Relationship Marketing (PG)

Lecture 4: Loyalty & Loyalty Schemes

Prof Jane Hemsley-Brown

Sunday, 17 November 2019 1

 Session plan

 Learning Outcomes
 The assignment – arrangements
 Examples of Loyalty
 Creating customer loyalty
 Loyalty cards and loyalty
 Key basis of loyalty
 Observations of loyalty
 Dick & Basu (1994)
 Task - recommendations
 Definitions of loyalty (attitude and behaviour)
 Task - recommendations
 Research on loyalty
 Article 1
 Task
 Article 2
 Starbucks case study task

Sunday, 17 November 2019 2

 Learning Outcomes
What will you learn in the session?

 Understand elements within Relationship Marketing that lead to

customer loyalty.
 Understanding the 4 different types of loyalty and how they differ
 Identify antecedents to loyalty from research
 Identify a variety of scales to measure loyalty
 Make recommendations based on research

Sunday, 17 November 2019 3

Purpose and rationale for loyalty

 The ultimate goal of relationship marketing paradigm is to maintain loyal

customers and make profit through repeat purchasing behaviors.
 Yet repeat purchase does not always mean loyalty to a company.
 A customer may keep using the same suppliers for some reason, for
example, high switching cost, but the customer may not be willing to enter a
close relationship with the supplier without feeling committed to the company
(Gummesson, 2008, p.24)
 Research shows that many variables contribute directly or indirectly to loyalty
Example 1: Waitrose

 “Pick your own offers” abandoned because customers

found it too confusing”

Smithers, R., (2018) Waitrose to close part of its loyalty scheme at end of February, The Guardian
(available online at https://www.theguardian.com/business/2018/feb/05/waitrose-to-close-part-of-
loyalty-scheme-at-end-of-february-pick-your-own-offers [acessed, 21/02/2019].
Waitrose rewards scheme “My picks”
Example 2: Tesco

 Tesco has delayed changes to its Club card rewards

scheme after a backlash from customers … …….those
hardest hit were its most loyal customers.
Example 3: Halifax

 Halifax charge more to loyal customers and offer all the

benefits of low cost to new customers
 Example 4: My Ryanair

 myRyair is a reward scheme

 Easy booking via an app
 Saved personal details
 “Loyalty” based on low price –
not on the reward scheme
 Discounts and free flights
 Customised deals based on travel record
 Essential – cannot book without joining

Sunday, 17 November 2019 9

 Creating customer loyalty

https://www.youtube.com/watch?v=XwcWJu5FYTI
Sunday, 17 November 2019 10
Loyalty cards & Loyalty

Loyalty card schemes – reward schemes - are

different from loyalty
Loyalty cards & Loyalty

A customer might have a loyalty card but not

have a close relationship with the company
… they might also not be loyal
Key basis of loyalty

 A customer may keep using the same suppliers for other

reasons, for example, high switching costs, but the
customer may not be willing to enter a close relationship
with the supplier because they are not committed to the
company (Gummesson, 2008, p.24) – this is not true
loyalty
Observations on Loyalty

 the objective of loyalty programmes must be to develop high levels of

emotional loyalty among programme participants, not just repeat buying.
 Emotional connection or attachment is important to retain and encourage
continuous purchase
 There are other reasons why customers are loyal – not just a preference for
the brand
 Customers may not switch to another brand in spite of marketing or word of
mouth

Hallberg, G., 2003. Is your loyalty programme really building loyalty? Why
increasing emotional attachment, not just repeat buying, is key to maximising
programme success. Journal of Targeting, Measurement and Analysis for
Marketing, 12(3), pp.231-241.
Key paper on loyalty

 Dick, A.S. & Basu, K. (1994) ‘Customer Loyalty: toward an integrated

conceptual framework
Slide 6.16

Figure 6.3 Relative attitude–behaviour relationship

Source: Adapted from Dick and Basu, 1994.

