal and the

behavioural approaches. However, some argue that customer loyalty should not be

explained by one or the other approach, but should rather be considered as a two-

dimensional construct. Thus, the following section will further detail the two-

dimensionalconceptofcustomerloyalty.

3.2. Atwo-dimensionalapproach

3.2.1. Attitudinalapproach

Accordingtotheattitudinalapproach,aconsumerisloyalwhenhehasdeveloped

a positive attitude towards a brand (Lichtlé&Plichon, 2008). In thisway, attitudinal

loyalty refers to attitudinal preference as well as commitment towards the brand

(Bennett&Rundle-Thiele, 2002). Strong attitudes have an impact onmany customer

performance-relatedbehaviours.Thus, customerswith a strongpositive attitudemay

resistcompetitors’offersevenwhentheyarebetter(Watsonetal.,2015).

Generally, attitudinal loyalty is measured using repurchase intention, price

tolerance, resistance against better alternatives, intention to advocate the product or

service, and word-of-mouth (Baloglu, 2002; Lichtlé & Plichon, 2008; Szczepanska &

Gawron, 2011). Furthermore, attitudinal loyalty can either be measured via its

antecedents or via its outcomes. On the one hand, antecedents comprise consumer

commitmentandconsumerattachment.Forinstance,customersmaybeaskedhowmuch

theylikethebrandorhowmuchtheyfeelcommittedtothebrand(Uncles,Dowling,&

Hammond, 2003). On the other hand, outcomes or consequences include consumer

17.

recommendation and positive word-of-mouth. For example, customers may be

questionediftheywillrecommendthebrand(Unclesetal.,2003).

3.2.2. Behaviouralapproach

Thebehaviouralapproachstatesthataconsumerisloyalwhenheregularlybuys

thesamebrand(Lichtlé&Plichon,2008).Thus,behavioural loyalty involvesrepeated

purchasesthatareobviouslybeneficialforafirm’sfinancialperformance(Watsonetal.,

2015).However,proponentsofthebehaviouralapproachoftenignorethepossibilitythat

repetitivepurchasebehaviourmaystemfromreasonsotherthanloyalty,suchaslackof

alternatives(Watsonetal.,2015).

Accordingtothebehaviouralapproach,loyaltymaybemeasuredviapurchaseor

visitfrequency,timeoramountspentateveryvisit,(re)purchaseprobability,purchase

sequence, retention rate, and switching behaviour (Baloglu, 2002; Lichtlé & Plichon,

2008;Szczepanska&Gawron,2011).Asthesemeasurementsarebaseduponcustomer

behavioursthatareeasilyobserved,itseemsevidentthatbehaviouralmeasurementsare

lessdifficulttoimplementandmonitorthanattitudinalmeasurements(Lichtlé&Plichon,

2008).

3.2.3. Mixedorcompositeapproach

Themixedorcompositeapproachindicatesthatafavourableattitudetowardsa

brand must be accompanied by repurchase behaviour (Lichtlé & Plichon, 2008).

Accordingly, a loyal customer is onewho repeatedlypurchases abrand as a result of

positive feelings towards thebrand.Thus, themixedor compositeapproach refers to

loyalty as being composed of attitudinal and behavioural elements,which is also the

approachthatwewilladoptthroughoutthispaper.

To conclude, customer loyalty requires both a favourable attitude and repeat

purchasebehaviour.Ontheonehand,focusingonbehaviouralonepreventscapturing

themotivationsbehindthepurchases.Bystudyingbehaviouralone,oneignoresif the

repeatpurchaseoccursforreasonsofconvenienceortrueloyalty(Baloglu,2002;Lichtlé

18.

& Plichon, 2008). On the other hand, focusing on attitude does not provide any

explanationsregardingcompetitiveeffects, familiarityandsituational factors(Baloglu,

2002).Therefore,customerloyaltyshouldbeconsideredasatwo-dimensionalconstruct,

composedofattitudinalandbehaviouralelements.

Nevertheless,measuring loyalty remains a challenge. There are variousmeasures

suggestedbyliterature,someincludingattitudinalelements,someincludingbehavioural

elements and someeven includingboth.Given thatwe conceptualize loyalty asbeing

composedofattitudinalandbehaviouralaspects,itonlyseemslogicaltoconsiderloyalty

measures thatassessbothattitudesandbehaviours.Besides this, studieshaveshown

thatbothaspectsofloyaltytogetherhaveagreaterimpactonobjectiveperformancethan

eitheralone(Watsonetal.,2015).

3.3. Loyaltytypology

Baseduponthecross-classificationofattitudinalandbehavioural loyalty,a loyalty

typologycanbeestablished.Figure3(Baloglu,2002)showsthefourdifferenttypesof

loyalty: low(orno) loyalty, spurious loyalty, latent loyalty,andhigh(or true) loyalty

(Baloglu, 2002). First of all, customerswith low loyalty are characterized by aweak

attitudinalattachmentandlowrepeatpatronage.Secondly,thosewithspuriousloyalty

expresshighpatronage levelsalthoughtheyarenotstronglyattachedtothebrandor

company.Thirdly,customerswithlatentloyaltydonotmakefrequentpurchasesdespite

holding a strong attachment to thebrandor company. Lastly, thosewithhigh loyalty

exhibit high levels of both attitudinal attachment and repeat patronage. This

classificationindicatesthatloyaltyappearsunderdifferentforms.Therefore,thevalueof

loyalty for a firm is not solely influenced by the level of loyalty, but also by the

compositioninthecustomerportfolio(Watsonetal.,2015).

19.

Figure3.Loyaltytypologybasedonattitudeandbehaviour.

Reprinted from “Dimensions of customer loyalty: Separating friends fromwellwishers,” by S. Baloglu,

2002, Cornell Hotel and Restaurant Administration Quarterly, 43(1), p. 48. Copyright 2002 by Cornell

University.

3.4. Driversofcustomerloyalty

Throughoutliterature,threemaindriversofcustomerloyaltyhavebeenidentified,

namely commitment, trust, and satisfaction. First of all, commitment, or thedesire to

maintainarelationship(Moormanetal.,1992),hasproventobeacentralantecedentof

company loyalty (Evanschitzky et al., 2012). Secondly, numerous researchers have

demonstrated a positive relationship between loyalty and trust, also defined as a

“willingnesstorelyonanexchangepartnerinwhomonehasconfidence”(Moormanet

al.,1993,p.82).Forinstance,MorganandHunt(1994)positionedbothcommitmentand

trust as the key mediating constructs of relationship marketing. Thirdly, satisfaction

referstothe“overallevaluationoftheextenttowhichtheobject(e.g.product/service)

hasfulfilledthecustomer’sexpectationsovertime“(Hansen,Samuelsen,&Sallis,2013,

p.1161).Eventhoughallthreeelementshaveastrongpositiveeffectoncompanyloyalty,

commitment and trust are said to play a more important role than satisfaction

(Evanschitzkyetal.,2012)

3.5. Companyloyaltyandprogramloyalty

Thenotion of customer loyalty typically comprises company or brand loyalty and

programloyalty.However,customersloyaltoaprogramdonotautomaticallybecome

loyaltothecompanyorthebrand(Evanschitzkyetal.,2012).Forinstance,Unclesetal.

20.

(2003) argued that in case of an attractive program, customers may rather build a

relationshipwiththeprogramthanwiththebrand.Whereasprogramloyaltyreferstoa

positiveattitudetowardsthebenefitsoftheloyaltyprogram,companyloyalty,orbrand

loyalty,relatestothepositiveattitudetowardsthecompanybrand(Evanschitzkyetal.,

2012).

As the two loyalties differ in their nature, they also have different antecedents

(Evanschitzky et al., 2012). As described in the previous section, company loyalty is

mainlydrivenbycommitment,trust,andsatisfactionwhichallconcernthequalityofthe

relationshipbetweenthecustomerandthecompany.Asforprogramloyalty,thefindings

byEvanschitzkyetal.(2012)indicatethateconomicdrivers,suchastheeconomicvalue

offered by the program, have a significant effect on program loyalty. In otherwords,

compared to program loyalty, company loyalty ismore emotion-based. Although the

effectiveness of loyalty programswill be discussed in the following chapter, amajor

conclusioncanalreadybedrawnhere.Fortheirloyaltyprogramstobesuccessfulinthe

longterm,companiesshouldfocusonofferingbothemotionalandeconomicbenefitsto

thecustomers.

To conclude, there is no universal definition of customer loyalty despite its

importanceinmarketingliterature.Wedecidedtoconsidercustomerloyaltyasatwo-

dimensionalconstruct,composedofattitudinalandbehaviouralelements.Inthatway,

customer loyalty refers to a favourable attitude towards a brand, accompanied by

repurchase behaviour. Based upon the level of each component, attitudinal and

behavioural, fourdifferent typesof loyalty canbedistinguished.Finally, thenotionof

customer loyalty isgenerallyusedtodescribecompanyorbrandloyaltyandprogram

loyaltywhicharetwodistinctiveconceptsthatshouldnotbeconfused.Indeed,company

orbrandloyaltyreferstoapositiveattitudetowardsthecompanyorbrandandismainly

drivenbythequalityofthebuyer-sellerrelationshipwhereasprogramloyaltyrelatesto

a positive attitude towards the benefits of the program and is largely stimulated by

economicdrivers.

21.

4. Customerloyaltyprograms

Nowthatwehaveanalysedtheconceptsofrelationshipmarketing,equitytheoryand

customerloyalty,wewillturnourattentiontowardsloyaltyprograms,whichareatthe

centreofthispaper.Wewillstartthischapterbyexposingthetheoreticalbackgroundof

loyalty programs. Then, we will briefly describe the potential obstacles to loyalty

programs before presenting the different types of loyalty programs that exist.

Afterwards,wewillfocusontheunderlyingmechanismsofloyaltyprograms.Finally,we

will analyse the factors influencing the effectiveness of loyalty programs before

concludingthisimportantchapter.

4.1. Definitionandtheoreticalfoundation

Many different terms are used to describe loyalty programs, including reward

programs,frequencyrewardprograms,loyaltycardsandloyaltyschemes.Inthispaper,

theterm“loyaltyprogram”isusedtoencompassallthesetermsandloyaltyprograms

are defined as “any institutionalized incentive system that attempts to enhance

consumers’consumptionbehaviourovertimebeyondthedirecteffectsofchangestothe

priceorthecoreoffering”(Hendersonetal.,2011,p.258).

Furthermore,loyaltyprogramsshouldhavethefollowingattributes:theyshouldbe

structured,long-termoriented,fosterloyalty,rewardmembersbasedontheircurrentor

futurevaluetothefirm,andadaptitsmarketingeffortstoitsmembers(Dorotic,Bijmolt,

&Verhoef,2012).Firstly,astructuredloyaltyprogrammeansthattheprogramshould

bemembership-based.Thisenablestheprogramprovidertoacquiresomeinformation

aboutitsmemberswhichcanbeusedtoimprovetherelationshipbetweenbothparties.

Secondly,loyaltyprogramsshouldnotbeintroducedforonlyashortperiodoftimeas

theyareexpectedtoformalong-terminvestmentforboththeproviderandthemembers.

