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

Abstract

According to many scientists, customer loyalty is one of the most important sources of the success of service business. This attitude is confirmed by the fact that it is three to five times less expensive for a business to retain its existing customers than it is to acquire new ones. Consequently, many companies have installed loyalty programs as a core component of their marketing strategy. Airline industry is not an exception in this field and the popularity of loyalty programs in airlines is still strengthening. In spite of the extensive usage of loyalty programs in airline industry, several questions remains unanswered. Do loyalty programmes offer a positive impact upon organizational performance in an environment in which all airlines offer similar programs? Can organizational performance be differentiated based on whether or not the airline has a loyalty program? The purpose of this study is to examine the influence of customer loyalty programs on organizational performance. 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 Baltic States, we provide empirical examples of their loyalty programs. Authors conduct an empirical investigation of the influence of customer loyalty programs on organizational performance in airlines in Baltic States. The Mann-Whitney test was used to examine the differences within the organizational performance of airlines by the fact of holding a loyalty program. The results of the performed empirical research have shown that airlines having a loyalty program can boast of a higher number of passengers carried than ones that do not. Surprisingly no statistically significant relations were found between the fact of holding a loyalty program and airlines’ revenue, profit. Customer loyalty programs frequently require costly long-term investments; the performed research of their effects will help airlines make more informed decisions and avoid costly mistakes. DOI: http://dx.doi.org/10.5755/j01.ee.27.1.10267