The effectiveness of loyalty programmes continues to be questioned, especially as their cost to firms increase together with their adoption rate across industries worldwide. Given the divergent industry specific findings predominantly focusing on the retail and airline industries, and the lack of previous consideration of important moderating variables type and timing of rewards, this study extended the research to service industries, investigating the effects of customer perceived benefits on loyalty programme effectiveness in terms of both attitudinal and behavioural loyalty.
Hypotheses established the extent to which reward design elements (customer perceived benefits and type and timing of rewards) develop customer relationships (perceived relationship investment and brand relationship quality) which are market-based assets driving future revenue for the firm, and resulted in customer loyalty in the financial services industry. A quantitative methodology and survey approach was adopted with a randomly selected stratified sample of respondents. The results supported the validity and reliability of the construct measures and a satisfactory adjusted SEM model fit.
The study provided industry-specific outcomes, indicating that social (integration with customer values), exploratory (exposure and access to relevant and timeous knowledge), monetary (financial value) and entertainment benefits drive customer loyalty in the financial services industry, with timing of rewards having no moderating impact and type of reward only impactful for consumers that prefer indirect (non-financial) exploratory and entertainment benefits. Importantly, the benefit of recognition was found not to have a significant influence. The study further supported divergent reward design elements as antecedents of customer loyalty across industries, as a result of the divergent nature of customer relationships between industries. Limitations of the research were consideration of customer characteristics, segments, and the relationship between attitudinal and behavioural loyalty.
The study’s theoretical contribution provides for a more comprehensive conceptual model of loyalty programme effectiveness, leveraging customer relationships which are grounded in market-based asset theory, as well as an empirical analysis of previously untested relationships between important variables. The research also confirms the requirement for industry-specific design elements for effective loyalty programmes. For practitioners, the findings provide guidance on design elements of an effective programme within the financial services industry.