Egan, Relationship Marketing PowerPoints on the Web, 4th edition, © Pearson Education Limited 2012
 Loyalty matrix (Dick & Basu, 1994)

 No loyalty:
– low repeat purchase, and low attitude strength, due to competition (a
view that all brands are very similar), or seeking a better deal for each
purchase. Possible ways of addressing this – promotions to attract price
sensitive to try the brand.
 Latent loyalty
– High attitude strength but low repeat purchase. This could be due to, for
example, love of the brand but no access to purchase goods e.g. no
Waitrose in the local area, or insufficient income to pay the prices.
 Spurious loyalty:
– Low attitude strength but high repeat purchase. This could be due to
similarity of offer, and lack of enthusiasm for checking competitive offers.
Companies could promote ways of gaining higher attitudinal loyalty in
these customers (marketing benefits etc.)
 Loyalty:
– Favourable attitude strength, emotional bond and commitment together
with repeat purchase behaviour.

Dick, A.S. & Basu, K. (1994) ‘Customer Loyalty: toward an integrated conceptual framework, Journal of the Academy of Marketing
Science, 22(2), 99-113.
Sunday, 17 November 2019 17
 Framework for Customer Loyalty (Model)

Dick, A.S. & Basu, K. (1994) ‘Customer Loyalty: toward an integrated conceptual framework, Journal of the Academy of Marketing
Science, 22(2), 99-113.

Sunday, 17 November 2019 18

Slide 3.19

Figure 3.3 Framework for customer loyalty

Source: Adapted from Dick and Basu, 1994, p. 100.

Egan, Relationship Marketing PowerPoints on the Web, 4th edition, © Pearson Education Limited 2012
Antecedents shown in a simple research model

Antecedents (independent variables) Consequences

(dependent
variables)
Cognitive Loyalty
Relationship

Relative Repeat Word of

Affective
Attitude Patronage Mouth

Conative

Based on Dick & Basu (1994)

Dick, A.S. & Basu, K. (1994) ‘Customer Loyalty: toward an integrated conceptual
framework

 Relative attitude strength – 3 categories

• Cognitive antecedents (thinking)
– Accessibility
– Confidence
– Centrality
– Clarity
• Affective antecedents (emotional) Antecedents?
– Emotions
– Moods
– Primary affect
– Satisfaction
• Conative antecedents (stance)
– Switching costs
– Sunk costs
– Expectations
 TASK Recommendations

 What can you identify from the paper by Dick and Basu
(1994) in terms of making recommendations for:
– MyWaitrose loyalty scheme?
– Improving the Tesco loyalty card scheme?
– Problems with Halifax customer acquisition offers versus
customers loyal to Halifax?
– The MyRyanair programme
 Make one recommendation for each on the basis of
research by Dick and Basu.

Sunday, 17 November 2019 22

Definitions of Loyalty

Day (1969): observation of repeat purchases

 loyalty is more than just repeat buying – it’s about commitment to the brand
 argued that people should consider the number of times purchases were
made as a matter of loyalty.
 Day (1969) identified the two concepts of attitudinal and behavioural
perspectives of loyalty:
– Customers should have an emotional loyalty to a brand (attitude)
– Customers should actually repeat buy the brand (behaviour)

Day, G.S. (1969), “A Two-Dimensional Concept of Brand Loyalty,” Journal of Advertising

Research, 9 (September), 29-36.
Questions about your attitudinal
loyalty

Responding:

Online: https://pollev.com/profjane
Attitudinal loyalty

 We define brand loyalty as conative loyalty or the degree to which the

consumer is committed to repurchase of the brand (Carroll & Ahuvia, 2006).
 Brand loyalty gets generated when a consumer is committed to purchasing
the same brand over a period of time rather than consuming different brands
(Thakur & Kaur, 2016).
 The true loyalty of a consumer is expressed by a strong desire to maintain
the relationship and willingness to share the experience with others (Bahri-
Ammari, et al., 2016).

