The Role of Relational Reward Benefits for Developing the Non-Financial Value of a Customer to an Organization: Structural Equation Modeling Approach

Abstract

Abstract:Research on the customer value to an organization has been widely explored, yet most studies only determined on the financial value based on the customer's purchasing behavior. The value of customers beyond their purchasing behavior -defined as the relational worth -has not been commonly captured yet. This non-financial value is one of the drivers in retaining customers, hence it becomes a crucial factor in preserving the profitability of the organization. For this reason, this paper aims to examine the customer non-financial valuations of a loyalty reward program. The scope of the study covered a reward program involving consumer exertions in the context of a Frequent Flyer Program (FFP) offered by an airline in Indonesia. The hypotheses are empirically tested with a sample of FFP members conducted through an online survey (n=475). The data were statistically analyzed using structural equation modeling (SEM) as a first order construct. Results indicate that the perceived social rewards lead to an affective and normative commitment as well as consumers' satisfaction, while the economic reward did not have an effect on developing affective bonds with members for long-term relationships. The relational benefit offered through the FFP creates affectively and normatively committed members who produce relational behaviors, in terms of WOM, immunity, openness and acquiescence of the members to the airline. Furthermore, the FFP members produced social behaviors toward the airline when they felt satisfied with their relational exchanges.Abstrak: Pada umumnya penelitian untuk mengidentifikasi siapa pelanggan-pelanggan yang berharga hanya berasarkan pada nilai transaksi (berapa banyak uang yang dibelanjakan pelanggan) dan belum mempertimbangkan nilai-nilai sosial pelanggan yang diberikan kepada perusahaan. Nilai sosial ini merupakan salah satu penentu keuntungan perusahaan. Penelitian ini bertujuan untuk mengetahui pengaruh hadiah yang diberikan kepada pelanggan terhadap nilai sosial yang dihasilkan. Penelitian dilakukan terhadap program loyalitas yang melibatkan usaha pelanggan dalam mendapatkan hadiah dan dalam konteks Frequent Flyer Program. Hipotesa diuji dengan menggunakan sampel yang terdiri dari 475 anggota FFP yang diperoleh dengan melalui survey online. Data dianalisis secara statistik dengan Stuctural Equation Modelling (SEM). Hasil penelitian menunjukkan bahwa hadiah yang bersifat sosial mempunyai pengaruh signifikan terhadap terciptanya perasaan emosional dan kepatuhan terhadap peraturan atau norma, dan perasaan puas dari

Influence of Customer Loyalty Program on Organizational Performance: a Case of Airline Industry

“…It is still unknown if these programs contribute to the key performance indicators in airline industry. These indicators are firm revenue, profit streams and the number of passengers carried (Gittell et al, 2004;Carlsson & Lofgren, 2006;Lederman, 2007;Wong & Chung, 2008;Demydyuk, 2011;Kristiani et al, 2014;Olazabal et al, 2014). Prior research (Berman, 2006;Bagdoniene & Jakstaite, 2007;Liu & Yang, 2009;Omar et al, 2010;Huettinger & Cubrinskas, 2011;Omar et al, 2011aOmar et al, , 2011b has shown that loyalty program has become an important mechanism to increase firm revenue.…”

“…However, B. P. S. Murthi et al (2011) found surprising evidence that in credit card industry customers who participate in loyalty program generate significantly less profit than those customers who do not. In airline industry the situation is opposite: frequent flyer programs do contribute to the profit of an airline (Kristiani et al, 2014). Formally, we offer the following hypothesis: H2: holding a loyalty program ensures a higher profit for an airline.…”

“…The empirical research of loyalty programmes applied by airlines selected website information as the unit of content analysis. Organizational performance was measured by revenue, profit and passengers carried (Gittell et al, 2004;Carlsson & Lofgren, 2006;Lederman, 2007;Wong & Chung, 2008;Demydyuk, 2011;Kristiani et al, 2014;Olazabal et al, 2014). We use a gathered data set.…”