Understanding The Effectiveness of Loyalty Programs On Customer Retention

UNDERSTANDING THE EFFECTIVENESS OF LOYALTY PROGRAMS… 1
Abstract
This study is an investigation of the effectiveness of Loyalty programs on Customer Retention. It
aimed at determining the level of assessment of loyalty programs in terms of Point programs, tiered
programs, paid programs, and partnered programs on customer retention. The researchers also focused on
determining whether the hypothesis of the study which states that the loyalty programs offered by the
retailers have not significantly affected customer retention is true. Furthermore, the researchers used a
modified rating scale questionnaire to assess the problem with a total of 100 respondents from a certain
institution. The researchers concluded that among the loyalty programs given, point programs and
partnered programs are considered predictors for Customer retention and that they are significant
variables while paid programs and tiered programs are non-predictors for Customer retention and that is
an insignificant variable which is stated by the regression summary table presented on Table 3.0. The
researchers then recommended that retailers focus as well in the non-predictor variables which are paid
program and tiered program to increase the benefits and rewards they get on the certain program.
Refining this Loyalty programs could increase the relationship between the characteristics of the loyalty
programs contributory to customer retention. In this case, Loyalty programs can be more effective in
Customer Retention.
Keywords: Loyalty Programs, Customer retention, Point Programs, Partnered Programs, Tiered
Programs, Paid programs, regression summary.
OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

1.0 Introduction
Have you experienced being valued in a restaurant or mall or even in a supermarket? What do
you feel if other customers get access instantly on something that you also want to access? Would you
avail that particular card to get a VIP experience? Some customers’ think that having a loyalty card can
make their purchase easy and convenient and some customers don’t want to because they will only shop
once or just sometimes. But little did they know, there’s a lot of benefit having a loyalty card. Customers
have an endless choice and move between into different brands. So in order for their customers to come
back, they need to build a connection with their customers and to invest in customer loyalty. According to
3Cinteractive, 64 percent of brands reported an increase in loyalty program membership over the years.
Loyalty programs have a significant advancement as the brands seek new ways to become more
valuable for the customers. An article published by Steve Olenski (2014), In fact, the “growth hacker”
movement, a recent collection of marketing gurus and regular business owners, whose sole aim is the
growth of the company, began by using loyalty programs as their traditional model to expand a company.
These individuals allocated all of their energy towards growing their business and saw customer loyalty
as one of the easiest ways to ensure this outcome.
Have you ever wondered how much it costs to business to acquire a new customer compared to
the costs for selling to existing ones? Harvard Business Review indicated that it costs about 5 to 25 times
more to acquire a new customer than it does to sell to existing ones. Not only that, but existing customers
spend 67 percent more than new customers.
The main objective of the study is to know how effective the four loyalty programs namely paid
program, point program, partnership program, and tiered program in attaining customer retention. In order
to reach this main objective, the research will address the following sub-objectives: the researchers want
to identify the extent or effect of point program on customer retention; identify the extent or effect of paid
program on customer retention; identify the extent or effect of partnership program on customer retention,
and identify the extent or effect of tiered program on customer retention.
This type of research contributes to the field of marketing to find the proper loyalty program or
recommendation that can be used in the business in order to succeed. This would help the future
researchers as a reference or guide of how effective loyalty program is. In addition, it could cost less and
create more benefits for your business in the long run.

2.0 Literature Review
A large and growing body of literature has investigated customer retention; for the purpose of
increasing the value of company’s customer base, a company needs to have knowledge of which customer
it should target, when and how it should contact those customers, amount of resources to be allocated and
these scarce resources are divided for various acquisition and retention activities.
Superior customer retention occurs when the process of complaints handling is documented. Recent
evidence suggests that relationship marketing tools such as customer service, personalization, brand
community, and loyalty/rewards programs are positively associated with customer retention. Relationship
marketing activities assist firms to develop a significant relationship with their customers.
In recent years, customer retention has gained increased value among both goods and service
providing firms. However although extensive research exists on the concept of customer retention and it’s
measures and instruments, studies and research on how professional service firms retain their customers
remain limited.
Customer retention is one of the main relationship marketing objectives. Currently, the perception
and application of customer retention are significantly valuable for companies. Thus, in order to perceive
and apply marketing principles in practice relevantly, it is important to ground theoretically and assess
empirically customer retention.
A study conducted by Margarita Išoraitė (2016) states that all scientific opinion of the loyalty
programs is similar. Loyalty program aims to educate buyers loyalty to the company, its products or
services, giving the customer added value, whether financial or non-financial support. Loyalty programs
aim to retain the existing customers and encourage their loyalty, but loyalty to each company's objectives
vary according to the company. Loyalty programs are: 1) to reward loyal customers, 2) to collect
information in order to know what are the best customers, 3) to manipulate the behavior of buyers, the
promotion applies to an individual in order to encourage customers to try new products, 4) to respond to
competitors' actions.