Bahri-Ammari, N., Van Niekerk, M., Khelil, B. H., & Chtioui, J. (2016). The
effects of brand attachment on behavioral loyalty in the luxury restaurant
sector. International Journal of Contemporary Hospitality Management,
28,(3): 559-585.
Carroll, B. & Ahuvia, A. (2006). Some antecedents and outcomes of brand
love. Marketing Letters, 17,(2): 79-89.
Thakur, A. & Kaur, R. (2016). An Empirical Examination of Relationship
Between Emotional Attachment and Attitudinal Brand Loyalty Towards Luxury
Fashion Brands. DLSU Business & Economics Review, 26,(1): 70-80.
 Measurement scales

 ATTITUDINAL LOYALTY - (Thakur & Kaur, 2016)

– 1. This is the only brand of this product that I will buy (Carroll &
Ahuvia, 2006).
– 2. When I go shopping, I don’t even notice competing brands
(Carroll & Ahuvia, 2006).
– If my store is out of this brand, I’ll postpone buying or go to
another store of the same brand (Carroll & Ahuvia, 2006).
– 4. I’ll ‘do without’ purchase rather than buying another brand
(Carroll & Ahuvia, 2006).
– 5. The reputation of this brand is a key factor in loyalty (Kesari &
Srivastatava, 2012).
– 6. I like the performance and features of this brand (Senel, 2011).
– 7. I find the performance and features (quality) of this brand
superior than the other brands (Rio et al., 2001).
Carroll, B. & Ahuvia, A. (2006). Some antecedents and outcomes of brand love. Marketing Letters, 17,(2): 79-89.
Thakur, A. & Kaur, R. (2016). An Empirical Examination of Relationship Between Emotional Attachment and
Attitudinal Brand Loyalty Towards Luxury Fashion Brands. DLSU Business & Economics Review, 26,(1): 70-80.
 Measurement scales

– 8. I prefer this brand to the other brands (Bouhlel et al., 2011).

– 9. I pay more for this brand than the other brands (Loureiro, 2011;
Sandra, 2013).
– 10. I recommend this brand to the others (Carol & Ahuvia, 2006).
– 11. I see myself as a loyal customer of this brand (Khare &
Handa, 2009).
– 12. I rarely take chances by buying unfamiliar brands even if it
means sacrificing variety (Xinting et al., 2013).
– 13. I usually buy the same brand even if it provides only average
quality (Loureiro, 2013).
– 14. My loyalty towards this brand increases when I am satisfied
about that brand (Cheong, 2013).

Thakur, A. & Kaur, R. (2016). An Empirical Examination of Relationship Between Emotional Attachment and
Attitudinal Brand Loyalty Towards Luxury Fashion Brands. DLSU Business & Economics Review, 26,(1): 70-80.
Behavioural loyalty

 Loyalty is based on customer behaviour, which in turn is characterized by the

purchase of the same brand in a continuous manner (Bahri-Ammari et al.,
2016).
 To build a long-lasting relationship with their customers and to maintain their
loyalty in the long term(Bahri-Ammari et al., 2016).

Bahri-Ammari, N., Van Niekerk, M., Khelil, B. H., & Chtioui, J. (2016). The effects of brand attachment on
behavioral loyalty in the luxury restaurant sector. International Journal of Contemporary Hospitality
Management, 28,(3): 559-585.
 Behavioural loyalty

1. When I come to the city, I stay at this hotel.

2. Compared with other hotels, I have spent more money at this hotel.
3. Compared with other hotels in this city, I have stayed more at this hotel.
4. Compared with other hotels in this city, I have used more of the services offered at this hotel.

Han, X., Kwortnik Jr, R.J. and Wang, C., 2008. Service loyalty: an integrative model and examination across service
contexts. Journal of Service Research, 11(1), pp.22-42.