Thirdly, loyaltyshouldstimulatecustomerretentionandcustomersharedevelopment

andthereby,fosterattitudinalandbehaviouralloyalty.Fourthly,loyaltyprogramsshould

reward customers for their loyalty based upon their current or future value to the

programprovider.Rewardsmayforinstanceconsistindiscounts,gifts,orpreferential

22.

treatment. Lastly, the provider of the loyalty program should make sure that its

marketingeffortsfitthemembers,forinstancethroughpersonalizedoffersormailings.

Asitisformostrelationshipmarketingprograms,loyaltyprograms’ultimategoalis

toincreasecompanyprofitability.Theyaimtodosothroughincrementingsalesrevenues

andpreservingthecurrentcustomerbase(Unclesetal.,2003).

Themainbenefitsofaloyaltyprogramincludeincreasedcustomerloyalty,greater

advocacy,higherrepeat-purchaserates, lowerpricesensitivity,andstrongerattitudes

towardsbrandsandretailers(Berman,2006;McCall&Voorhees,2010).

Additionally,iftheloyaltyprogramkeepstrackofthecostumer’spurchasehistory,it

hasmanymoreperksforthefirm,suchasaccesstovaluableinformationonconsumers

andconsumertrends,abilitytotargetspecificconsumersegments,higheraveragesales

throughup-sellingandcross-selling,andgreatersuccessinimplementingproductrecalls

(Berman,2006).

4.2. Potentialobstacles

Despitethepreviouslycitedbenefits,loyaltyprogramsalsofaceanumberofpotential

obstacleswhichcompaniesshouldbeawareof(Berman,2006).

Firstly, inmanymaturemarkets,firmsofferloyaltyprogramsthataresimilarwith

regards to membership provisions, purchase requirements, and rewards. As a

consequence, firmsareunable toderive long-termcompetitiveadvantages from their

loyaltyprograms,butatthesametime,theydonotwanttopulloutfromtheirloyalty

programcommitmentsfearingtheycouldlosesales.

Secondly, customersoften joinmultiple loyaltyprogramsof competing companies

whentheirproductofferingand/ortheirloyaltyprogramsaresimilar.Thus,theyswitch

loyaltyamongtheseprogramsandarenotloyaltoonespecificcompany.

23.

Thirdly,firmsoftenfailtochoosethemostaccuratetypeofprogram.Indeed,when

considering implementinga loyaltyprogram, firmsshould takeanumberofvariables

intoaccount,includingtheresourcelevels,thetypeofcustomerthattheyaimtoattract,

orthedegreeofmanagerialcommitmenttotheprogram.

Fourthly,firmstendtofocustoomuchonmonetaryorgiftrewards.Insteadofsolely

offering discounts of free products, firmsmay use other benefits to stimulate loyalty

basedonpurchasevolumes.Therefore,theymayrewardtheirmostloyalcustomersby

offeringthemadditionalbenefits,suchasspecialcustomersupport,personalshoppers,

or preferential access to offers, whichmay be considered as more valuable to these

customers.

Fifthly, firms should not use their loyalty program to cover up for ineffective

marketing.Indeed,theaimofaloyaltyprogramistoreinforcecustomerloyaltyandthus,

aloyaltyprogramshouldnotbethereasonthatconsumerspurchaseaparticularbrand

orbuyfromaspecificretailer.

Lastly, program privacy issues represent a major potential pitfall. Firms that use

customerdatabasesfortheirloyaltyprogrammustensurethattheycontroltheaccessof

sensitivedatasuchasincome,socialsecuritynumberandpurchasehistory.

Thesepotentialpitfallsunderlinetheneedforcompaniestoofferaloyaltyprogram

that is suited to the customer’s needs and that differentiates itself from those of its

competitors.

4.3. Loyaltyprogramtypology

Therearevariouswaystocategorizeloyaltyprograms.Wechosetoputforwardthe

classification proposed by Berman (2006), which is based on the complexity of the

programanddistinguishesfourmaincategories.

Type1,themostbasicformat,providesmemberswithanadditionaldiscountatthe

register.Membershipisopentoallcustomersandeachcustomergetsthesamediscount

24.

disregardingofhisorherpurchasehistory.Thus,theprogramdoesnotencouragerepeat

purchasingandonlyrewardscardownershipinsteadof loyalbehaviour.Forexample,

Acuitis, an optician, provides their members with a 10% discount each time they

purchasecontactlenses.

Type2rewardsmembersbygivingthemonefreeitemwhentheyhavepurchaseda

determinednumberofunits.Thefirmdoesnotneedtomaintainacustomerdatabaseas

thecustomerkeepsholdofhisorherpurchases,oftenundertheformofacard.Examples

oftype2programsincludeafreejuice(Guapa)orafreesandwich(Panos).

Type3offersmembersrebatesorpointsbasedoncumulativepurchases.Forthistype

ofprogram,thefirmneedstomaintainadatabasethattracksamember’spurchasesand

points.Forinstance,membersoftheloyaltyprogrambyDelhaizeorCarrefourreceive1

point for each2€ spent.Oncemembershave collected500points, theywill get a 5€

voucher.

Type4providesmemberswithtargetedoffersandmailings.This typeofprogram

necessitates a comprehensive customer database with customer demographics and

purchase history. For example, Ubereats uses its membership program to attract

consumerswhohavenotusedtheirservicelatelythroughsendingthemsuggestionsand

discountcodes.

Alltheprogramsexcepttype1arebuiltuponlower-levelprogramswhichmeansthat

firmscanupgradetheirprogramofferings.

4.4. Loyaltyprogrammechanism

AccordingtoHendersonetal.(2011),loyaltyprogramsinduceachangeinconsumer

behaviourbaseduponpsychologicalmechanisms from three specificdomains; status,

habitandrelational.

Firstofall, loyaltyprogramsprovideconsumersastatuswhich leads toapositive

comparisonwithothers.Ingeneral,humansareattractedbystatus-basedsystemsand

25.

theopportunitytoelevatetheirstatus.Conferringanelevatedstatustocustomersmay

thusmotivatethemtobehaveloyally.However,theeffectsofapossibledecreaseinstatus

aswellas theeffectsof theenvyandhostility feltbyotherconsumersmayoffset the

benefitsandthus,shouldnotbeneglected.

Secondly, loyalty programs create habits, and thereby, advantageous memory

processes.Tostimulatetheformationofahabit,contextstabilityisrequiredandboth

initialpurchase intentionandrepeatedpurchasesshouldnotdirectlybe linked to the

loyalty program incentives. The habit can be further developed through promoting

interactionamongconsumers,inparticularthroughencouragingsocialshopping.Indeed,

thisprovidesfortargetedconsumersastablesocialcontextandthereby,strengthensthe

habit, and for non-target consumers incentives to imitate the behaviours of target

consumers.

Thirdly, loyalty programs build relationshipswhich engenders amore favourable

treatmentbyconsumers.Forsometimenowfirmshaveunderstoodthemultiplebenefits

that relationship marketing entails and thus, focus on relationship-building loyalty

programs. Factors that play a key role in initiating a strong relationship include

benevolentmotives,discretionaryrewards,andcommunalqualitiessignalledbythefirm.

Theimpactoftherelationshipisevenstrongerwhenconsumersdeveloparelationship

withanindividualemployeeasopposedtotheoverallcompanyandwhentheprogram

rulesareperceivedasfair.

4.5. Loyaltyprogrameffectiveness

Despite considerable interest and investment in loyalty programs, the number of

activemembersremainsrelativelylowandtheimpactofloyaltyprogramsoncompany

profitabilityismorethanoftencalledintoquestion.Thus,designingandmaintainingan

effective loyaltyprogramremainsachallenge.Basedupon the findingsbyMcCalland

Voorhees(2010)andSteinhoffandPalmatier(2016),theelementsthatdeterminethe

effectivenessofaloyaltyprogramcanbegroupedintofourcategories;thestructureof

the loyalty program, the structure of the rewards, the consumer fit with the loyalty

program,andtheeffectsofloyaltyprogramsontargetandbystandercustomers.

26.

4.5.1. Thestructureoftheloyaltyprogram

Therearetwoprevailing loyaltyprogramstructures,namely frequencyreward

andcustomertier(Doroticetal.,2012).Ontheonehand,frequencyrewardprograms

grantdiscountsorgiftstoallmemberswhoreachagiventhreshold.Theyaretypicallyof

the form “Buy X amount or times, get a reward”. On the other hand, customer tier

programsdividecustomersintodifferentcategoriesandgivethemrewardsbasedupon

thecategorytheyarein.Inotherwords,thevalueoftherewardsgrowsasthecustomer

increaseshiscumulativespendingwithinthe firmandmovesuptoahighercategory.

Thistypeofstructurebeingmorecomplex,itmeritsfurtherelaboration.

Customer tier programs have proven to be particularly powerful. They give

customersa senseof identityand fit, notonlywith the firmbutalsowithotheralike

customers (McCall & Voorhees, 2010). Furthermore, tiered programs enable firms to

furthersegmenttheircustomersandadapttheirrewardstothedifferentcustomertiers.

Tobeeffective,acustomertierprogramshouldmeetfourrequirements(Doroticetal.,

2012).Firstofall,thefirmmustestablishsignificantdifferencesbetweenthedifferent

tiers.Secondly, the firmneedstodiscriminateamongcustomerswithoutdiscouraging

thosewhoaresensitivetowhattheygetincomparisontoothers.Thirdly,theprogram

needstomotivatecustomerstoboosttheirloyaltyovertime.Lastly,thefirmshouldnot

neglectthefactthathigh-tiercustomerswillbemorecriticalintheirevaluations.Indeed,

thesegmentationofloyaltyprogrammembersraiseshigh-tiercustomers’perceptionof

statuswhichleadstooverallpositivefeelingsregardingtherelationship,butitmayalso

makethemmoredemandingandvulnerable.

4.5.2. Thestructureoftherewards

Loyalty programs offer a wide range of rewards which can be differentiated

accordingtotheirnatureandutility.

Regardingthenatureofthereward,onedistinguishesbetweendirectandindirect

rewards.Directrewardsaretiedtotheprovider’sofferingorlineofbusinesswhereas

indirectrewardsaretypicallyunrelated(Doroticetal.,2012).Severalstudieshaveshown

27.

that the involvementof the consumer influences the evaluationofdirect and indirect

rewards (McCall&Voorhees, 2010). Indeed, consumerswho are highly involved in a

product category consider the consistency between the provider and the reward as

important and thus, prefer direct rewards. On the contrary, consumerswho are less

involved in a product category are relatively indifferent between direct and indirect

rewards.

Asregardsutility,mostrewardsprovideeitheracquisitionorexchangeutility.On

the one hand, acquisition utility refers to direct benefits of the loyalty program and

typically includes economic rewards and other tangible rewards (McCall&Voorhees,

2010).Thosekindofrewards,alsoknownunderthenameofhardrewards,generally

provide savings through discounts, coupons, rebates or cash (Dorotic et al., 2012).

Although hard rewards are favoured among customers, theymay decrease customer

loyalty as they draw the attention from the brand to the reward, and thereby, lower

customers’intrinsicrelationshipmotivation.

