Do Loyalty Programs Enhance Behavioral Loyalty

An Empirical Analysis Accounting for Program Design and Competitive Effects

J. Leenheer, T.H.A. Bijmolt, H.J. van Heerde, A. Smidts

Research output: Working paperDiscussion paperOther research output

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Abstract

This paper studies the effects of loyalty programs on share-of-wallet using market-wide household panel data on supermarket purchases.We find that loyalty programs relate positively to share-of-wallet, but the programs differ in effectiveness and some are ineffective.Both a saving component and a multi-vendor structure enhance the effectiveness of a loyalty program, but high discounts do not lead to higher share-of-wallets.Further, if households have multiple loyalty cards, the effectiveness of a specific loyalty program is much smaller.The positive loyalty program effects on share-of-wallet entail substantial additional customer revenues.However, given the high number of loyalty programs already available in the market, our model predicts that a new loyalty program introduction will only lead to small effects on share-of-wallet.
Original languageEnglish
Place of PublicationTilburg
PublisherMarketing
Number of pages45
Volume2002-65
Publication statusPublished - 2002

Publication series

NameCentER Discussion Paper
Volume2002-65

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Loyalty programs
Competitive effect
Empirical analysis
Behavioral loyalty
Share of wallet
Household
Market model
Supermarkets
Discount
Revenue
Vendors
Loyalty cards
Panel data
Purchase

Keywords

  • loyalty
  • marketing
  • retailing

Cite this

Leenheer, J., Bijmolt, T. H. A., van Heerde, H. J., & Smidts, A. (2002). Do Loyalty Programs Enhance Behavioral Loyalty: An Empirical Analysis Accounting for Program Design and Competitive Effects. (CentER Discussion Paper; Vol. 2002-65). Tilburg: Marketing.
Leenheer, J. ; Bijmolt, T.H.A. ; van Heerde, H.J. ; Smidts, A. / Do Loyalty Programs Enhance Behavioral Loyalty : An Empirical Analysis Accounting for Program Design and Competitive Effects. Tilburg : Marketing, 2002. (CentER Discussion Paper).
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abstract = "This paper studies the effects of loyalty programs on share-of-wallet using market-wide household panel data on supermarket purchases.We find that loyalty programs relate positively to share-of-wallet, but the programs differ in effectiveness and some are ineffective.Both a saving component and a multi-vendor structure enhance the effectiveness of a loyalty program, but high discounts do not lead to higher share-of-wallets.Further, if households have multiple loyalty cards, the effectiveness of a specific loyalty program is much smaller.The positive loyalty program effects on share-of-wallet entail substantial additional customer revenues.However, given the high number of loyalty programs already available in the market, our model predicts that a new loyalty program introduction will only lead to small effects on share-of-wallet.",
keywords = "loyalty, marketing, retailing",
author = "J. Leenheer and T.H.A. Bijmolt and {van Heerde}, H.J. and A. Smidts",
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Leenheer, J, Bijmolt, THA, van Heerde, HJ & Smidts, A 2002 'Do Loyalty Programs Enhance Behavioral Loyalty: An Empirical Analysis Accounting for Program Design and Competitive Effects' CentER Discussion Paper, vol. 2002-65, Marketing, Tilburg.

Do Loyalty Programs Enhance Behavioral Loyalty : An Empirical Analysis Accounting for Program Design and Competitive Effects. / Leenheer, J.; Bijmolt, T.H.A.; van Heerde, H.J.; Smidts, A.

Tilburg : Marketing, 2002. (CentER Discussion Paper; Vol. 2002-65).

Research output: Working paperDiscussion paperOther research output

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T1 - Do Loyalty Programs Enhance Behavioral Loyalty

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AU - Bijmolt, T.H.A.

AU - van Heerde, H.J.

AU - Smidts, A.

N1 - Subsequently published in the International Journal of Research in Marketing, 2007 (rt) Pagination: 45

PY - 2002

Y1 - 2002

N2 - This paper studies the effects of loyalty programs on share-of-wallet using market-wide household panel data on supermarket purchases.We find that loyalty programs relate positively to share-of-wallet, but the programs differ in effectiveness and some are ineffective.Both a saving component and a multi-vendor structure enhance the effectiveness of a loyalty program, but high discounts do not lead to higher share-of-wallets.Further, if households have multiple loyalty cards, the effectiveness of a specific loyalty program is much smaller.The positive loyalty program effects on share-of-wallet entail substantial additional customer revenues.However, given the high number of loyalty programs already available in the market, our model predicts that a new loyalty program introduction will only lead to small effects on share-of-wallet.

AB - This paper studies the effects of loyalty programs on share-of-wallet using market-wide household panel data on supermarket purchases.We find that loyalty programs relate positively to share-of-wallet, but the programs differ in effectiveness and some are ineffective.Both a saving component and a multi-vendor structure enhance the effectiveness of a loyalty program, but high discounts do not lead to higher share-of-wallets.Further, if households have multiple loyalty cards, the effectiveness of a specific loyalty program is much smaller.The positive loyalty program effects on share-of-wallet entail substantial additional customer revenues.However, given the high number of loyalty programs already available in the market, our model predicts that a new loyalty program introduction will only lead to small effects on share-of-wallet.

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KW - retailing

M3 - Discussion paper

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BT - Do Loyalty Programs Enhance Behavioral Loyalty

PB - Marketing

CY - Tilburg

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Leenheer J, Bijmolt THA, van Heerde HJ, Smidts A. Do Loyalty Programs Enhance Behavioral Loyalty: An Empirical Analysis Accounting for Program Design and Competitive Effects. Tilburg: Marketing. 2002. (CentER Discussion Paper).