Sunday, 17 November 2019 29

Questions about your
behavioural loyalty

Responding:

Online: https://pollev.com/profjane
 Behavioural Loyalty (Mattila, 2006)

 (1) say positive things about their most preferred hotel brand to
other people (WOM?)
 (2) recommend the preferred hotel brand to someone who
seeks your advice (WOM?)
 (3) encourage friends and relatives to do business with the
preferred hotel brand (WOM?)
 (4) consider the preferred hotel brand my first choice when
traveling 

 (Cronbach’s alpha of .93). In addition, respondents were

asked to indicate their share of spending (percentage of total
annual room-nights) among their most favorite hotel brands
(up to four brands).
Mattila, A. S. (2006). How Affective Commitment Boosts Guest Loyalty (and Promotes Frequent-guest
Programs). Cornell Hotel and Restaurant Administration Quarterly, 47(2), 174–181.

Sunday, 17 November 2019 31

 Behavioural loyalty scale items

1. If I had to replace my (product), I would buy the same brand

(Pedeliento et al., 2016). 
2. *I will continue to choose this brand before other brands 
3. *I would continue to favour the offerings of this brand before
others 
4. *I am willing “to go the extra mile” to choose this brand 
5. *I would rather stay with this brand than try a different brand I am
unsure of 
6. *Next time I am looking for this product I will stay with brand 
7. *I will recommend this brand to someone who seeks my advice
(WOM?)
8. *I am very committed to this brand (*Hemsley-Brown & Alnawas,
2017) (attitudinal?)
9. I am willing to make an effort to search for my favourite brand.
(Ailawadi, Neslin and Gedenk 2001) 

Hemsley-Brown, J., Alnawas, I. (2016) Service Quality and Brand Loyalty: The Mediation Effect of Brand Passion,
Brand Affection and Self-Brand Connection, International Journal of Contemporary Hospitality Management, 28(12)
2771-2794
 Article 1: The Impact of Customer Loyalty programmes on Customer
Retention

 (350) questionnaires
 Jordanian customers in grocery retail sector
 Independent variable: loyalty programmes: [point system, tier system reward,
charges an upfront fee for VIP benefits and nonmonetary programmes]
 Dependent variable: customer retention.

Loyalty
Customer
Sunday, 17 November 2019 programme
retention

Magatef, S.G. and Tomalieh, E.F., 2015. The impact of customer loyalty programmes on customer retention.
International Journal of Business and Social Science, 6(8), pp.78-93.

Sunday, 17 November 2019 33

 Article 1: The Impact of Customer Loyalty programmes on Customer
Retention

 there is significant evidence of the effect of all loyalty programmes on building

and maintaining customer retention
1. major effect was for a tier system reward (e.g. British airways, Blue,
Silver, Gold Executive Club tier benefits)
2. followed by charge up-front fee for VIP benefits (e.g. American Airlines
Citi Executive Card)
3. and then point system – just air miles – points e.g. Norwegian Airlines
and Ryanair)

Sunday, 17 November 2019

Loyalty Customer
programme retention

Magatef, S.G. and Tomalieh, E.F., 2015. The impact of customer loyalty programmes on customer retention.
International Journal of Business and Social Science, 6(8), pp.78-93.

Sunday, 17 November 2019 34

 Article 1: The Impact of Customer Loyalty programmes on Customer
Retention

 Loyalty programmes: are structured marketing efforts that reward, and

therefore encourage, loyal buying behaviour, which is potentially beneficial to
the firm
 Weakest effect for non-monetary loyalty programmes
– E.g. loyalty only offers early booking (e.g. for events)
– E.g. loyalty only offers a free coffee (e.g. MyWaitrose)
– E.g. loyalty only offers access to a “friends” lounge (e.g. art galleries)
 Only 12% - 15% of customers are loyal to a single retailer
 Loyal customers spend more with the company.
 Loyalty programmes provide the company with a wealth of consumer
information.

Magatef, S.G. and Tomalieh, E.F., 2015. The impact of customer loyalty programmes on customer retention.
International Journal of Business and Social Science, 6(8), pp.78-93.