Ontheotherhand,exchangeutilityrelatestointangiblerewards,alsocalledsoft

rewards (McCall & Voorhees, 2010). Soft rewards offer psychological and emotional

benefits,includingpreferentialtreatment,supplementaryservicesorupgrades,special

events,entertainmentorraisedstatus(Doroticetal.,2012).Theytendtobeparticularly

effectivetoenhancebrandloyaltyastheyreinforceattitudinalcommitment,

4.5.3. Theconsumerfitwiththeloyaltyprogram

Anotherimportantfactortotheeffectivenessofaloyaltyprogramiswhetherthe

programfitstheconsumer’sidentity.Indeed,iftheprogrammeetstheconsumer’sneeds

and he can relate to the benefits ofmembership, hewill probably view the program

positivelyandincreasehispurchasefrequency(McCall&Voorhees,2010).Thisviewis

supported by Ha and Stoel (2014) who demonstrate that the fit between a loyalty

program’s reward characteristics and a consumer’s identity goal will reinforce the

consumer’sidentitycongruencewhichreferstoaconsumer’sperceptionthathisloyalty

program membership is important. Thus, consumers who have value-expressive

shoppinggoalswillperceivetheirmembershiptobemoresignificantwhentheirloyalty

28.

program offers rewards with value-expressive functions whereas consumers with

utilitarianshoppinggoalswillperceivetheirmembershiptobemoresignificantwhen

theirloyaltyprogramoffersrewardwithutilitarianfunctions.Amongthetwotypesof

rewards, value-expressive rewards have shown to be more effective. Moreover, the

identity congruence can even be further enhanced when the loyalty program

distinguishesitselffromtheotherloyaltyprogramsinthemarketplace.

4.5.4. Theeffectsontargetandbystandercustomers

Loyaltyprogramshaveanimpactontwotypesofcustomers;targetcustomers,

thosewhoreceiverewards,andbystandercustomers,membersornon-membersofthe

program who do not get rewards but watch others getting rewarded (Steinhoff &

Palmatier,2016).However,mostresearchsolelyfocusesontheeffectsofloyaltyprogram

ontargetcustomersandignorestheeffectstheymayhaveonbystandercustomers.

SteinhoffandPalmatier(2016)havedemonstratedthataloyaltyprograminduces

threekindsofcomparisons;withreciprocitynorms,withothers,andofinput-outcome

ratios,whichallinfluencetheeffectivenessofaloyaltyprogram.

Firstly, comparisonswith reciprocity consists in comparingexpectations about

the give and get in a relationship. In the framework of a loyalty program, if this

comparisonispositiveforthetargetcustomer,hewillexpressfeelingsofgratitudeanda

needtoreciprocatewhichresultsinanincreasedloyaltyprogramperformance.Thisis

inlinewiththefindingsbyPalmatieretal.(2009),discussedinchapterone,whostated

thatfeelingsofgratitudeengenderadesiretoreciprocatewhichpositivelyaffectsfirm

performance.

Secondly,comparisonswithothersstronglyaffectcustomerstatuswhichrelates

tothecustomer’sperceptionofoccupyinganimportantpositionwithinafirm’scustomer

hierarchy. Comparisons among consumers tend to have a positive impact on target

customers’statusandanegativeimpactonbystandercustomers’statusandthus,have

anopposingeffectonloyaltyprogramperformance.

29.

Thirdly, comparisons of input-outcome ratios consist in customers comparing

their own ratio of efforts to benefits, called internal equity, with the ratio of other

customers,calledexternalequity.Basedupontheirconsiderationsofequityorinequity,

customersmakefairnessjudgements.Asdiscussedinchaptertwo,perceivedfairnessor

unfairness has a strong impact on the quality of a relationship, and subsequently, on

relationshipmarketingprograms.Duetocross-customercomparisons,loyaltyprograms

may lead tounfairnessperceptionsamongbystandercustomerswhichhasanegative

impactonloyaltyprogramperformance.

As a conclusion, despite thewell-knownbenefits of loyalty programs for both the

seller and the buyer, loyalty programs face a significant number of obstacles and

designingandmanaginganeffectiveprogramremainsachallenge.Thereareanumber

offactorsthatinfluencetheeffectivenessofaprogramamongwhichweconsideredthe

structureoftheprogram,thestructureoftherewards,theconsumerfitwiththeprogram

and the effects of the program on target and bystander customers to be the most

significant.When creating a loyalty program, firms need to start by identifying their

customers’ needs to be able to design a programwhich is relevant to the individual

customer.Whiledecidingonastructurefortheprogramaswellasforitsrewards,firms

mustconsidertheoutcomestheywanttoachievethroughtheirloyaltyprogram.Finally,

theeffectsofloyaltyprogramsonbystandercustomersshouldnotbeneglectedasthis

may helpmarketers understand “the potential dangers of prioritizing the few at the

expenseofthemany”(Steinhoff&Palmatier,2016,p.89).

30.

5. Customerfrustrationinloyaltyprograms

Asdiscussedinthepreviouschapter,designinganeffectiveloyaltyprogramremains

challenging.Indeed,loyaltyprogramsfrequentlyfailtoachievetheirintendedobjectives

whichiswhyweconsideritimportanttodiscusstheeventualnegativeconsequencesof

loyaltyprograms.Morespecifically,wewilldefinethenotionoffrustrationwhichmay

appearasaresultofnegativeexperienceswithloyaltyprograms.Furthermore,wewill

expose a model of customer frustration in loyalty programs to provide a better

understandingoftheconcept.Finally,wewillendthischapterwithabriefconclusion.

5.1. Definitionandtheoreticalfoundation

Loyaltyprogramsaimtobebeneficialforboththecustomerandthecompany.The

former receives rewards for his loyalty whereas the latter benefits from a stronger

customerbaseandincreasedsalesrevenues.However,thosebenefitsonlyoccurwhen

customers consider participation in the program as rewarding and have no negative

experiences,whichisnotalwaysthecase(Stauss,Schmidt,&Schoeler,2005).Indeed,

participantsofloyaltydoencounternegativeexperiencesandcomplaintsarenumerous,

includingtherewardsbeingoftoolittlevalue,thesupplyoftheproductsadvertisedas

rewardsbeinginsufficientandtheprotectionofprivatedatabeingviolated.Therefore,

analysingthenegativeeffectsthatloyaltyprogramsmayhaveoncustomersseemsvital

fortheproperunderstandingofloyaltyprograms.

Frustration refers to a strong negative emotion as a result of the blocking or

preventionofapossiblyrewardingactorsequenceofbehaviour(Colman,2009).Applied

to loyaltyprograms,customer frustrationmayappear if customersdonotreceive the

rewards promised by the company in exchange for their loyal behaviour or if they

considerthebenefitsasworthless((Staussetal.,2005).

Frustrationisnottobeconfusedwithdissatisfaction.AshighlightedbyStaussetal.

(2005),frustrationdiffersinseveralaspectsfromdissatisfaction.Firstly,theconceptof

satisfactionrelatestobothpositiveandnegativeexpectationdisconfirmationswhereas

frustration solely refers to a negative expectation deviation. Secondly, dissatisfaction

31.

regardstheentirespectrumofunfulfilledexpectationswhereasfrustrationonlyconcerns

the negative consumer experiences in which the expected goal or reward is not

accomplished. Thirdly, dissatisfaction may refer to a slightly negative emotion as

opposed to frustration which is per definition a strong negative emotion. Fourthly,

comparedtofrustrationwhichsupposesthatcustomershaveanexplicitgoalbeforethe

experience, dissatisfaction may emerge without customers being aware of their

expectationsbeforetheexperience.Lastly,frustrationisbasedupontheassumptionthat

customersexpecttoreachtheaspiredgoalduetotheirpreviousexperiencesorpromises

by the company. However, this precondition is not necessary for the expression of

dissatisfaction.Asaconsequence,frustrationcanbeconsideredasthespecialformofa

stronglyfeltdissatisfaction.

5.2. Modelofcustomerfrustrationinloyaltyprograms

Figure 4 (Stauss et al., 2005) shows a model of customer frustration in loyalty

programs that revolves around three elements: frustration incidents, frustration

sensation,andfrustrationbehaviour.

Generally,themodelstatesthatfrustrationincidents,includingtherefusalofreward,

reduction of reward, and postponement of reward, trigger frustration sensation, also

describedasstrongnegativeemotions,whichleadtofrustrationbehaviour.Thelatter

relateto theactionsundergonetodiminishoreliminatethe frustrationsensationand

comprise intensificationofeffort,protestandavoidance.Morespecifically, frustration

incidentsareeitherdirectlyrelatedtotheloyaltyprogramortotherelationshipwiththe

companyand thus, thederiving sensationandbehaviourdiffer. Indeed, in thecaseof

relationship-relatedincidents,theincidentsarealsocausedbytheparticipationinthe

loyaltyprogram,buttheparticipants’frustrationsensationandbehaviouraredirected

towards the company and the relationshipwith this companywhereas in the case of

program-relatedincidents,theparticipants’frustrationsensationandbehaviourfocuson

theprogramitself.

Ontheonehand,program-relatedfrustrationincidentscomprisedifficultyofaccess,

impossibilityofclaimingthereward,worthlessnessofthereward,andredemptioncosts.

32.

The deriving frustration sensation differs according to the extent of the reward

withdrawal, the time of the reward withdrawal, the perceived deliberateness of the

withdrawal, and the expectation of the onset of frustration. Thus, the participants’

frustrationsensationisstrongerwhentheextentoftherewardwithdrawalis intense,

whenrewardwithdrawaloccurs late,whentherewardwithdrawal isperceived tobe

relativelydeliberate,andwhenparticipantsdonotexpectthattheywillbefrustrated.

Furthermore, participants tend to reactwith avoidance behaviourwhen the onset of

frustration is expected and with protest behaviour when the reward withdrawal is

perceivedtobedeliberateorwhenthefrustrationsensationisintense.Anintensification

ofeffortsmainlyoccursamongparticipantswhohavenotreachedanexclusivestatusin

theprogramyetbutbelievetheycan.

Ontheotherhand,relationship-relatedfrustrationincidentsincludediscrimination,

defocusing, and economization. As participants who experience relationship-related

frustration incidents are unable to intensify their efforts to lessen or eliminate the

frustrationsensation,theychooseprotestoravoidancebehaviour.

Figure4.Modelofcustomerfrustrationinloyaltyprograms.

Reprintedfrom“Customerfrustrationinloyaltyprograms,”byB.Stauss,M.Schmidt,&A.Schoeler,2005,

International Journal of Service IndustryManagement, 16(3), p.238. Copyright 2005 by Emerald Group

PublishingLimited.

33.

Toconclude,firmsneedtoknowthatfrustrationmayariseamongcustomerswho

encounter negative experiences with loyalty programs or who consider their

participationinsuchaprogramasnotrewarding.Frustrationincidentsengenderstrong

negativeemotions,referredtoasfrustrationsensation,whichinturnleadtofrustration

behaviour that manifests itself in an intensification of efforts, protest behaviour or

avoidance behaviour. Additionally, the relationships between the model elements is

moderatedbyfrustrationtolerance,whichreferstotheabilityofapersontowithstanda

frustratingsituation foracertain timewithoutresponding inadequately (Staussetal.,

2005).Thismodelprovesthat it is fundamental for firmsthatcustomersperceivethe

coreserviceaswellasthequalityoftheprogramassatisfactory.Moreover,firmsshould

carefullymonitorcustomers’behavioursothattheyareabletoreactoncetheydetectthe

slightestsignoffrustrationbehaviour.

34.

