The Influence of Loyalty Programmes' Reward Design on Firm Performance: A Comparative Analysis of the German and the UK Retail Grocery Markets

Abstract

Customer loyalty programmes have come into prominence as a proper mechanism to ensure customer retention. Academic literature on loyalty programmes suggests that the effectiveness of a customer loyalty programme depends on its reward design (Dowling and Uncles 1997; Jain and Singh 2002). At this point, this is the first research that puts together the components of reward design offered by several academic studies and that attempts to build a link between these components and firm performance measures. The first stage of the research demonstrates that in both Germany and the UK, grocery retailers utilizing customer loyalty programmes perform significantly better than their competitors refusing to employ these programmes. At the second stage, effects of each reward design component on firm performance measures were investigated through factorial MANOVA tests. Results shows that tiered value propositions implemented in customer loyalty programmes proved to have significant and positive influence on performance of grocery retailers in both markets. In addition, according to the results, a wide variety of rewards offered within the framework of customer loyalty programmes also increases firm performance, especially when big players of a market employ these programmes.