Spillover Effects of Brand Alliance and Service Experience on Host Brands in Loyalty Program Partnerships

Abstract

Three studies explored the consequences of loyalty program partnership on individual brands. The first study sought to determine what kinds of brand equity and category similarity would result in customers’ higher perceived attractiveness of and intention to join the loyalty program partnership. The study finds that higher category similarity increases both perceived attractiveness and joining intention towards a loyalty program partnership. When loyalty program partnership consisted of similar category businesses, individual brands also experienced changes to their brand equity levels. Low equity brands when partnered with high equity brands experienced a significant improvement in their brand equity levels. A high-high pairing increased the brand equity for the both host and partner brands while a low-low pairing increased the brand equity for the host brand. The second study investigated if participation in a loyalty program partnership affected the brand identity distinctiveness of the host brand. Contrary to expectations, host brand did not experience any loss in brand identity distinctiveness after a loyalty program partnership. The third study examined the possible effects of negative spillover in a loyalty program partnership in a partner service failure situation. In line with predictions, this study found that host brands were not immune to service failures by the partner brand. Even though the host brand did not cause the service failure, they were negatively affected by the service failure due to their association with the partner brand through loyalty program partnership. Negative effects on the host brand included decline in brand equity and lessened future behavioral intentions towards the host brand. Category similarity was again a significant factor in determining the effects of the negative spillover among the partner brands. Decline in the host brand equity was significant