Part2:Practicalpart

Nowthatwehavereviewedtheexistingliteratureonthesubjectofloyaltyprograms,

wewill present the study that we have conducted.Wewill start this part by briefly

explainingthecontextofourstudybeforeintroducingourresearchproblem.Afterwards,

wewillfocusonthemethodologyusedforthepurposeofourstudy.Wewillitemizethe

overallapproachadopted forourresearchaswellas theprocessused tocollectdata.

Then,wewilldescribeouranalysistechniquebeforepresentinganddiscussingourstudy

results. Ultimately, we will end this part by advancing some recommendations and

limitationswithregardstoourresearch.

1. Contextofthestudy

First and foremost,wewill briefly put our study into context beforemoving onto

exposingourresearchproblem.

Our literature review revealed that loyalty programs, as part of relationship

marketing programs, have been the focus of considerable interest of researchers and

practitioners.However,manyloyaltyprogramsstillfailtoachievetheirobjectivesand

the impact of loyalty programs on company profitability has more than often be

questioned.Thismaypartiallybeexplainedthroughthescarcityofresearchfocusingon

consumers’motivationtoparticipateinloyaltyprograms.Infact,forloyaltyprogramsto

besuccessful,theyrequireactivecustomerparticipationandthus,itisfundamentalto

understandwhatdrivescustomerparticipationinloyaltyprograms.Ourstudyseeksto

fillthegapinthisareaofresearch.

ThestudybyDeWulfetal.(2003)isoneofthefewstudiesthatexploredthedrivers

ofcustomerparticipationinloyaltyprograms.Basedupontheprinciplesofequitytheory,

the authors realised a quantitative research in which they distinguished between

consumerinputsandoutputsasattributesinfluencingcustomerparticipationinloyalty

programs. Their findings support the theory that consumers aim to maximise the

expectedoutputswhileminimisingtheirinputs.Furthermore,theirstudyindicatesthat

35.

participationcostsandprogrambenefitsarethemaindriversofcustomerparticipation

inloyaltyprograms.DespitethesignificantcontributionsbyDeWulfetal.(2003),this

areaofresearchmaybefurtherexplored.

Whereas De Wulf et al. (2003) adopted a quantitative approach, we choose a

qualitativeapproachtogeneratenewelementsthatmightnotbecoveredbytheexisting

literature. The objective of this study is to understand consumers’ attitudes and

behaviourwithregardstoloyaltyprogramstodeterminewhatdrivestheirdecisionto

participateornot in a loyaltyprogram.Understanding themotivations andbrakes to

customerparticipationinloyaltyprogramswillenablemarketerstoincreasecustomer

engagement in loyalty programs, and thereby, improve the effectiveness of such

programs.

Besidesthis,thestudydatesfrom2003andthus,morerecentresearchmaybeofuse.

Loyaltyprogramshaveevolvedovertime,andsohasconsumers’purchasingbehaviour.

Withtheriseofthedigitalage,andmorespecifically,theecommerce,therearecountless

optionsforloyaltyprograms.Similarly,theconsumerdecisionjourneyhaschangedand

consumers have become more empowered. They may also have developed different

motivestoparticipateinloyaltyprograms.However,theriseofthedigitalagemayalso

haveledtotheemergenceofnewbarrierstocustomerparticipationinloyaltyprograms.

Therefore,wewishtoprovideanewperspectivebyputtingforwardamorerecentstudy

onthisresearchtopic.

36.

2. Researchproblem

Aswewillconductaqualitativestudy–thereasonsforthischoicewillbediscussed

in the subsequent chapter -, we will not formulate any hypotheses a priori. Indeed,

through this study,we aim to seek new elements and not to validate or reject some

previously established hypotheses. More specifically, we will attempt to detect the

underlyingmotivationsandbrakesbehindcustomerparticipationinloyaltyprograms.

Indeed,tobeabletodeterminewhatdrivescustomerparticipationinloyaltyprograms,

weneedtounderstandwhatmotivatescustomerstoparticipateinloyaltyprograms,but

also what hinders them from participating in loyalty programs. Thus, rather than

elaboratingsomehypotheses,wewillstatesomeresearchquestionsthatwillguideour

study.

Asareminder,ourcentralresearchquestionisasfollowed:

Whatdrivescustomerparticipationinloyaltyprograms?

Inotherwords:

Whatarethefactorsthatleadcustomerstoparticipateornotinloyaltyprograms?

Asaconsequence,thefollowingassociatedsub-questionswillorientourresearch:

§ For what reasons do consumers decide to enrol and participate in a loyalty

program?Whatare the factors thatmotivatecustomerparticipation in loyalty

programs?

Ø Docustomersengageinloyaltyprogramstosavemoney?

Ø Docustomersengageinloyaltyprogramstoreceiverewards?Ifso,what

type of rewards do they wish to receive; monetary, social, or other

rewards?

Ø Aretherecertaintypesofprogrammesthatarepreferredoverothers?

37.

§ For what reasons do consumers refuse to enrol and participate in a loyalty

program?What are the factors that impede customer participation in loyalty

programs?

Ø Do customers feel that their ratio of efforts and outcomes is not well

balanced? Do they consider the benefits of loyalty programs not to be

worththeeffort?

Ø Docustomersrefusetoengageinloyaltyprogramsforpracticalreasons?

Ø Oraretheredeeperreasonssuchastheconcernwithprivacyissuesthat

hindercustomersfromengaginginloyaltyprograms?

38.

3. Methodology

Afterhavingputourstudyintocontextandexposedourresearchproblem,wewill

nowpresentthemethodologyusedforthisstudy.Wewillbeginbyexplainingourchoice

toadaptaqualitativeapproachasamethodofanalysis.Then,wewillfocusonthedata

collection,andmorespecifically,onthedatacollectionmethod,theinterviewscript,and

thesamplingmethod.

3.1. Methodofanalysis:qualitativeanalysis

Tostartwith,giventhatweoptedforaqualitativeapproach,wewillbrieflyintroduce

theconceptofqualitativeresearch.

Qualitativeresearchconsists in “thecollection,analysis,and interpretationofdata

that cannot be meaningfully quantified, or summarized in the form of numbers”

(Parasuraman,Grewal,&Krishnan,2007,p.178).Ittypicallyinvolvesnon-structured,

flexible data collection from a relative small number of respondents. Whereas

quantitative research focuses on measurement, qualitative research emphasises on

getting a better understanding of the existence and origin of attitudes, interests, and

opinions(Bradley,2010).Itaimstodosobyusingobservation,discussion,andprojective

methods.Althoughqualitativeresearchdoesnotmeasurethe“amount”ofanopinionor

anemotion,itmayprovideanindicationofthefeelingsthatdominate.

Wedecidedtooptforaqualitativeapproachfortwomainreasons.

Firstofall,aqualitativeapproachisthemostappropriateforexploratorystudiesas

it aims to generate initial insights, ideas or understanding about a certain issue

(Parasuramanetal.,2007).Creswell(2009)arguedthataqualitativeapproachisuseful

whenaconceptneedstobeunderstoodbecausethereislittleresearchonit,whichisthe

caseforourresearchproblem.Aspreviouslystated,despitetheinterestandinvestment

in loyalty programs, there is a lack in research on themotivations behind customer

participation in loyalty programs. Therefore, we consider that out research problem

meritsaqualitativeapproach.

39.

Secondly,qualitative researchprovidesvaluable insights into consumerbehaviour

(Burns,Bush,&Sinha,2014).Understandingwhypeoplebuyandusecertainproductsor

servicesisfundamentalformarketersinordertodevelopthemostsuitablestrategiesto

influence consumers. Through interviewing a small number of consumers, market

practitionerswillgainvaluableinsightsintohowconsumersbehavethewaytheydoand

how their attitudes and opinions are formed. Thus, qualitative researchmay provide

valuable information to firms with regards to many domains, such as product

development, price changes, promotional activities or repositioning. Understanding

consumers’behaviourisalsocrucialfortheeffectivenessofloyaltyprograms.Indeed,to

inciteconsumerstoenrolandparticipateinaloyaltyprogram,firmsneedtounderstand

whatfactorsinfluenceconsumers’perceptionandbuyingdecisions.Hence,aqualitative

approachseemstobethemostappropriateforourstudy.

3.2. Datacollection:focusgroups

Now thatwe have determined themethod of analysis, wewill turn out attention

towards the data collection process.Wewill start by determining the data collection

methodbeforeelaboratinganinterviewscript,andfinally,decideonasamplingmethod.

3.2.1. Datacollectionmethod

Therearevariousqualitativeresearchtechniquesusedtocollectdata,themain

ones being observation techniques, projective techniques, focus groups, in-depth

interviews,andprotocolanalyses(Burnsetal.,2014).Forthepurposeofthisstudy,we

decidedtooptforfocusgroups.Thus,wewillbrieflydefinetheconceptoffocusgroups

beforediscussingthereasonsforthischoice.

Focusgroups canbedefinedas “small groupsofpeoplebrought togetherand

guided through an unstructured, spontaneous discussion for the purpose of gaining

information relevant to the researchproblem” (Burns et al., 2014, p. 151). Generally,

focusgroupsareledbyamoderatorwhointroducesthetopic,asksthequestions,and

ensures an open communication that remains focused on the desired topic (Bradley,

2010;Burnsetal.,2014).

40.

Furthermore,thereareseveralwaystocarryoutfocusgroupsincludingface-to-

face, phone conference calls, videoconference sessions, chat groups, and by email

(Bradley, 2010). For our study, we decided to stick with the traditional face-to-face

groups.

Afterexaminingandcomparingthevarioustechniquesavailabletocollectdata,

we considered traditional focus groups to be themost appropriate technique for our

studyforthefollowingreasons.

Firstofall,Burnsetal.(2014)arguethatfocusgroupsshouldbeusedwhenthe

research question requires something to be explored rather than to be predicted. As

previouslyexplained,ourstudyconsistsinanexploratoryresearch.

Secondly,asindicatedbyParasuramanetal.(2007),focusgroupsaregenerally

usedtogetanunderstandingofconsumersandtheirperceptions.Morespecifically,focus

groups allow researchers to obtain detailed information regarding consumer needs,

motives,perceptions,andattitudesonproductsorservices(Burnsetal.,2014).Aswe

aimtounderstandconsumers’behaviourandmotiveswithregardstoloyaltyprograms,

we will be interviewing actual consumers. Therefore, focus groups seem to be an

appropriatetechniquetocollectdataforourstudy.

Thirdly,focusgroupsofferalargeversatility(Parasuramanetal.,2007).Theycan

beusedtogaininsightintoawiderangeofissues,whichiswhytheyarealsosuitablefor

ourresearchproblem.

Lastly, compared to in-depth interviews, focus groups often generate richer

insightsabout the topicbeingdiscussed (Parasuramanetal., 2007).Respondents feel

moreateasewhentheyarewithpeoplethataresimilartothemandmaybuildoneach

other’sideas.Inthatway,focusgroupsaremorelikelytogeneratefreshideas(Burnset

al., 2014). As little is known about customers’ motivation to participate in loyalty

programs,weaimtogetasmuchinformationaspossiblefromactualcustomers.Given

that customers, as opposed to experts for example, are generally not used to being

interviewed,webelievethattheywillfeelmorecomfortableinagroupdiscussionthan

41.

inapersonalinterview.Therefore,forthepurposeofourstudy,focusgroupswillbemore

productivethanin-depthinterviews.

