Which retailers adopt a loyalty program? An empirical study

Abstract

This paper examines antecedents of retailers’ loyalty program adoption and their perceptions regarding loyalty program effectiveness. The investigated antecedents consists of sector, competitive and demand, and firm characteristics. To test the hypotheses, we surveyed 180 retail companies active in 15 retail sectors, 37% of which have a loyalty program. The survey data are complemented with expert judgements on sector characteristics. We estimate multi-level models for both loyalty program adoption and perceived effectiveness (tobit-2 specification). We find that the sector characteristics assortment homogeneity and average purchase frequency stimulate loyalty program adoption considerably. Further, customer-oriented firms are most likely to adopt loyalty programs. Contrary to loyalty program adoption, the effectiveness of a loyalty program in terms of additional customer knowledge and customer loyalty is hardly affected by market and organizational factors. But it appears that retail companies should better take into account their technological skills necessary for obtaining useful information from the customer loyalty program data.