Loyalty program benefits and their effect on relationship quality and loyalty to the retailer

Abstract

Loyalty Programs (LPs) aim to increase profit by rewarding, with various benefits, customers who patronize the retailer. This study investigated the benefits LPs provide in the South African Fast-moving consumer goods (FMCG) marketplace and how these influence relationship quality and loyalty between retailer and customer. How the perceived benefits of LPs contribute to relationship quality (satisfaction, trust and commitment), and how they lead to loyalty are examined. To illustrate these relationships, a model showing three independent (perceived benefits, namely altruistic, consumeristic, and egoistic) and three dependent variables (relationship quality, namely trust, satisfaction, and commitment), plus customer loyalty, was developed. A quantitative survey was administered electronically over 11 days to a randomly selected sample of 5000 consumers per day from a commercial database, resulting in 1944 responses. After the deletion of incomplete or inappropriate responses, 479 usable replies remained. Since this sample was self-selected, it should be considered a convenience sample. Structural equation modelling (SEM) with confirmatory factor analysis (CFA) was applied to test the hypotheses and develop the model. SEM indicated that respondents consider egoistic and consumeristic benefits as the same. Furthermore, trust and satisfaction manifest as a single construct. Both consumeristic and altruistic benefits had a significant positive relationship with this unified construct of trust/satisfaction, and the relationship between altruistic benefits and commitment was also positive and significant. Finally, although neither altruistic nor consumeristic benefits appeared to contribute directly to loyalty, a positive relationship existed between the new construct of trust/satisfaction and those of commitment and loyalty. The pathway to loyalty is indirect, and to reach this sought-after goal, relationship quality constructs must first be achieved.