Alicia Fiorletta (2014) in her article "Relations, Not Rewards, is Key to Successful Loyalty
Programs", stated that in the last four years, retail stores had seen a decline of consumer engagement in
traditional loyalty programs. She emphasizes the fact that the retailer must start focusing more on their
loyalty initiatives so that they can compete in a better manner. In her article, she stated that there were
2.65 billion of total loyalty program subscriptions in 2012. As per the research conducted by Colloquy,
the active subscription memberships slipped from 46 % in 2010 to 44% in 2012. The study further shows
that points programs, discounts, punch cards and rewards, which were earlier regarded as star loyalty
programs are nowadays losing their attractiveness to consumers, and as a result, retailers now need to
revamp their strategies to retain and attract customers. Moreover, customers are confused regarding some
of the existing tiring reward systems such as gold, silver, and bronze, as they do not know what tier they
belong to in their favorite loyalty programs. Such reward programs create more confusion for the
customers rather than improving their shopping experience. Alicia Fiorletta further stated that it is
essential for the retailers to deliver value to the customers so as to maintain and earn their loyalty.
Retailers must use loyalty programs for establishing an emotional connection with the consumers rather
than focusing only on increasing transactions. The article also reflects that instead of reinventing different
loyalty schemes for different channels, a central engagement hub should be practiced by the retailers for
their loyalty programs. In this regard, the Omnichannel approach is most suitable for the retailers to
design their loyalty programs as it results in a lot easier in marketing strategy (Fiorletta, 2014).
According to a study by HelloWorld, younger customers are more inclined to prioritize

innovative tactics in loyalty programs, with 55% of Millennials and 38% of Gen-Xers expressing a
preference for surprise and delight tactics, a feat less appealing among Baby Boomers (23%). Meanwhile,
Millenials believe that loyalty programs should offer meaningful brand connections.

2.1 Theoretical Review
Bucket Theory of Marketing

Andrew Ehrenberg coined the phrase 'leaky bucket' to describe this syndrome: in effect, firms are
putting customers into a leaky bucket, and instead of preventing them from leaking away through the
bottom of the bucket, the firm keeps topping up the bucket with new customers.
Every business is like a leaky bucket, the water in the bucket represents the customers, many businesses
have a number of holes in it and the water flowing out in the holes represents the customers leaving the
company and lost sales-including future revenue, so in order for a company to be profitable is to keep
pouring more and more water in the bucket or plug the holes in the bucket. (Jim Palmer, 2010).
Figure 1
Customer retention is one of the key concepts in relationship marketing. Most companies
concentrate on recruiting new customers to replace customers who move on, rather than seeking to retain
customers. (Blythe J. Key, Concepts in Marketing, 2009).
Instead of pouring more water in the bucket (which is attaining new customers), it is far less for a
company to plug the holes (retaining customers through loyalty programs) because recovered long-term
customers can be worth much more to a company than newly recruited customers.

Relationship Marketing Theory

Relationship Marketing (RM) can be defined as an approach to establish, maintain, and enhance
long-term associations with customers and other stakeholders.
Relationship marketing mainly involves the improvement of internal operations. Many customers leave a
company or defect from a company not because the customers didn’t like the product, but because the
customers were frustrated with the customer service. A key assumption is that all parties will be able to
meet their objectives through the relationship. A business may retain its customers by creating a good
relationship with them using loyalty programs.
Firms have started focusing on relationship marketing as a core marketing strategy for
establishing a long-term and profitable relationship with the customers that is beneficial for both the
company and the customers.
Thus, according to them, customer retention can be defined as 'zero defection' or 'no-switching' of
the profitable customers of the organizations to their competitors. On the other hand, customer retention is
the longevity of the customer's relationship with the firm.
Commitment-Trust Theory
The commitment-trust theory of relationship marketing is composed of two fundamental factors,
trust, and commitment. These two factors must exist for a relationship to be successful. Relationship
marketing involves forming bonds with customers by meeting their needs and honoring commitments.
Rather than chasing short-term profits, businesses forge long-lasting bonds with their customers. As a
result, the customers trust these businesses, and loyalty helps both parties fulfill their needs.
Trust - Trust is the confidence both parties in the relationship have that the other party won’t do
something harmful or risky. Businesses develop trust by standing behind their promises.
Commitment - Commitment involves a long-term desire to maintain a valued partnership. That desire
causes the business to continually invest in developing and maintaining relationships with the customers.
For example, the business could offer discounts or loyalty programs.

