Date of Award
Master of Business
Faculty of Business and Public Management
Since the 1970s there has been a paradigm shift away from mass marketing towards the establishment and maintenance of individual relationships known as relationship marketing. Customer loyalty programs can be seen as the tactical strategies that have resulted from this change in focus, as they attempt to retain existing customers by developing a long-term, mutually satisfying relationship. The first of these such strategies was introduced in 1981, and they are still a relatively new and unexplored phenomenon. The limited research on these strategies conducted thus far has shown the many purported advantages to be doubtful at best, yet their number and scope continue to increase exponentially (Bejou, 1997). As a result of this apparent contradiction between the published research and what is being observed in practice, this study used exploratory, qualitative methods to investigate the objectives of management when implementing loyalty programs as well as the criteria they used to assess the effectiveness of these programs. The sample for this study comprised six managers of several large organisations within Australia. Individual depth-interviews probed managers' motivations for implementing customer loyalty programs and their perceptions of the performance of these programs to date. The results of this study suggest that the objectives behind the implementation of customer loyalty programs may have evolved over time to a more bottom-line orientation. Furthermore, the informants contend that exclusive loyalty is virtually impossible to achieve with a loyalty program, or any other method. Nonetheless, this research suggests that those loyalty programs offering rewards that aim to improve the value proposition of the core product, may be more successful in terms of differentiation and loyalty. Finally the results suggest that despite the fact that many organisations are forced to offer a loyalty program to maintain their competitive position, if well constructed and well managed there appears to be benefits to the company in terms of marketing flexibility and alternative revenue streams. Due to the nature of the research design, the objective of this research was not to provide statistical indicators about the performance of sample members' loyalty programs. It is hoped that the findings drawn from the data can enhance the understanding of the customer loyalty program phenomenon, from a qualitative perspective, and thus guide future research into areas in which the current literature is deficient. For example, this study highlighted the confusion that surrounds the definition of a customer loyalty program and the implications this has had for the appraisals of these programs. Further research into this, and other important areas of inquiry raised in this study, may enable academics and practitioners to better explain the continued growth of loyalty programs, and fully understand the real benefits and costs associated with them.
Simms, P. D. (2000). Exploring the criteria used by managers to measure the effectiveness of customer loyalty programs. Retrieved from http://ro.ecu.edu.au/theses/1356