Short-term Impact of Item-based Loyalty Program on Customer Purchase Behaviors

Abstract

Studies based on the analysis of a new design of loyalty program, item-based loyalty programs (IBLPs), indicate that customers are more interested in item-based reward points than in traditional price discounts. However, we are still unaware of customer responses to the different point settings on IBLP items. This study investigates an analysis with Tobit II to explore IBLPs’ short-term (4 months) impact on customers’ purchase behaviors using data from two newly opened Japanese supermarket chains that have implemented this new IBLP program from the beginning. The results showed that different types of customers are differently affected by IBLPs, and that heavy customers are more inclined to purchase more items with more spending money than others. The results also indicated that customers’ purchase behaviors are affected by IBLPs’ different point levels. Moreover, to an IBLP with different points, the responses from different types of customers are different. The findings of this study have important guiding significance in IBLP design and marketing management.

Which loyalty program do customers prefer: a coalition program or a single-firm program?

“…Concerning rewards, consumers were found to prefer luxury more than necessity rewards as the magnitude of program requirements increases (Kivetz and Simonson, 2002), effort-congruent more than effort-incongruent rewards (Kivetz, 2005), altruistic more than self-oriented rewards for gamified loyalty programs (Hwang and Choi, 2020) and nonsalient autonomy-supportive more than salient controlling rewards (Kim and Ahn, 2017), direct rather than indirect rewards in high involvement situations and immediate rather than delayed rewards in low involvement situations (Yi and Jeon, 2003) and social rewards for programs with high controlling policies and financial rewards for programs with low controlling policies (Noble et al , 2014). Other studies have examined point programs in terms of magnitudes, points required to redeem the reward and points earned per dollar (Bagchi and Li, 2011), the ease of computing the percentage savings for redeeming points (Kwong et al , 2011), bonding potentials (Wendlandt and Schrader, 2007) and point promotions (Zhang and Breugelmans, 2012; Wu et al , 2020).…”

“…Moreover, this work raises a need to extend the results to a diverse range of cultures since they were obtained in a Japanese sample. Extant studies on loyalty programs using Japanese subjects had never directed attention to cultural effects, although they have cited many studies conducted outside Japan (Hidaka et al , 2018; Kimura, 2022; Wu et al , 2020). Thus, cultures are not considered as a significant factor in this research domain.…”