2.2 Variable Discussion

Certain variables are to be used by the researchers to conduct their study which understands the
effectiveness of loyalty programs on customer retention. The following variables are:
2.2.3 Paid Program
The paid program is a kind of loyalty program wherein a customer pays a
monthly or annual fee to join the VIP members club. This is for a customer to gain or to receive
special services, discounts or unique opportunities that a company has to offer. These benefits and
exclusive rewards are being offered only to the customer who paid the membership. So, if a
customer does not belong to the VIP Members Club, he will not be able to get the same benefit that a
member enjoys.
2.2.4 Tiered Program

The tiered program is a type of a loyalty program in which the customer gets
different rewards depending on the tier they're in. for the customer to move on to the next
tier there is a milestone to pass. The milestone is determined or measured by how many the
customer has spent. Simply put, this program is based on the levels of loyalty, the customer gets
more points every time they purchase something, the more loyalty points the customer received, the
higher loyalty level they will reach, and the higher the level they will reach, the more rewards the
customer will receive.
2.2.5 Point Program

Point programs are the most popular used type of reward program. Its basic
principle is to spend more to get more, meaning the more the products you purchase, the more
points you will earn. By rewarding your customer using this program, you can add your customer
value. But most point program only has a specific time frame wherein customers can exchange or use
the points they earned to redeem or avail certain rewards depending on the companies program
rules. And most of the time, it is used by any retail store.
2.2.6 Partnered Program

The partnered program is also known as a multi-brand program. Two companies form a
partnership in order to make a loyalty program. This loyalty program creates a business
relationship to help the growth of their business. It has an effect and will create an impact especially to

customers. An example is buying a product that has additional points or has a freebie versus the same
product alone. Customers will choose a partnered program product which has an additional benefit
for them rather than buying the same product alone. With the said example, two companies will have
more customers who will patronize their product because of the benefits that they are getting.
2.2.7 Customer Retention
Customer retention is the ability of a company or business to retain its customers.
This refers to actions being conducted by the companies in order to reduce customer
defection. Keeping customers means keeping the profit.
Problem Statement and Hypothesis

The purpose of this research is to provide data on how effective loyalty programs in driving customer
retention.
1. What is the level of assessment of the different loyalty programs offered by retailers:
a. Point Program
b. Tiered Program
c. Paid Program
d. Partnered Program
Partnered Program Ho: The Loyalty Programs offered by the retailers have not significantly affected the
customer retention.

2.3 Research Paradigm
Loyalty Programs
 Point Program
 Tiered Program Customer Retention
 Paid Program
 Partnered Program
Figure 2
3.0 Research Methods
3.1 Research Design

This research makes use of a quantitative research strategy. According to Babbie, Earl of
The Practice of Social Research, quantitative method emphasizes objective measurements and
statistical, mathematical, or numerical analysis of data collected through polls, questionnaires and
surveys.
3.2 Research Locale
The researchers have gathered their information at Our Lady of Fatima University,
Antipolo Campus. The respondents are Business Administration Students because they are
knowledgeable about Loyalty Programs. The researchers aim to provide data on how effective loyalty
programs on customer retention with a total of 100 respondents.
3.3 Population and Sampling
The researchers used Purposive Sampling Technique for the statistical treatment of their
data. According to Ashley Crossman (2018), a purposive sample is a non- probability sample that
is selected based on characteristics of a population and the objective of the study. Purposive
sampling is also known as judgemental, selective, or subjective sampling.

