Impact of Loyalty Programs on Customers' Loyalty: A Case Study of Shoes and Handbags Retail Outlets of Pakistan

By Irshad, Medeeha; Amjad, Shehla et al. | Pakistan Journal of Psychological Research, Summer 2015 | Go to article overview

Impact of Loyalty Programs on Customers' Loyalty: A Case Study of Shoes and Handbags Retail Outlets of Pakistan


Irshad, Medeeha, Amjad, Shehla, Janjua, Saquib Y., Pakistan Journal of Psychological Research


There has been a growing trend of making long-term relationships with the customers who can deliver long-term profits to the company (Crucerua & Moise, 2014). Managers of proficient companies often ask themselves questions regarding the need for application and development of certain methods and tools for developing long-term relationships with customers. Building relationships with customers represent a real challenge that requires knowledge and understanding of marketing concepts as well as their practical use (Crucerua & Moise, 2014). Customers' expectations are constantly changing throughout the world due to which customer relationship management has become increasingly important.

Relationship marketing is 'the ongoing process of engaging in cooperative and collaborative activities and programs with immediate and end-user customers to create or enhance mutual economic value at reduced cost' (Sheth & Parvatiyar, 2000, p. 9). Relationship marketing entails the development of strategies to build relationships with customers, to develop these relationships further, and maintain them over the long-term; and through this process, add value (MiquelRomero, Caplliure-Giner, & Adame-Sánchez, 2014). The basis of relationship marketing is customer loyalty because retaining customers over their life will contribute to enhance profitability (Gandomi & Zolfaghari, 2013). The main theme of relationship marketing is building trust between the firm and the customers and keeping promises made to the customers (Abdul, Gaur, & Peñaloza, 2012). The relationship practices mainly consist of making the customers feel special by making long-term relations with them and providing them with customized services (Zhang & Wedel, 2009).

With the advancement in information technology, new customer relationship management techniques are being used. One such technique that many retail stores use is known as customer loyalty program. Loyalty means customers' commitment with a particular organization in terms of purchasing the organization's goods and services repeatedly and recommending the products and services of that organization to their friends and associates (Chen, 2015). Loyalty programs are basically used to offer some benefits to the customers who buy the brand (Leenheer, van Heerde, Bijmolt, & Smidts, 2007). They offer customers with accumulating economic benefits. They are usually in the form of points and when the members of the loyalty program obtain a card, they get 'points' based on their purchases. These points can be saved for rewards. In order to create switching costs and lengthen the relationship, loyalty programs offer the customers with rewards on the basis of cumulative buying and aim to result in repeat buying behavior (Kim, Lee, Choi, Wu, & Johnson, 2013).

The development and maintenance of customer loyalty occupies a lot of importance in companies' marketing plans, especially, when it comes to the highly competitive markets with increased unpredictability and reduced product differentiation (Grönroos, 2009). Loyalty provides basis to the customers to engage themselves in the search of extended information with fewer reasons among different alternatives. Loyal customers require less persuasion compared to the customers who do not have any previous experience of an organization. Besides this, loyal customers are more devoted to recommend an organization and its products to other people (Bove & Johnson, 2009).

Loyalty programs are quite common in U.S. and Europe, but it is relatively a new concept in the Asian Pacific countries (Steyn, Pitt, Strasheim, Boshoff, & Abratt, 2010). People generally confuse loyalty programs with sales promotions. While the sales promotions have short-term focus to increase sales, the loyalty programs have longterm focus in establishing long-term relationships with the customers (Omar, Aziz, & Nazri, 2011). Retailers have introduced different schemes for loyalty programs in order to make customers feel special. …

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