Nonetheless,focusgroupsalsorepresentsomedrawbackswhichshouldbetaken

intoconsideration.Thoseincludelackofrepresentativeness,subjectiveevaluationofthe

meaningofthediscussions,andhighcostsperparticipant(Burnsetal.,2014).Indeed,

given the size and the selection of the sample, focus groups cannot be considered a

representativesampleofalargerpopulation.Thegoalisnottogeneralizethefindings,

buttounderstandconsumers’motives,attitudesandbehaviour.Furthermore,analysing

andinterpretingtheresultsofthefocusgroupsremainschallengingandisbasedupon

themoderator’ssubjectiveevaluationof theparticipants’statementsand interactions.

Finally,comparedtoquantitativedatacollectionmethodssuchassurveys,focusgroups

aremoreexpensivetoperform.Inmostcases,participantoffocusgroupsgetsomekind

ofcompensationinexchangefortheirengagementorareatleastofferedlightsnacksand

refreshmentsduringthediscussionsession,whichincreasesthecostsperparticipant.

3.2.2. Interviewscript

Inordertoguaranteethesmoothfunctioningoffocusgroups,itisfundamentalto

generateascriptbeforehand. Indeed,awell-elaboratedscriptensures thateach focus

groupisconductedinasimilarway,thatthemoderatorstaysontrackandontime,and

thatthequestionsareputintocontextfortheparticipants(Simon,1999).

Generally,afocusgroupscriptiscomposedofthreeparts(Simon,1999).

Thefirstpartistheopeningofthefocusgroup.Thus,itconsistsinwelcomingthe

participants,introducingthepurposeandthecontextofthefocusgroups,providingsome

explanations regarding the conduct of the focus group, andmaking the introductions

(Simon,1999).Regardingourinterviewscript,wewillstartbythankingtheparticipants

inadvancefortheirinputandbyexplainingthatthesefocusgroupstakeplacewithinthe

frameworkofamasterthesis.Thenwewillmoveontodefiningloyaltyprogramstomake

sureeachmemberofthegrouphasaproperunderstandingofthisconcept.Furthermore,

we will highlight the few guidelines that should be respected to ensure the proper

42.

functioningofthediscussiongroups.Wewillendtheopeningpartbyindicatingthatthe

datawillbekeptanonymousandbymakingsurethateachparticipantisintroduced.

Thesecondpartisthepartwherethequestionsareasked.Giventhatfocusgroups

typically last for one or two hours, around five questions should be asked. The first

questionsareintroductoryorwarm-upquestionswhereastheremainingquestionsget

attheheartofthetopic.Additionally,thequestionsshouldbeopen-endedandmovefrom

thegeneraltothespecific(Simon,1999).Basedontheseguidelines,wewillelaboratethe

questions forour script.The firstquestion,whichservesasan introductoryquestion,

consistsinaskingtheparticipantstodescribetheloyaltyprogramstheyparticipatein.

Then,wewillmoveontomorespecificsubjects, suchas thereasonswhyparticipants

decidetoenrolinaloyaltyprogramorthereasonswhytheyrefusetoenrolinaloyalty

program.Wewillendthispartbyaskingtheparticipantstodescribethekeyelements

that an efficient loyalty program should incorporate. We feel that this question will

smoothlyclosethediscussion.

Thelastpartistheclosingofthefocusgroup.Itwrapsupthesessionbygivingthe

participantsanopportunityforfurtherinput,byexplainingthemhowthedatawillbe

usedandbythankingthemfortheirparticipation(Simon,1999).Thisisexactlyhowwe

will close our focus group. Indeed, we will ask the participants if they wish to add

somethingbeforeexplainingthemhowthedataofthefocusgroupswillbeusedforthis

masterthesis.Finally,wewillendthefocusgroupsessionsbythankingtheparticipants

fortheirinput.

ThefullinterviewscriptusedforbothfocusgroupsissetoutinAnnex1.

3.2.3. Samplingmethod

Nowthatwehavedecidedonadatacollectionmethodandgeneratedaninterview

script,weonlyneed tochoose the rightparticipants forour focusgroups. In fact, the

effectivenessofafocusgrouplargelydependsonthegroupcomposition.

43.

Accordingtostandardindustrypractice,focusgroupsaretypicallycomposedof6

to 12 people (Burns et al., 2014). A small group (less than 6 participants) does not

producetheenergyandgroupsdynamicnecessaryforaconstructivefocusgroupsession

whereas a large group (more than 12 participants) often becomes fragmented, and

thereby,hindersanaturaldiscussion.Foreachfocusgroupsession,weselected7people.

Unfortunately, due to last-minute cancellations, only 6 people actually attended each

session,whichstillconformstothepreviouslycitedrequirement.

Additionally, participants should not be professional respondents, but should

havehad some experience regarding the discussion topic (Parasuraman et al., 2007).

Obviously,theselectionofgroupmembersshouldbeinaccordancewiththepurposeof

thefocusgroup(Burnsetal.,2014).Therefore,weonlychosepeopleparticipatingatleast

inoneloyaltyprogram.

Furthermore,focusgroupsrequireacertaindegreeofhomogeneityamonggroup

memberswithrespecttodemographic,socioeconomic,orotherrelevantcharacteristics

(Burns et al., 2014;Parasuramanet al., 2007). Indeed, participants,who are typically

strangers,tendtofeelmorecomfortablewhentheyaresurroundedbypeoplewhothey

share similarities with. Those may include age, gender, job situation, household

composition, purchase experience, or even leisure pursuits. In our case, we consider

significant tohaveahomogenousgroup in termsof customerexperiencewith loyalty

programs.Morespecifically,weselectedparticipantsaccordingtothenumberofloyalty

programstheyparticipatein.Inthatway,participantsarehomogeneousononecriterion

butheterogeneousonother criteria, suchasgenderor job situation,whichensuresa

comfortable feeling among group members, but also a certain degree of diversity

necessarytoafruitfuldiscussion.Therefore,wedecidedtorealiseonefocusgroupwith

peopleparticipatinginarelativelysmallnumberofprograms(lessthan8)andonefocus

groupwithpeopleparticipatinginarelativelylargenumberofprograms(morethan8)

(seetable1).

Toconclude,twofocusgroupssessions,eachwith6peopleparticipatingatleast

inoneprogram,havebeenrealized.Giventhatmostparticipantswerefrancophone,the

discussionswereconductedinFrench.Bothfocusgroupsessionshavebeenrecorded,

44.

withtheagreementofalltheparticipants,andentirelytranscribed.Thetranscriptscan

befoundinAnnex2and3.

Table1.Overviewtableofparticipants’data.

Participant Gender Age Occupation # loyalty

programs

#peoplein

household

Responsible

household

FocusGroup1

David Male 23years Student 4 1 Yes(50%)

Lisa Female 27years Marketing 7 1 Yes

Tina Female 24years Student 6 1 Yes

Alex Male 25years Student 4 1 Yes

Christophe Male 30years Salesperson 6 2 Yes(50%)

Valérie Female 23years Jobseeking 5 1 Yes(50%)

FocusGroup2

Lena Female 26years Psycho-

motor

therapist

18 2 Yes(50%)

Caroline Female 59years Pensioner 10 3 Yes

Sandra Female 25years Speech

therapist

10 3 No

Chiara Female 32years Teacher 40 1 Yes

Laura Female 25years Educator 12 4 No

Gabrielle Female 23years Jobseeking 8 4 No

45.

4. Analysisapproach:thematiccontentanalysis

Inthischapter,wewillpresentthetechniquethatwehaveusedtoanalysethedata

thathadpreviouslybeencollected.Inotherwords,wewillexplainhowweexaminedthe

information collected through our focus groups. First, we will briefly describe the

approachthatweadoptedtoanalysethedataandsecond,wewillexposetheprocessthat

wehavefollowed.

Tostartwith,thereareavarietyofapproachesavailabletoanalysequalitativedata.

Forthepurposeofourstudy,wedecidedtooptforathematiccontentanalysiswhich

involves“describingcontentbasedonthemes”(Isabel,2013,p.305).Morespecifically,

theprocessofthematiccontentanalysisrequires identifyingthemesandcategories in

the interview transcripts and “attempting to verify, confirm and qualify them by

searching through the data and repeating the process to identify further themes and

categories”(Burnard,Gill,Stewart,Treasure,&Chadwick,2008,p.430).

Tofacilitatetheanalysisprocess,weusedaqualitativedataanalysissoftwarepackage

calledATLAS.ti.However,itshouldbenotedthatthisprogramdidnotanalysethedata

forus,itonlyhelpedustomanagethedata.

In practice, we started by importing the transcripts of both focus groups in the

computer program before reading them in depth. Then, we moved on to creating

quotations,whicharesegmentsofadocumentthatweconsiderinterestingorimportant,

andassigningacodetothem.Acodeistypicallyawordorastatementthatsumsupwhat

isbeingsaidinthetext(Burnardetal.,2008).

Theprocessofcodingconsists inorganizingandcategorizing thedata.Codesmay

either emerge from reading the document, also called in-vivo codes, or they are

predefinedbasedupontheliterature(Isabel,2013).Inouranalysisprocess,weuseda

combinationofbothtypes.Ontheonehand,wecreatedcodesderivedfromourliterature

reviewandour researchquestions.On theotherhand, as theprocess of reading and

analysingthedatamovedforward,wecameupwithadditionalin-vivocodes.

46.

Furthermore, the process of coding passes through three stages: open, axial, and

selectivecoding(Isabel,2013).Opencodingreferstothefirstlevelofcodinginwhichthe

data is broken down into codes that are then grouped into categories. Axial coding

focuses on identifying relationships between codes and categories and readjusting

categoriesthroughcombininginductiveanddeductivethinking.Selectivecodingconsists

indefiningone category as the core category and linking theother categories to that

category.Withregardstoourdata,thecodingprocessledtothecorecategory“customer

participation in loyalty programs” which is directly linked to two sub categories;

“motivations”and“brakes”.Thus,thedefinitionofourcorecategoryisinlinewithour

researchproblem.

After finishing the analysing process and establishing a system of categories, we

moved onto detecting the relevant information and selecting the most significant

quotationstodescribeourfindings.

Finally,itshouldbenotedthattheanalysisofqualitativedatarequiresinterpreting

thestudyresultswhichobviouslyinvolvesacertaindegreeofsubjectivity(Burnardetal.,

2008).Therefore,itisfundamentaltothoroughlyanalysetheentiredatasettoensurea

systematicandrigorousanalysisprocess.

47.

5. Resultsofthestudy

In this chapter, we will present the results of our study. In accordance with our

researchquestionsandouranalysisapproach,wewill firstexpose themotivationsof

customers to participate in loyalty programs. Second, we will reveal the brakes that

hindercustomerparticipationinloyaltyprograms.

Table2providesanoverviewoftheitemswewilladdresshereafter.

Table2.Motivationsandbrakesbehindcustomerparticipationinloyaltyprograms.

Motivations–Reasonstoparticipate Brakes–Reasonstonotparticipate

Linkedtothebenefitsoftheprogram

§ Discounts

§ Freeproducts

§ Relevantoffersandrewards

§ Preferentialtreatment

§ Immediatebenefits

Linkedtotheprogram

§ Personaldatarelease

§ Participationcost

§ Highparticipationefforts

§ Limitedprogramduration

Othermotivations

§ Simplicityofprogram

§ Highpurchasefrequency

§ Loveofbrand

Otherbrakes

§ Benefits: Irrelevant offers and

rewards

§ Excessiveamountofemails

48.