3.4 Research Ethics

The researchers strived to avoid bias data analysis, data interpretation and other aspect
of research. The researchers avoided careless errors and negligence. The researchers made sure that all
the data and information that has been gathered will only be used in the study.
3.5 Research Instrument
The researchers will use a rating scale questionnaire for gathering data. The scale is
essential in the study because it I the communication point between the researchers and the
respondents. The rating scale enables the evaluation of the data gathered from the
respondents.
3.6 Data Collection
The researchers will use a rating scale survey questionnaire as the main instrument for
gathering data. The researchers must provide a consent letter to an adviser so that the
respondents are aware that the survey being conducted is authorized. The researchers assured
that the chosen respondents have knowledge on the study.
3.7 Data Analysis
The data collected were presented using descriptive statistics. The t-test was used
to analyze the hypotheses of the study. The software used was the Statistical Package for
Social Services. (SPSS V.20).
Range Interpretation Rank

3.51-4.00 Strongly Agree 4
2.51-3.5 Agree 3
1.51-2.5 Disagree 2
1-1.5 Strongly Disagree 1
Figure 3 Ranges and Interpretation of Mean Score of Data
4.0 Results

Table 1.1
Assessment of Loyalty Programs
Point Program
Criteria Mean Interpretation Rank

1. Retailers 3.27 Agree
increase the
points the 3
customer
receive per
purchase.
2. Points are 3.32 Agree
consistently
provided for 3
every
purchase.
3. Retailers offer 3.26 Agree
points 3
conversion
Overall Mean 3.28 Agree 3
Table 1.1 presents the assessment of Point program. Based on the table, the 1 st criteria gathered a
mean score of 3.27; the 2nd criteria gathered a mean score of 3.32; the 3 rd criteria gathered a mean score of
3.26. Out of the 3 criteria’s presented above, the ranking is as follows: 1 st rank belongs to the 2nd criteria,
2nd rank belongs to the 1st criteria and the 3rd rank belongs to the 3rd criteria. The overall mean of table 1.1
presented a mean score of 3.28, which means that the consumers agree that point programs have a
significant effect on customer retention.
Table 1.2
Tiered Program


1. Retailers 3.29 Agree
increase the
rewards the 3
customer get
every tier.
2. I am willing 3.25 Agree
to spend more
to get into a 3
higher tier
and earn
rewards.
3. The rewards I 3.20 Agree
receive for
every tier are 3
worth the
money I
spent.
Table 1.2 presents the assessment of Tiered program. Based on the table, the 1 st criteria gathered a
mean score of 3.29, the 2nd criteria gathered a mean score of 3.25, and the 3 rd criteria gathered a mean
score of 3.20. Out of the 3 criteria’s presented above, the ranking is as follows: 1 st rank belong to the 1 st
criteria, 2nd rank belongs to the 2nd criteria, and the 3rd rank belongs to the 3rd criteria. The overall mean of
table 1.2 presented a mean score of 3.24, which means that the consumers agree that tiered programs have
a significant effect on customer retention.
Table 1.3
Paid Programs

1. Retailers give 3.45 Agree

more
rewards/benefi 3
ts after
purchasing
VIP
membership.
2. Purchasing 3.12 Agree
VIP
membership is 3
worth the
money I’m
paying.
3. I am willing to 3.10 Agree
pay to get
exclusive 3
benefits.
Table 1.3 presents the assessment of Paid Program. Based on the table, the 1 st criteria gathered a
mean score of 3.45, the 2nd criteria gathered a mean score of 3.12, and the 3 rd criteria gathered a mean
score of 3.10. Out of the 3 criteria’s presented above, ranking as follows: 1 st rank belongs to the 1 st
criteria, the 2nd criteria belong to the 2nd criteria and the 3rd rank belongs to the 3rd criteria. The overall
mean of table 1.3 presented a mean score of 3.22, which means that the consumers agree that paid
programs have a significant effect on customer retention.
Table 1.4
Partnered Programs

1. I am satisfied Agree
with the
benefits I 3
received from 3.35

partnered
programs.
2. Partnered Agree
Programs 3
save me 3.16
money.
3. The reward Agree
keeps the
customers 3
happy and 3.32
engaged in a
certain
program.
Table 1.4 presents the assessment of Partnered Program. Based on the table, the 1 st criteria
gathered a mean score of 3.35, the 2 nd criteria gathered a mean score of 3.16 and the 3 rd criteria gathered a
mean score of 3.32. Out of the 3 criteria’s presented above, the ranking is as follows: 1 st rank belongs to
the 1st criteria, the 2nd crank belongs to the 3rd criteria and the 3rd rank belongs to the 2nd criteria. The
overall mean of table 1.4 presented a mean score of 3.27, which means that the consumers agree that
partnered program have a significant effect on customer retention.
Table 2.0
Assessment of Customer Retention
1. Reasonable 3.44 Agree 3
Price
2. Excellent 3.54 Strongly Agree
Customer 4
Service
3. High Product 3.51 Strongly Agree
Quality 4
4. Reliability 3.34 Agree 3
5. Loyalty 3.39 Agree
Programs 3

