Loyalty programs and a sense of community

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Abstract

Purpose - Previous research has explored the impact of customer participation in organizational-sponsored loyalty programs on customer loyalty; however, the findings are mixed. Other research, outside the loyalty program literature, reveals that customers who socially interact with other customers, via participation in brand communities, often exhibit an intense loyalty to the sponsoring brands. Proposes to investigate the following questions: "Can loyalty programs be differentiated based on whether or not members perceive a sense of community?"; and "Does a perception of a sense of community impact member loyalty to sponsoring organizations?"

Design/methodology/approach - Q-technique factor analysis is utilized analyzing statements from loyalty program participants. Principal component factor and cluster analyses confirm a two-tiered classification schema distinguishing loyalty programs based on perceptions of communal benefits. Differences between the two factors are explored. A survey developed from the Q-sort analysis was then administered to 153 loyalty program participants, providing evidence that consumers are more loyal to communal programs.

Findings - Loyalty programs can be distinguished based on the sense of community which members perceive. Furthermore, consumers are more loyal to communal programs than to programs that simply use financial incentives. Communal programs elicit stronger emotional connections and participants are significantly less predisposed to competitor switching.

Originality/value - This study integrates the theory of sense of community into the marketing literature, also offering researchers a nine-item, unidimensional scale to measure the construct within the context of loyalty programs. Confusion in the literature regarding the efficacy of loyalty programs is diminished by showing a positive relationship between loyalty and a member's perceptions of community.

Keywords Loyalty schemes, Brand management, Communities, Brand loyalty, Customer satisfaction

Paper type Research paper

Introduction: loyalty programs

Since the early 1990s, organizations have been encouraging customer participation in a proliferation of loyalty programs in which consumers are offered incentives in exchange for repeat business (Roehm et al, 2002). Also known as "frequency programs" (Kivetz and Simonson, 2002), loyalty programs are designed as a tool for organizations to develop and enhance customer loyalty. By enrolling in organizational-sponsored loyalty programs, customers receive benefits such as monetary discounts, the ability to join customer clubs, organizational newsletters, or prizes. Based on the assumption that loyalty programs result in increased customer loyalty (Dowling and Uncles, 1997; Palmer et al,...