5.1. Motivations

Inordertoprovideabetterunderstandingofwhatdrivescustomerstoparticipatein

loyaltyprograms,wedecidedtodividethemotivationsthatcameupduringbothfocus

groupsintotwocategories,namelymotivationslinkedtothebenefitsoftheprogramand

othermotivations.Asamatterof fact, thebenefitsofferedbya loyaltyprogramarea

compellingmotivationforcustomerstoenrolandparticipate,whichiswhytheymeritto

beaddressedseparately.

5.1.1. Motivationslinkedtothebenefitsoftheprogram

Discounts

Throughout our study, it became very clear that customers participate in loyalty

programs hoping to save money. As such it is not surprising that one of the most

preferred benefits and the biggest motivation to participate in loyalty programs are

discounts.Themostpopularwaysofprovidingdiscountsaretoofferanamountofforto

offerapercentageoff.Thepreference fordiscountsmaybeexplainedby the fact that

customersexactlyknowwhattoexpectfromthemandthattheyareabletousethemfor

whateveritemtheywant.

“Thediscounts.”(Sandra)“It’smorecomparedtotheportfolio,inordertosave

money.”(David)“Iftherearediscounts,I’llenrol.”(Lisa)“IfIbuyformorethan100euros,

IautomaticallygetadiscountandIlikethat.”(Caroline)“Thediscountwillnaturallybe

targetedtowardswhatI’mgoingtobuy.”(David)

Freeproducts

Besides discounts, free products alsomotivate customers to participate in loyalty

programs.Indeed,freeproductsenablecustomerstosavemoney,butalsotodiscover

andtestnewproducts.Withregardstothetypeofgiftsthatareoffered, itseemsthat

consumersenjoyreceivingbothproductsthatarelinkedtotheprovider’sofferingand

productsthatareunrelatedtotheprovider’soffering.Whatmattersforconsumersisthat

thegiftsareofhighqualityandthattheyaretailoredtotheirprofile,whichleadsusto

thenextpoint.

49.

“Idon’tknowwhyIespeciallylikedthat,butattheplacewhereIusedtotakemylunch

duringofficehours,after10lunches,Igotasaladforfree.”(Lisa)“Myfavoritesystemis,

asIsaidbefore,thethingwhereyougetsomethingforfreeifyougoacertainnumberof

times.”(Lisa)“Icouldn’tresist,IgotacardatAutocenterGoedertinLuxembourgbecause,

infact,whenyouspend30eurosforfuel,theyofferyouacarwashforfree.Thus,Icouldn’t

resist,it’sreallyinteresting.”(Alex)

Relevantoffersandrewards

Even though the subject of saving money frequently came up during both focus

groups, consumersarenotsolelymotivatedbyeconomic interests. Indeed, customers

alsodecidetoparticipateinloyaltyprogramswiththeviewofreceivingrelevantoffers

andrewards.Bythat,wemeanoffers,forinstancepromotionsorrecommendations,and

rewards, forexample freeordiscountedproducts, thatare targeted to thecustomer’s

profile, desires and needs. Customers are much more likely to join and actively

participateinaprogramwhentheyconsiderthebenefitsasvaluabletothem.

“AndonBooking,it’stogetmoretargetedhotels.”(Alex)“Amazon,I’msubscribedto

thenewsletter,becauseIknowthattherewillbeinterestingoffers.”(Tina)”Itneedstobe

targeted.”(Tina)“Therefore,Ionlyenrollifitisinterestingforme.”(Christophe)“The

advantagesmustalsoaffectme.”(Valérie)

Preferentialtreatment

Furthermore, preferential treatment may not be the main reason for which

consumersdecideto joina loyaltyprogram,but it isdefinitelyanaspectthattheyare

interested in. Preferential treatmentmay consist in exclusive access for members to

events, sales, promotions or other advantages such as free delivery. Additionally,

preferentialtreatmentmayalsorefertospecialbirthdayofferssuchasapersonalized

birthdayletteroramailaccompaniedbyabirthdayreward.Thoserewardsmayinclude

avoucher, adiscountoragift.Customerswelcomesuchbirthdayoffersbecause they

make them feel special, which ultimately enhances the customer relationship.

Preferentialtreatmentispositivelyperceivedbycustomersandthus,motivatesthemto

activelyparticipateintheprogram.

50.

“FreedeliveryforthememberswasoneofthereasonsforwhichIenrolled.”(Sandra)

“EachWednesday,thereisapromotionforthemembersoftheprogram,itissomehowan

eventformembers,andIlovetheconcept.”(Laura)“Yes,Ialsothinkthatofferslikethat,

forbirthdays,it’sanicegesture,notallthebrandsdothat.”(Sandra)“Often,youalsoget

somethingforyourbirthday,eitheravoucheroradiscount(…)andIthinkthatthisis

nice.Idon’tknow,youfeelabitspecial.”(Laura)

Immediatebenefits

Ourstudyalsorevealedthatitisnotonlythetypeofbenefitthatexplainscustomers’

motivationtoparticipateinloyaltyprograms,butalsothetimingofthebenefit.Indeed,

ourstudyshowedthatcustomersarelargelymotivatedbyimmediatebenefits.Bythis,

wemeanbenefitsthataregiventocustomerseachtimetheycompleteaspecificaction,

typicallyapurchase,asopposedtobenefitsthataregiventocustomersafterreachinga

minimumthresholdofpointsormoneyspent.Foronething,consumersaremuchmore

likelytoenrolinaloyaltyprogramiftheyreceiveanimmediatebenefitforjoiningthe

program.Foranotherthing,providingconsumerswithabenefiteachtimetheypurchase

somethingwillmotivatethemtocomeback,andthereby,enhanceactiveparticipationin

theloyaltyprogram.

“YouneedtofeelapunctualbenefitandifthereisabenefiteachtimeIcomeback,this

willpushmetocomeback”(David).“Itisratherlikethat,ifIwillreceivesomething

immediatelyornot.”(David)“IftheytellmethatIwillgetsomethingatthemomentI

enroll,thenIwillimmediatelyenroll.”(Laura)“Forme,whatisreallyimportantistoget

anadvantageimmediately.”(Lena)

5.1.2. Othermotivations

Simplicityofprogram

Anothercrucialaspect,besidesthebenefits,isthesimplicityoftheprogram,which

comprisesthreedifferentelements.Firstofall,consumerspayspecialattentiontothe

sign-upprocess.Indeed,theyarelargelymotivatedtojoinaloyaltyprogramifthesign-

upprocessisfastanddoesnotdemandtoomucheffort.Secondly,consumersaremore

likely to join a loyalty programwhen theyunderstandhow to earn rewards. Thirdly,

51.

consumersappreciateprogramswithsimplespendingrulesthatdonotrequiretoomuch

effort. Inthatway, theyseemtomostlypreferprogramswith immediatediscountsor

pointsbasedprogramsthatenablethemtoredeempointsfordiscountsorproducts.

“IfIcomefrequently,andthen,ifitiseasyorifIneedtofilloutaformduring3years.”

(Tina)“Infact,formetoenroll,itneedstobeeasytodo.”(Laura)“Simplicityofsigning

up.”(Laura)“IlikethatprogrambecauseitiseasyandIfrequentlygothere”(Lena)

Highpurchasefrequency

Moreover,itbecameveryclearthatconsumersarelargelymotivatedtoparticipatein

loyaltyprogramswhentheyhaveahigh levelofpurchasefrequency.Thus,customers

joinloyaltyprogramswhentheyhaveboughtafewtimesfromthebrandorthecompany

orwhentheyareconvincedthattheywillfrequentlybuyfromtheminthefuture.Inthat

way, high purchase frequency drives customer participation in the loyalty program,

whichinturnwillstimulatepurchasefrequencyagainduetothebenefitsofferedbythe

program.

“BecauseIfrequentlygotothatshop,andthus,Itellmyselfthatitisworthit.”(Lisa)“I

enrolledbecauseIfrequentlygothere”(Sandra).“First,IneedtogothereoftenorI

believe,IbelieveatleastthatIwillcomebackoften,otherwiseIdon’tenroll.”(Laura)“And

then,itistruethatonceI’menrolledandtheprogramoffersgreatadvantages,thiswill

encouragemetoshopthere.”(Laura)

Loveofbrand

Finally,someconsumersalsoengageinloyaltyprogramsfortheloveofabrand.

Inotherwords,theyjoinaloyaltyprogrambecausetheylovethebrand,theirproduct

selectionortheircustomerservice.Thosecustomersareextremelyvaluable,astheydo

notonlyrepeatedlypurchasefromthebrand,butalsohaveapositiveattitudetowards

thebrand,whichcorrespondstothedefinitionofaloyalcustomer.

“IonlyhaveloyaltycardsforbrandsthatIlove.”(Tina)“Ilike,Iliketheirselectionof

clothes,theirserviceandtheiroffers.”(Laura)“BecauseIlovegoingthereandbuyingmy

52.

productsthere.TheyhaveagreatchoiceofproductsandthereareallthebrandsthatI

like.”(Sandra)

5.2. Brakes

Likeintheprevioussection,toprovideabetteroverview,wedecidedtodividethe

brakesbehindcustomerparticipation in loyaltyprogramsintotwocategories,namely

brakeslinkedtotheprogramitselfandotherbrakes.Indeed,whencollectingthedata,

wenoticedthatseveralelementsthathindercustomerparticipationinloyaltyprograms,

were linked to the program itself, which is whywe decided to regroup them in one

category.

5.2.1. Brakeslinkedtotheprogram

Personaldatarelease

Duringourstudy, itbecameveryclearthatthereleaseofpersonaldatawithinthe

frameworkofaloyaltyprogramisapredominantissueamongconsumersandthemain

brakeoncustomerparticipationinloyaltyprograms.Bypersonaldatarelease,wemean

theinformationcustomersareaskedtoprovideaboutthemselveswhentheyenrolina

loyaltyprogram,forexamplename,addressinformation,contactdetails,ordateofbirth.

In recentyears, consumershavebecomemoreawareofdataprivacy issuesand thus,

their attitudes towards privacy have evolved. This evolution is also seen in loyalty

programs,wheremoreandmoreconsumersrefusetojoinloyaltyprogramsbecausethey

are reluctant to sharing their personal data. Besides noticing a general negative

perceptionregardingthereleaseofpersonaldata,wealsoobservedthatsomecustomers

arebyfarmoresensitivetothisissuethanothers.

“Iamagainstloyaltycards,butonlybecauseoftheprivacyprinciple.”(Alex)“IfIwas

surethattheywouldkeeptheemailin-house,andthattheywouldrespectprivacy,and

thattheywouldnotsendemailsifIdon’taskemails,andthattheywouldkeeptheemail,

thenIwouldenrollmuchmore.”(Alex)“Itisreallyimportantthatthepersonaldataare

notdiffused”.(Valérie)“ItisbecauseofthatthatIstillrefuse.”(Gabrielle)“Online,I’m

reallyshockedsometimes.Andotherwise,Iknowthatfirmsuseourdata,butIdon’treally

53.

knowwhattheydowithit.Tobehonest,I’veneverthoughtindepthaboutthat,IguessI

somehowjustacceptthatitislikethat”.(Lena)

Participationcost

Furthermore,customersseemtoberelativelyreluctanttoengageinloyaltyprograms

whenthereisaparticipationcost.Forcustomerstobewillingtopayamembershipfee,

thebenefitsmustbeverystrongandclearlyexposed.Indeed,customersseemtoperceive

the loyalty program as an appreciation for their support. Several of our participants

arguedthattheprovideroftheloyaltyprogramwantstoacquirethemasacustomer,and

thus,thereshouldbenoparticipationcost.Therefore,wemayconcludethattheexistence

ofaparticipationcosthinderscustomersfromparticipatinginloyaltyprograms.