Table 2.0 presents an assessment of Customer Retention. Based from the table, the 1 st criteria
gathered a mean score of 3.44, the 2 nd criteria gathered a mean score of 3.54, the 3 rd criteria gathered a
mean score of 3.51, the 4 th criteria gathered a mean score of 3.34 and the 5 th criteria gathered a mean score
of 3.39. Out of the 5 criteria’s presented above, the ranking is as follows: 1 st rank belongs to the 2nd
criteria, 2nd rank belongs to the 3 rd criteria, 3rd rank belongs to the 1 st criteria, 4th rank belongs to the 5 th
criteria and the 5th rank belongs to the 4th criteria. The overall mean of table 2.0 presented a mean score of
3.44, which means that the consumers agree that the given criteria’s have a significant effect on customer
retention
5.1 Discussion
Table 3.0
Stepwise Regression / Correlation Summary
Loyalty Programs (IV) VS Customer Retention (DV)
Model Variables Entered Variables Removed

2 Point Program Tiered Program
Partnered Program Paid Program
Table 3.0 presents a summary of the Stepwise Regression. From the above table, the Loyalty
Programs, which is the independent variable, and Customer retention, which is the dependent variable, is
being contrasted. The independent and dependent variables were taken from the researcher’s paradigm.
The variables that were entered were Point program and Partnered program while the variables that were
removed are as follows: Tiered program and Paid program. This means that out of the dimensions of
Loyalty Programs that the researchers have specified, only the Point program and Partnered program was

a predictor for Customer Retention. While the Tiered program and Paid program were disregarded
because they were found to be non-predictors of customer retention based on the Stepwise Regression.
Furthermore, the data presented above gives the researchers an overview of what Loyalty Programs do or
does not affect customer retention.
Multiple Correlation Model Summary
Multiple R R-Square F-Value P-Value Interpretation Decision

0.664 0.441 38.222 0.000 Significant Reject Ho
The multiple R-value of 0.664 shows a high extent of the relationship between the characteristics
of the loyalty programs, point program and partnered program, contributory to customer retention. The
coefficient of determination further reveals that 44.1% of the possible variations in customer loyalty can
be attributed to point and partnered program.
The Tiered and Paid program were not considered as significant indicators of customer retention,
thus, they were excluded from the stepwise regression algorithm.
There has been mixed empirical evidence of loyalty program effectiveness. The result of the
study was evidenced by an article published by Grace Miller (2018), the most effective loyalty marketing
programs offer fun, easy to understand and desirable rewards systems that help incentivize customers to
shop. A survey conducted by Code Breaker reveals that 75% of the respondents said that they would
actively engage with loyalty programs. The study indicated that the Point program and Partnered program
have a positive impact on customer retention. Points given on point programs are only valuable to the
participant if it will buy something the participant really wants. In the increasingly competitive business
space, customer loyalty programs could be what differentiates a business from its competitors and keep its
customers attached. Thus, the effectiveness of loyalty programs on customer retention is undeniable. In
addition, loyalty programs are popular with the supermarket industry, as most consumers have engaged in
at least one program.
Customer retention can be seen as the image of customer defection, a high retention rate has the
same significance as a low defection rate. The result of the study coincides with that of Krishnan (2013),
which reveals that the main factor which could help to retain a customer is found to be ‘provide loyalty
benefits’, customer retention programs help companies to retain many customers as possible.
The results of the study revealed a high extent of the relationship between the loyalty programs
and customer retention, implying that point programs and partnered programs are contributory to
customer retention.

6.0 Conclusion
The study shows the assessment of the effectiveness of Loyalty Programs namely: Point Program,
Paid Program, Partnered Program, and Tiered Program on Customer Retention. The results of the study
show that, among the loyalty programs specified by the researchers, Point Program and Partnered
Program are the most significant Loyalty Programs that have a significant effect on Customer Retention.
The assessment of the respondents in loyalty programs in terms of point program are as follows:
First, if the points increase that the customer received per purchase. Second, if the respondents are
satisfied with the points they have received every purchase. And lastly, if the retailers increase their points
conversion.
The assessment of the respondents in loyalty programs in terms of a partnered program are as
follows: First, if the respondents are satisfied with the benefits they received. Second, if a partnered
program can really save money. And lastly, if the rewards received by the customer keeps them happy and
still engaged on.
Moreover, the following 2 different loyalty programs namely: Paid program and Tiered program
were found insignificant or not predictors on customer retention based on Table 3.0: Stepwise-Regression
Summary under the variables entered and removed.
The results also show that the loyalty programs are contributory to customer retention since the
overall mean score was 3.44 with an interpretation of agree therefore the hypothesis provided by the
researchers is rejected.