Sunday, 17 November 2019 35

 Article 1: Recommendations

 Marketers must keep using all kinds of customer loyalty programmes

due to their clear impact on customer retention. Especially the Tier system
reward.
 Marketers must keep looking for new and initiative tools to differentiate their
loyalty programmes, to attract new customers and to increase the purchasing
amount of the existing ones.
 Marketers must be focused on the balance between costs and revenues of
each distinctive loyalty programme, because it is important for any business
to think in an economical way.
 Due to the fact that customers differ in their characteristics and preferences -
distinctive loyalty programmes should be segmented according the
characteristics and preferences of the target customers.
 The loyalty programmes must be easy to redeem the points and the
benefits, which helps the loyalty programme members to be able to convert
their points into merchandise, discounts and other services.

Magatef, S.G. and Tomalieh, E.F., 2015. The impact of customer loyalty programmes on customer retention.
International Journal of Business and Social Science, 6(8), pp.78-93.
Sunday, 17 November 2019 36
 Article 1: Recommendations

 Focus on retaining customers due to their role in recommending the

company to their friends and relatives through the positive word of mouth.
And retaining customers is less expensive than acquiring new ones.
 The importance of diversifying the loyalty programmes to attract more
customers from different demographic characteristics and maintain them as
long as possible.
 Develop a loyalty programmes which fit the youth needs and shopping
requirements.
 Keep customers informed about all available loyalty programmes and the
benefits and rewards.
 Develop a transparent feedback system and listening to customer views
and suggestions regarding the available loyalty programmes.
 Respond to feedback on criticisms of the programmes.

Magatef, S.G. and Tomalieh, E.F., 2015. The impact of customer loyalty programmes on customer retention.
International Journal of Business and Social Science, 6(8), pp.78-93.

Sunday, 17 November 2019 37

 Recommendations

 What can you identify from the paper by Magatef &

Tomalieh, (2015) in terms of making recommendations
for:
– MyWaitrose loyalty scheme?
– Improving the Tesco loyalty card scheme?
– Problems with Halifax customer acquisition offers versus
customers loyal to Halifax?
– The MyRyanair programme
 Make one recommendation for each on the basis of
research by Magatef & Tomalieh, (2015).

Sunday, 17 November 2019 38

 Article 2: An examination of restaurant loyalty programs

 Aims to investigate customer preferences towards loyalty reward

programs in the restaurant industry.
 Willingness to join such programs and expected benefits are also
examined.
 Focus group interviews followed by a survey
 USA restaurant patrons and arts festival-goers
 A vast majority of study respondents favoured immediate, monetary
gratification.
 Consistent across restaurant types (fast-food versus casual dining).

Dongsuk Jang, Anna S. Mattila, (2005) "An examination of restaurant loyalty programs: what kinds of
rewards do customers prefer?", International Journal of Contemporary Hospitality Management, Vol. 17
Issue: 5, pp.402-408
Sunday, 17 November 2019 39
 Article 2: An examination of restaurant loyalty programs

 93% of the respondents in the fast-food sample preferred monetary rewards

(discounts or cash back) to non-monetary rewards (special services or
products, such as preferred seating, flower service, or luxurious desserts)
 Concerns expressed regarding joining a loyalty scheme:
– expecting lots of promotion e-mails
– difficulty in redeeming rewards
– don’t like to carry the reward card
– not interested in reward programs
 Developing an effective loyalty reward program requires a thorough
understanding of what kinds of rewards are perceived favourably by the firm’s
customer base.

Dongsuk Jang, Anna S. Mattila, (2005) "An examination of restaurant loyalty programs: what kinds of
rewards do customers prefer?", International Journal of Contemporary Hospitality Management, Vol. 17
Issue: 5, pp.402-408

Sunday, 17 November 2019 40

 Article 2: An examination of restaurant loyalty programs

 Restaurants should consider employing immediate and monetary rewards as

opposed to points-system, luxury, and non-monetary rewards.
 Motivation to join loyalty reward programs: casual dining patrons are looking
for exciting and entertaining rewards in addition to mere cost savings.
 Reward schemes with monetary rewards are particularly important for price
sensitive customers and businesses that rely on competitive [low] prices.

