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Do Loyalty Programs Enhance Behavioral Loyalty: An Empirical Analysis Accounting for Program Design and Competitive Effects

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Author Info

  • Leenheer, J.
  • Bijmolt, T.H.A.
  • Heerde, H.J. van
  • Smidts, A.

    (Tilburg University, Center for Economic Research)

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    Abstract

    This paper studies the effects of loyalty programs on share-of-wallet using market-wide household panel data on supermarket purchases.We find that loyalty programs relate positively to share-of-wallet, but the programs differ in effectiveness and some are ineffective.Both a saving component and a multi-vendor structure enhance the effectiveness of a loyalty program, but high discounts do not lead to higher share-of-wallets.Further, if households have multiple loyalty cards, the effectiveness of a specific loyalty program is much smaller.The positive loyalty program effects on share-of-wallet entail substantial additional customer revenues.However, given the high number of loyalty programs already available in the market, our model predicts that a new loyalty program introduction will only lead to small effects on share-of-wallet.

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    Bibliographic Info

    Paper provided by Tilburg University, Center for Economic Research in its series Discussion Paper with number 2002-65.

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    Date of creation: 2002
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    Handle: RePEc:dgr:kubcen:200265

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    Web page: http://center.uvt.nl

    Related research

    Keywords: loyalty; marketing; retailing;

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    References

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    1. Peter E. Rossi & Robert E. McCulloch & Greg M. Allenby, 1996. "The Value of Purchase History Data in Target Marketing," Marketing Science, INFORMS, vol. 15(4), pages 321-340.
    2. Laitila, Thomas, 1993. "A pseudo-R2 measure for limited and qualitative dependent variable models," Journal of Econometrics, Elsevier, vol. 56(3), pages 341-355, April.
    3. Muniz, Albert M, Jr & O'Guinn, Thomas C, 2001. " Brand Community," Journal of Consumer Research, University of Chicago Press, vol. 27(4), pages 412-32, March.
    4. Liebermann, Yehoshua, 1999. "Membership Clubs as a Tool for Enhancing Buyers' Patronage," Journal of Business Research, Elsevier, vol. 45(3), pages 291-297, July.
    5. Fournier, Susan, 1998. " Consumers and Their Brands: Developing Relationship Theory in Consumer Research," Journal of Consumer Research, University of Chicago Press, vol. 24(4), pages 343-73, March.
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    Cited by:
    1. Pierre Volle & Aîda Mimouni, 2006. "Les bénéfices perçus des programmes relationnels : une approche de segmentation appliquée aux enseignes de distribution," Post-Print halshs-00164834, HAL.

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