Recommendation
The researchers were able to accomplish the main purpose of the study which is to know
what is the level of assessment of the different loyalty program offered by the retailer in terms of
point program, paid program, tiered program, and partnered program on customer retention. The
researchers found out that the tiered and paid program were not considered as significant
indicators of customer retention. In able for a retailer to retain its customer using these two
loyalty programs, retailers must change their loyalty programs strategy or improved their loyalty
programs. Therefore the following recommendations were formulated by the researchers:
In terms of paid programs, retailers should focus on the benefits they will give or reward
to their customers. To make your future customer engage in your customer loyalty program offer
them an incentive as a reward for joining up. This will help you to build a better relationship and
be able to retain defected customers. The customers will feel your commitment by providing
better benefits when joining the VIP membership. This is evidenced by Table 1.3: Weighted Mean
of Paid Program wherein the third statement ranked 3 rd out of all the statements presented,
therefore, implying a further improvement in this program.
In terms of tiered programs, a customer should feel that the money they spent every tier is
worth with the rewards they received. Exclusivity makes every customer feel valued. Giving your
customers in the upper tiers better rewards than to a regular one time shoppers makes them feel
valued. Offer them the best rewards to those members to provide the most value to your business.
Diversify the rewards for upper levels of your program to increase its appeal. This will help you
to keep them engage, happy and feel important as a member of the tiered program. This is
evidenced by Table 1.2: Weighted Mean of Tiered Program wherein the 3 rd statement also ranked
3rd out of all statements presented.
The researchers also found out that point and partnered programs were considered as a
significant indicator of customer retention. The following recommendations were formulated by
the researchers:
In terms of point programs, consumers still find it appealing to earn points for purchases,
therefore, retailer’s should increase the points the customer receive per purchase and points are
consistently provided for every purchase the customer makes. These statements are evidenced by
Table 1.1: Weighted Mean of Point Program wherein they ranked 1 st and 2nd out of all statements
presented, therefore, implying that customers agree on the certain loyalty program.

In terms of a partnered program, customer likes the idea of programs partnering with
other brands to increase ways to earn loyalty points. The customers are satisfied with the benefits
they received from a certain program. The rewards keep the customers happy and engaged in a
certain program. These statements are evidenced by Table 1.4: Weighted Mean of Partnered
Program wherein they ranked 1st and 2nd out of all statements presented, therefore, implying that
customers agree on the certain loyalty program.

7.0 Acknowledgment
First of all, we would like to thank the Almighty God for all the blessings that he
has given us not just on this research but to everything that we have accomplished so far
and we will be accomplishing in the future. We like to thank God for the strength,
endurance, and wisdom that he has provided for us to complete this research.
We would also like to express our deepest gratitude towards our parents and
family for their undying love and support. Their love and support has always been with
us and it motivates us in what we do as well as helps us get through everything in life.
We also express our special thanks to our research professor as well as an adviser,
Prof. Alexander V. Gutierrez, for providing us the opportunity to conduct this research.
His knowledge, vigor, vision, patience, and guidance inspired us to accomplish this study.
His assistance towards us in completing this research is unmeasurable and with his
diversity in teaching, helps us understand on conducting this research from the beginning
through methodology until the end. With his guidance, this research has become easier
and we will always be grateful for everything that he has offered. It was our privilege to
work under his supervision and all the wisdom that he has provided for us will forever be
appreciated.
We extend our gratitude to all the College of Business and Accountancy faculty
members for their support throughout this research. Their pieces of advice and critiques
have molded this research to the best that it can be.
Our deepest gratitude goes to Prof. Francis C. Castro who have contributed so
much to this research. His aid from the survey questionnaire through the statistical
treatment of our data is deeply appreciated. We express our deepest gratitude for all the
help he has given us through this study.
We would also like to say thanks to our friends Patrick Ryan Aguilar and his
group and Jack Danielle Bautista and his group for their continuous encouragement as
well as their constant wisdom that also influenced this research. Our special thanks also

go to Christian Peñalosa for all the contribution and support that he has given us for the
betterment of this research.
And lastly, we would like to thank everyone who has been a part of this research
whether directly or indirectly. Without their contribution, this research would not have
been completed.

