Abstract
Purpose Loyalty programs (LPs) in a business-to-business (B2B) context have been under-researched when compared to consumer markets. The purpose of this paper is to investigate if and to what extent the loyalty program activity (LPA) based on recency, frequency and monetary framework reflects the effectiveness of a specific LP. Design/methodology/approach Using the data obtained from 818 business customers enrolled in a LP, logistic regression models are run to find the impact of LPA on the company’s sales. Findings The results suggest that in a linear LP, the frequency of rewards impacts sales the most, compared to recency and amount of points redeemed. The intensity of a LPA is influencing the expected sales in a company. Research limitations/implications The current study is not focused on the redemption patterns and the value of the rewards offered in the program. Limitation of the study only to one country and in a single company does not allow to generalize presented findings. Practical implications Companies should focus their efforts on defining the best level of frequency rewards in their LPs. Reward timing should be considered as a factor that influences the change in customer purchasing behavior more than the amount of points accumulated. Originality/value The research provides empirical evidence to support the highest influence of frequency of rewards on sales, compared to recency and amount of points redeemed. This is one of the few LP studies conducted in the context of the B2B market.
Highlights
Following Reichheld and Sasser’s (1990) seminal article, companies have started paying more and more attention to managing relationships with existing customers
It comes as no surprise that companies are introducing loyalty programs (LPs) to enrich relationships with their customers and build up more business value from a loyal customer base (Viswanathan et al, 2017)
Recent report by KPMG shows that a LP can cost a company as much as 5 percent of sales (KPMG, 2016) it is crucial to understand how LPs can influence on company performance (Bijmolt et al, 2010; Breugelmans et al, 2015) and drive sales (Lal and Bell, 2003; Taylor and Neslin, 2005)
Summary
Following Reichheld and Sasser’s (1990) seminal article, companies have started paying more and more attention to managing relationships with existing customers. According to KPMG’s Global Consumer Executive Top of Mind survey, 90 percent of consumer goods and retail senior executives are concerned with customer loyalty (KPMG, 2017). It comes as no surprise that companies are introducing loyalty programs (LPs) to enrich relationships with their customers and build up more business value from a loyal customer base (Viswanathan et al, 2017). Recent report by KPMG shows that a LP can cost a company as much as 5 percent of sales (KPMG, 2016) it is crucial to understand how LPs can influence on company performance (Bijmolt et al, 2010; Breugelmans et al, 2015) and drive sales (Lal and Bell, 2003; Taylor and Neslin, 2005)
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