Dongsuk Jang, Anna S. Mattila, (2005) "An examination of restaurant loyalty programs: what kinds of
rewards do customers prefer?", International Journal of Contemporary Hospitality Management, Vol. 17
Issue: 5, pp.402-408

Sunday, 17 November 2019 41

 Case Study
Read the case study and carry out the task

Starbucks: taking the Starbucks experience digital

Welch, M. & Buvat, J. (2011) Starbucks:

taking the “Starbucks experience”
digital, Capgemini Consulting: available
at@
https://www.google.co.uk/url?sa=t&rct
=j&q=&esrc=s&source=web&cd=1&ved=
2ahUKEwjY_s-
Tt8_gAhWPQxUIHXmZBuAQFjAAegQI
ABAC&url=https%3A%2F%2Fwww.capg
emini.com%2Fwp-
content%2Fuploads%2F2017%2F07%2F
starbucks-23-04.pdf&usg=AOvVaw2H-
2vLdGuqm_mlffVBgeE_ [accessed
22/02/2019.

Sunday, 17 November 2019 42

 Starbucks app

Sunday, 17 November 2019 43

RM Loyalty Task

1. List the reasons why the Starbucks’ mobile app is a

success, including the innovative digital features.
2. Draw up a table which lists features on the basis of
attitude building and behavioural features.
3. Choose one key feature of the app that you think
contributes to its success.
References

 Bahri-Ammari, N., Van Niekerk, M., Khelil, B. H., & Chtioui, J. (2016). The effects of brand attachment on behavioral loyalty in
the luxury restaurant sector. International Journal of Contemporary Hospitality Management, 28,(3): 559-585.
 Day, G.S. (1969), “A Two-Dimensional Concept of Brand Loyalty,” Journal of Advertising Research, 9 (September), 29-36.
 Dick, A.S. & Basu, K. (1994) ‘Customer Loyalty: toward an integrated conceptual framework, Journal of the Academy of
Marketing Science, 22(2), 99-113.
 Carroll, B. & Ahuvia, A. (2006). Some antecedents and outcomes of brand love. Marketing Letters, 17,(2): 79-89.
 Dongsuk Jang, Anna S. Mattila, (2005) "An examination of restaurant loyalty programs: what kinds of
 rewards do customers
 Egan, J., (2011), Relationship Marketing: Exploring relational strategies in marketing, Harlow, Prentice Hall.
 Gummesson, E., (2008), Total Relationship Marketing, Oxford, Butterworth Heinemann.
 Hallberg, G., 2003. Is your loyalty programme really building loyalty? Why increasing emotional attachment, not just repeat
buying, is key to maximising programme success. Journal of Targeting, Measurement and Analysis for Marketing, 12(3),
pp.231-241.
 Han, X., Kwortnik Jr, R.J. and Wang, C., 2008. Service loyalty: an integrative model and examination across service contexts.
Journal of Service Research, 11(1), pp.22-42.
 Hemsley-Brown, J. & Alnawas, I. (2016). Service Quality and Brand Loyalty: The mediation effect of brand passion, brand
affection and self-brand connection. International Journal of Contemporary Hospitality Management, 28, 2771-2794.
 Magatef, S.G. and Tomalieh, E.F., 2015. The impact of customer loyalty programmes on customer retention. International
Journal of Business and Social Science, 6(8), pp.78-93.
 Smithers, R., (2018) Waitrose to close part of its loyalty scheme at end of February, The Guardian (available online at
https://www.theguardian.com/business/2018/feb/05/waitrose-to-close-part-of-loyalty-scheme-at-end-of-february-pick-your-own-
offers [acessed, 21/02/2019].
 Thakur, A. & Kaur, R. (2016). An Empirical Examination of Relationship Between Emotional Attachment and Attitudinal Brand
Loyalty Towards Luxury Fashion Brands. DLSU Business & Economics Review, 26,(1): 70-80.
 Questions

Next Week: Customer Relationship Management (CRM)