References
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Appendices
Appendix A
Research Instrument
Understanding the effectiveness of Loyalty programs on Customer Retention

Name (Optional):_____________________________________________________________
Age _________________________________ Gender _______________
________________________________________________________________________
For each of the questions below, check the response that best characterizes how you feel about
the statement, where: 1= Strongly Disagree, 2= Disagree, 3= Agree, And 4= Strongly Agree.
Part 1: Point Programs 4 3 2 1

1. Retailers increase the
points the customer
receive per purchase.
2. Points are consistently
provided for every
purchase.
3. Retailers offer points
conversion.
Part 2: Tiered Programs 4 3 2 1

1. Retailers increase the
rewards the customer get
every tier.
2. I am willing to spend
more to get into a higher
tier and earn rewards.
3. The rewards I receive for
every tier are worth the
money I spent.

Part 3: Paid Programs 4 3 2 1

1. Retailers give more
rewards/benefits after
purchasing VIP
membership.
2. Purchasing VIP
memberships are worth
the money I’m paying.
3. I am willing to pay to get
exclusive benefits.
Part 4: Partnered Programs 4 3 2 1

1. I am satisfied with the
benefits I received from
partnered programs.
2. Partnered Programs save
me money.
3. The rewards keep the
customers happy and
engaged in a certain
program.
Part 5: Customer Retention 4 3 2 1

1. Reasonable Price
2. Excellent Customer
Service
3. High Product Quality
4. Reliability
5. Loyalty Programs

Appendix B
Letter to the Institution
March 4, 2019
Rolando L. Palad
CBA Program Head
Our Lady of Fatima University
Dear Mr. Palad,

We, the third year marketing students of Our Lady of Fatima University – Antipolo Campus, are
currently conducting our MKTG 12 (Marketing Research) class. We are working on our thesis
paper entitled, “UNDERSTANDING THE EFFECTIVENESS OF LOYALTY PROGRAMS ON
CUSTOMER RETENTION OF SELECTED BUSINESS ADMINISTRATION STUDENTS OF
OUR LADY OF FATIMA UNIVERSITY ANTIPOLO CAMPUS”. The objective of our paper is
to provide data on how effective loyalty programs on customer retention.
In lieu of this, we ask your good office of your permission to allow us in conducting our survey
at the university premises. This involves one hundred (100) students to respond to our
questionnaire. Rest assured that the data collected would be treated with utmost confidentiality.
Further, ethical standards shall be observed accordingly.
If you have any questions and concerns, kindly contact me, Ellendale G. Vicente, at +63 906-
685-9441. Your support and approval on this matter are highly and greatly appreciated.
Name of Researchers:
1. Ellendale G. Vicente
2. Randy Valmoria
3. Charles M. Sia
4. Aldrich T. Ronquillo
5. Carlo Beriña
6. Pauline C. Arceo
Respectfully yours,
Ellendale G. Vicente
Principal Investigator, Student
Our Lady of Fatima University
Noted by:
Alexander V. Gutierrez Alexander V. Gutierrez Rolando L. Palad
Research Adviser Research Professor CBA Program Head

Appendix C
Letter to the Respondents
To our respondents:
Good day!
We, the third year students of Our Lady of Fatima University, College of Business and
Accountancy taking Bachelor of Science in Business Administration Major in Marketing
Management would like to request your participation by answering our questionnaire as part of
our data gathering procedure for our marketing research entitled “UNDERSTANDING THE
EFFECTIVENESS OF LOYALTY PROGRAMS ON CUSTOMER RETENTION OF
SELECTED BUSINESS ADMINISTRATION STUDENTS OF OUR LADY OF FATIMA
UNIVERSITY ANTIPOLO CAMPUS ”.
. Rest assured that all information derived therein will be treated with utmost
confidentiality.
Thank you very much and God bless.
Respectfully yours,
Vicente, Ellendale G.
Valmoria, Randy
Ronquillo, Aldrich T.
Sia, Charles M.
Beriña, Carlo
Arceo, Pauline C.
Noted By:
______________________
Mr. Alexander V. Gutierrez
Research Professor
_______________________
Mr. Rolando L. Palad
CBA Program Head

