Proceedings | Marketing area | Year 2014
 

Behavioral Change of Loyalty Program Members: An Investigation of Customers’ Purchases When Ones Move from Lower to Upper Tier

by Randall Shannon; Boonying Kongarchapatara
  
  7th Oxford Asia Retail Conference in Singapore 24-26 September 2014

Abstract

Loyalty schemes have been adopted widely across industries, such as airlines, hotels, car rental, financial services, and various types of retailing. Despite the proliferation of loyalty schemes implemented around the world, the effectiveness of this relationship marketing instrument remains unclear. Customer loyalty may assessed by attitude, patronage behavior, or both attitudinal and behavioral loyalty. These different perspectives may lead to different research methods and measurements. In addition, there are a number of factors, which may affect the effectiveness of the loyalty program. This present study aims to investigate the impacts of tier structure of the loyalty scheme instrument. In particular, it focuses on the behavioral change of members when they are eligible to move up from the lower to upper tier. This study has gained access to analyze the actual purchase data of 70 upper-tiered members of a retail chain in Thailand. The data was recorded over a period of 24 months (the first 12-month data are the member purchases before being in the upper class and the latter 12-month is after being in the upper tier as a VIP member). The results show that on average the purchases before and after being in the upper tier are significantly different, with more being spent after customers moved to the upper tier.

Keywords: Loyalty program, Tier structure, Customer loyalty