“Nothat’snotnormalatall,iftheywantyoutobetheircustomer,whypay.”

(Christophe)“Therearecertaincardswhereyouneedtopay5eurosandthen,Iamoften

morereluctant”.(Lena)“Ihavealreadyseenloyaltyprogramsthathaveacost,butforme

personally,thatisnotreallyanoption.”(Gabrielle)

Highparticipationefforts

Besides being reluctant to pay a fee for their participation in a loyalty program,

consumersalsowanttokeeptheirparticipationeffortsaslowaspossible.Participation

efforts comprise all the activities customers need to undertake to validate their

enrolmentandtoreceivethebenefitsofferedbytheprogram.Theeffortsthatcameup

allthetimeduringourstudywerealongandcomplicatedsign-upprocessandtheburden

relatedtocarryingcards.Amongtheparticipantsofthefocusgroups,themajoritystated

thattheyrefusetojoinaloyaltyprogramiftheyneedtofilloutalongformoriftheyneed

toconfirmtheirmembership.However,someparticipationsarguedthattheywouldbe

willingtoundertakesomeeffortsifthebenefitswereworthit.Afewalsoadmittedthat

theyrefusetojoinprogramsbecausetheyownalreadytoomanycardsandarefedup

carrying them always around. This clearly proves that high participation efforts

representabraketocustomerparticipationinloyaltyprograms.

“Administrativeburden.”(David)“Ifyouneedtofilloutanentireform,that’snotgood

atall.”(David)“Thereareshopswhereyouneedtofilloutaformandthen,youneedto

54.

subscribeonlineifyouareathome.Andthen,Idon’tdoit.”(Laura)“Idon’tlikecarrying

1000cards.“(Chiara)“Infact,Iwilltakealookattheadvantagesandaskmyselfifitis

worthit.”(Valérie)

Limitedprogramduration

Additionally, our study revealed that consumers are less interested in loyalty

programsthatarelimitedintime.Inotherwords,iftheprogramrequiresparticipantsto

collectacertainnumberofpointsortospendacertainamountofmoneyduringalimited

period,consumerswillbelessmotivatedtoengageintheprogram.Ifconsumersfeelthat

thebenefitswillnotbeavailabletothem,theywillgetfrustratedandasaconsequence,

theywillbelikelytodropoutoftheprogram.Therefore,weconsiderlimitedprogram

durationafundamentalbraketocustomerparticipationinloyaltyprogram.

“Youneededtogoacertainamountoftimesduringacertainperiodoftime,that

frustratedmebecauseInevermadeit.”(Caroline)“Ifthereisatimelimit,itisless

interesting.”(Lena)

5.2.2. Otherbrakes

Irrelevantoffersandrewards

It is not uncommon that within the framework of a loyalty program, customers

complain about the rewards being irrelevant or of too little value to them. This is

especiallytruewhentherewardsconsistinfreeproducts.Indeed,customersarguethat

the gifts don’t live up to their expectations, that they are useless or that they do not

adequately reward their repurchasing behaviour. In that way, irrelevant offers and

rewardsmay lead to frustration,which ultimately impedes customer participation in

loyaltyprograms.

“Ioftengotgiftsthatwereirrelevant,thatwerenotatalltargeted,thatwereuseless.”

(Lena)“Itisfrustratingtoreceiveuselessgifts.”(Caroline)“Youareannoyedbecauseyou

boughtsomuchandthen,youreceivethat“(Sandra)

55.

Excessiveamountofemails

Finally, it alsobecameveryapparent that consumersareannoyedby themultiple

emailstheygetwithintheframeworkofaloyaltyprogram.Moreimportantly,consumers

may develop a negative attitude towards a brand or a company and perceive their

communicationorbehaviourasaggressive.Sometimes,anexcessiveamountofemails

evenresultsinconsumersunsubscribingfromtheloyaltyprogramwhichleadsustothe

conclusion that too many emails hinder active customer participation in loyalty

programs.

“IfIreallygettoomanyemails,Iunsubscribe,finalpoint.”(Gabrielle)“Ireceivethat

manyemailsanditannoysme.”(Caroline)”Ifthoseareemailswithpromotions,new

products,discounts,andiftheyaretoofrequentoriftheyarenotofinteresttome,ifthey

don’tcorrespondtowhatI’mlookingfor,thenitannoysme.”(Laura)“IthinkofYves

Rocher,Iunsubscribedbecauseinmyopiniontheyweretoaggressive.”(Lisa)

5.3. Keytakeaways

Toconcludethischapter,wewillpresentasummaryofthemotivationsandbrakes

relatedtocustomerparticipationinloyaltyprograms.

§ Motivationslinkedtothebenefitsoftheprogram

Ø Discounts:Discounts under the formof an amount off or a percentage off are,

togetherwith freeproducts, themostpreferredbenefits as customershope to

savemoneythroughtheirparticipationinaloyaltyprogram.

Ø Free products: Free products enable customers to save money, but also to

discoverandtestnewproducts.

Ø Relevantoffersandrewards:Customersappreciateoffersandrewardsthatare

targetedtotheirprofile.

Ø Preferentialtreatment:Preferentialtreatmentsuchasexclusiveaccesstooffers

or special birthday offers make customers feel valued and enhance the

relationshipbetweentheproviderandthecustomer.

56.

Ø Immediatebenefits:Customersaremuchmore likely toparticipate ina loyalty

programwhen they receiveabenefit themoment they signupand/orat each

purchase.

§ Othermotivations

Ø Simplicityofprogram:Customershighlyappreciateprogramsthathaveasimple

sign-upprocess,simpleearningrulesandsimplespendingrules.

Ø Highpurchasefrequency:Highpurchasefrequencydrivescustomerparticipation

intheloyaltyprogram,whichinturnwillencouragepurchasefrequencyagaindue

tothebenefitsprovidedbytheprogram.

Ø Loveofbrand:Customerswhojoinaloyaltyprogrambecauseoftheloveforthe

brandareextremelyvaluableastheyaretrulyloyalcustomers.

§ Brakeslinkedtotheprogram

Ø Personaldatarelease:Thereleaseofpersonalinformationisapredominantissue

among customers and themain reasonwhy customers refuse toparticipate in

loyaltyprograms.

Ø Participationcost:Customersarelesslikelytojoinaloyaltyprogramwhenthere

isaparticipationcost.

Ø Highparticipationefforts:Highparticipationefforts, suchascompleting lotsof

paperwork,discouragepeoplefromjoiningaloyaltyprogram.

Ø Limitedprogramduration:Customersarelessmotivatedtoparticipateinaloyalty

programthatislimitedintimeasopposedtoonethatisunlimitedintime.

§ Otherbrakes

Ø Irrelevant offers and rewards: Offers or rewards that are irrelevant to the

customermay create frustration, and thereby, impede customer frustration in

loyaltyprograms.

57.

Ø Excessiveamountofemails:Anexcessiveamountofemailsnegativelyimpactsthe

perceptionthatcustomershaveoftheprogramproviderandmayeventuallylead

customerstounsubscribefromtheprogram.

58.

6. Discussionandrecommendations

In this chapter,wewill aim to interpret the results of the studywhichhavebeen

detailedabove.Afterwards,wewillputforwardanumberofscientificandmanagerial

recommendations.

6.1. Discussion

Firstandforemost,wewereabletodetermineeightfundamentalmotivationsthat

drivecustomers toparticipate in loyaltyprograms.Among thosemotivations, fiveare

linkedtothebenefitsofferedbytheloyaltyprogram.Themerefactthatthemajorityof

themotivationsarerelated to thebenefitsof theprogramshows the importance that

customersattachtoreceivingbenefits.Additionally,thisisinlinewiththefindingsbyDe

Wulfetal.(2003)whodefinedprogrambenefitsasoneofthemaindriversofcustomer

participationinloyaltyprograms.

More specifically, the motivations linked to program benefits are: discounts, free

products, relevantoffersandrewards,preferential treatmentand immediatebenefits.

Whereasexisting literaturemostly focusesonwhether consumerspreferhardor soft

benefits, we go a little bit further and specify which benefits motivate customers to

participate in a loyalty program.Our study pointed out that customers participate in

loyalty program hoping to save money which is why it comes as no surprise that

discounts and free products are the most preferred benefits. Additionally, our study

showedthatcustomersaremoremotivatedtoparticipateinloyaltyprogramswhenthey

receive immediate rewards. However, customers also value getting preferential

treatmentandreceivingoffersandrewardsthataretargetedtotheirpreferencesand

needs.Thelatter isconsistentwiththe literatureinthisarea. Indeed, if theprogram’s

benefitcharacteristicsfittheconsumer’sidentity,theconsumerwillperceivehisloyalty

programmembershipasimportantandthereby,bemoremotivatedtoparticipateinthe

program(Ha&Stoel,2014;McCall&Voorhees,2010).Thus,withregardstoprogram

benefits,weconcludethatcustomersaremostlymotivatedbyimmediatehardbenefits

combinedwithsoftbenefits,whichisverymuchinaccordancewiththeexistingliterature

(DeWulfetal.,2003).

59.

Besidesthis,thethreemotivationsthatarenotrelatedtotheprogrambenefitsare:

simplicityofprogram,highpurchasefrequencyandloveofabrand.Whereasthestudy

by De Wulf et al. (2003) has highlighted the importance of purchase frequency in

customers’motivationtoparticipateinloyaltyprograms,itonlypartiallyfocusesonthe

simplicityoftheprogramasafactorinfluencingcustomers’motivationtoparticipatein

loyaltyprograms.Infact,ourstudyrevealedthatcustomersaremorelikelytoparticipate

inaloyaltyprogramwhentheprogramiseasytounderstandandtheeffortsaskednot

toohigh.However,thestudybyDeWulfetal.(2003)solelyinvokesparticipationefforts.

Finally, we have identified a motivation that has not been covered by literature yet,

namelytheloveforabrand.Thismotivationisparticularlyimportant,ascustomerswho

participate in a loyalty program because of the love for the brand and who are

characterizedbyhighrepeatpatronage,aretrulyloyalcustomers(Baloglu,2002).

Apartfromthemotivationsthatleadcustomerstoparticipateinloyaltyprograms,we

also determined six brakes that prevent customers from participating in loyalty

programs. Like De Wulf et al. (2003), we identified the release of personal data,

participationcost,highparticipationeffortsandlimitedprogramdurationasfactorsthat

discouragecustomersfromparticipatinginloyaltyprograms.InthestudybyDeWulfet

al. (2003), participation cost appeared to be by far the most important determinant

whereasinourstudy,thereleaseofpersonaldataandhighparticipationcostswerealso

consideredassignificantfactors.Withregardstothereleaseofpersonalinformation,we

noticedarealdivergenceamongparticipantsofourfocusgroups.Morespecifically,some

participants were really well informed about sharing personal data with companies

whereasotherswerebarelyawareofthisissue.Itseemedthatthosewithanextended

knowledge on the subjectwere also thosewho had amore critical attitudewhich is

probablyduetothefactthattheyknowthatcompaniesusethepersonaldataoftheir

customers,andthus,aremorereluctantaboutreleasingtheirpersonaldata.