Appendix D
Research Tally


Appendix E
Reliability Test
Reliability
[Dataset0] C:\Users\PC\Documents\MARKETING LOYALTY PROGRAM.sav

Scale: ALL VARIABLES
Case Processing Summary
N %
Cases Valid 10 100.0
Excluded a 0 .0
Total 10 100.0
a Listwise deletion based on all variables in the procedure.
Reliability Statistics
Cronbach’s Alpha N of Items
.853 17

Appendix F
Validation Letter
March 20, 2019
C E R T I F I CAT I O N
This is to certify that Ellendale G. Vicente who is working on the research entitled
“UNDERSTANDING THE EFFECTIVENESS OF LOYALTY PROGRAMS ON CUSTOMER
RETENTION OF SELECTED BUSINESS ADMINISTRATION STUDENTS OF OUR LADY OF
FATIMA UNIVERSITY ANTIPOLO CAMPUS” has conferred with me for the statistical analysis of his
research paper. I acknowledge him for his efforts to consider my judgments regarding the statistics of his
paper.
This certification was issued for whatever purpose it may serve
_____________________________
Signature over Printed Name
Date: ___________________

Appendix G
Statistician’s Certificate
March 20, 2019
FATIMA UNIVERSITY ANTIPOLO CAMPUS” has conferred with me for the statistical analysis of his
research paper. I acknowledge him for his efforts to consider my judgments regarding the statistics of his
paper.
This certification was issued for whatever purpose it may serve
___________________________
Mr Francis C. Castro
Statistician
Appendix H
Grammarian’s Certificate
March 20, 2019

FATIMA UNIVERSITY ANTIPOLO CAMPUS” has conferred with me for the grammatical analysis of
his research paper, for the degree of Bachelor of Science in Business Administration Major in Marketing
Management was edited by the undersigned.
___________________________
Mr. Jefferson B. Lerona
Grammarian
Appendix I
About the Researchers
Ellendale G. Vicente graduated high school in

Bagong Nayon II National High school. He is
currently studying BSBA Major in Marketing
Management at Our Lady of Fatima University. He
plans to be a successful businessman.

Pauline C. Arceo graduated high school at Antipolo

Immaculate Concepcion School. She is currently
studying BSBA Major in Marketing Management at
Our Lady of Fatima University. She aims to be a
successful businesswoman.
Carlo B. Berina graduated high school at Antipolo

National Highschool. He is currently studying BSBA
Major in Marketing Management at Our Lady of
Fatima University. He aims to be a successful
businessman.

Aldrich T. Ronquillo graduated high school at

Colegio de San Clemente. He is currently studying
BSBA Major in Marketing Management at Our Lady
of Fatima. he aims to be a successful businessman.
Charles M. Sia graduated high school at College

of San Benildo Rizal, He is currently taking
BSBA Major in Marketing at Our Lady of Fatima
University. He aims to be a successful
businessman.

Randy P. Valmoria graduated high school at

Antipolo National Highschool. He is currently
studying BSBA Major in Marketing Management
at Our Lady of Fatima University. He aims to be a
successful businessman.

Understanding The Effectiveness of Loyalty Programs On Customer Retention

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UNDERSTANDING THE EFFECTIVENESS OF LOYALTY PROGRAMS… 1

This study is an investigation of the effectiveness of Loyalty programs on Customer Retention. It

Programs, Paid programs, regression summary.

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

2.0 Literature Review

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

According to a study by HelloWorld, younger customers are more inclined to prioritize

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

2.1 Theoretical Review

Bucket Theory of Marketing

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

Relationship Marketing Theory

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

2.2 Variable Discussion

2.2.4 Tiered Program

2.2.5 Point Program

2.2.6 Partnered Program

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

Problem Statement and Hypothesis

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

2.3 Research Paradigm

3.1 Research Design

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

3.4 Research Ethics

Range Interpretation Rank

Figure 3 Ranges and Interpretation of Mean Score of Data

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Criteria Mean Interpretation Rank

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

Criteria Mean Interpretation Rank

Criteria Mean Interpretation Rank

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Criteria Mean Interpretation Rank

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

Model Variables Entered Variables Removed

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Multiple R R-Square F-Value P-Value Interpretation Decision

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OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

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OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY

Ahmad, R., Canterbury Business School, The University, Canterbury, Kent.

OUR LADY OF FATIMA UNIVERSITY COLLEGE OF BUSINESS AND ACCOUNTANCY