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40 years of loyalty programs: how effective are they? Generalizations from a meta-analysis

Abstract

Despite firms’ extensive usage of loyalty programs (LPs) and decades-long academic research on their effectiveness, LPs’ effects on customer loyalty are still heavily debated. We perform a comprehensive meta-analysis of loyalty programs across various LP designs and industries and spanning different performance metrics to identify moderators of LP effectiveness. Based on a data set with 429 effect sizes, published or available between 1990 and 2020, we find strong evidence that LPs enhance customer loyalty. However, while LPs particularly enhance behavioral loyalty, shifting consumers’ attitudinal loyalty is more challenging. Further, LP effectiveness differs systematically depending on LP design characteristics (LP structure, reward content and delivery) and industry characteristics. These effects are enabled by both cognitive and affective drivers, acting sequentially, as underlying mechanisms. Despite a wide range of methodologies investigating LPs’ effectiveness, methodological choices have little impact on the substantive results. We develop a comprehensive research agenda and managerial implications.

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Notes

  1. Up until now, the four LP design characteristics in Bombaij and Dekimpe’s (2020) study constitute the largest number of simultaneous effects investigated.

  2. The literature discussion covers conative loyalty, but this dimension is not part of the meta-analytical framework and is not included in empirical predictions because only 8 effect sizes were retrieved for it.

  3. Similarly, in the few cases when the studies compare different intensity levels of the same LP design characteristics (e.g., 5 tiers vs. 3 tiers rather than tiers vs. no tiers), the higher intensity level served as the treatment condition to maintain consistency between effect sizes.

  4. For example, we were able to retrieve LP design and rewards information about Macau’s Venetian Casino’s Sands Rewards Club included in Shi et al. (2014) from the archived corporate web site and online business news articles published then (Cision PR Newswire 2010).

  5. Diagnostic tests of publication bias based on funnel plot asymmetry are inadequate if the distribution of effect sizes is likely to be heterogeneous (Ionnadis 2005), as in our case, because the pool of effect sizes reflects a population with different underlying “true” effects. As a solution, we account for heterogeneity with the moderators, including the precision of the effect size (Sterne and Egger 2005).

  6. For the full list of articles included in the meta-analysis, see Web Appendix A.

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Acknowledgements

The authors are thankful to Marnik G. Dekimpe, Grahame R. Dowling, Conor N. Henderson, Harald van Heerde, and Jie Zhang for their comments and advice on previous versions of this article.

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Belli, A., O’Rourke, AM., Carrillat, F.A. et al. 40 years of loyalty programs: how effective are they? Generalizations from a meta-analysis. J. of the Acad. Mark. Sci. 50, 147–173 (2022). https://doi.org/10.1007/s11747-021-00804-z

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Keywords

  • Loyalty programs
  • Loyalty cards
  • Reward programs
  • Customer loyalty
  • Firm performance
  • Relationship marketing
  • Meta-analysis