Moreover, our study revealed two additional brakes that hinder customer

participation in loyalty programs, namely excessive amount of emails and irrelevant

offers and rewards. Indeed, it became apparent that customers are annoyed by the

numerousemailstheyreceivefromtheprogramprovidertotheextentthattheyconsider

unsubscribingfromtheprogram.AsindicatedbyJonesetal.(2015),peoplearesimply

60.

overloaded with companies’ marketing efforts. Similarly, customers complain about

offers or rewards being irrelevant orworthless to themwhich is consistentwith the

findings by Stauss et al. (2005)who explained that customer frustrationmay arise if

customers consider the program benefits as worthless. Customer dissatisfaction or

customerfrustrationmayleadcustomerstounsubscribefromloyaltyprogramswhichis

why we consider excessive amount of emails and irrelevant offers and rewards as

significantbrakestocustomerparticipationinloyaltyprograms.

Besidesidentifyingthefactorsthatdrivecustomerparticipationinloyaltyprograms,

ourstudyalsoshowedthatwhendecidingtoparticipateinaloyaltyprogram,customers

comparetheireffortstotheexpectedoutcomes,eventhoughthisthinkingprocessmay

bedoneunconsciously.Thisisconsistentwithequitytheorywhichstatesthatpartiesin

anexchangerelationshipcomparetheirratiosofinputstoexpectedoutcomes(Samaha

etal.,2011).Thus,ourstudyis in linewiththefindingsby(DeWulfetal.,2003)who

demonstratedthatcustomersaimtominimizetheirinputsandmaximizetheexpected

outcomeswhenparticipatinginaloyaltyprogram.

Finally,ourstudyalsorevealedtheimportanceofsegmentingthecustomerbaseas

perceptions, needs andpreferences differ among customers. The small sample of our

studyalreadyprovideddivergingattitudesandpreferences,forinstancewithregardsto

privacyissuesandparticipationefforts.Moreover,somecustomerswillsimplyremain

reluctanttoparticipateinloyaltyprograms.AsindicatedbyJonesetal.(2015)andKumar

etal.(2003),thedegreeofrelationshipintentionvariesfromconsumertoconsumerand

there is no interest in badgering consumers that have no intention to develop a

relationshipwithrelationshipmarketingmaterials.Thisissuewillbediscussedfurther

below.

61.

6.2. Recommendations

Nowthattheresultsofthestudyhavebeenclearlyexposedanddiscussed,wewill

presentonemainscientificrecommendation.

Throughoutourstudy,wehavehighlightedtheimportancetounderstandwhatdrives

customers’participationinloyaltyprogramstostudytheeffectivenessofsuchprograms.

However, there is to our knowledge no conceptualmodel that represents the factors

influencingcustomerparticipationinloyaltyprograms.Thus,wesuggestconstructinga

modelthatindicatesontheonehand,thefactorsthatmotivatecustomerstoparticipate

ina loyaltyprogram, themotivations,andon theotherhand, the factors thatprevent

customersfromparticipatinginaloyaltyprogram,thebrakes.

Figure5illustratesthemodelthatwesuggestbaseduponthefindingsofourstudy.

Toconclude,futureresearcherscouldusethatmodelasastartingpointfortheirstudies.

Figure5.Suggestionforaconceptualmodelofcustomerparticipationinloyaltyprograms.

62.

Apart from the scientific recommendation, we will also put forward some

managerial recommendations. In other words, these recommendations will be

designatedtofirmsthatwishtoimplementanewloyaltyprogramortofirmsthatwish

toimprovetheirexistingloyaltyprogram.

To start with, we highly recommend firms to segment their customer base

according to customers’ profile, and more specifically, their preferences, needs and

expectations. Indeed,ourstudyrevealed that themotivationsandbrakes tocustomer

participationinloyaltyprogramslargelydifferamongcustomers.Thus,companiesfirst

needtodecidewhichtypeofcustomertheyaimtoattractthroughtheirloyaltyprogram.

Theymayforinstanceseektoattracthighprofitablecustomersasopposedtothemass.

Then,companiesmaymoveontoidentifyingthecustomer’sprofileinordertobeableto

adapttheiroffer.Bythatwemean,thatcompaniesshouldcomeupwithadiversityof

rewards targeted to the customer’s preferences and needs as well as adapt their

communicationtowardsthecustomer.Additionally,companiesneedtoacceptthatsome

customerswillnotbe interested in joiningtheir loyaltyprogramandthus,shouldnot

concentratetheirmarketingeffortsonthosecustomers.

Moregenerally,werecommendfirmstointegratesomeformofimmediatehard

benefits in their program as customers are largelymotivated by such benefits.More

specifically,wesuggestcreatingarewardthatcustomerwillreceiveforenrollinginthe

program. This will not only stimulate repurchase behaviour, it will also improve the

attitudethatcustomershavetowardsthecompany.Aspreviouslyargued,firmsshould

make sure that the program’s benefit characteristics fit the customer’s profile.

Nonetheless, a program should comprise hard benefits, such as discounts or free

products,preferablycombinedwithsomesoftbenefits,likespecialbirthdaymessagesor

preferentialtreatment.

Finally,weadvisefirmstocreatea loyaltyprogramthatiseasytounderstandand

thatdoesnotasktoomucheffortfromcustomers.Morespecifically,firmsshouldmake

surethatthesigningupprocessissimpleandfast,astoomuchpaperworkwilldiscourage

customersfromjoiningtheprogram.Moreover,thespendingrulesandtheearningrules

shouldbesimplesothatcustomersknowwhattoexpectfromtheprogram.Asregards

63.

the physical card of a program, some customers perceive carrying cards as a burden

whereasotherdonotmind.Thus,firmsmayconsideraprogramthatusesbothphysical

cardsanddigitalapplicationstoensureitsatisfiesthedivergingneedsof itscustomer

base.

64.

7. Limitations

Ourstudyissubjecttoanumberoflimitationswhichpavethewayforfutureresearch

andwhichwewilldiscusshereafter.

First of all, our research was not limited to one particular industry. Indeed,

throughoutthisstudy,ouraimwastodeterminetheoverallfactorsthatleadcostumers

to participate in loyalty programs or not. We ignore if customers’ motivation to

participateinloyaltyprogramdependsontheindustryinwhichtheprogramprovider

operates.Therefore,futureresearchcouldexaminewhethertheindustryoftheprogram

provider has an impact on customers’ preferences as well as their motivation to

participateinloyaltyprograms.

Secondly,ourresearchisbiasedtowardsrelativelyyoungindividuals.Althoughwe

didnottargetaspecificagegroupforourqualitativestudy,ourfocusgroupshappened

tobemajorlycomposedofindividualsagedbetween23and30years.Wedonotbelieve

that customers’ motivation to participate in loyalty programs profoundly changes

according to the customer’s age. However, we need to admit that interviewingmore

peopleofahigheragegroupmayhaveledtodifferentresults.Similarly,theparticipants

ofthefocusgroupsweremajorlyofeitherBelgianorLuxembourgnationality.Itseems

obvious that conducting a research with people from different countries or cultures

would have provided different insights as individuals’ perceptions and attitudes are

influencedbytheirculturalandethnicalbackground.Thus,qualitativeresearchwitha

more diverse sample could be realised in order to complete our study results. Such

researchmaydetect further elements that influence customerparticipation in loyalty

programsandthathavenotbeencoveredbyourresearch.

Thirdly,aswitheveryqualitativestudy,ourstudyisbaseduponasmallsampleof

respondents.Indeed,twelvepeoplehavebeeninterviewed,whichcannotbeconsidered

arepresentativesampleofthepopulation.However,ourstudyprovidessomesignificant

resultsasregardscustomers’motivationtoparticipateinloyaltyprograms.Thoseresults

maybestatisticallyconfirmedthroughfuturequantitativestudies.

65.

Lastly,withthebenefitofhindsight,ourinterviewscript,whichservedasabasisfor

ourfocusgroupsessions,mayhavelimitedtheoutcomesofourqualitativestudy.Indeed,

we could have included some projective techniques in our interview script to reveal

participants’hiddenthoughts,attitudesormotivationsregardingtheirparticipationin

loyalty programs. For instance,we could have askedparticipants to complete certain

sentencesortotellusthefirstthingthatcomesintheirmindwhenwestateacertain

word.Thismighthavehelpedtocollectdeeper informationandmighthavemadethe

discussionmoredynamic.Asaconsequence,ourinterviewscriptmayhavelimitedthe

resultsofourstudy.

66.

Conclusion

Throughout this thesis,we studied customers’ attitude andbehaviour towards

loyaltyprogramsinordertogetabetterunderstandingofthefactorsthatinfluencetheir

decision to participate or not in a loyalty program. In other words, our aim was to

determinethemotivationsandbrakestocustomerparticipationinloyaltyprogramsin

order to fill the gaps in the literature on this topic and to put forward some

recommendations for companies that wish to implement or improve their loyalty

program.

Inordertofindelementsofresponsestoourresearchquestion,weconducteda

qualitativestudyusingfocusgroups.Wedecidedtoadoptanexploratoryapproachfor

ourstudy,asourobjectivewastogeneratenewinsightsandtogetabetterunderstanding

ofcustomers’behaviour.Thekeyfindingsofourstudywillbepresentedhereafter.

Based upon the data collected throughout our focus groups, we analysed the

motivations and brakes to customer participation in loyalty programs in order to

comprehend the reasons for which customers decide to participate or not in loyalty

programs.Weidentifiedfivemotivationslinkedtothebenefitsoftheprogram;discounts,

free products, relevant offers and rewards, preferential treatment, and immediate

benefits, as well as three other motivations; simplicity of program, high purchase

frequency, and love of brand. Furthermore, we revealed four brakes linked to the

programitself;releaseofpersonaldata,participationcost,highparticipationefforts,and

limitedprogramduration,aswellastwootherbrakes;irrelevantoffersandrewards,and

excessiveamountofemails.

From an academic point of view, our research provides new elements and

completes the existing literature on the topic of customer participation in loyalty

programs.Baseduponourliteraturereviewandthefindingsofourstudy,weproposea

conceptualmodelthatcouldbeusedasastartingpointforfutureresearch.

Fromamorepracticalpointofview,understandingcustomers’perceptionsand

behaviourisfundamentalformarketersinordertodevelopthemostsuitablestrategies

67.

toinfluenceconsumers.Throughourstudy,marketpractitionersgaininsightsintohow

consumers perceive loyalty programs and what drives them to participate in such a

programs.Furthermore,weputforwardsomepracticalrecommendationstoencourage

companiestodesignmoreeffectiveloyaltyprograms.

Despite this progress, further research is required to fully comprehend what

drives customers to participate in loyalty programs. Future research may analyse

whethertheindustryoftheprogramproviderhasanimpactoncustomers’decisionto

participateornot.Inadditiontothis,futureresearchmayuseamorediversesamplein

order to increase the validity of our results. Quantitative research should also be

undertakentostatisticallyconfirmthefindings.Finally,itwouldalsobehighlyinteresting

tomakeadistinctionbetweenwhatdrivescustomerstoenrolinaloyaltyprogramand

whatdrivesthemtoactivelyparticipateinaloyaltyprogram.

68.

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