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

Abstract

Loyalty programs enhance airline's value proposition. Yet little is known about how customer loyalty programs affect organizational performance. This understanding is important because airlines must decide what design of loyalty program to choose in order to maximize the revenue, profit and the number of passengers. The authors develop and test theory proposing that specific design of loyalty program ensures better organizational performance. The purpose of this study is to examine the influence of loyalty programs on organizational performance of airlines. The methods of systemic analysis of scientific literature, secondary data analysis, comparative analysis, content analysis were used in order to reach the set purpose. Using a sample of airlines in the Baltic States, we conduct an empirical investigation of the influence of customer loyalty programs on organizational performance in airlines. The Mann-Whitney test was used to examine the differences within the organizational performance by the fact of holding a loyalty program. The results indicate that differences in loyalty programs matter. Airlines having a loyalty program can boast of a higher number of passengers carried than the ones that do not. Surprisingly no statistically significant relations were found between holding a loyalty program and airlines' revenue, profit. It follows that airlines must consider these effects before the allocation of long-term investments into customer loyalty programs.

Loyalty programs for the passenger transportation industry: a study of Zimbabwean Companies

“…For the industry players though, there is currently more than sufficient research on the necessity of customer loyalty programs and the attached importance they bring to business enterprises world over (Beck et al, 2015;Magatef & Tomalieh, 2015;Sharp & Sharp, 1997;Jang & Mattila, 2005;Vilkaite-Vaitone & Papsiene, 2016). Using loyalty programs to manage customer-company relations has been a master-stroke in enhancing the former's retention thereby reducing marketing costs which is something the passenger transportation sector in the country will be well advised to embrace (Kang et al, 2015).…”

“…Many of the literature reviewed spent much of their focus on how loyalty programs enhance organisational performance through customer retention. Measuring of competitive advantage and measuring their effects of financial performance (Magatef & Tomalieh, 2015;Beck et al, 2015;Basera, 2014;Liu & Yang, 2009;Vilkaite-Vaitone & Papsiene, 2016). However, Berman (2006) and Furinto et al (2009) introduced contrasting views that focus on how loyalty programs are designed as being the most valuable process in their success.…”

“…As a way to remain competitive but ultimately reducing switching costs for passengers (Thompson & Chmura, 2015), on the positive, the challenges introduced by the reservation of the industry saw innovative companies in the sector identifying that the need to continuously acquire passengers creates an increase in marketing costs thereby reducing profitability. Leading them to introduce essential rewards and incentives, the companies have been able to retain passengers (Vilkaite-Vaitone & Papsiene, 2016) and create what has essentially become a distinct market segment. Increasing passengers switching costs will remain difficult for bus companies due to the high supply of alternative modes of transportation, players have had to introduce modern coaches and buses with varying exclusive services and products to enhance safety and comfort.…”

Analysis of Key Indicators That Affect the Expected Benefit of Customers When Using Loyalty Cards

“…Authors consider loyalty cards as a tool for creating a long-term, profitable relationship between seller and customer based on satisfaction (Plazibat, Šušak, & Šarić, 2016;Vilkaite-Vaitone & Papsiene, 2016). A number of authors (Plazibat et al, 2016;Vesel & Zabkar, 2009) believe that loyalty cards are made with the initial objective to increase the number of repeat purchases in sectors with strong competition, but taking into account that brand value is not decreasing.…”

Drivers of attitudinal and behavioural loyalty in B-2-B markets

“…Companies spend billions on the development of customers' loyalty, while scientists write numerous articles on this topic. For a long time, it was mainly related to B-2-C markets, but it seems that loyalty is essential for the business-to-business markets as well (Skarmeas et al, 2016;Vaitone-Vilkaite & Papsiene, 2016). The previous research showed that satisfaction is the key determinant of customer loyalty (Wirtz et al, 2014;Askariazad & Babakhani, 2015).…”