Design Effective Loyalty Programs to Boost Customer Loyalty
--
Insights from three decades of academic loyalty program research
Is your business launching a new loyalty program? Or perhaps you’d like to revamp an existing program. In either case, you are likely to ask how you should best design the program for maximum effectiveness.
A research study to be published in the Journal of the Academy of Marketing Science analyzed three decades of accumulated scientific research on loyalty programs to offer some answers to that question. Here we bring you an annotated summary of the key findings.
Overview of the Research
Led by Professor Belli from the University of Adelaide in Australia, the research team dug deep into academic research on loyalty programs. They used a method called meta-analysis, which allows the results across different research studies to be statistically analyzed and combined to create insights.
The researchers analyzed 429 effects from 110 previous research studies. These studies spanned a wide variety of industries, including grocery and non-grocery retail, hospitality, financial services, airlines, among others.
Do Loyalty Programs Increase Customer Loyalty?
Across all studies, the average program impact on customer loyalty was small- to medium-sized. The impact was slightly bigger on behavioral loyalty than on customer attitude-based loyalty.
What’s more telling is how much variations were observed across studies. From the effect size data the researchers provided in the web appendix,
- 8% of the effects were negative (r < 0);
- 29% were medium to large (r ≥ .30); and
- the rest were positive and small in magnitude.
Compared across industries, loyalty programs had a bigger impact in low-frequency industries (e.g., hotels) than in high-frequency industries (e.g., grocery stores).
