Evaluating the impact of a loyalty program: A case study in automobile industry

Abstract

In recent years, there has been a rise in popularity of loyalty programs in various industries including airlines, retailers, and financial institutions. Loyalty programs typically provide customers with loyalty incentives such as points redeemable for discounts or prizes. However, there has been some debate on whether loyalty programs have significant impacts on increasing customer loyalty. In this talk, we present a case study which evaluates the impact of a loyalty program of an automobile manufacturer. The company's loyalty program, launched about three years ago, provides various leisure-related services as well as automobile maintenance services. The purpose of the case study is to investigate whether the loyalty program has an impact on enhancing its customer loyalty; and if so, identify the service items having important effects. An empirical study is conducted involving an on-line survey using its loyalty program members. Structural equation modeling (SEM) is used in building and analyzing quantitative models among service items, customer perception and satisfaction dimensions, and customer loyalty measures. The outcome of this study can be used in devising a strategy for improving the company's loyalty program.