Loyalty Programs in Emerging and Developed Markets: The Impact of Cultural Values on Loyalty Program Choice

Abstract

Loyalty programs increase customers’ repeat purchase behavior and reward their continued patronage by enhancing the firm's value proposition. Yet little is known about how cultural values affect loyalty program choice as firms expand abroad. This understanding is important because multinational corporations must decide whether to standardize or adapt their loyalty programs when internationalizing. The authors develop and test theory proposing that cultural values influence loyalty program choice. The results indicate that cultural differences matter. Consumers from countries high in power-distance values and low in individualism values prefer loyalty programs that offer related rewards, whereas consumers from countries low in masculinity values and low in uncertainty avoidance values prefer unrelated rewards. The analysis also indicates that consumers from countries high in masculinity values and high in uncertainty avoidance values shun loyalty programs altogether and prefer immediate promotional offers. This finding suggests that loyalty programs do not work equally well in all countries and that multinational corporations may need to adapt reward programs as they internationalize to ensure that their loyalty-building efforts are successful.